Ghana Pledges Loyalty To Single Monetary Zone

Accra, Ghana (PANA) - Ghana Wednesday resolved to remain a loyal partner to the ECOWAS Monetary Integration process and pursue policies that will allow it to recover to meet the targets set for macroeconomic convergence.

This is in spite of the micro-economic difficulties facing the country, especially from the external market imbalances.

Kwamena Ahwoi, the Planning, Regional Economic Co-operation and Integration minister, made the pledge at the opening of a ministerial meeting on the Second Monetary Zone for ECOWAS.

He said monetary integration in the sub-region is important due to the many benefits that could be derived from it.

It would facilitate trade in the sub-region by reducing everyday transaction costs in currency conversions, eliminate foreign exchange risk and also help reduce economic uncertainty.

It is further expected to boost trade and thereby providing a stimulus to higher growth and employment in the region.

Ahwoi noted that Ghana's macro-economic performance in recent years has supported the objectives of the ECOWAS monetary programme as seen in the management of the budget deficits though most of it was eroded in late 1999.

He called on the various countries to ensure that they pursue appropriate policies that would result in the successful single currency launch.

The macro-economic convergence criteria, expected to be observed in two phases, begins with benchmarks relating to the rate of inflation, gross foreign reserves, central bank financing of budget deficits and a budget deficit to GDP ratio.

Ahwoi said these criteria have been designed to impose on participating countries the discipline that will be necessary to make the single monetary zone a success.

He cautioned that for most countries the criteria would require some tough policy adjustments that are necessary and a fair price to pay for the potential benefits.

Commenting on Ghana's economic situation, the minister said the recent instability of the exchange rate has raised the debate of what the appropriate exchange regime should be.

He said empirical evidence proves the single currency scheme yields more macro-economic stability in countries that opt for it.

In the face of large external shocks that are typical for non-oil primary commodity exporting countries like Ghana, he added, the policy response is not always defined.

"A country can choose to minimise the impact of such shocks through accessing foreign credit lines or allowing the shocks to pass through totally into the economy. Ghana has chosen a combination of the two by adjusting the prices of crude oil to reflect developments on the external markets," he said.

He explained that the current moves have come about due to the severe shocks in the latter part of 1999 that reversed some of the gains made in economic management.

Ahwoi appealed for the convergence of public support in the various countries for the cause of a single monetary zone.

The meeting has as its focus issues on monetary integration with particular reference to the establishment of a second monetary zone with a single currency in the sub-region.

The ultimate task is to achieve the second monetary zone by 2003 and merge it with the CFA zone to form a single monetary zone by 2004.