Holding reserves in foreign banks attracts negative rates of interest – Akufo-Addo tells African leaders

President Nana Addo Dankwa Akufo-Addo has proposed to African leaders to decide that a minimum of 30% of the reserves of each African country, sovereign reserves, should be invested in the African multilateral institutions.

The President noted that most African countries hold their reserves in foreign banks, attracting largely negative rates of interest.

Mr Akufo-Addo said these when he delivered the keynote address at the Heads of State and Government’s Dialogue on Saturday, 17 February 2024, at the 37th Ordinary Session of the Assembly of Heads of State of the African Union (AU), on the theme: ‘Establishing African Union Financial Institutions in the Context of Africa’s Agenda for Global Financial Architecture Reform.’

“We are all in agreement that the way the global financial architecture works is not in our [Africa’s] favour, and there is the need to make some fundamental and systemic reforms. But making the reforms also requires that we [Africans] also take some steps that will assist us to have a greater impact in the way in which our economies are financed.

“As it stands, virtually all our countries hold our reserves in foreign banks, attracting largely negative rates of interest. The proposal that I am going to put to the plenary is that we should decide that a minimum of 30% of the reserves of each one of us, sovereign reserves, should be invested in the African multilateral institutions,” President Akufo-Addo advocated.

“I speak about the AfDB, I speak of Afreximbank. We should strengthen their balance sheets and strengthen their capacity to facilitate more and more resources for our development. If we find a way that we can increase the financial power of our institutions, we are in a better place to finance our development,”Akufo-Addo added.

He added “We spend a lot of our time going from one country to another, having these summits. We have summits with China, India, Japan, and America. We now have summits with Turkey, and recently with Italy and other countries are also going to have these summits. We [African Heads of State] all go to these summits because we do not want to endanger our relations with them.

“If we can find an institutional arrangement for ourselves whereby at least once a year, we can meet to talk about the strategic economic matters that affect our continent, I think we will obviate the need for these moving around from one country to the other and that is the idea of having every year, an economic summit,” President Akufo-Addo suggested.