BoG Governor calls for efforts to meet convergence criteria for Monetary Union

Dr Ernest Addison, the Governor of the Bank of Ghana, has mounted a strong conceited defense on the need to improve the macroeconomic environment of the West Africa sub-region which will place it on a stronger convergence path for a viable monetary union.

Speaking at the opening session of the Joint Ordinary Meeting of the Economic and Monetary Affairs Committee and The Operations and Administration Committee of WAMA, Dr Addison said the performance of the sub regional economies is worrying but not surprising given the challenges the region has faced over the past three years.

“Now the concern is whether the 2026 deadline for achieving convergence is still realistic in the face of the disruptive effects of the repeated shocks on the region. This, perhaps, calls for a readiness assessment for the launch of the ECO in 2027 as move along” he said.

An Assessment of regional economies for 2022 showed that no Member State satisfied the four primary convergence criteria, while the number of Member States that met at least three primary criteria dropped to four. Similarly, no Member State is expected to meet all the four primary criteria in 2023.

The criteria include overall fiscal deficit of three per cent, average annual inflation of five per cent and gross reserves of more than three months of import cover.

In June 2021, the Authority of ECOWAS Heads of State and Government adopted a new Roadmap for the Launch of the ECO and a new Macroeconomic Convergence and Stability Pact (MCSP) after the COVID-19 pandemic disrupted the planned launch of the ECO in 2020.

“With the new roadmap, majority of Member States must meet all the Primary Convergence Criteria on a sustainable basis by 31st December 2026. This implies that the period 2024 to 2026 is critical if we should make any meaningful progress with the new Roadmap” Dr Ernest Addison added.

Progress

Dr Addison noted that despite the challenges, some progress has been made in the implementation of the roadmap.

The Director-General of the West Africa Monetary Agency Momodou Bamba Saho said the roadmap for the launch of the ECO required member states to consistently meet all the four primary convergence criteria by 2026.

However, in 2022, only two Member States, Guinea and Liberia, met the budget deficit criterion. However, performance on the average annual inflation criterion sharply declined, with only Benin and Niger meeting the target.

The central bank financing criterion also saw a deterioration in 2022, with four Member States missing the target, emphasizing the need for policy reforms. Lastly, while performance on the gross external reserves’ criterion weakened slightly in 2022, 14 Member States still complied, showcasing the region’s resilience. No Member States Met all four primary convergence criteria. Four Member States (Benin, Niger, Guinea and Liberia) complied with at least three Primary Convergence Criteria.

“In summary, while we have made strides in certain areas, there is a clear need for enhanced strategies and reforms to ensure all Member States align with our shared goals. Together, we can navigate these challenges and lay the foundation for a prosperous ECOWAS” Dr Ernest Addison added.