Trade in­te­gra­tion vi­tal to macroe­co­nomic con­ver­gence

The Pak Banker - - COMPANIES/BOSS -

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.

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