African countries are making tremendous efforts towards sound macroeconomic policy convergence on inflation, budget deficits and economic growth rates, but need to mainstream regional monetary and macroeconomic objectives in their national development strategies, according to a new United Nations report.
“African countries are experiencing enormous difficulties in achieving the desired macroeconomic convergence criteria set by Regional Economic Communities (RECs),” the report, Assessing Regional Integration in Africa (ARIA III), says.
“They should be more responsible in macroeconomic policy making and set their own priorities for exchange rates, fiscal policies and interest rates,” it concludes.
ARIA III, the third in a series of reports providing empirical evidence on the progress and prospects of African integration by measuring the level and rate of convergence of macroeconomic and financial components on the continent, is to be released in full on 21 November by the UN Economic Commission for Africa (ECA) and the African Union.
RECs, like the Economic and Monetary Community of Central Africa (CEMAC) and West African Economic and Monetary Union (UEMOA), vary considerably on the overall trend and its components, as does country performance, but the RECs have done better at controlling inflation and budget deficits, according to the report.
But they have not done so well at reducing external debt. Economic growth rates are also generally encouraging across Africa. Integration blocs that already exist as monetary unions tend to do better in terms of macroeconomic policy convergence. A number of RECs are also actively promoting step-by-step approaches towards monetary and financial integration within their communities or sub-regions.
The report indicates that CEMAC and UEMOA, among others, have done well in maintaining single digit inflation, but the remaining countries performed poorly partly due to negative external shocks and large budget deficit with external debt ratios as a percentage of gross domestic product still remaining as high as 70 per cent in some countries, lack of reliable statistics and poor growth performance.
The convergence criteria established by the RECs include agreed targets such as budgetary balance, inflation and public debt.