A former Minister of Finance, Ken Ofori-Atta has advised West African economies to abandon their quest to introduce the Single Currency, the ECO for the region.
ECOWAS was forced in 2021 to push back the introduction of the currency to 2027 due to the outbreak of COVID-19. The currency was proposed to boost economic development in the West African region and improve cross border trade.
In addition, it is expected to be eventually merged with the Euro-pegged CFA franc, which is used by most French-speaking West African countries within the West African Economic and Monetary Union (UEMOA).
However, Mr. Ofori-Atta is of the view that most of the countries in the region are not committed to the single currency drive.
Speaking to Joy Business’ George Wiafe on the sidelines of AFREXIM Annual Meetings in Nassua Bahamas, Mr. Ofori-Atta said most ECOWAS member countries are unable to meet the convergence criteria to permit the introduction of the currency.
“ECO has been difficult and the capacity of us, the 16 countries in ECOWAS to come to a convergence point where we all will fulfill the criteria seems very lucid, he said.
Per the conditions, ECOWAS member countries are expected to meet four primary criteria which include, a single-digit inflation rate at the end of each year, a fiscal deficit of no more than 4% of the GDP, a central bank deficit-financing of no more than 10% of the previous year’s tax revenues, and gross external reserves that can give import cover for a minimum of three months.
Mr. Ofori-Atta is of the view that the criteria may be difficult to achieve by the economies needed to set the currency in circulation.
According to him, ECOWAS can learn from other regional blocs by perfecting payment systems and removing trade barriers.
“If you look at East Asia, they didn’t really end up having one currency but they really increased trade and also got their payment systems in an effective way. That’s a model that has worked and maybe we could under the leadership of Afriexim bank facilitate all of these fintechs being sandboxed into the central banks. I think we will come out with apps that will be more efficient for us”, he suggested.
Mr. Ofori-Atta is also of the view that ECOWAS can leverage the African Continental Free Trade Area to remove barriers and promote trade harmonization in the region.
“I think the issue of payment systems and the issue of digitalization being efficient and therefore supporting AfCFTA maybe will lead to the type of results we require”.
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