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How the African Continental Free Trade Area Agreement can boost intra-African trade by 53% and benefit the continent

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African countries stand to benefit significantly from increased trade integration under the African Continental Free Trade Area (AfCFTA), according to the International Monetary Fund (IMF). The IMF estimates that removing barriers to trade could boost intra-African trade by 53%, while removing both trade and non-trade tariffs would increase real GDP per capita by over 10% in the average African country.

The IMF also believes that increased trade integration could help reduce poverty by between 30-50 million people on the continent. The AfCFTA is one of the flagship projects of the African Union’s Agenda 2063 and aims to increase intra-Africa trade, value-added production, and trade across all sectors of the continent’s economy. With 55 African countries having already signed onto the free trade pact, and 46 having ratified the agreement, it is expected to be the world’s largest free trade area by population and with a combined GDP of $3tn.

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For the most part, the IMF recommends that African countries work together with stakeholders and financial institutions to reduce trade barriers from 6% to 1% and remove non-trade barriers to increase the success of the continental free trade area.

The IMF also calls for investment in physical and human capital, the creation of a business-friendly environment, and the introduction of a social safety net that supports the most vulnerable during the transition to higher growth. The report also notes that improvements in the trade environment would boost Africa’s trade with the rest of the world, with exports from Africa to the rest of the world increasing by 29% and imports from the rest of the world by 7%.

In addition to the IMF, Dr Ngozi Okonjo-Iweala, Director-General of the World Trade Organisation (WTO), has urged African countries to reduce the cost of trade and make the AfCFTA work to strengthen regional economic activity.

She emphasised that trade reforms and greater trade integration are critical to reducing extreme poverty and achieving economic prosperity across the continent. Despite the potential benefits of the AfCFTA, it is important to note that the pace of progress and the impact on households and workers may vary across countries.

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