Officials expressed cautious optimism last Thursday, Sept. 8 about the prospects of meeting the 2027 deadline for the introduction of the proposed common Eco currency of the Economic Community of West African States (ECOWAS).
The officials expressed their sentiments in their keynote speeches at the 43rd Ordinary Meeting of the Economic and Monetary Affairs Committee and the Operations and Administration Committee of the West Africa Monetary Agency (WAMA) in the Ghanaian capital of Accra,
The impact of the current global economic crisis on West African countries is the main impediment the officials fear could affect the roadmap towards the introduction of the common ECO currency for the subregion.
Due to the impact of the COVID-19 pandemic, the leaders of the Economic Community of West African States (ECOWAS) in June 2021, adopted a new roadmap for the launch of the ECO by 2027, which required all member states to meet all the primary convergence criteria requirements on a sustainable basis by the end of 2026.
But Ernest Addison, Governor of the Bank of Ghana, observed in his keynote speech that since the coming into force of the new roadmap, additional shocks, including the Russia-Ukraine crisis, had unleashed untold hardships on the subregion, inducing high commodity prices, especially for food and energy, resulting in unprecedented inflation rates.
Addison noted that policy tightening by central banks in response to inflation had raised the cost of borrowing and constrained economic activity.
“With elevated debt levels, these developments have further compounded the fiscal and debt sustainability concerns for some countries, as in the case of Ghana, which led to the debt restructuring exercise,” he stated in the message read for him.
The Ghanaian official added, “Now the concern is whether the 2026 deadline for achieving convergence is still realistic in the face of the disruptive effects of the repeated shocks on the region. This development calls for a readiness assessment for the launch of the ECO in 2027 as we move along.”
The convergence criteria are requirements based on macroeconomic indicators that ECOWAS member states should meet consistently for the new monetary zone and subregional currency.
Despite some progress on the implementation of the roadmap amid the challenges, Addison noted that more remained to be done, adding, “While we strive to fulfill the arduous task of meeting the convergence criteria, we need to pay equal attention to other key areas of the roadmap.”
Momodou Bamba Saho, Director-General of WAMA, noted in his opening speech that no ECOWAS member state met all four primary convergence criteria in 2022, and none is expected to meet them in 2023, while four countries-Benin, Niger, Guinea, and Liberia, complied with at least three primary convergence criteria in 2022.
“While we have made strides in certain areas, there is a clear need for enhanced strategies and reforms to ensure all member states align with our shared goals. Together, we can navigate these challenges and lay the foundation for a prosperous ECOWAS,” said Saho.
The four primary convergence criteria to support the creation of the West Africa Monetary Zone and the new ECO currency include meeting targets for inflation, overall budget deficit to gross domestic product, central bank financing of budget deficit, and a cap on foreign exchange reserves.