African nations plan to raise about $8 billion for a fund to help offset revenue losses for countries that lower cross-border tariffs, as part of a continent-wide free-trade agreement.
The African Export-Import Bank, or Afreximbank, previously provided $1 billion for the fund after the African Union set it up to help cushion sudden revenue losses and encourage participation. The free-trade area went into effect on Jan. 1.
“The $1 billion made available by Afreximbank will be used to leverage funding from other multilateral development-finance institutions, export credit agencies, commercial banks and donors,” Afreximbank said in an emailed response to questions on Thursday. “About $8 billion is expected to be mobilized” to meet the level of support required by countries, it said.
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The world’s biggest free-trade area aims to bolster intra-African trade by lowering or eliminating cross-border tariffs on 90% of goods, facilitating the movement of capital and people, promoting investment and paving the way for a customs union.
Trade within the continent, which stands at more than $350 billion a year, is expected to grow by 52% in the next decade, according to David Luke, coordinator of the African Trade Policy Centre at the United Nation’s Economic Commission for Africa.