Six ECOWAS States Agree To Form Monetary Union

April 21, 2000

ACCRA, Ghana (PANA) - Six ECOWAS states outside the CFA franc zone have committed themselves to create a second monetary union in the sub-region by January 2003.

In a communique, dubbed the "Accra Declaration on Second Monetary Zone", Ghana, Gambia, Guinea, Liberia, Nigeria and Sierra Leone said the union would be based on conditions adopted by the ECOWAS Authority for the establishment of a single monetary zone.

The authority decided on a fast-track approach to ensure an accelerated implementation of integration programmes at a meeting in Lome in December.

"In recognition of the difficult adjustment effort needed to achieve the targets set for macro-economic policy convergence, member states agree to undertake concerted action to attain the following primary convergence criteria," the communique said.

According to the communique issued Thursday at the end of a one-day mini-summit in Accra, the countries pledged to attain an inflation rate of not more than 9 percent by the 2000 and 5 percent by 2003.

They would maintain gross external reserves to cover at least three months of imports by the end of 2000, and six months by the end of 2003.

The presidents of Ghana, Nigeria and Guinea and representatives from Sierra Leone, Gambia and Liberia signed the declaration, which was witnessed by President Alpha Oumar Konare of Mali, current chairman of ECOWAS.

The declaration commits the countries to central bank financing of budget deficit to not more than 10 percent of previous year's tax revenue.

Budget deficit (excluding grants) to GDP ratio should not be more than 5 percent by 2000 and 4 percent by 2002.

"Six secondary criteria adopted under the ECOWAS single currency programme will also be observed in support of the above four criteria," the declaration said.

"Member states undertake to establish an effective macro-economic data base within each country and at the sub-regional level as essential support for the multilateral surveillance mechanism," it added. "In order to accommodate the monetary and fiscal pressures that this regional macro-economic harmonisation programme will exert on individual national economies, member states agree to establish an appropriate regional compensation and stabilisation arrangement in support of the commitments to be met under the monetary integration programme."

The declaration said modalities for implementation would involve the adoption of "the recommendations of the Convergence Council, including the attached Action Plan, which outlines the programme of activities to be undertaken in four stages ending in December 2002."

That would be followed by the commencement of the second monetary zone in January 2003.

Required institutional arrangements include the establishment of a summit of heads of state and government, Convergence Council of ministers and governors of central banks, a technical committee assisted by the task force, and a common central bank, it said.

It cited that "member states recognise the need for strong political commitment and (will) undertake to pursue all such national policies as would facilitate the regional monetary integration process."

"In this regard, national economic management programmes will be formulated and implemented to reinforce the monetary integration objective. This concerted approach is to be reflected in member states' interactions with all their relevant development partners," it added.