Prepare for the fallout from the AfCFTA – IMF | Economic news

The International Monetary Fund (IMF) has called for country specific policies to limit the disruption that free trade under the African Continental Free Trade Area (AfCFTA) could pose to businesses and lives in Ghana and in the rest of the continent.

He said that although the agreement that liberalizing trade on the continent “is a game-changer” for intra-regional trade and productivity, it tends to create job losses and destabilize some businesses, d ‘where the need for fallback measures.

The fund’s chief economist, Dr Gita Gopinath, raised this concern during a virtual discussion with students from the University of Ghana, Legon and across the continent on the IMF’s latest edition on economics. World (WEO), released last month.

The event allowed Dr Gopinath, who is the first woman to hold the post, and the IMF to answer questions from the virtual audience on the key findings of the report, which contains the fund’s latest forecast on the global economy.

Domestic policy

While praising the AfCFTA, the fund’s chief economist said trade deals over the years are known to contain consequences that countries under the current regime must anticipate.

“What we know from trade deals in the past is that you definitely have benefits for a lot of people; it increases productivity and lowers the prices at which consumers buy their products. “

“But, of course, we also know that it can create disruption in terms of job loss for some people,” she said.

“So it is very important to combine this policy with national policies to make sure that you are protecting the most vulnerable when such policies are put in place,” she added.

Advantages

Beyond the need to prepare for the consequences, Dr Gopinath said the agreement that created a common market for Africa was “an impressive achievement” that promised enormous benefits for people and economies.

She said that while intra trade in other regions was around 25 percent, trade between African countries lagged around 12 to 15 percent of their imports.

This, she said, could be further explored when the AfCFTA is fully implemented.

The IMF chief economist added that the scope of goods covered by the agreement meant that African companies could benefit from expertise in manufacturing and added value to help them increase their capacities and extend their reach.

Climate change

Responding to a question on how the world could help Africa contain the impact of climate change on its economies and its people, Dr Gopinath said increased investment in green finance was essential.

She said the public sector needs to create an enabling environment to attract investment in renewals and energy efficiency mechanisms.

She said social safety nets should also be instituted to enable vulnerable people in society to consume environmentally friendly sources of energy which could prove costly in the meantime.

WEO conclusions

Meanwhile, the fund expects growth in Sub-Saharan Africa (SSA) to rebound from a contraction of 2.6% in 2020 to 3.2% this year before rebounding to 3.9%.

He reiterated his earlier warning that the pandemic must reverse the progress made in reducing poverty over the past two decades.

“Nearly 90 million people will likely fall below the extreme poverty line in 2020 and 2021.”

“In all regions, vulnerabilities, economic structure and growth trends before the crisis, along with the severity of the pandemic and the size of the policy response to combat the fallout, are shaping the patterns of recovery,” said the January edition of WEO.