Two speakers at a three-day colloquium on Africa’s economic integration in Accra have expressed their optimism that the continent can achieve its desire of using a common currency but it is dependent on several factors.
Speaking on the topic “Single Currency and African Integration – A Diversion or True Path”, Professor Kodzo Evlo from the University of Lome, said currency unification was a possible part of economic integration.
He, however, stated that currency unification was not required for rapid economic integration or strong macroeconomic performance, but “may be desirable only after reasonable progress is made in overall economic integration.” Proceed with caution
Professor Evlo warned that a single currency policy should be implemented with caution so that it did not hamper macroeconomic performance and economic development.
“Single currency is not a compelling path; it can become a real diversion if it is not well designed or implemented. A high degree of economic integration can be achieved without single currency; however, well designed and well implemented monetary integration can be highly helpful,” he said.
“The issue of a single currency has been a difficult and contentious one. We must be very careful to adopt the right approaches,” he stressed, adding that although no consensus had been reached as yet because it was a tough decision to take, a single currency would be a plus for regional integration.
Addressing participants on Wednesday on the topic “Should Africa’s Dream of Monetary Union Be Kept Alive,” Dr Joseph Attah-Mensah of the United Nations Economic Commission for Africa (UNECA), said “It should be kept alive and it is achievable, but we need to do the right thing so that we get there.” Conditions for monetary union and single currency
He said a monetary union was dependent on price stability, the free movement of labour across borders with no visa restrictions and an open market to ensure capital movement among others.
Touching on the conditions that would make the adoption of a single currency by countries necessary, Prof. Evlo said while a monetary union was needed to establish a single currency regime, it was dependent on political, social and historical considerations.
The benefits and costs of common currencies
Stating that there were benefits to using a single currency such as enhancement of the usefulness of money as a medium of exchange and as a store of value, easier transactions between countries, improvement of liquidity and the reduction of the need for external reserves, there were also costs.
He listed some of the costs as the loss of independence by national authorities to a supranational authority, the giving up of alternative uses of the exchange rate as a policy tool, the inevitable exposure of member countries to disturbances arising from any part of the union and the resources devoted to resolving internal conflicts.
The colloquium was organised jointly by UNECA and Third World Network – Africa on the theme: “Africa’s Economic Integration: Strengthening Internal Coherence and Resilience to External Challenges.”
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