NDAMU SANDU IN MOSCOW, RUSSIA
The African Export-Import Bank (Afreximbank) is in discussions with the African Union (AU) to set a US$1bn facility to cushion countries from revenues shocks that could arise when they adopt the continental free trade area, a top banker has said.
The African Continental Free Trade (AfCFTA) entered into force on May 30 after 24 countries, including Zimbabwe, had deposited their instruments of ratification which will see the creation of one of the world’s largest trading blocs.
Afreximbank’s president Benedict Oramah told guests at the opening of the bank’s annual general meeting Friday, that countries that require stabilisation shocks could access the facility.
Afreximbank’s annual meetings are being held in Moscow, Russia from June 20 to 22.
“To ensure that countries are supported to manage the fiscal revenue shock, the AfCFTA may engender, we are in discussions with the African Union to arrange an AfCFTA Adjustment Facility in an amount of US$1 billion to be available to countries in need,” Oramah said.
“This facility will make it easier for countries to comply with their commitments on tariff concessions and make the AfCFTA more impactful.”
The creation of the facility would bring comfort to African countries amid warning by critics that AfCFTA would result in the loss of tariff revenue.
Afreximbank has been pushing for a growth in intra-African trade with the bank setting aside a US$25bn envelope on a revolving basis to drive intra-regional trade between 2017 and 2021.
To date, the Cairo-headquartered bank has disbursed US$8 billion, Oramah said.
He said AfCFTA represented the most consequential move that can place the continent on the path to economic prosperity as it will create an integrated market of 1,2 billion people and US$2,5 trillion in GDP. AfCFTA, Oramah said, would throw into the dustbin history the “fragmentation and Balkanisation” that had been at the root of Africa’s underdevelopment appears to be destined to the dustbin of history.
Oramah said the bank has completed the development of a Pan African Payment and Settlement System that enables intra-African trade to be paid for in African currencies. This, he said, reduces transaction costs in intra-regional payments and projected to formalise a significant proportion of about US$40bn in informal intra-African trade.
“We believe that the system will in 3 – 4 years add more than US40bn to annual intra-African trade flows,” he said.
In F18, Afreximbank’s total assets and contingent liabilities were up 15 percent to US$15bn from US$13bn in 2017.
Net income rose to US$276m from US$220m in the prior year. Oramah attributed the uptick to a 19 percent growth in net interest income and cost containment.