Jump Starting the African Monetary Fund

The push for intraregional trade in Africa comes at a pivotal moment for the continent. Across the region, growth in gross domestic product remains very uneven. In large part, this sluggish growth is due to the lackluster performance of the three largest economies. But it is also due to increasing debt vulnerabilities across the continent, as public sector debt has risen to levels that could increase borrowing costs and divert resources from other needed areas.

A policy brief by Hadiza Gagara Dagah, William N. Kring and Daniel Bradlow advocates for African Union (AU) leaders to move forward on the establishment of the African Monetary Fund (AMF). The authors draw lessons from the existing landscape of regional financial arrangements (RFAs) and their implementation and operations to propose concrete next steps for AU members in implementing an AMF that complements intraregional trade efforts.

The policy brief determines that AU members should take three steps in order to create an effective AMF. First, AU leadership must emphasize the benefits and synergies of pursuing regional trade integration along with the implementation of the AMF. Second, an AU member state or group of member states should become the champion for advancing the ratification process. Finally, a re-established AMF steering committee should draw upon lessons from existing RFAs to develop a plan for addressing the current barriers to AMF implementation, such as resource constraints. Together, these initiatives, by promoting the AMF, will help foster a more integrated and prosperous Africa.