The EU and the European Investment Bank (EIB) have agreed terms for the creation of a trust fund to support infrastructure in Africa. Up to EUR 320 million in grants and loans are earmarked for the fund over the first two years.

Development Commissioner Louis Michel and Philippe Maystadt, President of the EIB, signed a Memorandum of Understanding in Brussels yesterday. Mr Michel said the fund would finance big transport, telecommunication and energy projects and would allow Europe, often overshadowed by programmes financed by the World Bank, to "increase its visibility and influence".

"This is an innovative tool that can really make the difference and support a long awaited African request. No single donor can face the enormous challenge of financing the basic infrastructure of the Continent. Therefore we must joint our efforts, everyone from his competence. I invite all Member States to channel a substantial amount within their recent commitments to increase aid into this ambitious project," said Mr Michel.

A strong infrastructure network for transport, energy, water, as well as for information and communication technologies (ICT). is seen as the key element for sustainable development, economic growth and poverty reduction.

In the start-up phase (2006-2007) the European Commission intends to mobilise up to EUR 60 million in grants and the EIB up to EUR 260 million in loans for the operation of the Fund. It is now up to EU Member States, their development agencies and financial institutions to take part in the fund.

The Trust Fund addresses the strong African demand for infrastructure to boost trade and growth. Its priorities for intervention are trans-African networks for transport, energy, water, and ICT. "Ownership" by its beneficiaries is a key principle of this initiative and, therefore, African partners and institutions are associated closely to the process.

Current investment in infrastructure in Africa needs to be doubled, according to estimates, with an initial increase of EUR 8 billion per year until 2010, rising to EUR 16 billion for the following five years. The Commission says that making available these large amounts will require "not only an increase of the Official Development Aid grant money, but also the effective application of lending strategies by development financial institutions and mobilisation of private capital".

The selection of projects will be done in consideration with the priorities listed by the African Union and the New Partnership for Africa's Development (NEPAD).