1. THE WEST AFRICAN MONETARY AGENCY (WAMA) Macroeconomic Convergence and Policy Harmonization in ECOWAS ADDIS ABABA,26 and 27 JULY 2012 1

2. Outline: IntroductionSome Macroeconomic Developments in ECOWAS Status of macroeconomic convergence in ECOWAS Some Policy Harmonization InitiativesConclusion 2

3. Introduction WAMA: Established in 1992 by the Authority of ECOWAS Heads of State and Government (Per Decision A/DEC./7/92) A specialised autonomous body of ECOWAS, concerned with monetary Integration and payments arrangement 3

4. Introduction (contd.) – Through a transformation from West African Clearing House (WACH) Why was the transformation necessary? The transformation had become necessary following: – the adoption of the ECOWAS Monetary Cooperation Programme (EMCP) in 1987; and – the need for an entity to handle the implementation of this Programme in addition to the multilateral payments related issues; – WACH originally established in 1975:- to provide a mechanism through which members could use their domestic currencies for current and capital account transactions within the West African region; The objective had been to encourage intra-regional trade and help member countries to economize on the use of foreign exchange. 4

5. Introduction (contd.) Membership comprises the eight central banks of ECOWAS Member States: 1)Bank of Cape Verde 2)Central Bank of The Gambia 3)Bank of Ghana 4)Central Bank of the Republic of Guinea 5)Central Bank of Liberia 6)Central Bank of Nigeria 7)Bank of Sierra Leone 8)BCEAO (the common Central Bank of the eight countries of UEMOA) Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, Togo 5

6. Introduction (contd.)  OBJECTIVES – promote trade and financial transactions; – encourage exchange rate liberalization among member States; – promote monetary cooperation and consultation among member States; – assist member States in the harmonization and coordination of their monetary and fiscal policies; – ensure the monitoring, coordination and implementation of the ECOWAS Monetary Cooperation Program (EMCP); – encourage the pursuit of appropriate macroeconomic policies conducive to market- determined exchange and interest rates; – initiate and promote policies and programmes aimed at achieving monetary integration within the region; and – ensure the establishment of a single monetary zone in West Africa by creating the necessary conditions leading to implementation of uniform monetary policy and creation of a single currency. 6

7. Introduction (contd.) 7 The Convergence Criteria Primary CriteriaBudget Deficit/GDP ratio (excluding grants) ≤ 4 percentInflation rate ≤ 5 percent Central Bank Financing of Budget Deficits ≤ 10 percent of previous year’s Tax Revenue Gross External Reserves ≥ 6 months of imports coverSecondary CriteriaProhibition of new arrears and liquidation of all outstanding onesTax Receipts/GDP ratio ≥ 20 percentSalary Mass/Tax Receipts ratio ≤ 35 percentPublic Investments/Tax Receipts ratio ≥ 20 percentPositive Real Interest RatesReal Exchange Rate Stability

8. SOME MACROECONOMIC DEVELOPMENTS IN ECOWAS 8

9. Growth in ECOWAS was quite encouraging in 2011: With the exception of Cote d’Ivoire, all countries recorded positive growth rates Economic activity slowed down in most UEMOA countries as a result of the negative effects of the Ivorian crisis and the unfavourable climatic conditions The regional economy is expected to expand further in 2012 driven by a number of factors: large mining ventures in Niger, Liberia and Sierra Leone improvement in weather conditions in the Sahel - Gambia and Mali Restoration of peace and security in Cote d’Ivoire 9 GDP GROWTH RATES 2008200920102011 2012 S-S. AFRICA5.62.8 5.3 5.1 5.4 ECOWAS5.65.5 7.06.27.7 UEMOA3.93.0 4.40.86.1  Benin 5.02.72.63.1 3.5  B. Faso 5.23.2 7.94.15.6  C. d'Ivoire 2.33.8 2.4  G. Bissau 3.23.03.55.3 4.5  Mali 5.04.5 5.85.4  Niger 9.6-0.9 8.02.38.5  Senegal 3.22.24.14.0  Togo 2.43.4 4.04.8 WAMZ6.16.37.8 8.2  Gambia 6.14.65.5 3.35.5  Ghana 8.44.0 8.0  Guinea 4.9-0.31.94.0 5.5  Liberia 3.53.63.76.9 9.5  Nigeria 6.06.7 8.0 7.4 7.7  S. Leone 4.03.25.3 6.025.2 Cape Verde6.14.05.6 5.15.7

