West Africa needs diversified economies to achieve second monetary zone: expert

The quest by the West African bloc to create a second monetary zone can only be met if the countries take steps to diversify their economies, a monetary policy expert said here late Friday.

Papa Lamine Diop, Executive Secretary of the Association of African Central Banks said after the conclusion of a three day Continental Seminar of the association that cyclical shocks within the economies have been the main obstacles to the creation of the second monetary zone in the sub-region.

Anglophone countries including Ghana, Nigeria, Sierra Leone, The Gambia, Liberia as well as The Republic of Guinea, a Francophone country, have been working unsuccessfully close to 20 years to create a second monetary zone with one currency alongside the CFA zone for the Francophone countries.

This is part of the efforts to have a sub-regional integration to lead gradually to the economic integration of Africa.

"Shocks have been hampering this effort. As you are aware, commodity price shocks, drought and recently the Ebola pandemic have all worked against achieving this goal," Diop narrated.

The six countries were expected to meet four primary convergence criteria including a single-digit inflation rate at the end of each year; a fiscal deficit of no more than 4.0 percent of the GDP; a central bank deficit-financing of no more than 10 percent of the previous year's tax revenues; and gross external reserves that can give import cover for a minimum of three months.

Acknowledging that work had been going on in each of the countries to achieve these targets consistently, Diop urged the governments to invest in the diversification of their economies in order to avoid the devastating effects of these exogenous and internal shocks on the economies which keep delaying the commencement of the second monetary zone with the proposed Eco currency.

He urged that the agriculture sector being one of the most consistent of all the economic sectors in Africa, should have more investments from the continent's natural resource revenues in order for it to grow and support the economies.

"If all the major economic sectors are well developed and there is a shock in one or two of them, the strengths of the others would compensate for the shocks from the other sectors; and there is the need for political will to achieve this," Diop added. Endit