Sierra Leone: Only “political will” will do the trick Only the political will of member-countries will deliver the proposed common currency, Eco, for the West African Monetary Zone (WAMZ), the B&FT has been told. While some work has been done toward realisation of the common-currency dream, the final lap depends on the political willingness of the six countries Ghana, Guinea, Nigeria, Sierra Leone, Liberia and The Gambia in the zone, said Dr. Eunice EgbunaNgozi, Director of Financial Integration of the West African Monetary Institute (WAMI). WAMI is a precursor to the envisioned common central bank for the WAMZ. “The 2015 deadline requires the political will of all our member-countries to be achieved. A lot of progress has been made and a lot of improvement must equally be achieved, especially on the qualitative and quantitative benchmarks. Between now and 2015 we need to do a lot, but it all depends on the political will,” Dr. Ngozi said. Ten criteria grouped into Four Primary Convergence Criteria and Six Secondary Convergence Criteria have been identified by WAMI as conditions precedent for introduction of the Eco. The four primary convergence criteria to be attained by each member-country by the 2015 deadline include a single-digit inflation rate at the end of each year; a fiscal deficit (excluding grants) to GDP ratio of not more than 4 percent; a central bank deficit-financing ceiling of 10 percent of the previous year’s tax revenues; and gross external reserves covering at least three months of imports. Among the six secondary convergence criteria are curbs on nominal exchange rate depreciation, fiscal arrears, and the share of tax revenue that is spent on wages of Government employees. Member-countries’ performance against the criteria has been inconsistent, and all six have failed to achieve the ten criteria together at any single time. Very often, also, domestic economic imperatives have conflicted with a country’s commitments under the single-currency pact. WAMI’s mandate includes the monitoring and evaluation of performance by the WAMZ member-states on the prescribed convergence criteria and policy harmonisation issues. Vice President KwesiAmissah-Arthur, who until August 2012 was Governor of the Bank of Ghana, said last year that central bank authorities in the WAMZ were rethinking the Eco in the wake of crisis in the euro-zone. “We’ve seen the problems that a monetary union without a fiscal union creates,” he said, referring to a major weakness in the initial make-up of the euro-zone that most economists blamed for the debt crisis that has tormented the region. The rigidity of economic management options, such as the inability of countries in a common currency zone to implement independent monetary policies even in the midst of a crisis, has been cited as a major drawback to the Eco. “In creating the Eco, we have to be careful about this problem whereby a very small economy in the group will create problems for the banking sectors and other economies of the group,” Amissah-Arthur said. According to him, the WAMZ has commissioned consultants to “look again” at the design of the Eco in the wake of these concerns. Deadlines for adoption of the Eco were previously postponed in 2003, 2005 and 2009. However, Marshall Umo, a Senior Economist at WAMI, sounded optimistic in an interview with the B&FT that the Eco is still on the minds of WAMZ member-governments. “The single currency agenda is very much alive and there’s high buying at the top. In terms of what needs to be done, the countries must endeavour to meet the quantitative and qualitative criteria. That’s where the problem is. “We have seen from the experience in Europe that there’s the need to re-emphasise that countries within the zone must meet the convergence criteria before the single currency is achieved.” Only the political will of member-countries will deliver the proposed common currency, Eco, for the West African Monetary Zone (WAMZ), the B&FT has been told. While some work has been done toward realisation of the common-currency dream, the final lap depends on the political willingness of the six countries Ghana, Guinea, Nigeria, Sierra Leone, Liberia and The Gambia in the zone, said Dr. Eunice EgbunaNgozi, Director of Financial Integration of the West African Monetary Institute (WAMI). WAMI is a precursor to the envisioned common central bank for the WAMZ. “The 2015 deadline requires the political will of all our member-countries to be achieved. A lot of progress has been made and a lot of improvement must equally be achieved, especially on the qualitative and quantitative benchmarks. Between now and 2015 we need to do a lot, but it all depends on the political will,” Dr. Ngozi said. Ten criteria grouped into Four Primary Convergence Criteria and Six Secondary Convergence Criteria have been identified by WAMI as conditions precedent for introduction of the Eco. The four primary convergence criteria to be attained by each member-country by the 2015 deadline include a single-digit inflation rate at the end of each year; a fiscal deficit (excluding grants) to GDP ratio of not more than 4 percent; a central bank deficit-financing ceiling of 10 percent of the previous year’s tax revenues; and gross external reserves covering at least three months of imports. Among the six secondary convergence criteria are curbs on nominal exchange rate depreciation, fiscal arrears, and the share of tax revenue that is spent on wages of Government employees. Member-countries’ performance against the criteria has been inconsistent, and all six have failed to achieve the ten criteria together at any single time. Very often, also, domestic economic imperatives have conflicted with a country’s commitments under the single-currency pact. WAMI’s mandate includes the monitoring and evaluation of performance by the WAMZ member-states on the prescribed convergence criteria and policy harmonisation issues. Vice President KwesiAmissah-Arthur, who until August 2012 was Governor of the Bank of Ghana, said last year that central bank authorities in the WAMZ were rethinking the Eco in the wake of crisis in the euro-zone. “We’ve seen the problems that a monetary union without a fiscal union creates,” he said, referring to a major weakness in the initial make-up of the euro-zone that most economists blamed for the debt crisis that has tormented the region. The rigidity of economic management options, such as the inability of countries in a common currency zone to implement independent monetary policies even in the midst of a crisis, has been cited as a major drawback to the Eco. “In creating the Eco, we have to be careful about this problem whereby a very small economy in the group will create problems for the banking sectors and other economies of the group,” Amissah-Arthur said. According to him, the WAMZ has commissioned consultants to “look again” at the design of the Eco in the wake of these concerns. Deadlines for adoption of the Eco were previously postponed in 2003, 2005 and 2009. However, Marshall Umo, a Senior Economist at WAMI, sounded optimistic in an interview with the B&FT that the Eco is still on the minds of WAMZ member-governments. “The single currency agenda is very much alive and there’s high buying at the top. In terms of what needs to be done, the countries must endeavour to meet the quantitative and qualitative criteria. That’s where the problem is. “We have seen from the experience in Europe that there’s the need to re-emphasise that countries within the zone must meet the convergence criteria before the single currency is achieved.” Comments are closed.
Posted on: Mon, 24 Jun 2013 14:36:19 +0000
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