Central Bank Governors, deputies and their representatives from the COMESA region held a one-day symposium in Lusaka on the ‘Role of Central Banks in Advancing the Continental and Tripartite Free Trade Area. The gathering agreed that Central Banks have a critical role to play in the full and successful implementation of the African Continental Free Trade Area (AfCFTA) and the Tripartite Free Trade Area (TFTA) by ensuring macroeconomic and financial stability hence the need to start engaging on the matter.
Speaking at the Symposium in Lusaka on 13 December 2019, Chairperson of the COMESA Committee of Governors of Central Banks Mr Ahmed Osman said it is important to start discussing the Agreements in order to have the right pricing mechanism, efficient trade and appropriate payment channels required for trade exchanges as the region leaps forward with the two free trade arrangements.
He added that formulating and implementing appropriate exchange rate policies to support trading activities will also be important as the Continental and Tripartite Free Trae Area come into force.
“The growing protectionism in advanced countries naturally means we in COMESA and Africa need to explore the possibility of expanding and enlarging our market beyond individual country borders…. the AfCFTA and TFTA are crucial in this exercise,” Mr Osman, who is also the Governor of the Central Bank of Djibouti said.
The bankers noted that the AfCFTA ushered in a new era of deeper collaboration in trade among African countries and it builds on the integration attained by Regional Economic Communities such as COMESA, EAC and SADC.
The governors agreed that lack of trade finance can limit the full trade potential of the AfCFTA and TFTA and therefore discussed selected sub-themes during the symposium. They discussed the ‘role of central banks in eradicating obstacles for advancing AfCFTA and TFTA’, ‘the use of blockchain to increase efficiency in the CFTA’ and ‘the importance of regional payments systems to increase trade in the CFTA.’
Some of the key obstacles in advancing the AfCFTA and TFTA identified during the symposium include the failure by some Member Sstates to diversify their economies and add value to products, poor road and rail infrastructure which hinders economic growth, limited and inactive cross listings on the stock exchanges, restrictive customs procedures and high fees making cross border trade expensive and political tension and violence in some Member States.
Other factors are the limited ICT penetration and use in some parts of Africa, shallow financial systems and having multiple and different national currencies with volatile exchange rates almost all of which are non-convertible.
The delegates made several recommendations to improve trade financing, exploring ways of leveraging on blockchain and other new technologies and the need for central banks to support initiatives aimed at interfacing regional payments and settlement systems for increasing trade in the AfCFTA.
Twelve Member States namely Burundi, Djibouti, DR Congo, Egypt, Eswatini, Kenya, Libya, Malawi, Sudan, Uganda, Zambia and Zimbabwe attended the Symposium which was organized by the COMESA Monetary Institute (CMI).
Once fully implemented, the AfCFTA is expected to cover all 55 African countries with an estimated combined current GDP of US$2.5 trillion and a population of one billion, 60 percent of whom are below the age of 25 years.