African Unification Front
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Back to Press Documents
AUF PRESS RELEASE
Date Issued: May 11, 2001
Dear All,
Now that the African Union is an inevitable, it is time to flesh out the details of how it should work. One of the key components of the Union Act calls for the establishment of the African Central Bank.
The AUF envisions the Bank as the instrument to manage the currency reserves of al of the Africa's state central banks and encourage international acceptance of the single African currency.
In order to finance the establihment of a common external tariff and a free market in Africa, the Union needs the African Central Bank to monitor trade flows, collect decentralized and geographically dispersed data and provide uniform organizational information to African trade organizations.
Monetary stability and economic integration will help to prevent disruptions in trade resulting from fluctuations in currency exchange rates. Ideally the African Union will institute a single currency that is necessary as replacement for the blocked currencies of African states.
The African Central Bank will strengthen coordination of monetary policies among African states and study and develop the infrastructure and procedures required for the conduct of a single monetary policy.
Africa's Required Reserves (money to be deposited at the African Central Bank by ALL of Africa's credit institutions for the purpose of implementation of the national monetary policy), fall into two categories: reserves of domestic currency; and reserves of foreign currency. The African Central bank will have set the interest rate remunerated on banks' compulsory reserves for domestic currency liabilities at a certain range, perhaps from 3.0% to 6.0% and the interest rate remunerated on banks' compulsory reserves built for foreign currency liabilities from 4.0% to 7.0%.
The Central Bank would create a mechanism to limit the fluctuation in the bilateral exchange rates against the US dollar to perhaps ±2.25%. The African Central Bank's "Exchange Control Authority" (not necessarily with that exact name) would maintain price stability. In order for it to work, the Exchange Control Authority must be independent of state and community authorities.
The single currency would eliminate the need for exchange rates among Africans and would put Africans in a stronger position to maintain parity with international currencies.
The advantages of having such a system as expalined above are numerous. The Bank will formulate a general framework of legal, accounting, and regulatory policies and institutions and procedures to assess foreign investment interest, including:-
· evaluation of direct investment in Africa in order to guarantee that any investment has a direct benefit to Africa, such as increased
employment, and
· regulation of the movement of foreign capital in Africa.
The tangible benefits for say rural communities in Africa is really great. Why do I say this? Well foreign banks (European and American especially) hoard a significant percentage of all credit destined for African agriculture and real estate programs (eg. for building tourist facilities, irrigation projects etc)...so basically moneys in the millions of dollars.
In Africa, banks charge only between 4 and 6% interest on most development and aid projects (but there are many exceptions). As a consequence of international banking practice, African farmers are subsidizing the administrative structures of banks around the world...the African farmers money generates interest while it whirls around the speculators firms and while it sits in the banks in Europe and America.
With the consolidation of Africa's credit system, the farmers won't have to make foreign banks rich. Moreover, it will be easier for Africans to use syndicated credit in order to generate budgets large enough to finance really expensive projects such as a space program or a massive environmental clean up, without increasing taxes or borrowing aid.
Best Regards,
Dan Kashagama
General Secretary
African Unification Front
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