PRECONDITION FOR THE ECO AS A CURRENCY YET TO BE MET

202

By: Kebba AF Touray

Member States of the West African Monetary Zone are yet to meet the four primary convergence criteria necessary for the establishment of the eco as a single currency in the Zone.

Mr. Momodou Bamba Saho, Director General of West African Monetary Agency (WAMA) made it abundantly on Thursday 2nd February 2023, while delivering a statement at the official opening of the 42nd Ordinary Statutory Meeting of the West African Monetary Agency dubbed WAMA.

He said that their most recent assessment of the economies of the member states, indicated that none of member states met all of the four primary convergence criteria at end June 2022, compared to end June 2021.

The four primary convergence criteria are a budget deficit below 3% of GDP; public debt of no more than 70% of GDP; inflation of 5% or less; and a stable exchange rate. The WAMZ member countries that are yearning to establish the eco are The Gambia, Sierra Leone, Nigeria, Ghana, Liberia and Guinea.

“Compliance with microeconomic convergence criteria in the past three years has continued to be a challenge as member states are confronted by the continuing multiple crises. In the face of a continued global slowdown, the ECOWAS Economies have actually shown some resilience”, he said.

However he said, some of the currencies in the member states have depreciated significantly, coupled with pressure on government finances, rising in debt whilst inflation has remained stubbornly high putting more and more of the people in the member states into poverty and hurting the most vulnerable of the populations in the member states.

These developments, he added has posed challenges for policy makers in the region, adding that policy makers have much work to do, to strengthen their microeconomic tool kit to better adjust fiscal and monetary policies to respond to the challenges.

“Strong policy actions on the parts of the member states will be necessary to seal our economies from the headwinds and to keep the EMC on track. We at WAMA will continue to work diligently and robustly towards meeting our obligation under the EMC and towards implementing the activities assigned to them under the roadmap for the launch of  ECO by 2027 ”, WAMA DG Called.

He said that they are approaching the stage of monetary integration process, at which the member states will have to negotiate the extent of the delegation of monetary policy making sovereignty to a Central Bank of West Africa.

He said that the current work that they are doing on preparing the status of the  Central Bank of West Africa, status of monetary union, the distribution of the capital and proposals for a waited voting systems for decision making, among others will have implications for the voice and representation of member states on the prospective monetary union.

WAMA Technical Committee Chairman, Hassan Mahmud, said that the world currently faces yet another global economic challenges emanating from the ongoing Ukraine-Russia War and the economic slowdown in China, and the situation has continued to worsen the global economic outlook as well as supply chain destructions that has intensified since the post COVID-19.

This he said is leading persistent increases in food and energy prices and throwing more people into unemployment and below the poverty line globally.

“Many monetary authorities were beginning to tighten monetary policies since the end of 2021 in response to heightened global inflation to such a high level that has not been in decades. These are responses to unfavorable external financial conditions and deterioration in domestic economies. International trade windows significantly in 2022 from figures hovers double digits by the end 2020, with outlook for 2023 looking more relatively weaker”, he lamented.

He added that the world economy is experiencing an increased private and public debt as several countries expanded their debt profiles through new borrowings to stay afloat, thereby putting pressure on external reserves and causing substantial depreciation in the exchange rate of many countries. 

He said given this outcome multilateral institutions such as IMF and the World Bank, have continued to project the worst global economic situation in the latest forecast, reporting that the IMF further downgraded global growth prospect to slow from 3.2 percent in 2022 to 2.7 percent 2023, and further downwards to 2.2 percent in 2024.

“Deliberations in the next few years will therefore focus on salient issues affecting the region and drawing resolutions with the overall objective to advancing ECOWAS Monetary Cooperation Program, said WAMA Technical Committee Chairman.