African central bank governors discuss AU financial institutions

Governors of African Central Banks convened in Kigali Serena Hotel to discuss issues concerning the creation of three African Union (AU) financial institutions. This comes after the AU resolution to form the African Monetary Fund (AMF), African Central Bank (ACB) and the African Investment Bank (AIB). The governors under the Association of African Central Banks (AACB) yesterday deliberated on the objectives and conditions necessary for the proper operation of the institutions. In his presentation, Chicot Eboue, a consultant from the Nancy 2 University of France, indicated that the ACB would help in promoting price stability while meeting developmental challenges of Africa. He said that the prerequisite for the development and functioning of the ACB is the harmonization of monetary policies in the African countries. This will include real interest and exchange rates alignment and convergence of productivity of labour and capital. Eboue noted that it will also require similar real economic growth rates, similar and higher ratio of investment to Gross Domestic Product (GDP). His idea was seconded by the governors who agreed that when established, the ACB would solely issue and manage Africa’s single currency and monetary authority of the continent’s economy. The AIB would help in addressing the investment needs of Africans by financing the investment needs of African countries. Another consultant, Claude d’Almeida, in his presentation noted that Africa needs enough resources for investment if it is to address its huge financial deficit. He said that the AIB would address this issue by mobilizing external and internal resources to allocate direct loans for special projects in the sectors of infrastructure, energy and transport thus speeding up development. D’ Almeida suggested that finances to establish the AIB should be mobilized through member countries, regional economic groupings, the private sector and Africans in Diaspora through ownership of equity in the bank. Some governors shared the view of not allowing non-Africans to own shares in the AIB saying it would lead to duplication of its activities. They believe it would function like the African Development Bank which has not fully supported the private sector. Tumusime Mutebile, the Bank of Uganda Governor was of the view that forming a financial institution with roles similar to those of the African Development Bank (ADB) was unnecessary. “It does not mean that we create new institutions just because there are investment needs,” said Mutebile, adding that “If we have money let us invest it through the ADB.” Ends

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African central bank governors discuss AU financial institutions