Devalue currencies to stop further depreciation
The Vice President, Mr Kwesi Amissah-Arthur, has proposed the devaluation of the currencies of some countries in the West African Monetary Zone (WAMZ) to save them from further depreciation.
He said such devaluation would increase the currency stability and resilience and pave the way for the attainment of a single currency in the sub-region by 2020.
Mr Amissah-Arthur made the call when he opened the 35th meeting of the Convergence Council of the WAMZ in Accra yesterday.
The ECO is the proposed name for the common currency that WAMZ plans to introduce in the framework of Economic Community of West African States (ECOWAS). After its introduction, the goal would be to merge the new currency with the West African CFA franc at a later date.
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 no more than four per cent of gross domestic product (GDP), a central bank deficit-financing of no more than 10 per cent of the previous year’s tax revenues and gross external reserves that can give import cover for a minimum of three months.
Invest more effort
Mr Amissah-Arthur said considering the amount of resources, time and effort that had gone into the integration agenda, a lot of effort needed to be invested to build on the performance and sustain the momentum towards the 2020 goal of achieving a single currency.
He said it was critical to understand why the conventional approach was not providing the outcome desired by member countries.
He, therefore, called for innovative approach towards attaining the 2020 goal of a common currency.
Mr Amissah-Arthur said member countries could pursue institutional innovations by making use of the experiences of others such as the Eurozone.
“We need to design a stability mechanism, create a banking union, strengthen the fiscal regimes in member countries and improve information sharing and surveillance within the Zone,” he stressed.
Missing links
Mr Amissah-Arthur said given the lack of clear progress on the substantive convergence agenda, he wondered whether the member countries still needed a WAMZ agenda that was costing tax payers a lot of money with no end in sight.
He also posed the question as to whether member countries should continue to maintain three surveillance institutions - the West African Monetary Institute (WAMI), the West African Monetary Agency (WAMA) and The West African Institute for Financial and Economic Management (WAIFEM) - given the lack of progress and the financial burden they continued to put on taxpayers.
ECOWAS Commission
The Vice President of the ECOWAS Commission, Dr Toga Gayewea, said West Africa was still a good reference point for economic growth despite the political, security, economic and health challenges that the region faced in 2015.
However, he said, those socio-economic challenges impacted adversely on economic activities in the WAMZ, resulting in a reduction of real GDP growth, as well as fiscal and balance of payment challenges for the zone.
Dr Gayewea said to improve on the performance of member states on the convergence scale in the medium term, “it is essential to ensure that our member states continue to implement prudent fiscal, monetary and exchange rate policies and adopt policy measures aimed at enhancing revenue mobilisation and diversification of our economies.”
He said since unemployment and poverty remained a challenge for member states, it was crucial to shift focus from examining not only the growth figures, but also the inclusive and sustainable nature of the growth, its gender sensitivity and how to ensure that the growth was broad based.
Dr Gayewea affirmed ECOWAS’s commitment to the monetary integration agenda and the sustainable development of the sub-region.
He, therefore, urged member states to undertake all the necessary measures for the realisation of the ECOWAS single currency by 2020.
