15 March 2009

Africa United By a Single Currency?

opinion

We wish to continue from last week on the august discourse on the monetary institutes and policies that will ultimately see West Africa integrated under a single currency. This week we seek to proceed with the role and functions of the West African Monetary Institute (WAMI), thus:

The role and functions of the West African Monetary Institute (WAMI)

4- exchange rate mechanism and conversion rate

The WAMI would study the issue of exchange rate parities within the West African monetary zone and recommend the appropriate exchange rate mechanism and parities for the existing currencies in the second monetary zone. It would also provide a basis for the setting up of an exchange rate mechanism and the appropriate bands of fluctuation for currencies in the zone. It would be responsible for determining the value of the common currency and the conversion rates of national currencies into the common currency.

5- Organisation of sensitisation

It would embark on a programme of sensitisation of citizens of the participating countries in order to create wide public support for the introduction of the new currency. This would involve organisation of seminars/workshops etc. to educate the public on the new currency, the ECO. This activity would be undertaken in collaboration with member states which have set up National Sensitisation Committees (NSCs) in this regard.

6- Design and technical preparation of the new currency

The WAMI will be responsible for the preparation of background work on the new currency to be issued by the common Central Bank. This would include the name, determination of par value, denominations, that would facilitate the printing of the new bank notes and coins by the WACB.

Modalities for setting up a common central bank

The Institute would also be responsible for the setting up of the common Central Bank, including drawing up the legal framework of the central bank and related institutions, proposals for selecting the Headquarters, the modalities for contributing to the capital, the physical infrastructure and drawing up guidelines for the hiring of key officers.

Forster cooperation among countries

The West African Monetary Institute will fulfill a role similar to that played by the European Monetary Institute (EMI). In this regard, the West African Monetary Institute would provide a platform for intense cooperation between the central banks in the West African Monetary Zone, and foster in the countries of the Zone the feeling of ownership of the future common Central Bank.

Create enabling environment

The institute would create the conditions for a smooth transition to the new common currency by ensuring that regulations in all countries are consistent with the introduction of a new currency; prices are quoted in the new currency as well as any other practical issues that would facilitate the smooth introduction of the new currency, and withdrawal of old currencies.

Organisational structure of WAMI

The West African Monetary Institute is headed by a director general and has five departments - Research, Operations, Finance and Administration, Internal Audit and Legal. The WAMI is supervised by a Convergence Council of Ministers and Governors of Central Banks.

Budget

An initial two-year budget was approved for the Institute in December 2000 to cover the period of activities of the Institute, in the years 2001 and 2002. The budget was subscribed to by central banks in accordance with the ECOWAS Budgetary allocation formula which is a coefficient of contribution based on GDP and population. Since 2002 annual budgets prepared by the Institute are approved by the Convergence Council for funding by the central banks.

Work programme

WAMI's initial two-year work programme, was expended in 2002 to focus on multilateral surveillance of macroeconomic convergence. The other aspects of the work programme include technical, institutional and policy harmonization issues that are to be implemented in order to set up the common Central Bank.

Conclusion

The Institute since its inception has been undertaking relevant activities that would enable it achieve its mandate as contained in its statute. It is envisaged that it would be able to accomplish its tasks to enable the common Central Bank to take off smoothly by December, 2009 as planned. It is hoped however, that the member countries would maintain their commitment to meet the convergence criteria and other obligations.

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