THE WEST AFRICAN MONETARY AGENCY (WAMA) Macroeconomic Convergence and Policy Harmonization in ECOWAS...

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Introduction

• WAMA: Established in 1992 by the Authority of ECOWAS Heads of State and Government (Per Decision A/DEC./7/92)

• A specialised autonomous body of ECOWAS, concerned with monetary Integration and payments arrangement

Introduction (contd.)– Through a transformation from West African Clearing House (WACH)

• Why was the transformation necessary?

• The transformation had become necessary following:– the adoption of the ECOWAS Monetary Cooperation Programme (EMCP) in

1987; and – the need for an entity to handle the implementation of this Programme in

addition to the multilateral payments related issues;

– WACH originally established in 1975:- • to provide a mechanism through which members could use their domestic

currencies for current and capital account transactions within the West African region;

• The objective had been to encourage intra-regional trade and help member countries to economize on the use of foreign exchange.

Introduction (contd.)• Membership comprises the eight central banks of ECOWAS Member

States:

1) Bank of Cape Verde2) Central Bank of The Gambia3) Bank of Ghana4) Central Bank of the Republic of Guinea5) Central Bank of Liberia6) Central Bank of Nigeria7) Bank of Sierra Leone8) BCEAO (the common Central Bank of the eight countries of UEMOA)

• Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, Togo

Introduction (contd.) OBJECTIVES

– promote trade and financial transactions; – encourage exchange rate liberalization among member States;– promote monetary cooperation and consultation among member States;– assist member States in the harmonization and coordination of their monetary and fiscal

policies;– ensure the monitoring, coordination and implementation of the ECOWAS Monetary

Cooperation Program (EMCP);– encourage the pursuit of appropriate macroeconomic policies conducive to market-

determined exchange and interest rates;– initiate and promote policies and programmes aimed at achieving monetary integration

within the region; and– ensure the establishment of a single monetary zone in West Africa by creating the

necessary conditions leading to implementation of uniform monetary policy and creation of a single currency.

Introduction (contd.)

