An end of year single inflation rate and fiscal deficit of 4 per cent of GDP as been set as key requirements for the qualification of ECOWAS member countries in the usage of the Eco currency.
This is according to President of the ECOWAS Commission, Jean Claude Kassi Brou.
Making the disclosure at the 59 Ordinary Session of ECOWAS, President Jean Claude Kassi Brou stated the aforementioned requirements form part of an ten (10) convergence qualification criteria for all ECOWAS members.
“Member states are urged to work towards meeting the 10 convergence criteria including an end of year single inflation and fiscal deficit of not more than 4 per cent of GDP for qualification,” he stated.
Speaking further, President Jean Claude Kassi Brou noted the implementation of the single ECO currency has been re-scheduled for 2027, attributing the delay in implementation to the outbreak of the Covid-19 pandemic.
“We also have in terms of the single currency a new road map and a new convergence part that covered the period 2022, 2026 and 2027 period being the launching of the Eco. So that’s also being a very big decision because we recall due to the Covid, the head of state decided to suspend the implementation convention of part in 2020 and 2021 and they also decided that the ministerial committee should look at the new road map,” he said.
He also revealed that only 6 member states out of the 16 have so far ratified the agreement for the use of the Eco single currency.
The Eco is the proposed name for the common currency that the West African Monetary Zone (WAMZ) plans to introduce in the framework of the Economic Community of West African States (ECOWAS). This objective is to create a common currency for all West Africa states.
It is also to enable the French-speaking west African region to abandon the CFA franc for the Eco, as part of a process to gain complete fiscal and monetary independence from France.
For the Eco to be implemented, 10 convergence criteria, set out by the West African Monetary Institute (WAMI), must be met.
These criteria are divided into four primary and six secondary criteria.
Up to the fiscal year 2011, only Ghana had been able to meet all the primary criteria in any single fiscal year.
The four primary criteria to be achieved by each member country are:
- 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.
- Gross external reserves that can give import cover for a minimum of three months.
The six secondary criteria to be achieved by each member country are:
- Prohibition of new domestic default payments and liquidation of existing ones.
- Tax revenue should be equal to or greater than 20 percent of the GDP.
- Wage bill to tax revenue equal to or less than 35 percent.
- Public investment to tax revenue equal to or greater than 20 percent.
- A stable real exchange rate.
- A positive real interest rate.
