The Fund will support African countries and the private sector to effectively participate in the new trading environment established under the AfCFTA. African States that suffer tariff revenue loss for implementing the Continental free trade agreement stand to benefit as the African Continental Free Trade Area (AfCFTA) Secretariat and African Export-Import Bank (Afreximbank), on Wednesday in Cairo, signed the $10 billion AfCFTA Adjustment Fund.
The resources required for the Adjustment Fund over the next five-10 years are estimated at $10 billion. Afreximbank on Wednesday committed $1 billion towards the AfCFTA Adjustment Fund. The Fund will support African countries and the private sector to effectively participate in the new trading environment established under the AfCFTA.
Also to benefit from the fund are banks, start-ups, small and medium enterprises, and African youth among others. The two institutions signed an agreement relating to the management of the base fund of the AfCFTA Adjustment Fund.
The agreement was signed by Benedict Oramah, president and chairman of the board of directors of Afreximbank and Wamkele Mene, secretary general of the AfCFTA Secretariat, in the presence of Aly Basha, Minister Plenipotentiary (Trade) of the Arab Republic of Egypt as well as African bankers and captains of industry.
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 Adjustment Fund to support AfCFTA State Parties to adjust to the new liberalised and integrated trading environment established under the AfCFTA Agreement.
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.
Speaking during the signing ceremony, Wamkele Mene, Secretary General of the AfCFTA Secretariat, 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 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,” said Mene.