IMF, policymakers, academics harp on SSA’s integration

International Monetary Fund

International Monetary Fund

The talks about integration of the Sub-Saharan African (SSA) economies through currency may have gained traction as more than 30 high-level policymakers across sub-region were unanimous on the on the subject, but also sought the achievement of trade and economic integration as prerequisite.

The forum jointly convened by the International Monetary Fund (IMF), the Africa Training Institute (ATI), and the Banque de France in Mauritius, with participants from SSA and academics from Africa, America, and Europe, also explored conditions under which integration remains an appropriate mechanism for improving welfare in respective member countries.

IMF Deputy Managing Director, Carla Grasso, and a Director at the Institute for Capacity Development, Sharmini Coorey, while underlining the timeliness of the forum, admitted that monetary integration is arguably one of the most pressing macroeconomic policy questions of our times, with urgent questions regarding governance.

Participants agreed that the prerequisites for monetary integration are increased trade and economic integrations, but identified the exposure to potential large asymmetric shocks and the risks associated with large current account imbalances by some monetary union members as sources of concern.

“While monetary unions—such as the CFA zone—have contributed to price stability, there are more gains to be achieved on growth and economic development from trade integration, than perhaps from monetary integration,” the participants said in a statement.

As preparatory to the take off of the proposal, a panel with focused on the need to develop capacity agreed on the need for better infrastructure development in all sectors—both physical and Information Technology as well as for strengthened human resources, as prerequisites for reaping the benefits of any form of regional integration.

In the second ATI Presidential Lecture, the Executive Secretary, UN Economic Commission for Africa, Dr. Carlos Lopes, made a strong appeal to African leaders to deliver on their agreed upon strategy of industrialization in Africa as a prerequisite for a successful regional integration.

He highlighted on the priorities of investing in infrastructure and the development of both human resources and institutions, arguing that while Africa is late in the industrialisation race, some factors play in its favour going forward.

These, he said, include the continent’s large internal market, the declining cost of fossil fuel energy and large potential for renewable energy, low labor costs, and the large gains in employment that could be realized from even a modest increase in the value chain produced within Africa given the low current level.

However, several participants were skeptical about the gains from fiscal unions at this stage, as a complement to monetary unions, given that many countries do not feel ready to give up political sovereignty, which comes with the implementation of a fiscal union.

They concluded that monetary integration should not be pursued too fast and that priority should be given to implementing a comprehensive structural reform agenda as it emerged from the discussion.

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