President instructs AU to reform global financial structure
President Nana Addo Dankwa Akufo-Addo called on African Union (AU) Member States to work collectively to reform the global financial architecture, build and strengthen the financial institutions of the union.
He said a collective effort by the union was essential to transform the size and state of the African economy as this would go a long way in mobilizing resources on the continent.
President Akufo-Addo made the call yesterday during the 35th Ordinary Session of the AU Assembly in Addis Ababa, Ethiopia, scheduled for February 5-6 this year.
Reporting as the Champion of African Union Financial Institutions (AUFI), the President said that increased resource mobilization on the continent would provide the necessary impetus for growth, job creation and economic revitalization.
President Akufo-Addo said that although there is an ongoing process to establish four financial institutions (AUFI) – the African Central Bank (ACB), the African Investment Bank (AIB), the African Monetary Fund ( AMF) and the Pan-African Stock Exchange. (PASE), the process was not as smooth as expected.
According to him, none of the AUFIs has reached the minimum number of ratifications required for the enabling legal instruments to enter into force and thus facilitate their substantial implementation.
“Unfortunately, the main challenges to the establishment of AUFIs include the slow pace of signing and ratifying legal instruments and the limited capacity of member states to fund their establishment,” he said.
This, he explained, was detrimental to the operationalization of the African Monetary Institute, which was the first step towards the establishment of the African Central Bank.
President Akufo-Addo, who is also the Chairman of the Authority of the Economic Community of West African States (ECOWAS), presented a number of recommendations to the AU Assembly for its adoption and its endorsement, which, he said, “will be essential for the creation of AUFIs.”
“They have been captured in the draft decision of the Assembly which will be submitted to Your Excellencies for consideration and adoption,” he informed the meeting.
Reallocation of SDRs, rating agencies
On the question of the reallocation of Special Drawing Rights (SDRs) in the context of optimizing its impact on Africa, the President recalled that in Paris last May, world leaders had committed to allocate the historic issue of 650 billion SDRs to the International Monetary Fund. (IMF) Member States, with a quota allocation to Africa of 5% or SDR 33.3 billion.
“We appreciate this commitment to additional resources, which our continent badly needs. It is regrettable, however, that the only proposal that has been put on the table by European countries so far is to reroute these SDRs through a single institution, the IMF,” he said.
“The IMF should not be the sole beneficiary of such a shift. We believe that our own continental institutions, such as the African Development Bank (AfDB) and Afreximbank, should be the beneficiaries of recycling these SDRs.
“Our finance ministers and the United Nations Economic Commission for Africa (UNECA) have been advocating for regional development agencies to be included in this shift,” he said.
President Akufo-Addo further told the assembly that African finance ministers, together with the ECA, had always championed the allocation of SDRs to capitalize AfDB and AfreximBank, help establish an African stability mechanism and launch a Liquidity Support Facility (LSF).
“We must guard against the consecutive and continued takeover by rating agencies, which has affected the cost of and access to capital markets for African countries and has, during this period of COVID-19, led to the deterioration of the rating of many African countries, further exacerbating their funding problems,” he said.
He thus stressed the need for the AU Assembly to urge the G20 leaders to fulfill their commitment to reallocate to Africa the SDR equivalent of $100 billion agreed at the Paris Summit in May 2021. .
As the champion of AUFIs, President Akufo-Addo, during a workshop for AU finance ministers and central bank governors on November 3, 2021, stressed the need for support and accelerated action for the establishment of AUFIs.
He said that apart from the benefits the AUFIs would bring to the union, the institutions “are also prerequisites for the effective implementation of the African Continental Free Trade Area (AfCFTA) agreement and the achievement of Agenda 2063: “The Africa We Want”.