Integrated discussion paper From crisis resolution to crisis prevention

This discussion paper proposes a two-pillar financial resilience framework for Africa: the African Financial Stability Mechanism (AFSM), a concessional liquidity facility for rapid response to macro-economic and climate shocks, and the African Stability and Growth Pact (ASGP), a flexible, peer-reviewed fiscal governance framework. The AFSM is intended to be capitalised via a blend of SDRs, member contributions, and DFI support, while the ASGP encourages nationally tailored fiscal rules. The two are integrated such that AFSM access is linked to ASGP participation, aiming to reduce moral hazard and increase investor confidence through a phased roll-out starting with a 2025-2027 pilot.

• The African Financial Stability Mechanism (AFSM) is proposed as a regional financing arrangement (RFA) and concessional liquidity facility designed to provide rapid financial support during macro-economic shocks, including those induced by climate events. It is not intended to fund long-term climate mitigation or adaptation projects.
• The African Stability and Growth Pact (ASGP) is a proposed fiscal governance framework that avoids uniform targets in favor of nationally owned, context-specific fiscal rules. It includes flexibility for resilience investments, allowing for deviations of up to 2% of gross domestic product (GDP).
• The AFSM will utilize a menu of liquidity tools, including concessional liquidity loans for short-term budgets, market support operations to restore investor confidence, guarantees to attract private capital, and a climate shock liquidity facility for rapid-onset disasters or drought index triggers.
• Access to AFSM liquidity is proposed as a tiered system based on a country's commitment to the ASGP: Tier 1 provides full access for those meeting benchmarks; Tier 2 provides conditional access for those on a reform path; and Tier 3 provides restricted access for those outside the coordination framework.
• The AFSM is expected to be capitalised through a blended finance model. Core capital sources include Special Drawing Rights (SDRs), paid-in or callable member contributions, and support from African development finance institutions (DFIs) such as Afreximbank, TDB, and BOAD, as well as sovereign wealth funds (SWFs) and philanthropic partners.
• The operational governance of the AFSM-ASGP nexus will be streamlined through a single Joint Technical Committee (JTC) and a lean secretariat, leveraging existing institutions such as the African Union Commission (AUC), AfDB, APRM, CABRI, and UNECA to avoid duplication.
• A phased roll-out is recommended, starting with a piloting phase from 2025 to 2027 involving five to seven countries, followed by institutionalisation from 2028 to 2030, and eventual AU treaty endorsement after 2030.
• The document distinguishes between the foreign exchange-based capital needed for the AFSM and the domestic resource mobilisation tools used to support the ASGP, such as local-currency debt market deepening and green guarantee facilities.
• Success of the framework will be measured by metrics such as the speed of AFSM disbursement, reduced market spreads for programme countries, improved budget credibility under the ASGP, and the adoption of tailored national fiscal rules.

APA

FSD Africa (2025). Integrated discussion paper From crisis resolution to crisis prevention. https://fsdafrica.org/wp-content/uploads/2026/02/801131-ACF-AFSM-paper-Eng-05A.pdf

Chicago

FSD Africa. Integrated discussion paper From crisis resolution to crisis prevention. 2025. https://fsdafrica.org/wp-content/uploads/2026/02/801131-ACF-AFSM-paper-Eng-05A.pdf.

Wikipedia

{{cite report |author=FSD Africa |title=Integrated discussion paper From crisis resolution to crisis prevention |date=2025 |url=https://fsdafrica.org/wp-content/uploads/2026/02/801131-ACF-AFSM-paper-Eng-05A.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fsdafrica2025integrated, author = {{FSD Africa}}, title = {{Integrated discussion paper From crisis resolution to crisis prevention}}, institution = {FSD Africa}, year = {2025}, url = {https://fsdafrica.org/wp-content/uploads/2026/02/801131-ACF-AFSM-paper-Eng-05A.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }