The African Continental Free Trade Area (AfCFTA), if successfully implemented, could immensely prop up economic growth and improve people’s living standards, the International Monetary Fund (IMF) has revealed in a study.
The report named Trade Integration in Africa – Unleashing the Continent’s Potential in a Changing World is a ray of hope to Africa’s beleaguered population, at a time of rising geopolitical tensions and climate change.
Economic shocks fueled by pandemics, civil wars and climate change have significantly hampered food production and business, leading to unemployment, abject poverty, hunger and malnutrition.
Thus, the report indicated that greater trade openness would help countries adapt to climate change and strengthen food security, including improving the availability and affordability of food supplies.
“More diversified and broad-based trade would reduce the impact of disruptions in specific markets and products that could result from shifts in global trade patterns,” reads the report.
The world’s lender had earlier last week warned that Africa could suffer a permanent economic hit if tensions splinter the global economy into opposing trading blocs around the US and China.
Estimates show that sub-Saharan Africa could see a 4% decline in Gross Domestic Product (GDP) after 10 years under a severe version of this bipolar world.
To reap big from the full benefits of AfCFTA, which could be the world’s biggest free-trade zone by area when the treaty becomes fully operational by 2030, large cuts in tariff and non-tariff trade barriers among African nations will be needed, the IMF said in the report.
“These reductions could increase the median merchandise trade flow between African countries by 15% and median real per-capita GDP by 1.25% or more if combined with substantial improvements in the trade environment.”
The IMF report further stipulates that reforms along with the AfCFTA implementation could increase the median merchandise trade flow between African countries by 53% and the rest of the world by 15%. That could raise the median per-capita GDP in Africa by more than 10% and lift as many as 50 million people in the world’s poorest continent from extreme poverty by 2035.
Dr. Mukhisa Kituyi, who served as Secretary General United Nations Conference on Free Trade and Development (UNCTAD) in 2021 said the AfCFTA will help African states build trading capacities, through regional value chains, noting that African countries trading amongst themselves strengthens the continent’s ability to trade.
“Intra-African trade creates more employment opportunities in the source country than Africa trading with the rest of the world-more industrial and value added jobs,” said Dr. Kituyi.
He added that the treaty once it comes into full effect will foster competitiveness, removing domestic market distortions which have been adding a burden to domestic consumers because of too much protectionism.
Policy actions recommended in the report include a modernized social safety net that supports the most vulnerable during the transition to a higher growth trajectory and investment in human capital.
All 55 nations recognised by the African Union (AU) except Eritrea have signed to join the AfCFTA and 46 have ratified the accord, which is expected to genetate annual GDP of USD. 2.2 trillion.
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