Economists and financial experts have raised concerns over the not-so-necessary economic criteria set by ECOWAS as a precondition for launching the West African common currency, Eco.
The decision to create a single currency for West Africa was reached by the heads of state of the Economic Community of West African States (ECOWAS) in 1999.
The first deadline for the full implementation of the common currency for West Africa’s Anglophone countries was 2003. The deadline could not be met. And subsequent deadlines of 2005, 2009 and 2015 could not all be possible because no country meets all the conditions on a sustained basis.
Now a new deadline of 2020 has been set.
Prof. Biao Barthelemy, head of the research unit in economics and management of the University of Parakou in Benin, questioned the very basis, the rationale for the criteria.
“What is the essence of the criteria,” he asked rhetorically. “There is a need to remove or at least dilute the criteria so it would not continue to be an obstacle to the realisation of a common currency in West Africa.”
The professor was speaking at a panel discussion on economic integration of West Africa at the 21st session of the Intergovernmental Committee of Experts for West Africa organised by the UN Economic Commission for Africa from 27 to 29 June 2018 in Cotonou, Benin.
He further argued that the convergence criteria should not be a precondition for the realisation of a single currency.
ECOWAS has set out 10 convergence criteria (conditions) for member states to comply with before the Eco could be launched. Under the convergence criteria, each of the countries should have a single digit inflation rate; fiscal deficit of not more than four per cent; deficit financing not 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.
In other parts of the world, notable Europe, a common currency was launched for the zone without any convergence criteria as a precondition.
Prof. Barthelemy said Europe adopted a gradual approach to common currency as opposed to global approach that ECOWAS sets out.
Under a gradual approach to common currency, countries that are ready and willing to join the single currency zone can team up and start while the rest can join in later.
“That is how the Euro Zone started; not all the countries join in at the same time,” he reiterated.
The global approach is where all the countries in the zone have to be ready before a common single currency could be launched.
“It takes a long time and makes the entire process looks not workable,” the economic researcher explained.
Commenting on the postponement of previous deadlines, Barthelemy said in Africa, authorities like postponing deadlines.
“We need to move forward now,” he affirmed, adding that at the new deadline of 2020, countries that meet the criteria partially or fully can more forward to the single currency zone and others join in later.
“If that is not the case, I am afraid that we may never get there. We have to move forward and let others catch up, otherwise we wouldn’t get there,” he reiterated.
During the floor discussion, other experts weighed in on the topic. A lot of them emphasised that the convergence criteria set by ECOWAS are outdated and impracticable.
A French speaking expert said there is a need to review the criteria if a common single currency is to be realised in West Africa.
“Literature has shown that these criteria are not relevant and should not be a precondition, so we may drop them and move forward,” he said.
Another expert weighed in: “If you look at the countries with single currency, they have not put in all these convergence criteria as a precondition and they are moving forward with their single currency. So we should drop all these things and move forward to our single currency.”
A Ghanaian expert said data showed that from 2005 to 2016, no country has achieved all the criteria on a sustained basis.
“That made me wonder if there not an alternative to these criteria to the achievement of a single currency for West Africa,” he said.
After the last postponement of the launching of Eco, the ECA, at the request of the ECOWAS Commission, conducted a study to find out how to accelerate the process of moving towards the common currency.
The study has revealed that countries in the sub-region can actually converge to a common single currency without meeting the convergence criteria of ECOWAS.
Amadou Diouf, a senior economist at ECA West Africa, said less than two years from the attainment of the targeted deadline of 2020 for a single currency, the prerequisite conditions to achieve the goals have only been partially achieved.