Time is ripe for use of local currencies in cross border transactions -

WAMI

Accra, Oct. 9, GNA - Dr Joseph Nnanna, Director-General of the West Africa Monetary Institute (WAMI), said on Monday that the strong economic fundamentals in all member states of the West Africa Monetary Zone provided adequate impetus to launch the use of local currencies to settle cross-border transactions through the banking system and forex bureaux.

"This is the auspicious moment to make case for convertibility of our local currencies within member countries of WAMZ because for a long time now, we have sustained periods of macroeconomic stability, stable exchange rates and adequate stocks of international reserves," Dr Nnanna told the opening session of a workshop of experts aimed to draw a framework to facilitate the quoting and trading in local currencies. "The success of our dream to adopt a single currency by December 2009 is dependent on how effectively we attain convertibility among our states. Indeed convertibility is a first step to single currency," he said.

Convertibility refers to the use of domestic currency to purchase foreign goods and services. A currency is convertible if it is freely accepted and offered for the settlement of international transactions. Dr. Nnanna said the move was also to deepen intra-trade among the countries by allowing economic operators within the five countries constituting the zone- Ghana, Liberia, Guinea, Gambia and Sierra Leone, to trade among themselves by being able to convert their local currencies at the commercial banks or forex bureaux for payment within member states for their transactions.

"What we intend to do is to give legal meaning and formalise what is already being done by the traders in the informal sector, who sell these currencies under the table in the black markets." Dr. Nnanna said once the countries were able to come together the incentive to indulge in currency counterfeiting would disappear while the risk of multiplicity of currency, such as exchange rate risk, was also eliminated.

The formalization would also improve efficiency, minimize the use of cash in business transactions and ensure the expansion of recorded intra-regional trade transactions. Dr Nnanna was positive that the programme could take off as early as December this year if stakeholders agreed on the framework for its launch.

However, Dr Nnanna said, an obstacle to make the scheme operational was the current restrictions that the various Central Bank legislations placed on the amount of local currency allowed to be taken outside a country.