African leaders demand financial systems reform; launch ‘Africa Club’ at 37th African Union Summit

February 28, 2024
Posted by: OptimizeIAS Team
Category: DPN Topics

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African leaders demand financial systems reform; launch ‘Africa Club’ at 37th African Union Summit

Subject: IR

Section: Int. Grouping

Context:

The 37th African Union Summit concluded on February 18, 2024, in Addis Ababa, Ethiopia, with discussions among heads of state and government members on key issues like education, climate change, and the economy.

Details:

Despite Africa’s minimal contribution to the global climate crisis, the continent faces significant adverse effects from climate change.
African nations have been diverting public funds to mitigate these impacts, often at the expense of other critical areas such as achieving the Sustainable Development Goals (SDG) set by the United Nations.
The summit highlighted the growing need for improved access to quality financing for climate and development initiatives in developing countries.
This includes calls for reforms in the global financial system to better meet the financing needs of these countries, emphasizing the importance of adjusting the interconnections among international financial institutions, economic governance, and financial regulatory frameworks.
The AU is the most recent recipient of ‘full member status’ to the Group of 20 (G20), pointing to the continent’s growing voice on the global stage.
The proposals at the AU Summit underscored the bloc’s vision for addressing economic frameworks that no longer serve their interests and needs.

Key highlights related to financial system reforms from the AU summit:

Initiatives	Description
Launch of Alliance of African Multilateral Financial Institutions, ‘Africa Club’	This alliance, comprised of African-owned and controlled financial institutions,aims to enhance Africa’s role in the global financial system. It intends to align its operations with the Sustainable Development Goals (SDGs) and the African Union’s Agenda 2063, introduce innovative financial solutions, facilitate debt management discussions, and promote collaboration to meet the unique financial needs of African nations. Members of the ‘Africa Club’ include prominent institutions like the African Export-Import Bank, Trade and Development Bank, Africa Finance Corporation, African Reinsurance Corporation, African Trade and Investment Development Insurance, Shelter Afrique Development Bank, and ZEP- RE (PTA Reinsurance Co).
Establishing African Union Financial Institutions	At the 37th African Union (AU) Summit, leaders from the continent reiterated the longstanding need for establishing an African Monetary Union. This ambition is proposed to be realized through the creation of three key AU financial institutions:The African Central Bank, the African Monetary Fund, and the African Investment Bank. Additionally, there has been discussion on assessing the feasibility of creating a Pan-African Stock Exchange. Despite the potential benefits these institutions could offer, their establishment has faced significant challenges over time.
African leaders’ demands for financial system reforms	In recent years, including in 2023, African Union (AU) member leaders have emphasized the need for reforms in the global financial system to correct structural imbalances. Prior to the 2024 AU Summit, these demands were summarized, highlighting several key areas for improvement.African leaders are calling for solutions to the continent’s debt crisis, an increase in grants and concessional funding to Africa, and the rechanneling of Special Drawing Rights (SDR) issued by the International Monetary Fund (IMF) to African financial institutions. Additionally, they seek to enhance Africa’s influence and participation in global decision-making bodies and commit to an ambitious agenda for green growth across the continent. These demands align with initiatives like the Nairobi Declaration and the priorities of the Vulnerable 20 group of countries, aiming to improve finance access and quality for the Global South.
Joint taskforce on international taxation	Launched at COP28, Dubai, UAE Launched jointly by- Antigua and Barbuda, Barbados, France, Kenya, Spain, and the African Union Commission, with the European Commission as an observer. It is intended to ensure that all economic sectors, particularly those with a low tax burden, contribute a fair share to climate financing according to respective greenhouse gas emission levels. The taskforce is the result of discussions initiated at the June 2023 Paris Summit for a New Financing Pact and the September 2023 African Climate Summit, held in Nairobi.