Foundations for Progressive Customs, Monetary and Fiscal Union

The African Union is pursuing a long-term goal of customs, monetary, and fiscal union. While the AfCFTA has seen initial tariff offers, progress in liberalising intra-African tariffs remains limited. Achieving monetary union requires the convergence of diverse exchange rate regimes toward an intermediate managed float or crawling peg referenced to a common currency like the XDR. Fiscal stability is hindered by persistent deficits and debt burdens, necessitating countercyclical debt rules and economic diversification to reduce reliance on volatile commodity exports.

• The first phase of AfCFTA negotiations (2019-2022) resulted in 43 out of 54 member nations providing tariff offers, though progress in liberalising tariffs for the 90% of product lines not classified as sensitive or strategic has been limited.
• African currency regimes vary from pegged currencies in West and Central Africa to freer floating currencies. Pegged currencies offer controlled inflation but limit monetary policy tools and may constrain real growth by encouraging import dependence and discouraging domestic import substitution.
• To achieve monetary union, the document proposes converging African currency regimes toward an intermediate managed float or crawling peg referenced to a common currency, specifically the globally trade-weighted Special Drawing Rights (XDR).
• Most African countries face high external and domestic debt burdens driven by persistent fiscal deficits, which were exacerbated by the COVID-19 pandemic and contribute to a depreciation-inflation cycle.
• To enhance fiscal capacity and reduce procyclical revenue volatility caused by dependence on export commodities, the document suggests implementing countercyclical debt rules based on tax-to-GDP and investment ratios, alongside diversifying domestic production and revenue sources.

APA

South African Institute of International Affairs (2024). Foundations for Progressive Customs, Monetary and Fiscal Union. https://saiia.org.za/research/au-lays-foundations-for-progressive-customs-monetary-and-fiscal-union/

Chicago

South African Institute of International Affairs. Foundations for Progressive Customs, Monetary and Fiscal Union. 2024. https://saiia.org.za/research/au-lays-foundations-for-progressive-customs-monetary-and-fiscal-union/.

Wikipedia

{{cite report |author=South African Institute of International Affairs |title=Foundations for Progressive Customs, Monetary and Fiscal Union |date=8 March 2024 |url=https://saiia.org.za/research/au-lays-foundations-for-progressive-customs-monetary-and-fiscal-union/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{southafricaninstituteofinternationalaffairs2024foundations, author = {{South African Institute of International Affairs}}, title = {{Foundations for Progressive Customs, Monetary and Fiscal Union}}, institution = {South African Institute of International Affairs}, year = {2024}, month = mar, url = {https://saiia.org.za/research/au-lays-foundations-for-progressive-customs-monetary-and-fiscal-union/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }