By Kofi Ahovi
The common currency for West African economies, ECO, which was supposed to take effect from December this year, is expected to be postponed again.
The expected postponement is due to the inability of member countries to meet the convergent criteria to enable the smooth take of the common currency.
The new currency would facilitate cross-border payment of transferring funds, which would also put in place the single payment system.
Four out of the five member countries, Ghana, Guinea, Sierra Leone and Nigeria were unable to meet the convergent criteria under the West African Monetary Zone (WAMZ). Gambia is the only country to meet all the criteria for three years running (2006 to 2008).
WAMZ was expected to take off effectively with the ushering in of the ECO by December 1, 2009.
As it appears, the launch date may be shifted by the Heads of State in June at their meeting, although the new date is yet to be confirmed.
Business week checks revealed that ECO is not likely to be adopted by the due date, implying also that establishment of the proposed West African Central Bank (WACB) may not materialize by the target date, since WAMZ may not be realizable.
The WAMZ was formally launched by Heads of State and Government of five countries in December 2000, with the objective of establishing a common central bank and introducing a single currency by 2003, later postponed to 2005 and 2009.
The convergence criteria to be met by December 1, 2009, by all the five countries include, single digit inflation; fiscal deficit/gross domestic product ratio of less than four per cent; central bank financing of deficit of less than 10 per cent and a gross external reserve that could finance not less than three months of imports
The secondary convergence criteria include: No accumulation of new domestic payment arrears and liquidation of all old arrears; Tax revenue as a ratio of the GDP should be less than 20 per cent and the wage bill as a ratio of tax revenue should not exceed 35 per cent.
Others are that domestically financed public investment as a ratio of tax revenue should be at least 20 per cent, while the central parity of nominal exchange rate determined on 31 December, 2003 should be maintained with 15 per cent fluctuation band as defined by WAMZ Exchange Rate Mechanism (ERM-II).
The common currency for West African economies, ECO, which was supposed to take effect from December this year, is expected to be postponed again.
The expected postponement is due to the inability of member countries to meet the convergent criteria to enable the smooth take of the common currency.
The new currency would facilitate cross-border payment of transferring funds, which would also put in place the single payment system.
Four out of the five member countries, Ghana, Guinea, Sierra Leone and Nigeria were unable to meet the convergent criteria under the West African Monetary Zone (WAMZ). Gambia is the only country to meet all the criteria for three years running (2006 to 2008).
WAMZ was expected to take off effectively with the ushering in of the ECO by December 1, 2009.
As it appears, the launch date may be shifted by the Heads of State in June at their meeting, although the new date is yet to be confirmed.
Business week checks revealed that ECO is not likely to be adopted by the due date, implying also that establishment of the proposed West African Central Bank (WACB) may not materialize by the target date, since WAMZ may not be realizable.
The WAMZ was formally launched by Heads of State and Government of five countries in December 2000, with the objective of establishing a common central bank and introducing a single currency by 2003, later postponed to 2005 and 2009.
The convergence criteria to be met by December 1, 2009, by all the five countries include, single digit inflation; fiscal deficit/gross domestic product ratio of less than four per cent; central bank financing of deficit of less than 10 per cent and a gross external reserve that could finance not less than three months of imports
The secondary convergence criteria include: No accumulation of new domestic payment arrears and liquidation of all old arrears; Tax revenue as a ratio of the GDP should be less than 20 per cent and the wage bill as a ratio of tax revenue should not exceed 35 per cent.
Others are that domestically financed public investment as a ratio of tax revenue should be at least 20 per cent, while the central parity of nominal exchange rate determined on 31 December, 2003 should be maintained with 15 per cent fluctuation band as defined by WAMZ Exchange Rate Mechanism (ERM-II).
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