The African Union has approved the establishment of the African Monetary Fund, which will have a paid up capital of $23 billion.
At least a quarter of the capital must be raised by the 54 members but only 15 members are required to ratify the protocol for the fund to be deemed active.
The AMF is seen as crucial to helping African countries eliminate trade barriers and increase monetary integration by acting as a policy watchdog and currency clearing house, besides giving credit to help member countries tackle balance of payment deficits.
“The functions and activities of the Fund shall be to be… to promote and facilitate trade, the settlement of commercial payment and encourage capital flow between State Parties…” reads the AMF Protocol.
Under the AMF ownership plan, Kenya, Tanzania, Uganda will contribute 2.50, 2.41 and 2 per cent respectively of the paid up share capital while Rwanda and Burundi will own 1.27 per cent and 1.17 per cent respectively. The financial input also doubles as voting rights.
If regional member states ratify the protocol, Kenya is expected to contribute $141 million in paid-up capital over the next eight years and will be obliged to inject $283 million if called upon.
AMF will be based in Yaoundé, Cameroon and is one of three institutions envisaged in the AU Treaty for spearheading the creation of an African Economic Community. The others are the African Central Bank and the African Investment Bank.
The fund is expected to dilute the International Monetary Fund’s role in Africa as emerging economies voice concerns over its failure to give them a say commensurate with their newfound economic clout.
Meanwhile, the AU is expected to draw $10.9 million from its reserve fund to meet its 2014 budget following failure by members to increase their contributions.
Another $4.91 million will be drawn from the Acquisition of Properties Fund and the Women’s Fund in a bid to close the $149 million shortfall.
At the African Union Heads of State Summit in Malabo, Equatorial Guinea in June, the heads of state requested the AU to drop all activities without funding from the budget to avoid further deficit. The 2014 budget was reduced by $78 million.
“By March, the AU was using the reserve funds because of delayed remittance by the member states,” noted Pan African Lawyers Union programme lawyer Selemani Kinyunyu.
The presidents approved a total budget of $522 million for 2015. A total of $131 million is expected to be raised by member states, and $225 million secured from international donors. Two-thirds of the $131 million contribution will be assessed on the five main contributors — Nigeria, Algeria, Egypt, Libya and South Africa.
The AU Council of Ministers has proposed a $5 levy on airfares to and from Africa, a $2 levy per bed night in member state hotels, a 0.1 per cent levy per text message sent from Africa and an additional 0.5 per cent of national budgets.
These proposals could raise the AU budget to $2 billion a year.