QUESTION OF THE DAY
Many people have been approaching Foroyaa to explain what is not clear to them about a new currency called the eco. They claim that they have heard news of the CFA being converted into the eco and that other countries in West Africa that are not part of the eco will also join the monetary union.
There is argument that this was as a result of an agreement between President Alassane Ouattara and President Macron of France. What is the truth?
The truth is that eight members of the Ecowas states are part of the CFA currency zone which is an economic and monetary union with the West African Economic and Monetary Union in English (or UEMOA in French). The rest of the Ecowas states are not part of any monetary union.
Ecowas however since the year 2000 has the aim of establishing the West African Monetary Zone with a single currency. In order to achieve that aim, the plan was adapted for those countries that are not part of that zone to establish their union in a single currency called the eco. Once this is achieved, they will then proceed to integrate the two monetary zones into one by January 2020. This was the plan which cannot materialise because of three factors.
First and foremost, the countries that are not part of the CFA zone had established convergence criteria which member states of Ecowas must achieve before being qualified to be a member of the monetary zone. Since 2001, countries have been trying to meeting the four principal criteria and the six secondary criteria without success. Hence they have been postponing the date for establishing the monetary zone from one year to another. The last time the heads of state and government met to consider the issue of the monetary zone was 21st December 2019. The first obstacle is therefore meeting the convergence criteria set up by those members that are not part of the CFA zone.
The second challenge is how to integrate the CFA zone with the non CFA zone into the West African Monetary Zone with a West African Central Bank to issue a single currency.
Countries belonging to the CFA Zone whose chair is currently President Ouattara did meet to take a position on how to reform the West African Economic and Monetary Union (UEMOA) in order to facilitate its integration into the proposed West African Monetary Zone. This however would require a new arrangement with France which had agreed for the West African CFA to be pegged to the euro in a fixed exchange rate regime by ensuring that the foreign reserve of the eight countries that are part of the CFA zone would be deposited in the Central Bank of France.
How the eight countries will be liberated from this arrangement when they are integrated into the West African Monetary Zone is an issue which is still being debated.
The third challenge is whether the eight countries that are part of the CFA zone would be able to meet the convergence criteria zone to be able to be a member of the West African Monetary Zone.
The conclusion is therefore clear. The issue of launching a single currency is work in progress and Foroyaa will keep the readers updated since they have shown interest in it. It will be a part of the column opened for political debate. Hence all those who gather information on it in social media could send it to Foroyaa so that more clarity could be thrown on the subject. In the interim readers should take note of the key elements agreed upon by the heads of state and government during the 56th session of the Ecowas heads of state and government.
The relevant portion of its 21st December 2019 final communique reads:
“ON ECONOMIC PERFORMANCE AND IMPLEMENTATION OF REGIONAL INTEGRATION PROGRAMS
9. The authority takes note of the region’s improved economic performance, with ECOWAS real GDP growing by3.3% in 2019 against 3.0% in 2018, in a context characterized by a decline in inflationary pressures and healthy public finances.
10. It urges the Member States to continue economic reforms and ensure a sound macroeconomic environment in Member States, with a view to accelerating the structural transformation of ECOWAS economies.
11. To this end, the Authority commends the African Development Bank for the initiatives taken to ensure Africa’s economic transformation and development. It encourages the Bank to strengthen its cooperation with ECOWAS in funding regional programs and projects.
12. The Authority directs the Commission to support Cabo Verde in its agricultural policy in order to address the prolonged drought facing the country.
CREATION OF THE MONETARY UNION
13. The Authority commends the Ministerial Committee for progress made with the implementation of the ECOWAS Single Currency Program.
14. The Authority while welcoming the improved macroeconomic convergence outlook in 2019, urges Member States to continue efforts to comply with the convergence criteria.
15. It takes note of the implementation status of the activities contained in the revised roadmap. it further instructs the Ministerial Committee to take the required steps to hasten the implementation of the revised roadmap and relocate, as a matter of priority, the financial resources of the Special Fund, which finances activities essential to the establishment of the ECOWAS Monetary Union in 2020. The Authority directs the Ministerial Monitoring Committee to submit a report to its next ordinary session.
16. The Heads of State and Government take note of the proposed symbols of the ECOWAS single currency and adopt the following as the ECO symbol: Ec
17. As regards the name of the ECOWAS Central Bank, the Authority adopts the following: Central Bank of West Africa (CBWA).
18. Regarding the ECOWAS Single Currency, after having listened to H.E Alasane Ouattara, Chair of the UEMOA Authority of Heads of State and Government, the Authority takes note of the major developments in the UMOA monetary zone. The reform of the UMOA monetary zone will facilitate its integration into the future of ECOWAS monetary zone(ECO).
The Heads of State and Government commended those developments in the UMOA monetary zone.”
Should there be need for any further clarification address your concerns to Foroyaa