10. MACROECONOMIC DEVELOPMENTS IN ECOWAS GROWTH IN BROAD MONEY SUPPLY 20062007 2008200920102011 ECOWAS42.036.844.717.411.615.3 WAMZ51.542.455.818.610.617.1 GAMBIA26.26.718.419.413.711.0 GHANA39.135.940.224.733.833.2 GUINEA59.44.639.125.874.49.3 LIBERIA 34.438.6 44.441.331.639.5 NIGERIA43.144.257.817.56.915.4 SIERRA LEONE21.422.622.527.528.522.6 UEMOA11.418.79.614.215.711.1 BENIN18.019.827.37.47.38.1 BURKINA FASO10.122.912.021.619.213.8 COTE D’IVOIRE10.323.65.717.218.610.7 GUINEA BISSAU5.324.829.56.829.749.5 MALI8.89.30.714.410.415.3 NIGER16.223.212.118.521.86.1 SENEGAL11.912.61.811.413.76.8 TOGO22.816.818.116.116.315.9 CAPE VERDE 18.79.7 7.93.36.1-6.9

11. STATUS OF MACROECONOMIC CONVERGENCE IN ECOWAS 11

12. STATUS OF CONVERGENCE NUMBER OF COUNTRIES THAT MET THE CONVERGENCE CRITERIA 2006200720082009201020112012 Budget Deficit 6863343 Inflation 97110999 External Reserves 191111099 Central Bank Financing 13151312 1314 Domestic Arrears 6579910-- Tax Revenue 1112234 Salary Mass 8976445 Public Investments7787677 Positive Real Interest Rate 66010756 Real Exchange Rate 122811610 12

13. STATUS OF CONVERGENCE 13

14. STATUS OF CONVERGENCE 14 COUNTRY PERFORMANCE ON THE PRIMARY CRITERIA 2006200720082009 201020112012 BENIN2423434 B. FASO2313333 COTE D’IVOIRE3424433 G. BISSAU2213323 MALI2313332 NIGER2313333 SENEGAL2223333 TOGO2424433 THE GAMBIA3212111 GHANA1101111 GUINEA1220012 LIBERIA2222122 NIGERIA3333233 SIERRA LEONE0111011 CAPE VERDE2312222

15. STATUS OF CONVERGENCE COUNTRY PERFORMANCE ON THE PRIMARY AND SECONDARY CRITERIA 200620072008 2009201020112012 BENIN 4 7 5 7578 BURKINA FASO 6 63 6 676 CAPE VERDE 5 44 6 5 56 COTE D'IVOIRE 55 37 746 GAMBIA 63 1 4 2 2 2 GHANA 2 22 11 33 GUINEA 24 5 41 34 GUINEA-BISSAU 422 6 635 LIBERIA 44 3 444 4 MALI 6 748 7 75 NIGER 7 6 48 7 8 7 NIGERIA 465 53 4 4 SENEGAL 6 568 7 8 9 SIERRA LEONE 1212 2 3 2 TOGO 5 6 4 6 7 57 15

