Download WAMZ/TC/36 - West African Monetary Institute

MEETINGS OF THE WEST AFRICAN MONETARY ZONE
BANJUL, THE GAMBIA
JANUARY 13 – 17, 2014
WAMZ/TC/36
REPORT OF THE
36 MEETING OF THE TECHNICAL COMMITTEE
OF THE WEST AFRICAN MONETARY ZONE
TH
BANJUL, THE GAMBIA
JANUARY 13 - 14, 2014
REPORT OF THE 36THMEETING OF THE
TECHNICAL COMMITTEEOF THE WEST AFRICAN
MONETARY ZONE (WAMZ)
HELD IN BANJUL, THE GAMBIA
JANUARY 13 - 14, 2014
I.
INTRODUCTION
1. The 36thMeeting of the Technical Committee of the West African
Monetary Zone (WAMZ) was held at Kairaba Beach Hotel, Banjul, The
Gambia on 13th and 14th January 2014, to deliberate on the status of
implementation of the WAMZ programme. The technical documents
prepared by the West African Monetary Institute (WAMI) formed the basis
of the deliberations.
2. All the WAMZ Member States, ECOWAS Commission and WAMI were
represented at the meeting. West African Monetary Agency (WAMA),
West African Bankers Association (WABA), the ECOWAS Parliament,
West African Institute for Financial and Economic Management
(WAIFEM), ECOWAS Bank for Investment and Development (EBID),
Union
Economique
et
MonetaireOuestAfricaine
(UEMOA),
BanqueCentrale des Etats de l’Afrique de L’Ouest (BCEAO), African
Export-Import Bank (AFREXIMBANK) also attended as observers.The list
of delegates is attached as Appendix B.
II.
OPENING CEREMONY
Welcome Statement by the Representative of The Gambia
3. Mr.AbdoulieJallow, Permanent Secretary, Ministry of Finance and
Economic Affairsof the Republic of The Gambia, welcomed the delegates
to the 36thmeeting of the Technical Committee of the WAMZ and to the
beautiful smiling coast of Africa. He expressed the hope that the Meeting
would be another remarkable event in line with the country’s billing as one
of the most hospitable destinations. He informed delegates that The Gambia
and her people took pride in hosting the WAMZ meetings and encouraged
them to find time in their crowded schedule to savour the multitude of
places of interest and discover Gambia’s exceptional good way of life.
4. Mr.Jallowstated that as the global economic environment was rapidly
changing, becoming more sophisticated and competitive, the Zone could not
afford to remain a spectator as usual. He noted that although policy
1
formulation and implementation had improved significantly in the WAMZ,
most of the countries were small open economies and highly prone to
external shocks,and that it had long been recognized that their strength lay
in regional integration with strong regional institutions. He observed that
while the individual member countries belonged to most of such
international bodies,no such cooperation was more important and urgent
than a full ECOWAS monetary cooperation programme initiated since
1975.
5. He said that after nearly three decades into the ECOWAS single currency
programme, good progress had been registered in areas of economic growth
and governance but challenges still remained, especially in the area of
convergence.
He noted, however, that convergence alone was not a
sufficient condition for monetary integration, though critical from an
economic perspective.
He therefore called for some flexibility in the
application ofthe convergence criteria while focusing more on the structural
building blocks. In conclusion, he emphasised the need for concrete and
bold political decisions if the WAMZ was to achieve its integration dream.
Statement by the Representative of the President of the ECOWAS
Commission
6.
The statement by the representative of the President of the
ECOWAS Commission was delivered by Dr Nelson O. Magbagbeola, Ag.
Director of Multilateral Surveillance, ECOWAS Commission.
He
welcomed delegates on behalf of the President of ECOWAS Commission,
His Excellency KadréDesiréOuédraogo, and the ECOWAS Commissioner
of Macroeconomic Policy, His Excellency Dr. Ibrahim Bocar Ba. He said
ECOWAS Commission, as a key stakeholder, was concerned with the slow
pace of attainment of monetary integration in the WAMZ. A key challenge
he noted was the poor compliance with the primary criterion of budget
deficit and the secondary criteria of tax revenue-GDP ratio and wage billtax revenue ratio. He said the Commission would continue to encourage all
Member States to enhance domestic resource mobilization and improve
efficiency of the tax system to ensure that the tax yield reached and
surpassed the ECOWAS threshold of 20 percent of GDP, as well as
rationalize
expenditure
towards
poverty-reducing
development
programmes.
