Today, the 44th Meeting of the Technical Committee of the West African Monetary Zone (WAMZ), being hosted in Accra will come to an end, the culmination of one week of deliberations.
The concept of a common currency for all of West Africa has been on the drawing board for as long as the Economic Community of West African States itself has existed, since 1975. WAMZ however, with its concept of a second common currency in the sub region, to be used by its Anglophone nations and Guinea is much younger having been drawn up less than two decades ago. Now that particular concept, of a second common currency that subsequently would be merged with the long-standing CFA franc used by Francophone West Africa, has been put aside, replaced by a straight entry of WAMZ member states into a trans sub-regional currency to be used by all ECOWAS countries.
To be sure this is not much more complicated than the double track approach that it has replaced since the francophone UEMOA monetary zone has been firmly established and has been fully operational for decades albeit with the crucial backing of the French treasury. But the stumbling block remains the same whether the double track approach to a West African common currency is applied or the single-track approach which has replaced it; simply put, the Anglophone countries, without a strong convertible currency to provide an artificial peg as the Euro has done for the UEMOA zone through the auspices of France, have been unable to meet the requisite, purely economic convergence criteria.
The advantages of a common currency for the sub region are not in serious doubt, despite pockets of resistance to the initiative. However, after several decades, little substantive progress has been made by Anglophone West Africa with regards to meeting the requisite macro-economic convergence criteria.
Yesterday, Ghana’s Ministry of Finance released a statement crowing about its achievement of meeting three out of the four primary convergence criteria. But we would like to point out that over the past two decades, Ghana, just like the other member states of the WAMZ, have gravitated to and fro with regards to their success in this regard. What is most important is that no member state has been able to meet all four criteria at the same time yet; and there is still an array of secondary convergence criteria to be met as well.
Indeed, some ardent proponents of a common currency have suggested that some of the convergence criteria – especially the secondary criteria – should be scrapped to enable their aspirations to be fulfilled.
We would like to warn that this would be foolhardy. It would be prudent to remember how the economic crisis in the European Union, instigated by the global financial crisis and resultant global recession played out at the turn of the decade for the most unstable economies in the Euro currency zone, such as Greece and Iceland. Those convergence criteria – both primary and secondary – were put in place for good reason.
Simply put, there are no safe short cuts – member economies of a common currency zone must exhibit requisite macro-economic strength and stability.
Therefore, we call on all member states in the proposed common currency zone to redouble their efforts towards meeting all the requisite convergence criteria. Afterall, those criteria are also most useful towards accelerating economic growth in each individual economy as well.
Anything short of this would only result in a short-lived political success that would quickly be followed by a resounding, sub-region wide, macro-economic failure.