ECOWAS new monetary zone will take off if ...
Called the West Africa Monetary Zone (WAMZ), the new union is made up of Nigeria, Ghana, Guinea, The Gambia and Sierra Leone, with the possibility of others joining later. The WAMZ director general, M. O. Ojo, tells Ivor Agyeman-Duah that if a minimum number of countries meet the convergence criteria, the new monetary zone will take off.
Q: WAMZ has been in the pipeline for sometime. Why has it only recently become so important?
A: It has become more important now because the integration process of West Africa depends on it. We also have to note the developments on the continent such as the creation of NEPAD, the economic platform of the African Union. NEPAD depends on sub-regional integration programmes to succeed. In the past, the functions of WAMZ, which consists of countries outside the CFA Zone, were not aligned to the integration process. Now it is. This means that each country must double its efforts to ensure that the ECOWAS region eventually gets a single currency.
Q: The WAMZ common currency was supposed to be launched last year but it was called off. What happened?
A: The plan to start the programme last year was indeed too ambitious because it was only introduced officially in 2001 when the West Africa Monetary Institute (WAMI) started operations in Accra. WAMI is the official institution to technically monitor the programme and give constructive advice to the authorities. WAMI started off well but for an institution of that nature, I think one year, or even two years, was inadequate for it to be effective and bring the programme to fruition. Moreover, the programme was started at a time when some of the member countries, such as Sierra Leone, Guinea and Nigeria, were moving from dictatorship to democracy and were encountering serious difficulties. A lot of things were happening at the same time; therefore, the focus on the programme was not as deep as it should have been.
Q: You must have learned lessons from the CFA Zone.
A: Yes. From WAMZ's inception, we have been very cautious not to make the same mistakes that others have made, and one way of avoiding this is relating to them, understanding their problems as well as drawing inferences from these problems. This has been effectively done with the CFA Zone, which consists of the eight Francophone countries in West Africa. An observer from the CFA Zone attends WAMZ meetings and acts as an experienced counsel to ensure the right thing is done in this programme.
Q: The CFA Zone is largely successful due to its relationship with France, and now the European Union (after the launch of the euro which underpins the CFA). How does the CFA's relationship with France impact on the development of WAMZ?
A: The involvement of France in West Africa dates back to the colonial period and because of this, it is assumed that the former French colonies are still somewhat under French influence. This is an opinion that can be disputed, but it is obvious that these countries have received a lot of economic backing from France, particularly on monetary integration, and that has helped immensely. The most critical factor is that these countries have been united and have been together for so long, and this has helped a lot.
If the Anglophone countries in West Africa had remained together after independence, and had maintained the common institutions that existed at the time, such as the common currency, the ports and harbours and airlines, the process of integration would have been easier. That said, we must, however, add that the West African Currency Board that produced the Pound for Anglophone West Africa, did not create a monetary zone. So we had a common currency without a monetary zone.
Q: What's the difference?
A: The difference is that in a monetary zone there is harmonisation of economic policies. And the goal is to create a single economy from several economies, so that there is free movement of persons and capital from one country to the other. A perfect example is the European Union; you can travel from France to Germany and even to Eastern Europe without the hassle of the many obstacles of the past.
Q: What does this mean to the average person in Lagos, Accra or Freetown?
A: The monetary integration process is eventually going to facilitate growth, which will impact on poverty alleviation. If growth is not achieved, poverty cannot be reduced. Most of the member countries are currently growing by about 3% to 4%, but there is the potential to increase it to 7% or 10%. Once this happens and is sustained, poverty will be alleviated and more trade will be facilitated between the member countries. This surely will have a huge impact on the citizens of the region.
Q: We've heard this before, but there is nothing tangible yet. What is holding us back, political obstacles?
A: Yes, there are political obstacles. ECOWAS has been around for 29 years but most of its programmes, laudable as they always are, have not been implemented. Only a few have been well implemented. The rest have remained on paper. What is needed is the contribution of member countries to implement these programmes; this is where we have failed miserably. To get around the issue, ECOWAS has introduced an automatically-deductible levy based on the collection of duties in member countries, so that member countries don't have to have new resources to pay contributions to ECOWAS. Once this levy is collected, it becomes the source of funding for implementing these programmes.
Q: One of WAMZ's problems has been the convergence criteria. Do you think these will ever be met?
A: Nigeria and Ghana are very strong candidates based on previous performance. The others might have short-term problems but I think they will be able to make it. In our discussions with the IMF, we have been shown the effort being made for these countries to take off again. Some of them did not have IMF programmes but are now in the process of implementing them. This is the beginning of shared stability.
Q: How important is the relationship between these countries and the World Bank or IMF in the fulfilment of these obligations?
A: It is very important because IMF/World Bank programmes are very stringent and require the borrowing country to implement certain policies, which require discipline. This discipline is what we need. The programmes also create resources for the member countries, and act as an incentive.
Q: They may be important in terms of fiscal discipline but when it comes to the day-to-day running of the economy, there have been complaints that these conditions are harmful. How does this affect the monetary zone?
A: IMF and World Bank programmes are a matter of choice. But countries facing difficulties have to achieve stability and so enter into these programmes. The conditions become less stiff once stability has been attained, so the economy can take off again.
Q: How do you envision the monetary zone beyond 2005? Assuming the criteria are not met, what next?
A: If at least two countries can meet the criteria, the monetary union can take off: if not this becomes a political decision and the authorities will have to decide the next line of action.
Q: Some argue that the European Union (EU) did not wait for all the requirements to be met before launching the euro. Can you see WAMZ going that way?
A: No, that statement is not correct. The EU decided to go ahead and form the monetary union only with countries that had met the convergence criteria. Initially, they were 11, but were joined by Greece so they became 12. The 12 are now using the Euro and more will join later, especially the new members from Eastern Europe. It is the same process we are trying to follow; if a minimum number of countries meet the convergence criteria, we will have a take-off; the others can join later.
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|Date:||Nov 1, 2004|
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