7. He also noted that, apart from the quantitative macroeconomic convergence
criteria, timely resolution of the qualitative issues as contained in the
Roadmap of the ECOWAS Single Currency Programme was very
important. He said policy harmonization in areas such as statistics,
2
monetary policy and public finance frameworks as well as the removal of
all tariff and non-tariff barriers to free movement of persons and goods
within ECOWAS and integration of the financial markets must be
implemented with urgency. This, he said, required a collective effort and
strong resolve to ensure significant and sustained progress towards the
realisation of the WAMZ integration objectives, including creation of a
monetary union.
8. In conclusion, he commended WAMI on the achievements recorded in the
implementation of its activities under the Roadmap, including multilateral
surveillance, trade and financial integration, and payments system
development.
Remarks by the Director-General of WAMI
9. The Director-General of WAMI, Dr.AbwakuEnglama, welcomed the
delegates to the meeting and expressed his gratitude to the Government and
people of The Gambia for putting in place excellent arrangements to host
the WAMZ meetings and the hospitality extended to the participants since
their arrival. He also expressed hisappreciation to the country authorities
for the partnership and support received from them since his appointment
about a year ago.
10.He mentioned the various technical documents prepared by WAMI which
were before the delegates for their scrutiny and recommendations in line
with the key milestones under the Abuja Roadmap and upon the request
made by the Convergence Council at their 32nd meeting held in July 2013
in Accra, Ghana.The documents included:
I.
II.
III.
IV.
State of Preparedness for Monetary Union on January 1, 2015:
Interim Report
Report on the 6th WAMZ Trade Ministers’ Forum
WAMZ Payments System Development Project - Progress Report
WAMI’s Work Programme and Proposed Budget for Financial Year
2014
11.The Director-General informed the delegates that the performance score by
Member States on the primary macroeconomic convergence criteria
remained unchanged from last year, at 66.7 percent. One member state
(Nigeria) satisfied all the four primary criteria. Liberia and Sierra Leone
satisfied three criteria each, with Liberia missing the external reserves
criterion, and Sierra Leone, the inflation criterion. The Gambia, Ghana and
Guinea satisfied two criteria each. The Gambia missed the fiscal deficit and
3
central bank financing criteria, while Ghana and Guinea, the inflation and
fiscal deficit criteria. Inflation and fiscal deficit criteria continued to be the
more challenging for Member States, while central bank financing and
external reserves were the more consistently satisfied criterion. As regards
the secondary criteria, Member States’ performance deteriorated to 22.2
percent at end-June 2013, from 27.8 percent at end-June 2012
12.He expressed his gratitude to Honourable Mr.Seth Terkper, Minister of
Finance of the Republic of Ghana, Chairman of the Convergence Council;
Dr. Henry Kofi Wampah, Governor of the Bank of Ghana, Chairman of the
Committee of Governors; and Dr.AlhassanIddrisu, Director, Ministry of
Finance of the Republic of Ghana, Chairman of the Technical Committee,
for their sterling leadership and support to WAMI since the last meeting in
Accra, Ghana. He commended WAMI staff for their dedication to duty and
invaluable contributions towards the Institute’s work programme, and also
wished the delegates fruitful deliberations.
Remarks by the Out-going Chairman
13.Dr.AlhassanIddrisu, Director, Research and Forecasting Division, Ministry
of Finance of the Republic of Ghana and out-going Chairman of the
Technical Committee also welcomed delegates to the 36thmeeting of the
Technical Committee of the WAMZ. He used the opportunity to express
his gratitude to the Government and people of the Republic of The Gambia
for the warm welcome and excellent facilities placed at the disposal of the
delegates.
14.He noted that the meeting was another testimony that the WAMZ SingleCurrency Project was on course and member countries were prepared to
spend their resources and time to ensure the realisation of the goals of the
Project. He said that although the recent developments in the Eurozone were
sending some caution to all prospective monetary unions, the WAMZ
Authorities had been monitoring the current challenges facing the Eurozone
and how these were being resolved overtime with keen interest. He said it
was noteworthy that even in the wake of the crisis, there was no suggestion
that discredited the relevance of a monetary union for economic growth and
development.
