African Export-Import Bank (Afreximbank) has committed $1 billion out of the estimated $10 billion required over the next 10 years for the successful roll-out of the African Continental Free Trade Area (AfCFTA) adjustment fund as part of efforts to ensure successful implementation of the deal.
To this effect, the AfCFTA Secretariat and Afreximbank yesterday, signed an agreement relating to the management of the adjustment fund to support African countries and the private sector to effectively participate in the new trading environment established under the pact.
The agreement was signed by the President of Afreximbank, Professor Benedict Oramah and Secretary-General of the AfCFTA Secretariat, H.E Wamkele Mene, in the presence of Minister Plenipotentiary (Trade) of the Arab Republic of Egypt, Aly Basha, as well as African bankers and captains of industry.
The Adjustment Fund consists of a Base Fund, a General Fund and a Credit Fund. The Base Fund will consist of contributions from State Parties, grants and technical assistance funds to address tariff revenue losses as tariffs are progressively eliminated. It will also support countries to implement various provisions of the AfCFTA Agreement, its Protocols and Annexes.
The General Fund will mobilise concessional funding, while the Credit Fund will mobilise commercial funding to support both the public and private sectors, enabling them to adjust and take advantage of the opportunities created by the AfCFTA.
In his remarks, Oramah said the bank would work closely with all development partners, development financial institutions, and commercial banks, export credit agencies, investors and strategic partners to mobilise resources for the fund to enable the continent to implement the AfCFTA.
He said the AfCFTA Secretariat and Afreximbank were mandated by the African Union (AU) Summit of Heads of State and Government and the AfCFTA Council of Ministers responsible for Trade to establish the AfCFTA fund to support AfCFTA State Parties adjust to the new liberalised and integrated trading environment established under the AfCFTA Agreement.
According to him, the funds will be used to support both the public and private sectors to address short term disruptions, while enabling the private sector to retool, reskill and develop capabilities to produce value-added goods and services that can be traded competitively within the continent and catalyse the emergence of AfCFTA-led regional value chains.
Oramah noted that the adjustment fund comes a few weeks after the launch of the Pan African Payment and Settlement System (PAPSS), on January 13, 2022, as well as the second edition of the Intra-African Trade Fair, held in November 2021 in Durban.
“These are some of the initiatives that we are proud to implement in close collaboration with the AfCFTA Secretariat, setting the conditions that will undoubtedly lead to a smooth implementation of the AfCFTA. Today we have launched the Base Fund of the Adjustment Fund to address urgent needs of State Parties relating to tariff revenue losses and the transposition costs to enable them to implement the AfCFTA Agreement”, he added.
He said the launch of the General Fund and Credit Fund would follow to address the needs of the private sector including the small and medium enterprises, women and youth under the agreement.
Also speaking at the event, Mene stressed the importance of the adjustment fund as one of the instruments designed to support the implementation of the AfCFTA agreement and assist AfCFTA State Parties to deal with short term tariff revenue losses as they dismantle tariffs and implement the agreement.
“As we make significant progress in establishing schedules of tariff concessions, the finalisation of the Adjustment Fund will enable us to maintain and even accelerate the momentum.
“We now have an excellent tool to provide support to our State Parties and their private sector through financing, technical assistance, grants and compensation funding.
“It will help them mitigate revenue losses and competitive pressures that may result from a reduction in tariffs and liberalisation of markets in order to tap into the opportunities of the AfCFTA. This is another important step towards the successful implementation of the continental free trade agreement,” Mene said.
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