Africa’s macro-economic vulnerabilities, ranging from fiscal fragility and commodity dependence to the increasing frequency of climate shocks, highlight the urgent need for a predictable, African-led financial safety net. In response, the African Union (AU), with technical support from the African Development Bank (AfDB), has endorsed the development of the African Financial Stability Mechanism (AFSM) and is advancing the complementary design of the proposed African Stability and Growth Pact (ASGP).
This integrated paper outlines a two-pillar architecture designed to strengthen Africa’s ability to manage shocks, avoid defaults and promote credible fiscal governance:
i) The AFSM is envisioned as Africa’s regional financing arrangement (RFA) – a concessional liquidity facility anchored in the AU’s legal and institutional frameworks and expected to evolve towards a treaty-based footing over time (see Annexure 7 for proposed alternative institutional pathways). The mechanism draws on best practices in global RFAs but is tailored to the continent’s institutional realities. Instruments include refinancing loans, market support operations and guarantees.
ii) The ASGP, still under consultation, is proposed as a flexible fiscal governance framework that promotes country-specific fiscal rules, peer accountability and tailored paths to sustainability. Unlike harmonised convergence pacts in other regions, the ASGP explicitly avoids uniform targets and instead supports nationally owned fiscal strategies reviewed through African institutions like the Collaborative Africa Budget Reform Initiative (CABRI) and the African Peer Review Mechanism (APRM).
The French translation can also be accessed below.
