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CFA franc reform has been delayed (yet again) to 2027

By Nadoun Coulibaly
Posted on Friday, 30 July 2021 09:37

59th Ordinary Session of Ecowas-71, 19 June 2021, Accra. Presidency of the Republic of Benin

Ecowas’ West African leaders have agreed to postpone the launch of its single currency, the eco, which is now due to come into force in 2027.

During the latest summit of the Economic Community of West African States (Ecowas), which took place in Accra in late June 2021, the ministerial committee chaired by Ken Ofori-Atta, Ghana’s finance minister, endorsed a new roadmap for the launch of the eco, the future single currency’s name, which is now scheduled for 2027.

While waiting for this latest development, the Community was exempted from complying with the convergence criteria this year, due to the impact of the Covid-19 pandemic on states’ macroeconomic performance.

A West African economist that participated in these discussions told us that “efforts were made to bring the protagonists’ positions closer.” In this case, the Anglophones were on one side and the members of the franc zone on the other.

The talks also centred around providing “precise details on how to create this single currency.” But he fears that “successive postponements since 1987 have damaged this project’s credibility.”

Which majority will be implemented?

Ofori-Atta seems determined to have the single currency see the light of day. In Accra, he urged policymakers to refine the economic management tools and ensure that the currency is introduced within the newly proposed timeframe.

However, even though the draft Pact was the subject of intense debate at the end of June 2021, there are still many important decisions left to be made. For example, no consensus was reached on what kind of majority should be created to validate resolutions.

Four options were submitted to the ministerial committee: a simple majority composed of the entire zone (i.e. eight states), a majority of state members consisting of at least 50% of the eight West African Economic and Monetary Union (WAEMU) countries and 50% of those of the West African Monetary Zone (WAMZ) (Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone), a qualified majority of eight states that contribute – on average – at least 71% to the regional gross domestic product (GDP), and finally, a qualified majority of eight states that have a GDP of at least 51%.

According to the technical committee’s report, which we managed to consult, this matter will be the subject of an additional act and should not prevent the draft from being submitted to the heads of state.

An $18m technical roadmap

Another crucial point is the exchange rate regime. Although the issue seemed settled – since the previous 2015-2019 roadmap, Ecowas countries had agreed on the principle of a flexible exchange rate regime for their common currency – the revised roadmap insists on the link between the start of the stability phase and the launch of the future currency.

The roadmap, which is estimated to cost around $18m to implement, is composed of 10 programmes covering all the activities required to bring the currency into operation. These include strengthening Ecowas’ surveillance mechanism, creating a community solidarity and stabilisation fund, and harmonising the balance of payment statistics.

The future central bank – whose host country has yet to be determined – is expected to begin operations in 2025.

Integration in question

Hailing “appreciable technical work”, Togolese economist Kako Nubukpo says that “many outstanding questions arose that we tried to answer during the Lomé General Assembly”, starting with Ecowas’ vision for economic integration.

“Will it be federalism or simple coordination of economic policies?,” he asks, adding that “if federalism is chosen, we will need to assume that a great deal of budgetary solidarity will occur.” The economist also recalls the strong heterogeneity within Ecowas states, “where Gambia’s annual GDP is equivalent to 23 hours of Nigeria’s.”

The new eco in five dates

  • 2021-2022: The capital of the West Central African Bank (WACB) will be determined, followed by the pooling of reserves.
  • End of 2023: The WACB creation agreement will be signed and a host country designated for its headquarters.
  • Early 2025: start of WACB’s activities.
  • 2027: official launch of the eco.

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