President Nana Akufo-Addo has urged Member States of the African Union (AU) to work collectively to reform the global financial architecture, as well as build and strengthen the Union’s financial institutions.
Delivering his second report to the Assembly, on Sunday, 6th February 2022, in his capacity as AU Champion for Financial Institutions, President Akufo-Addo noted that the AU is currently engaged in the process of establishing four (4) financial institutions (AUFIs), namely the African Central Bank (ACB), the African Investment Bank (AIB), the African Monetary Fund (AMF), and the Pan African Stock Exchange (PASE).
According to the President, “the major challenges towards the establishment of the AUFIs include the slow rate of signature and ratification of the legal instruments, and the limited capacity of Member States to finance the establishment of the AUFIs. Regrettably, none of the AUFIs has reached the minimum number of ratifications required for the enabling legal instruments to enter into force, and, thereby, facilitate their substantive establishment.”
This, he explained, is detrimental to the operationalisation of the African Monetary Institute, which is the first step towards the establishment of the African Central Bank.
President Akufo-Addo, thus, presented a number of recommendations to the AU Assembly for its adoption and endorsement, which, he said, “would be critical towards the establishment of the AUFIs”. They have been captured in the Draft Assembly Decision that will be submitted to Your Excellencies for consideration and adoption.
SDR Reallocation, Rating Agencies
On the matter of SDR re-allocation, within the context of optimising its impact on Africa, the President recounted that, last May, in Paris, world leaders made a commitment to allocate the historic SDR 650 billion issuance to IMF Member States, with Africa’s quota allocation of 5% or SDR 33.3 billion.
“We value this commitment to additional resources, of which our continent is in dire need. It is unfortunate, however, that the only proposal that has been put on the table by the European countries so far is to re-channel these SDRs through only one institution, the International Monetary Fund (IMF),” he said.
President Akufo-Addo continued, “The IMF should not be the sole beneficiary of such rechanneling. We believe that our own continental institutions, such as the African Development Bank (AFDB) and Afreximbank, should be recipients of the recycling of these SDRs. Our Finance Ministers and the United Nations Economic Commission for Africa (UNECA) have advocated for the use of regional development agencies to be included in this rechanneling.”
He told the Assembly that African Finance Ministers, with UNECA, have consistently championed the allocation of SDRs to capitalize AFDB and AfreximBank, to help establish an African Stability Mechanism, and to initiate a Liquidity Support Facility (LSF).
“We need to guard against the continuing consequential stranglehold of the rating agencies, which has affected the cost and access to capital markets for African countries, and has, during this COVID period, resulted in the downgrading of many African countries, exacerbating even more their funding challenges,” President Akufo-Addo said.
He, thus, urged the AU Assembly to urge G20 leaders stick to their commitment to reallocate to Africa the SDR $100 billion agreed to at the Paris Summit in May 2021.