Economic Impact of G20 Compact with Africa Initiative on Member Countries

IMF Working Papers, September 26, 2025

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Economic Impact of G20 Compact with Africa Initiative on Member Countries

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Bibliographic details

• Authors: Edward R Gemayel, Asel Isakova, Vidhi Maheshwari
• Published: September 26, 2025
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9798229026543.001

Summary

• The Compact with Africa (CwA) is an initiative launched in 2017 under Germany’s G20 Presidency to promote private investment in Africa by creating a more attractive environment for private investment through policy reforms and improved macroeconomic and business frameworks in member countries.
• This paper attempts to quantify the impact of CwA membership on FDI inflows using the entropy balancing methodology to improve the credibility of a causal inference between CwA membership and FDI inflows.
• The analysis could not conclusively establish causality between CwA membership and FDI inflows, but offers other useful insights:
  • Inward FDI data suggests that CwA countries have experienced stronger FDI inflows on average, including during the pre-CwA years.
  • CwA countries tend to have stronger institutions, better infrastructure and human development, which are among key factors that help attract FDI to developing countries.
• Conclusion: Continued efforts by African governments to implement structural reforms, strengthen institutions, improve infrastructure and develop human capital are vital to create an attractive FDI environment; the CwA initiative could provide a platform for peer-to-peer learning and exchange, capacity building, policy dialogue and collaboration.

Methodology

• Entropy balancing methodology employed to improve the credibility of causal inference between CwA membership and FDI inflows.
• The paper compares inward FDI data for CwA countries versus non-CwA countries and examines pre-CwA and post-CwA periods.

Key Findings

• CwA countries have experienced stronger FDI inflows on average, including during the pre-CwA years.
• CwA member countries exhibit:
  • Stronger institutions
  • Better infrastructure
  • Higher levels of human development
• These factors are identified as among the key determinants that help attract FDI to developing countries.

Policy Implications and Recommendations

• African governments should continue:
  • Implementing structural reforms
  • Strengthening institutions
  • Improving infrastructure
  • Developing human capital
• The CwA initiative can serve as a platform for:
  • Peer-to-peer learning and exchange
  • Capacity building
  • Policy dialogue
  • Collaboration to support reforms that attract private investment

Publication and Data

• Authors: Edward R Gemayel, Asel Isakova, Vidhi Maheshwari
• Date: September 26, 2025
• Series: Working Paper No. 2025/189
• Issue: 189
• Volume: 2025
• Pages: 26
• DOI: https://doi.org/10.5089/9798229026543.001
• Stock No: WPIEA2025189
• ISBN: 9798229026543
• ISSN: 1018-5941
• Supplemental Resources: Link to data for this title (ZIP)

IMF Working Papers, "Economic Impact of G20 Compact with Africa Initiative on Member Countries", Edward R Gemayel, Asel Isakova, Vidhi Maheshwari, Working Paper No. 2025/189, September 26, 2025, DOI: https://doi.org/10.5089/9798229026543.001

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