Dark clouds over ECOWAS single currency
After shifting the goalpost for the introduction of a single currency for West Africa more than three times, the new 2020 deadline also risks being missed, as the 16-member countries are yet to record any significant milestone in the project.
For two years running, only five countries, out of the 16 members, met the budget deficit criterion in the first halves of 2014 and 2015.
On the other primary and secondary criteria, the member countries’ performance comes only close to satisfactory, although the bloc only has four years left for the introduction of a single currency for the anglophone, francophone and lusophone regions within ECOWAS.
“What is more challenging for all the countries is the budget deficit. And we are urging the countries to do their best so that they can meet this criteria,” the Director-General of the West African Monetary Agency (WAMA), Professor Mohamed Ben Omar Ndiaye has said.
He also said the countries needed to work on price
This trend has pushed down growth in the region from six per cent in 2014 to 4.7 per cent in 2015; the lowest growth since 2009.
He admitted that meeting the common currency timetable by 2020 was challenging because the time was short.
“We have to push very hard; a lot needs to be done and it’s challenging. It’s difficult achieving it, and difficult managing it even when we get there but we need to be committed and push ourselves to achieve it,” the director-general stated.
Milestones to achieve
The West African states need to attain some harmonised positions on a number of policies for a full monetary integration to be possible. These include harmonisation of monetary policy; balance of payments compilation; financial systems regulatory and supervisory laws, laws relating to current and capital accounts and exchange rate policies, as well as the development of ECOWAS Consumer Price Index (ECOWAS CPI).
According to the Deputy Governor of the Bank of Ghana, Mr Millison Narh, who opened the 28th joint meeting, “interestingly, none of these projects has been finalised, let alone come into operation.”
The deputy governor urged the member countries to strive to implement agreed-upon programmes and policies and avoid returning to the drawing board to rethink policies.
“I believe that sufficient thinking has gone into most of the projects that we have set for ourselves and full implementation should be our next concern,” Mr Narh stated.
About WAMA
The West African Monetary Agency (WAMA) is an autonomous and specialised agency of the Economic Community of West African States (ECOWAS). It was established in 1996 as a result of the transformation of the West African Clearing House (WACH). WACH was established in 1975 to serve as a multilateral payment facility to promote trade within the West African sub-region.
In addition to its functions of routing and clearing trade transactions and services, the agency, which comprises eight central banks of ECOWAS-member states, has been charged with the responsibility of monitoring, coordinating and implementing the ECOWAS Monetary Cooperation Programme (EMCP), geared towards the creation of the ECOWAS single currency.
ECOWAS member states have set out primary and secondary criteria to be achieved before a common currency can come into force. The four primary criteria to be achieved by each member country are; a single-digit inflation rate at the end of each year; a fiscal deficit of not more than four per cent of the GDP; a central bank deficit-financing of not more than 10 per cent of the previous year’s tax revenues, and the gross external reserves should be able to give import cover for a minimum of three months.
Since 2011, only Ghana has been able to meet all the primary criteria in any single fiscal year.
The six secondary criteria to be achieved by each member country include prohibition of new domestic default payments and liquidation of existing ones; tax revenue should be equal to or greater than 20 per cent of the GDP and wage bill to tax revenue should equal or be less than 35 per cent.
The rest are for public investment to tax revenue to equal or be greater than 20 per cent; a stable real exchange rate and a positive real interest rate. — GB