15.He observed that Ghana’s performance on the convergence scale, like other
Member States, had been mixed with the country satisfying two out of the
four primary convergence criteria in the last assessment period compared to
2011 when the country satisfied all four. In spite of this, he reaffirmed his
country’s commitment to delivering on their obligations spelt out by the
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WAMZ Agreement. In that regard, they were pursuing fiscal consolidation
measures to rein in fiscal deficit and public debt over the medium term and
bring inflation back to single-digit levels. The country was implementing a
home grown stabilisation programme which had begun to yield positive
results. In conclusion, he urged the delegates to scrutinise the reports and
policy papers before them so as to make practical and implementable
recommendations on the way forward for the WAMZ Programme.
III.
ELECTION OF CHAIRPERSON
16.The Meeting elected Mr.AbdoulieJallow, Permanent Secretary, Ministry of
Finance and Economic Affairs of the Republic of The Gambia as Chairman
of the Technical Committee.
IV.
ADOPTION OF AGENDA
17.The draft agenda was adopted without any amendment and is attached as
Appendix A.
DISCUSSION ON THE AGENDA ITEMS
V. PRESENTATION
REPORTS
AND
DISCUSSION
OF
CONVERGENCE
A. Presentation of the Interim Report on the State of Preparedness of
WAMZ Countries for a Monetary Union on January 1, 2015
18.The Director, Research and Statistics Departmentof WAMI, Dr. Abu
BakarrTarawalie, presented the Interim Report. Presenting the first part of
the report, he noted that notwithstanding the slow growth of global real
GDP,the Zone recorded a growth of 6.7 percent during the first half of
2013, from 6.4 percent in the corresponding period of 2012. Growth in the
Zone was driven mainly by the services and agriculture sectors. In The
Gambia, the economy was projected to expand substantially, from 3.9
percent in 2012 to 6.4 percent in 2013, due to recovery in agriculture and
tourism. In Ghana, growth remained robust, although decelerated from
7.9percent in 2012 to 6.4 percent at end-June 2013, mostly attributed to the
decline in agricultureand industry. In Guinea real GDP growth was
projected to decline to 2.9 percent in the review period, from 3.9 percent in
2012, due to reduced activities in the mining subsector.
19.In Liberia, the estimated real GDP growth for 2013 was revised to 8.1
percentcompared to 8.3 percent in 2012. The expected growth was
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underpinned by strong performance in iron ore mining. Nigeria’space of
economic growth slowed to 6.4percent in the first half of 2013 from 6.6
percent in the first half of 2012. Growth remained robust in SierraLeone,
with an estimated real GDP growth of 14.6 percent in 2013, driven largely
by the mining sub-sector, particularly iron ore production. However, this
was lower than the 15.2 percent posted in 2012.
20.On the primary convergence criteria, the Report noted that in the last
assessment period, Nigeria was the only Member State that satisfied all the
four primary criteria. Liberia and Sierra Leone satisfied three each. While
Liberia missed the external reserves criterion, Sierra Leone did not meet
the inflation criterion. The Gambia, Ghana and Guinea satisfied two criteria
each. The Gambia missed fiscal deficit and central bank financing criteria,
while Ghana and Guinea did not satisfy the inflation and fiscal deficit
criteria. Inflation and fiscal deficit were the more challenging criteria for
Member States, while central bank financing and external reserves were the
more commonly and consistently satisfied criteria. Member States attained
a performance score of 66.7 percent on the primary convergence scale in
June 2013, compared to 62.5 percent in the corresponding period of 2012.
21.As regards the secondary convergence criteria, the report noted that, at endJune 2013, no Member State satisfied all the six criteria. Nigeria achieved
three criteria (non-accumulation of arrears, salary mass over tax revenue
and exchange rate stability); Guinea met two (salary mass over tax revenue
and investment from domestic receipts); Liberia satisfied two (nonaccumulation & liquidation of domestic arrears and tax revenue over
GDP); and Ghana, one (non-accumulation & liquidation of arrears).
TheGambia and Sierra Leone did not satisfy any of the secondary criteria.
22.Presenting the second part of the Interim Report on the state of
preparedness, Dr.Tarawalie recalled that at the 32nd Meeting held in Accra,
Ghana, in July 2013, the Convergence Council of Ministers and Governors
of the Central Banks of the WAMZ directed WAMI to conduct a study on
the State of Preparedness of Member States for monetary union by January
1, 2015, and to present an interim report at the ongoing meetings.
