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Ghana is about to have the right to join the common currency for West Africa, which the various member states of the subregion have been aspiring to for decades.
After having met all the economic and financial criteria, except one, to be part of the single currency area, there remains only one final convergence criterion for the country before replacing the cedi of the impending single currency of the ECOWAS.
By the end of 2018, the country had met three of the four primary convergence criteria and two secondary criteria.
At 41st At the meeting of the West African Monetary Area (WAMZ) Convergence Council of Ministers and Central Bank Governors, Finance Minister Ken Ofori-Atta said that the last remaining criterion for Ghana was achieve the regional budget deficit target of 3.0% of the United States. Gross domestic product.
However, this is unlikely to happen this year. Ghana's budget deficit rose to 3.9 percent of GDP rebased at the end of 2018, compared to a target of 3.7 percent in the rebasing series. For 2019, the target was raised to 4.2%, which would move the country away from the regional criterion. rather than closer.
Moreover, even if Ghana fulfills the last criterion, it is very uncertain that the country chooses to adhere to a common currency which still only includes francophone countries in a monetary zone which effectively cedes its monetary sovereignty to France, which underpins the West African Francophonie. single currency in its present form.
The convergence criteria
The main convergence criteria for joining the West African Common Monetary Area are: a public deficit-to-GDP ratio of no more than 3%; an average annual inflation rate of less than 10%; Financing by the Central Bank of the budget deficit not exceeding 10% of the previous year's tax revenue; as well as gross external reserves of imports greater than or equal to three months.
The secondary criterion requires a nominal exchange rate that does not depreciate or depreciate by more than 10% over the previous year and that the ratio of public debt to GDP does not exceed 70%.
Measures to achieve the WAMZ budget deficit target
As part of Ghana's measures to ensure the sustainability of public finances and promote fiscal credibility, the Fiscal Responsibility Act was pbaded in December 2018 to limit the budget deficit to a maximum of 5% of GDP. 39 ensure a positive annual primary balance at any time, even if it is less restrictive. criterion of eligibility for the common currency.
Other achievements
While much remains to be done to achieve nominal convergence, the Minister noted that significant progress has been made in the real convergence of the WAMZ.
This includes the achievements of the Payment Systems Project, the harmonization of policies and the development of model laws for the financial sector in the WAMZ as well as the establishment of the WAMZ College of Comptrollers and other platforms for the WAMZ. the integration of capital markets and insurance sectors.
"This momentum needs to be maintained in order to deepen the real convergence gains for the area," said Ofori-Atta.
Common currency
It is envisaged to merge this WAMZ with the West African Economic and Monetary Union (WAEMU) to create a single monetary zone in West Africa.
UEMOA is made up of eight West African countries (Benin, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo), with a common currency, the West African Franc (CFA Franc). ), which is linked to the euro under the auspices of the French Treasury.
ECO was the proposed name for the common currency that WAMZ had originally planned to introduce in order to merge the ECO with the CFA franc of West Africa, thus creating a currency common for West Africa.
postponement
Heads of State of five West African countries decided on 20 April 2000 in Accra, as part of the accelerated integration process, to create a second monetary zone called the West African Monetary Zone.
These countries, namely The Gambia, Ghana, Guinea, Nigeria and Sierra Leone, signed the "Accra Declaration" which defined the objectives of the Zone as well as an action plan and institutional arrangements for the area. ensure the speedy implementation of their decision.
January 1, 2003 was initially planned for the launch of the single currency, but this date has been postponed to July 1, 2005, as Member States are unable to meet the four main criteria simultaneously and in a sustainable manner.
The zone has been further postponed to a new date for the launch of the single currency by 1 January 2020. Finally, the leaders of ECOWAS have decided to abandon the two-track strategy and move directly to a common currency for all countries in the subregion.
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