Wednesday, June 12, 2024
spot_img

Africa: IMF Chief Advocates Africa Continental Free Trade Area

Nairobi — The head of the International Monetary Fund is urging African countries to implement the Africa Continental Free Trade Area.

Speaking Friday in Nairobi, Kristalina Georgieva said intracontinental trade could grow by 53% if steps are taken to remove trade barriers and improve logistics and transportation.

Georgieva said there are many benefits to be gained from the Africa Continental Free Trade Area, or AfCFTA. But first, she said, reforms are needed to capture the full advantages, including what the IMF sees as the number one priority — reducing trade barriers, such as tariffs.

“If Africa decides to follow our science for example and bring trade barriers from 6% down to 1%, that would be a major step,” she said.

She also wants to see countries use fewer non-trade barriers, like quotas and embargoes, attempt to integrate into global supply chains and diversify their economies.

Ngozi Okonjo Iweala, head of the World Trade Organization, praised the agreement, but said that to make it work, it’s imperative to reduce the cost of trading within and outside Africa.

“Trading with the outside, that cost is equivalent to a tariff of 350%, which is 1.5 times larger than what you find in developed countries,” Iweala said.

But, Iweala said, trading within Africa is even worse.

“The barriers … are equivalent to 435% tariffs,” Iweala said. “So, unless we can deal with these costs and bringing them down, it will be very difficult for us to actualize a good implementation of the Continental Free Trade Area.”

But with many countries just recovering from the negative effects of the COVID-19 pandemic, reducing tariffs comes with its own problems.

“For some countries in the continent, they actually depend on those tariffs and customs duties for the bulk of their revenue, so it’s going to be a real challenge,” Iweala said. “That is why for the least developed countries for example, the agreement is that they have a longer period of time to implement because of the recognition that it is difficult, that it is not going to happen overnight.”