Foundations for Progressive Customs, Monetary and Fiscal Union

The African Union's Agenda 2063 aims for a progressive customs, monetary, and fiscal union. While the AfCFTA has seen initial tariff offers, long-term goals require harmonizing external tariffs, converging diverse exchange rate regimes toward a common reference currency like the XDR, and implementing countercyclical fiscal rules to manage debt and commodity-driven revenue volatility.

• The African Continental Free Trade Area (AfCFTA) negotiations from 2019 to 2022 resulted in 43 out of 54 member nations providing tariff offers, either individually or via four customs unions. However, progress in liberalising tariffs for the 90% of product lines not classified as strategic or sensitive has been limited, with removal time frames extending over a decade.
• Achieving monetary union requires the convergence of varied exchange rate regimes. Currencies pegged to the euro in West and Central African franc zones show controlled inflation but limited monetary policy freedom and constrained real growth, partly because overvalued pegged currencies encourage import dependence and discourage domestic import substitution.
• The document proposes a transition toward an intermediate exchange rate regime, such as a managed float or crawling peg, referenced to a common currency like the globally trade-weighted Special Drawing Rights (XDR). This alignment would eventually allow for the establishment of a common central bank and a common currency.
• Many African countries face high external and domestic debt burdens driven by persistent fiscal deficits, which were worsened by the COVID-19 pandemic. To mitigate this and the volatility caused by reliance on export commodities, the document suggests countercyclical debt rules based on tax-to-GDP and investment ratios, alongside diversifying government 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} }