Africa: IMF Emphasizes Robust Policy Framework for Intra-African Trade Success

The International Monetary Fund (IMF) has highlighted the significance of a robust policy framework that ensures macroeconomic stability and fosters a favorable business environment for the success of intra-African trade.

This insight was presented in an IMF report titled “Trade Integration in Africa: Unleashing the Continent’s Potential in a Changing World.”

The report indicates that implementing the African Continental Free Trade Area (AfCFTA) plans, aimed at lowering both tariffs and Non-Tariff Measures (NTMs), alongside substantial improvements in the trade environment, has the potential to significantly boost Africa’s intraregional and overall merchandise trade.

Moreover, the strengthening of the trade environment would also positively impact services trade, further augmented by services trade liberalization.

The successful implementation of AfCFTA and improvements in the trade environment would also support integration into Global Value Chains (GVCs). This, in turn, would create opportunities for enhancing manufacturing, achieving economies of scale, promoting economic diversification, and stimulating improved economic dynamism.

The report emphasizes that advancing towards making AfCFTA a comprehensive trade agreement, including regulatory alignment on goods and services provision, would unlock additional trade opportunities.

However, the IMF warns that efforts to overcome longstanding barriers to integration, such as the use of import tariffs for import substitution or revenue generation, need to be grounded in a strong policy framework that ensures macroeconomic stability and fosters a favorable business environment.

To establish AfCFTA as a deep trade agreement, policymakers must complete the implementation of Phase I and advance negotiations and implementation for Phase II of the agreement.