The African Continental Free Trade Area (AfCFTA) is gearing up for the first disbursement of $1 billion from its $10 billion Adjustment Fund, a key financial mechanism aimed at supporting member states as they transition to the continental free trade area.
The fund is designed to help countries adjust to the potential revenue losses and structural changes associated with tariff reductions and the implementation of AfCFTA agreements.
As part of a press briefing ahead of the Biashara Africa Summit in Rwanda, AfCFTA Secretary-General Wamkele Mene confirmed that the first tranche of disbursements will be available early next year, with governments and private players eligible to apply emphasizing the flexibility of the fund in addressing a broad range of economic needs.
The Biashara Afrika Summit, hosted in Rwanda, seeks to attract investments to ensure the successful implementation of the AfCFTA, re-echoing the region’s commitment to making the free trade area a cornerstone of Africa’s economy.
Wamkele Mene stressed that the fund’s operations would remain independent to avoid any political interference.
“It is up to the fund to decide how to deploy the capital. While we are a board member, we want it to operate at arm’s length to maintain operational independence,” he noted.
The AfCFTA Adjustment Fund is a financial tool designed to help member countries manage the short-term challenges that may arise from the implementation of the free trade area.
This includes addressing revenue losses from tariff reductions, capacity-building initiatives, and infrastructure upgrades needed to facilitate trade. The fund is part of a broader strategy to ensure that countries, especially least-developed nations, can participate fully in AfCFTA and take advantage of the long-term economic benefits it promises.
The first tranche of $1 billion will be disbursed to member states to support them in preparing for the implementation of tariff liberalization, building trade-related infrastructure, and enhancing their participation in intra-African trade. This disbursement is expected to help alleviate some of the immediate financial pressures that countries may face during the transition period.
The total Adjustment Fund is targeted at $10 billion, which will be raised over time through contributions from AfCFTA member states, development partners, and international financial institutions. The fund will be used over the coming years to help countries adjust economically and structurally to the new trade environment created by AfCFTA.
The fund will also support investments in trade-related infrastructure, such as roads, ports, and logistics systems, that are essential for the smooth flow of goods across borders. Additionally, it will focus on capacity building to improve the ability of governments and businesses to take full advantage of AfCFTA opportunities.
The fund is particularly important for least-developed countries (LDCs) and countries that rely heavily on tariff revenues. These nations may face short-term fiscal challenges due to the reduction of tariffs under AfCFTA. The disbursement of funds will help mitigate these challenges and allow these economies to adapt without major disruptions.
