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West Africa aims for currency union by end decade

OUAGADOUGOU - West African finance ministers and central bank governors agreed late on Tuesday to appoint a panel of consultants to look into establishing a single currency across the region by the end of the decade.

Eight former French colonies in West Africa currently use the CFA franc and five other mostly English-speaking states are moving towards their own common currency, but governments want a single track approach to monetary union for the whole region.

‘Instead of creating two monetary zones which will eventually evolve into one, which will take some time, heads of state asked us to look at other quicker possibilities to go directly to a single monetary zone,’ Burkina Faso’s Finance Minister Jean-Baptiste Compaore told Reuters.

Experts say West African monetary union would boost trade integration and smooth capital and investment flows in a region still divided by old colonial boundaries.

Countries in the region tend to have more trade with their old colonial masters, especially France, than between themselves.

Compaore is president of the regional convergence council which is overseeing the move towards a single currency and which met in Burkina Faso’s capital Ouagadougou on Tuesday.

The council discussed a strategy which calls for the establishment of monetary union by December 2009, provided that a critical mass of countries constituting 75 percent of the GDP in the 15-member Economic Community of West African States (ECOWAS) satisfy the convergence criteria.

The West African CFA franc—used by Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo—was created in 1945 to protect former colonies from the impact of the devaluation of the French franc after World War Two.

It was first pegged to the French franc and then, from 1999, to the euro at a rate of 1 euro 655.957 CFA ($1.42). The value has allowed some of these African countries to import manufactured goods relatively cheaply but has been criticised for preventing their farmers from exporting competitively.

Former British colonies Gambia, Ghana, Nigeria and Sierra Leone, along with French-speaking Guinea, have been working to create their own single currency to run alongside the CFA but if it comes into existence it looks likely to have a short life-span, quickly being absorbed into the wider monetary union.

Vice-president of the ECOWAS commission, Jean de Dieu Somda, said a team of specialists would study the options so that the convergence council of regional ministers and bankers could present a definitive strategy to heads of state in December.