A new report by the United Nations Economic Commission for Africa (UNECA) highlights growing fiscal pressures threatening to stall progress on the African Continental Free Trade Area (AfCFTA), even as governments attempt to navigate post-pandemic economic turbulence.
Titled “Advancing the Implementation of the African Continental Free Trade Area: Proposing Transformative Strategic Actions,” the report underscores the widening fiscal deficits, rising public debt, and weakening global demand, which are squeezing Africa’s fiscal space and limiting the policy flexibility needed for trade-led transformation.
Africa’s average fiscal deficit is projected to increase slightly from -4.5% in 2023 to -5.0% in 2024, before easing to -3.9% by 2026. Contributing factors include rising food prices, sluggish export revenues, and capital outflows, especially from China’s slowing demand. North Africa is expected to see the sharpest deficit increase, from 4.1% to 7.6% of GDP, due to declining tax revenues and higher debt servicing. Southern Africa faces persistent challenges from elevated debt repayment obligations. West Africa, led by Ghana, Nigeria, Côte d’Ivoire, and Sierra Leone, shows marginal improvement, reducing the regional deficit to 4.4%. Central and East Africa are forecast to post the lowest deficits, bolstered by recovering commodity prices and stable fiscal indicators.
While the AfCFTA holds immense potential to foster intra-African trade, boost industrialisation, and reduce dependence on external markets, UNECA warns that limited fiscal flexibility could hinder policy execution. Public debt burdens in many economies are curtailing governments’ ability to fund critical infrastructure, trade facilitation, and SME development.
To maximise AfCFTA’s transformative impact, UNECA urges African governments to adopt a comprehensive and coordinated reform strategy. Simplify Tariff and Non-Tariff Barriers ie Fast-track the removal of trade restrictions and empower national AfCFTA implementation committees. Strengthen Industrial Policy by developing regional value chains in agro-processing, pharmaceuticals, and green energy. Invest in Climate-Smart Trade, thus mobilise $22.4 billion for clean energy and carbon-neutral industrial practices by 2040. Digitise Customs and Trade Systems, ie deploy blockchain, e-processing, and AI to reduce trade bottlenecks. Gender-Inclusive Trade Policies to create incentives for women-led businesses and female entrepreneurs to participate in cross-border trade and harmonise regulations to align policies across regional economic communities to foster a more predictable investment environment.
The report calls for greater domestic revenue mobilisation, sustainable debt strategies, and countercyclical fiscal policies to stabilise economies and unlock AfCFTA’s full benefits. Without bold reforms, UNECA warns, Africa risks stalling its economic recovery and trade ambitions in the face of mounting macroeconomic headwinds.
“The AfCFTA presents a historic opportunity to drive structural transformation across Africa,” UNECA states. “But success hinges on coherent fiscal policies, sustainable investments, and bold reforms.”
For investors, policy-makers, and private sector actors, the UNECA report signals a pivotal moment: to move from aspirational policy to strategic execution, even as the continent balances economic fragility with an ambitious trade vision.
