… and increase intra-African trade flows
Africa is entangled amidst challenging developments in the national and world economies.Let me say that the COVID-19 Pandemic, among others, led to quantitative easing in developed countries, which, in turn, led to growing money supply by as much as 40 percent in some jurisdictions,and, consequently, rising levels of inflation.
Shortly after that, the sanctions emerging from the conflict in Ukraine caused global supply disruptions
which in turn fueled inflation.
In both cases, interest rates also rose, and in developing countries, this led to higher debt servicing
payments and repayments as well as currency depreciations.
In some parts of Africa, inflationary pressures are also coming from drought situations, complemented
with energy shortages for those countries which depend on hydroelectricity.
Against this background, we can recall the advice of the late Milton Friedman and I quote him: “Inflation
is always and everywhere a monetary phenomenon.”
From this quote, you as the African Monetary authorities have the supreme duty to bring down the
levels of inflation across Africa, which are currently in the range of single digit to three-digit levels across our countries, the highest being 157.9 percent.
Bringing down inflation would result in improving the welfare of our people.
Equally important, reducing inflation would result in macroeconomic and financial stability and create
better conditions for inclusive growth and sustainable development, including the development of our
emerging stock, bond and mortgage markets.
As we strive to leverage big data and artificial intelligence to complement interest rates in bringing down
inflation, I am sure we are fully aware that effectively harnessing these is anchored on investments in
human capital, physical Infrastructure as well as affordable and reliable supply of energy.
This precondition brings us back to the agenda of promoting inclusive growth and sustainable
development.
Although this is not an area of activity for monetary authorities, they create the necessary conditions for
the effective execution of this agenda by authorities managing the real sector of the African economy.
In addition, reducing levels of inflation would create a conducive environment for effective implementation of the macroeconomic convergence criteria of the African Monetary Programme adopted by the Assembly of the African Union Heads of State and Government in 2022.
Africa requires effective and timely implementation of the macroeconomic convergence criteria to lay
the groundwork for the establishment of the African Central Bank, and immediately after that, a single
African currency.
The continent needs a single African currency to, among others, increase Intra-African trade flows, and
this is key to strengthening the African economy and making it more resilient to endogenous and
exogenous shocks.
The urgency in timely and effective implementation of the macroeconomic convergence criteria is
further driven by the fact that even before Africa reaches continental economic integration characterised with the establishment of the African Central Bank, the permanent membership of the African Union in the G20 provides prospects for the Chief Executive Officer of the African Monetary Institute, when it is operational, to be a member of the African Union delegations to the G20 Finance Ministers and Central Bank Governors meetings as well as the working groups of the G20 Finance Track.
When the African Monetary Institute transforms into the African Central Bank, the Governor will be
attending the G20 Finance Ministers and Central Bank Governors meetings since this is one of the financial institutions of the African Union, together with the African Monetary Fund, African Investment
Bank and the Pan African Stock Exchange.
A new development is the operationalisation of the African Credit Rating Agency, which will, among
others, contribute to the development of a Pan African capital market.Once more, I am calling on our monetary authorities to come up with practical measures to bring down levels of inflation across Africa and contribute to improving the welfare of Africans.
By Albert M. Muchanga
The author is African Union Commissioner for Economic Development, Trade, Tourism, Industry and Minerals
Dreaming of a single currency is like dreaming of a United States of Africa. Why do we spend time dreaming about unachievable things instead of focusing on what’s realistic and feasible?
It’s a crazy idea. Albert Muchanga should concentrate on promoting intra-African trade instead of dreaming of a single currency. It’s clear Muchanga has never taken any coursework on the economics of monetary union. What will the single currency be used for when there’s precious little trade among African countries?
How about explaining how “the sanctions emerging from the conflict in Ukraine caused global supply disruptions which in turn fueled inflation.” And which country has 157.9 inflation?
Please come up with a solution to end poverty instead of hallucinations
CRAZY !!!
ZESCO sending sm’s about location of residences
What are the scheming now ??
africa CANNOT have a single currency as long as there is no Central Bank independence. No politicians in Africa can manage their countrry’s economy without manipulating the currency. Zambia almost succeeded with Caleb Fundanga and the MMD but PF came in and in 2021 just before the elections, they printed money. A single currency in Africa will only work if it is based on the gold standard and not the US dollar. Meanwhile, for some of us, we already have an international single currency- CRYPTO.
Gaddaffi came up with one currency for the continent and backed it up with gold. He decided that his oil would be sold in the currency. The US started shaking in the knees at the prospect of the dollar being abandoned. They invaded Libya as AU chairman and usual sellout, Jacob Zuma gave them the green light for a no fly zone
The U.S. and other Western nations were alarmed by Muammar Gaddafi’s proposal to introduce a new currency, the “gold dinar,” for several strategic reasons:
The threat to Western Banking Systems: The use of a gold-backed currency could have disrupted the fiat currency system, which relies on currencies not backed by a physical commodity like gold. A successful implementation of this currency could have set a precedent for other regions, threatening the existing global financial order, especially the banking systems in the U.S. and Europe.
