The African Union (AU) Summit has approved the creation of an African Monetary Fund (AMF), with an initial capital of US$22.64 billion, to promote economic development in Africa.
The Fund will work to correct balances of payment positions across Africa, mainly caused by low export of commodities and high import volumes which have exerted a negative burden on currency stability.
African Union Commissioner for Economic Affairs Anthony Maruping said the AMF was being established to help tackle macro-economic matters in Africa.
“It is not true that there has been an economic leadership gap in Africa,” Maruping told PANA. “We are creating an African institution because the UN Economic Commission for Africa is a global body.”
The Fund is expected to create a proper lending system in Africa to correct the balance of payment imbalances within the continent and ensure exchange rate stability.
It will also work towards African currency convertibility, ensuring that currencies across Africa can be exchangeable.
The Fund will promote monetary cooperation to achieve Africa’s desires to achieve economic integration, and will also try to speed up economic development within Africa.
To achieve this objective, the Fund will design formulas to lower the debt burden and other debt management policies in Africa and also facilitate the development of the African financial markets.
Its authorised share capital is denominated in 100 dollars per share. The callable share capital of the Fund has been set at 50% of the authorised share capital, which is US$11.32.
The paid up share capital would be at least 50% of the callable share capital – US$5.66 billion denominated in 100 dollars.
South Africa is expected to get the highest allocation of the 500,000 shares, with an 8.05% share, translating into nearly US$1billion, followed by Nigeria, at 7.94%, translating into US$899 million in capital contributions.
Egypt, Africa’s third largest economy, is expected to subscribe for 6.12% of the shares, contributing US$693 million, followed by Algeria, which is to be allocated 4.59% of the shares, at US$520 million.
Ethiopia comes up as Africa’s fifth largest economy with a subscription rate of 3.41% valued at US$386 million.
The Democratic Republic of Congo (DRC) will get 2.79% of the shares with US$316 million followed by Kenya with 2.5% valued at US$283 million.
Africa’s poorest economy, South Sudan, will contribute just US$64 million for just 0.57% while Cape Verde and Comoros will get US$112 million and US$110 million.
Each of the countries is expected to make payments of its subscription at once or in four installments of 25% of the amount. The payment period would last for between the initial four years to eight. The first payments are expected 60 days after the AMF treaty enters force.
Countries are also allowed to issue bonds in US dollars which are non-interest earning. The Fund will invest its fund in the international financial markets and is expected to maintain a sound credit rating, according to the Treaty, seen by PANA in Malabo, Equatorial Guinea.
The AMF will be based in Yaounde, Cameroon.