16. STATUS OF CONVERGENCE BUDGET DEFICIT(EXCL. GRANTS)/GDP ≤ 4% 16

17. STATUS OF CONVERGENCE BUDGET DEFICIT(EXCL. GRANTS)/GDP ≤ 4% 17

18. STATUS OF CONVERGENCE INFLATION ≤ 5% 18

19. STATUS OF CONVERGENCE INFLATION ≤ 5% 19

20. STATUS OF CONVERGENCE CENTRAL BANK BUDGET DEFICIT FINANCING/TAX REVENUE - ≤ 10% 20

21. STATUS OF CONVERGENCE CENTRAL BANK BUDGET DEFICIT FINANCING/TAX REVENUE - ≤ 10% 21

22. STATUS OF CONVERGENCE GROSS EXTERNAL RESERVES ≥ 6 MONTHS 0F IMPORTS COVER 22

23. STATUS OF CONVERGENCE GROSS EXTERNAL RESERVES ≥ 6 MONTHS 0F IMPORTS COVER 23

24. STATUS OF CONVERGENCE DOMESTIC ARREARS = 0 24 20062007200820092010 2011 BENIN0.0 BURKINA FASO0.0 63.60.0 COTE D'IVOIREyes 0.0 GUINEA BISSAUyes 0.0 MALI0.0 NIGER0.0 SENEGAL0.0 TOGOyes 0.0 CABO VERDE0.0yes0.0 THE GAMBIAn/a GHANAn/a yes GUINEAn/a LIBERIAn/a 0.0n/a0.0 NIGERIAn/a SIERRA LEONEn/a

25. STATUS OF CONVERGENCE TAX REVENUE/GDP ≥ 20 % 25

26. STATUS OF CONVERGENCE TAX REVENUE/GDP ≥ 20 % 26

27. STATUS OF CONVERGENCE SALARY MASS/TAX REVENUE ≤ 35% 27

28. STATUS OF CONVERGENCE SALARY MASS/TAX REVENUE ≤ 35% 28

29. STATUS OF CONVERGENCE PUBLIC INVESTMENT/TAX REVENUE ≥ 20% 29

30. STATUS OF CONVERGENCE PUBLIC INVESTMENT/TAX REVENUE ≥ 20% 30

31. STATUS OF CONVERGENCE POSITIVE REAL INTEREST RATES 31

32. STATUS OF CONVERGENCE REAL EXCHANGE RATE STABILITY 32

33. Some Policy Harmonisation Measures Policy Harmonisation in respect of the following : – Monetary Policy Frameworks; – Regulatory and Supervisory frameworks of banks and other financial institutions; – Accounting and Financial Reporting frameworks for banks and non-bank financial institutions, the – Legislations governing current and capital account transactions; and – Balance of payments statistics, etc. – Stabilisation of Exchange Rates/Exchange Rate Mechanism 33

34. CONCLUSION Despite slowdown in the global economy in 2011 due to a number of factors, including: Natural disasters Socio-economic disturbances Financial crisis Depressed business and consumer confidence Austerity measures Upward pressure on food and crude oil prices Economic activity in ECOWAS remained robust The economies were generally characterized by upward pressures on fiscal operations and inflation, reflecting supply constraints and the impact of exogenous shocks, especially, increases in food and crude oil prices. The major challenges in fiscal operations related to low tax revenue, high wage burden and interest payments Monetary policy was generally restrictive The constraints in the current account accentuated in spite of an encouraging export performance The projections show that economic activity will strengthen further in 2012 as: New major oil and mining projects become operational in Sierra Leone and Niger Peace and stability is restored in Cote d’Ivoire and Guinea-Bissau However, the downward risks relate to; The ongoing political developments in Mali 34

35. Conclusions Bright prospects for the EMCP, despite the challenges The political authorities are exhibiting a renewed commitment towards speedy implementation of the project; The implementing institutions are maximizing synergy through enhanced collaboration Member countries are more than ever determined to accelerate or at least sustain the implementation process; Considerable progress has been made under the programme: – member countries have stepped up efforts to achieve fiscal consolidation and harmonize their fiscal, monetary and financial policies; – the liberalization of the current and external capital accounts are in progress; – the framework has been laid for the architectural design of the WAMZ project – The economies of UEMOA are converging steadily 35

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