10 April 2014

Africa: Thorny Issues Worth Surmounting to Take the African Monetary Fund Off the Ground!

Ratifying the statutes, settling governance and capitalisation issues still remain hanging.

As participants at the just-ended Abuja seventh joint African Union conference of Ministers of Economy and Finance and ECA Conference of African Ministers of Finance, Planning and Economic Development beat their chests for having at long last adopted the statutes of the African Monetary Fund, one thing remains. Move beyond the statutes. It is certainly a good improvement but given that other interwoven conditions need to be put in place to reap the fruits of a common monetary union for the continent, staying just with the statutes would be a loud sounding nothing. Governance issues and capitalisation of funds need to be settled.

Adoption, Ratification

After the endorsement of the statutes by experts and then Ministers of Finance, the next step will be its adoption of Heads of State. But for the Fund to go operational there is need for ratification of the statutes by at least 15 countries. This ratification is a parliamentary act and looking at the different compositions of parliaments of the 54 countries, the ratification would not be easy to come by even if Heads of State were to endorse it. If the case of the African Investment Bank whose texts were adopted some four years ago and today, not more than ten countries have had it ratified by Parliaments of the respective countries were anything to go by, then the operationalisation of the Fund would not be for tomorrow.

Capitalisation of the Fund

According to Prof. Jean Marie Gankou, Steering Committee Chairman of the African Monetary Fund, there are three hypotheses on the capitalisation of the fund. There is a school of thought for 30 billion USA dollars, (about FCFA 14.362 trillion), some 42 billion dollars (about FCFA 20.107 trillion) and others more than 60 billion USA dollars (about FCFA 28.724 trillion). Even though a majority of the experts reportedly bought the 42 billion dollar standpoint, conclusions have not yet been arrived at. But sources say 22 billion dollars is under consideration. The 54 countries of Africa will contribute according to their strengths.

Governance Hurdles

The African Monetary Fund is out for continental monetary cooperation, secure financial stability, facilitate trade and promote high employment and sustainable economic growth. The 54 countries of the continent do not have the same economic viability and so their contribution to the Fund will not be the same. There will be a Board of Governors to implement the rules and regulations on its functioning. Yes! But anticipated superiority complex of some giant economies cannot be easily waved aside here. And should room be given for super powers to dictate the pace, then smaller nations would chicken out and in case of the reverse, the super powers might not see their interest guaranteed. Any withdrawal could be synonymous with requiem for the hope-raising Fund. The multiplicity of economic unions in the continent and the currencies with diverse exchange rates would not be smaller thorny issues that could impede the efficiency of the Fund if harmonisation is not prioritized.

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