Trade integration vital to macroeconomic convergence
AfDB has launched a policy-paper series on regional integration. A new policy paper by the African Development Bank carries the importance of trade integration to macroeconomic convergence.
Published in March 2013, the report titled "Supporting Macroeconomic Convergence in African regional economic communities" recommends to link the roadmap in the implementation of macroeconomic convergence to progress made in trade integration.
In so doing, the AfDB report comes with some revisions to the application of macroeconomic convergence, building on the lessons from the experience in implementing the concept in Europe and elsewhere, with a view to ensuring a balance between the financial sector and the real sector programs. "Indeed, the macroeco- nomic convergence achieves its highest relevance when it is mainstreamed into regional efforts towards development and poverty reduction," said Jian Zhang, principal macroeconomist at the Regional Integration and Trade Division, AfDB.
The paper also highlights the important role of fiscal policy and fiscal convergence in facilitating macroeconomic convergence. For the AfDB, given that upfront incentives as well as implementation capacities are low, surveillances should be more for promotional purposes - identifying specific country challenges and supporting them to improve performance - rather than for sanctioning purposes. In order to achieve higher performance, the paper also recommends increasing the degree of national and regional commitment and ownership, availing mechanisms to cushion adjustment costs and seeking technical and financial support for capacity building and investments.
In that regard, the report focuses on the important role of development partners, while acknowledging that African countries and regional economic communities (RECs) have the primary responsibility to ensure that the conditions for successful monetary unions exist. The AfDB, based on its mandate and comparative advantage as catalytic financier, knowledge broker and partner, could leverage its ongoing support for regional integration and trade, and financial sector development as well as its operations in the sector departments. The report recommends that the AfDB draw up specific support programs for each REC, based on a detailed assessment of the individual REC programs and consultations with relevant stakeholders.