Clearly the U.S. and its allies saw Gaddafi’s new currency as a direct threat to the global economic and financial system dominated by Western powers.
The currency would have led to Economic Independence for Africa: Gaddafi envisioned a broader plan for African economic independence. He sought to create a unified African currency which would have reduced African nations’ reliance on Western financial institutions like the IMF and the World Bank. This could have lessened Western economic influence over Africa and made African economies less vulnerable to external pressures.
Good grief!
A single Currence in Africa is just wishful thinking. African want to be regarded as Gods with poor women dancing after them. They enjoy being surrounded by a multiple bodyguards, creating monarchs and enriching their families. Having their heads on currences is their symbol of power.
So true they are in it for their selfish goals. Not for development.
Firstly, any currency is backed by actual resources. The EU is having these same problems because this was not well thought out. Let me explain: countries that are net exporters will benefit from such a currency being weakened as it will increase volumes of trade while countries that are net importers will need such a currency to be strong to cheapen imports. Also, countries with more export-worthy resources will contribute more to the currency while those without, less. There is also the issue of geopolitical events that may affect this currency which may require decisive action in resolving these, such as wars, ultimately resulting in the need of one army to an extent. Now, see how complex it gets if this army is say compromised.
Stop reading this suggestion so narrowly. He only mentioned the unitary currency but as a politician he knows what goes with it. We all know that one currency, one army, leads to one country, and this is advantageous especially so for so-called Third World Countries because they stand to benefit from a united states-unlike the EU which may find it hard to see the mutual benefits of one government.
However the EU has been working towards that as is reflected in their laws. All countries in Africa have export-worthy resources. They are currently untapped because of lack of resources to exploit them but once united you will be able to find redundant resources in Mauritania, Malawi, Burundi which may look unattractive at present.
@St. Desperacius.. Our dependency on the US can be traced to the Bretton Woods Institutions created in 1944 at the behest of the United States and every dollar was supposed to be backed by a certain amount of gold which caused inflation in the US. Subsequently, President Richard decided to decouple the USD from the gold Standard which caused the USD to become a fiat currency.
@Eagle’s Eye – The background to the issue is well documented by yourself. But that stated, the questions need to be answered. What goal is this attaining? What happens to countries that benefit from a devalued currency compared to those that would benefit from a stronger currency? Is there economic parity? Do African states even trade with each other? The concept is only workable when a framework is set where each country is given objectives and yardsticks. The first step is to establish internal trade and manage external trade. As long as internal consumption is low, it is not workable.
Remember when Olusegun Obasanjo, Thabo Mbeki Bouteflika, Abdoulaye Wade and Hosni Mubarak ganged up to form NEPAD? It set out precisely to establish internal trade by spurring the construction of regional focused infra-structure to enhance intra-Africa trade.
The One Currency would benefit from an Africa enjoying Economic Growth and Development brought about by intra-Africa trade. We dont have that trade at the moment because of our neo-colonial mentalities.
Each country is a slave to a neo-colonial pattern of trade: Trade only with the ex-colonial master. Zambia doesnt sell its copper anywhere in Africa but to the UK and its network or Japan. DRC trades with Belgium, Ivory Coast trades with France etc. Africa is full of one product countries focusing on selling that produce to some ex-coloniser. I cant even call what they sell products because they are all raw materials.
NEPAD aimed to accelerate Africa’s economic growth by encouraging investment into intra Africa infra-, frastructure. It wanted to support industrialisation. With intra trade Africa would be more competitive in the global economy.
Mr. Mshanga sir with due respect these theories you are writing about such inflation, interest rates, global economy and so what and so what we have heard and read more than enough of them. What you need to talk about is our natural resources which are in the hands of foreigners. Until we take charge and full control of our natural resources we shall never never develop. Forget about covid 19 and ukraine war, we have alawys been poor even before these issues so its shallow thinking to attribute our poverty to these recent issues. No wonder we can not develop to have people like that in high positions
I totally agree with the author. A single African currency will: (a) facilitate and expedite cross-border transactions in financial assets—such as bonds, shares of stock and treasury bills, bonds and notes; (b) eliminate the exchange-rate risk to which African cross-border business operators and consumers are currently subjected; (c) lead to less time and money spent by cross-border travelers, buyers and business operators on currency exchanges across national borders; and (d) make it much easier for consumers and business operators to compare costs and prices of goods and services across the African region, since the costs and prices would be quoted in the same currency—the African kwacha (AK), for example.
Henry Kyambalesa, sorry you have got this absolutely wrong. I’m friends with some people who know you and I know you’re going to do as I am going to suggest. Reach out for this book “The Economics of Monetary Union”. It’s the authoritative text on this subject . I’m also recommending it to Albert Muchanga.
The author is Paul de Grauwe. He’s a Swiss/Belgian scholar at the London School of Economics.
[Gunner in Zambia] … there are some theorists who may be against Monetary Union and those who may be for it. If Paul de Grauwe is against it, I am for it. I like the way the Eurozone is operating under a single currency, the euro. As I get more information about de Grauwe’ views, try and read one of my books entitled International Trade: Theory, Strategy and Challenges.