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The arrival of West Africa’s new major common currency Echo can be overcome five years after being affected by the epidemic of coronavirus virus.
Leaders of the eight countries of the West African Economic and Monetary Union (WAEMU) and the broader 15-member Economic Community of West African States (ECOWAS) had hoped that the replacement of the French colonial CFA franc would occur by the end of this year.
The criterion agreed between WAEMU members for the launch of the currency was to contain the national budget deficit at or below 3% of gross domestic product (GDP).
However, Ouatara told reporters in the city of Buaffel on Saturday that in light of the economic hit from the Kovid-19 epidemic, he does not expect to receive it within the next few years and therefore does not expect the Echo to be second-to-none. Will be applied for. According to Reuters, three to five years.
CFA Franc CFA Franc is the most commonly used currency in some African countries in West and Central Africa, as in Mali.
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The IMF estimates that the Sub-Saharan African economy will contract at a rate of 3.2% in 2020, the worst decline on record.
The CFA franc, which includes both the Central African XAF and the West African XOF, is currently valued at CFA 655.96 in euros. The arrival of the Kovid-19 crisis and the related fall in commodity prices put the currency under pressure, as uncertainty arose over whether the respective central banks (Central African States Bank and Central African States Bank of Central African States) would hold the peg. You can keep it or not. .
According to NKC African Economics, the French Treasury, which guaranteed the peg because of the epidemic and the slowing of the French Treasury, eased the pressure to some extent in May and currency stability pushed the region to the height of the financial crisis. helped. Relatively silent despite external pressure.
However, economist Leeuwner Esterhuysen of NKC suggested that the threat of a second wave of infection, particularly in Europe, could put the currency under further pressure this year.
“The adoption of a new, independent currency may reduce the region’s dependence on monetary growth in Europe, but may bring a new set of problems,” Estherhuysen said in a note on Monday.
“There are concerns that Nigeria will dominate growth in FX markets, linking potentially inappropriate currency risk with the heavy dependence of oil in FX markets, while some regional economic convergence criteria set for currency are also inaccessible due to heterogeneity among member economies Looks like. ”
Esterhuyson speculated that, as a result, CFA Frank’s planned replacement with Echo would need to be further refined in the coming years before it could be successfully implemented.
“The short-term focus of West African governments will be to reduce and broaden tax bases to curb budget shortfalls, as the introduction of new regional currency is still underway,” he said. The current CFA franc and its current euro pegs will remain in place for the future.