Aspiration 7 of Africa’s Agenda 2063 envisions “Africa as a strong, united, resilient and influential global player and partner” with a significant role in world affairs.
To achieve this Aspiration, the Agenda 2063 framework identifies the need for Africa to improve its partnerships and refocus them more strategically to respond to African priorities for growth and transformation; ensure that the continent has the right strategies to finance its own development and reduce aid dependency through the establishment of continental financial institutions.
The creation of Pan-African Financial Institutions (PAFI) aims at accelerating integration and socio-economic development of the continent through the establishment of organisations which will play a pivotal role in the mobilisation of resources and management of the African financial sector.
The financial institutions envisaged to promote economic integration are the African Investment Bank (AIB) and Pan African Stock Exchange (PASE); the African Monetary Fund (AMF) and the African Central Bank.
The objectives of the Pan-African financial institutions include:
- Facilitating the mobilisation of domestic and external resources to foster economic development and integration on the continent (AIB and PASE);
- Ensuring the stability of exchange rates between currencies and their mutual convertibility for the establishment of the African Central Bank (ACB);
- Promoting the development of African financial markets (AMF and PASE) and establishing a strong monetary union with a single African currency managed by the African Central Bank (ACB). Progress towards the adoption of a single currency will be monitored by the African Monetary Institute (AMI);
- Promoting African monetary cooperation in order to achieve African economic integration and speed up the economic development process in Member States (AMF / AMI).
African Investment Bank (AIB)
The purpose of the AIB is to foster economic growth and accelerate economic integration in Africa by financing development projects in Africa.
The AIB’s objectives will be to:
- Promote public and private sector investment activities intended to advance regional integration of African states;
- Utilise available resources for the implementation of investment projects contributing to strengthening of the private sector and modernisation of rural sector activities and infrastructures;
- Mobilise resources from capital markets inside and outside Africa for the financing of investment projects in African countries;
- Provide technical assistance as may be needed in African countries for the study, preparation, financing and execution of investment projects.
As at 31st December 2018, 22 AU Member States had signed the legal instruments of the AIB --Angola, Benin, Burkina Faso, Chad, Côte d’Ivoire, Comoros, Congo, DRC, Gabon, Gambia, Ghana, Guinea Bissau, Guinea, Liberia, Libya, Madagascar, Niger, Senegal, Sierra Leone, Sao Tome and Principe, Togo, and Zambia; while six had ratified --Benin, Burkina Faso, Chad, Congo, Libya, and Togo.
African Monetary Fund (AMF)
The purpose of AMF will be to facilitate the integration of African economies by eliminating trade restrictions, financing deficits, fostering monetary cooperation and integration, and providing technical assistance, particularly for poverty and debt reduction strategies for AU Member States.
The Fund is expected to serve as a pool for central bank reserves and AU Member States’ national currencies. The Fund will prioritise regional macro-economic objectives in its lending policies.
The AMF objectives will include:
- Providing financial assistance to AU Member States;
- Acting as a clearing house as well as undertaking macro-economic surveillance within the continent;
- Coordinating the monetary policies of Member States and promoting cooperation between their monetary authorities;
- Encouraging capital movements between Member States.
As at 31st December 2017, the texts of the AMF had been signed by nine countries --Benin, Cameroon, Chad, Congo, Ghana, Guinea-Bissau, Mauritania, Sao Tome and Principe, and Zambia-- and with no ratifications country ratifying the Fund’s legal instruments.
On April 6th 2018, the African Union Commission signed the Host Agreement of the AMF with the Government of the Republic of Cameroon to start the process of operationalization of the AMF in Yaoundé, Cameroon.
The African Central Bank (ACB)
The ACB’s purpose will be to build a common monetary policy and single African currency as a way to accelerate economic integration.
The ACB’s objectives will be to:
- Create and manage the continental common currency;
- Promote international monetary cooperation through a permanent institution;
- Promote exchange rate stability and avoid competitive exchange rates depreciation;
- Assist in the establishment of a multilateral system of payments in respect of current transactions between members and eliminate foreign exchange restrictions that hamper the growth of world trade.
The ACB will be responsible for managing monetary and exchange rate policy in Africa.
It will be preceded by the African Monetary Institute (AMI), which will lead the technical, political, statistical, legal and institutional preparatory work for the establishment of the ACB based on a gradual approach.
The Fund will lend support to African Union organs and Regional Economic Communities (RECs) in the implementation of the monetary cooperation programme, working closely with regional monetary institutes and sub-regions to improve macroeconomic convergence and financial integration.
In this regard, the African Union and the Association of African Central Banks (AACB) set up a joint committee and drew up a joint strategy for the establishment of the African Central Bank, a strategy in which the African Monetary Institute will play a vital role.
Find out more about Agenda 2063 and the Pan-African Financial Institutions by visiting www.au.int.