SOME MACROECONOMIC DEVELOPMENTS IN ECOWAS

MACROECONOMIC DEVELOPMENTS IN ECOWAS

GROWTH IN BROAD MONEY SUPPLY

2006 2007 2008 2009 2010 2011

ECOWAS 42.0 36.8 44.7 17.4 11.6 15.3

WAMZ 51.5 42.4 55.8 18.6 10.6 17.1

GAMBIA 26.2 6.7 18.4 19.4 13.7 11.0

GHANA 39.1 35.9 40.2 24.7 33.8 33.2

GUINEA 59.4 4.6 39.1 25.8 74.4 9.3

LIBERIA 34.4 38.6 44.4 41.3 31.6 39.5

NIGERIA 43.1 44.2 57.8 17.5 6.9 15.4

SIERRA LEONE 21.4 22.6 22.5 27.5 28.5 22.6

UEMOA 11.4 18.7 9.6 14.2 15.7 11.1

BENIN 18.0 19.8 27.3 7.4 7.3 8.1

BURKINA FASO 10.1 22.9 12.0 21.6 19.2 13.8

COTE D’IVOIRE 10.3 23.6 5.7 17.2 18.6 10.7

GUINEA BISSAU 5.3 24.8 29.5 6.8 29.7 49.5

MALI 8.8 9.3 0.7 14.4 10.4 15.3

NIGER 16.2 23.2 12.1 18.5 21.8 6.1

SENEGAL 11.9 12.6 1.8 11.4 13.7 6.8

TOGO 22.8 16.8 18.1 16.1 16.3 15.9

CAPE VERDE 18.7 9.7 7.9 3.3 6.1 -6.9

STATUS OF MACROECONOMIC CONVERGENCE IN ECOWAS

STATUS OF CONVERGENCE

NUMBER OF COUNTRIES THAT MET THE CONVERGENCE CRITERIA

2006 2007 2008 2009 2010 2011 2012

Budget Deficit 6 8 6 3 3 4 3

Inflation 9 7 1 10 9 9 9

External Reserves 1 9 1 11 10 9 9

Central Bank Financing 13 15 13 12 12 13 14

Domestic Arrears 6 5 7 9 9 10 --

Tax Revenue 1 1 1 2 2 3 4

Salary Mass 8 9 7 6 4 4 5

Public Investments 7 7 8 7 6 7 7

Positive Real Interest Rate 6 6 0 10 7 5 6

Real Exchange Rate 12 2 8 11 6 10 1012

COUNTRY PERFORMANCE ON THE PRIMARY CRITERIA

2006 2007 2008 2009 2010 2011 2012

BENIN 2 4 2 3 4 3 4

B. FASO 2 3 1 3 3 3 3

COTE D’IVOIRE 3 4 2 4 4 3 3

G. BISSAU 2 2 1 3 3 2 3

MALI 2 3 1 3 3 3 2

NIGER 2 3 1 3 3 3 3

SENEGAL 2 2 2 3 3 3 3

TOGO 2 4 2 4 4 3 3

THE GAMBIA 3 2 1 2 1 1 1

GHANA 1 1 0 1 1 1 1

GUINEA 1 2 2 0 0 1 2

LIBERIA 2 2 2 2 1 2 2

NIGERIA 3 3 3 3 2 3 3

SIERRA LEONE 0 1 1 1 0 1 1

CAPE VERDE 2 3 1 2 2 2 2

COUNTRY PERFORMANCE ON THE PRIMARY AND SECONDARY CRITERIA

2006 2007 2008 2009 2010 2011 2012BENIN 4 7 5 7 5 7 8BURKINA FASO 6 6 3 6 6 7 6CAPE VERDE 5 4 4 6 5 5 6COTE D'IVOIRE 5 5 3 7 7 4 6GAMBIA 6 3 1 4 2 2 2GHANA 2 2 2 1 1 3 3GUINEA 2 4 5 4 1 3 4GUINEA-BISSAU 4 2 2 6 6 3 5LIBERIA 4 4 3 4 4 4 4MALI 6 7 4 8 7 7 5NIGER 7 6 4 8 7 8 7NIGERIA 4 6 5 5 3 4 4SENEGAL 6 5 6 8 7 8 9SIERRA LEONE 1 2 1 2 2 3 2TOGO 5 6 4 6 7 5 7

STATUS OF CONVERGENCEBUDGET DEFICIT(EXCL. GRANTS)/GDP ≤ 4%

STATUS OF CONVERGENCEINFLATION ≤ 5%

STATUS OF CONVERGENCECENTRAL BANK BUDGET DEFICIT FINANCING/TAX REVENUE- ≤ 10%

STATUS OF CONVERGENCEGROSS EXTERNAL RESERVES ≥ 6 MONTHS 0F IMPORTS COVER

STATUS OF CONVERGENCEDOMESTIC ARREARS = 0

2006 2007 2008 2009 2010 2011BENIN 0.0 0.0 0.0 0.0 0.0 0.0BURKINA FASO 0.0 0.0 0.0 63.6 0.0 0.0COTE D'IVOIRE yes yes yes 0.0 0.0 0.0GUINEA BISSAU yes yes yes 0.0 0.0 0.0MALI 0.0 0.0 0.0 0.0 0.0 0.0NIGER 0.0 0.0 0.0 0.0 0.0 0.0SENEGAL 0.0 0.0 0.0 0.0 0.0 0.0TOGO yes yes 0.0 0.0 0.0 0.0CABO VERDE 0.0 yes 0.0 0.0 0.0 0.0THE GAMBIA n/a n/a n/a n/a n/a n/aGHANA n/a n/a n/a yes yes yesGUINEA n/a n/a n/a n/a n/a n/aLIBERIA n/a n/a n/a 0.0 n/a 0.0NIGERIA n/a n/a n/a n/a n/a n/aSIERRA LEONE n/a n/a n/a n/a n/a n/a

STATUS OF CONVERGENCETAX REVENUE/GDP ≥ 20 %

STATUS OF CONVERGENCESALARY MASS/TAX REVENUE ≤ 35%

STATUS OF CONVERGENCEPUBLIC INVESTMENT/TAX REVENUE ≥ 20%

STATUS OF CONVERGENCEPOSITIVE REAL INTEREST RATES

STATUS OF CONVERGENCEREAL EXCHANGE RATE STABILITY

Some Policy Harmonisation Measures

• Policy Harmonisation in respect of the following:– Monetary Policy Frameworks;– Regulatory and Supervisory frameworks of banks and

other financial institutions;– Accounting and Financial Reporting frameworks for banks

and non-bank financial institutions, the – Legislations governing current and capital account

transactions; and– Balance of payments statistics, etc. – Stabilisation of Exchange Rates/Exchange Rate Mechanism

CONCLUSION

Conclusions• Bright prospects for the EMCP, despite the challenges• The political authorities are exhibiting a renewed commitment towards

speedy implementation of the project;• The implementing institutions are maximizing synergy through enhanced

collaboration• Member countries are more than ever determined to accelerate or at

least sustain the implementation process;• Considerable progress has been made under the programme:

– member countries have stepped up efforts to achieve fiscal consolidation and harmonize their fiscal, monetary and financial policies;

– the liberalization of the current and external capital accounts are in progress;– the framework has been laid for the architectural design of the WAMZ project– The economies of UEMOA are converging steadily

THE WEST AFRICAN MONETARY AGENCY (WAMA) Macroeconomic Convergence and Policy Harmonization in ECOWAS...

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