23.On nominal convergence, the report stated that three countries achieved the
single-digit criterion in 2009, 2010 and 2012, while two countries achieved
the criterion in 2011. The Gambia was the only Member State that
consistently attained this criterion since 2009, with an average inflation rate
of 4.5 percent over a four-year period (2009-2012). Liberia satisfied the
inflation criterion during the four-year period, except in 2011. Ghana
consistently met the criterion during the period 2010-2012. Guinea met the
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criterion only in 2009, while Nigeria and Sierra Leone consistently failed to
satisfy the criterion during the period.In the first half of 2013, The Gambia,
Liberia and Nigeria were the only countries that satisfied the inflation
criterion.
24.The report indicated that fiscal deficit criterion continued to be very
challenging for the Member States, except Liberia and Nigeria. Liberia had
consistently achieved the criterion since 2009, recording, on average, a
surplus of 1.6 percent of GDP during the period 2009-2012. Nigeria also
continued to achieve this criterion since 2009, except in 2010 when the
country recorded a deficit of 5.0percent. In The Gambia, the deficit
deteriorated from 6.7 percent of GDP in 2010 to 13.5 percent in 2012.
Ghana met the criterion only in 2011, while Guinea and Sierra Leone did
not satisfy the criterion during the four-year period.
25.Member States had considerably reduced their dependence on central bank
financing of public expenditures, leading to marked improvements in their
performances on the central bank financing criterion. Since 2011, all
Member States continued to achieve this criterion. However, Guinea and
Sierra Leone missed out on this criterion in 2009 and 2010, while The
Gambia also missed out in 2010. In the first half of 2013, all the Member
States satisfied this criterion.
26.Performances on the gross external reserves criterion had been generally
robust since 2009, as no less than five of the six Member States
consistently met or exceeded the target. During the period 2009-2012,
Guinea missed the criterion in 2009 and 2010, when it recorded 2.2 and 1.9
months of import-cover, respectively. Sierra Leone missed the criterion, at
2.4 months of import-cover, in 2011, while Liberia fell short in 2012,
recording 2.3 months of import-cover. The Gambia, Ghana and Nigeria
consistently met the criterion throughout the four-year period.
27.Giving an overall assessment, the report stated that Member States’
compliance with the primary macroeconomic convergence criteria
deteriorated between 2009 and 2012. No two countries satisfied all the
primary criteria simultaneously during this period. Only Liberia satisfied
all the four primary criteria in 2009 and 2010, while Ghana was the only
one that satisfied all the criteria in 2011. This compares to the performance
between 2005 and 2008, when two countries, The Gambia and Nigeria,
satisfied all the four primary criteria in 2006 and 2007 and The Gambia
alone in 2008. During the first half of 2013, only Nigeria satisfied all the
primary criteria.
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28.On real convergence, the report explained that the combined GDP for the
Zone in 2012 was $566.2 billion in purchasing power parity (PPP) terms,
representing 76.2 percent and 15.4 percent of ECOWAS and Africa,
respectively. The per capita GDP for the Zone was US$2,635 (PPP).
Nigeria is the largest economy in the WAMZ, accounting for around 77.6
percent of the population and 80.4 percent of GDP in 2012. The second
largest country both in terms of population and nominal GDP is Ghana,
with 11.9 percent and 14.8 percent of the Zone’s population and GDP,
respectively. The Gambia is the smallest economy with the Zone’s
population and GDP share of 0.8 and 0.6 percent, respectively.
29.The report noted that an evaluation of business cycle synchronization to
identify channels of risk sharing that exist in the WAMZ indicated that
there were generally weak links and synchronisation among Member States
in terms of real GDP, inflation, broad money supply, nominal interest rate,
fiscal deficit over GDP and gross external reserves in months of import.
30.The report used the economic distance method to evaluate the performance
of Member States on key macroeconomic indicators. In terms of inflation,
Gambia was the target country and the closest country to it was
Liberia.Ghana, Guinea, Nigeria and Sierra Leone were all farther away
from the target country, with Guinea as the farthest country on the inflation
score.This implied that significant efforts of joining the monetary union on
the basis of inflation must be made by the four countries (Ghana, Guinea,
Nigeria and Sierra Leone).
31.Liberia was the target country on the fiscal deficit and the closest country
to it was Nigeria. Ghana and Sierra Leone were farthest from the target
country, implying that the greatest fiscal effort of joining the monetary
union must be made by these two countries. Nigeria’s huge gross external
reserves made it incomparable in the Zone. In place of Nigeria, The
Gambia became the target country on the external reserves score. The
distances between the target and the rest of the Member States were
relatively short with Sierra Leone and Ghana as the closest countries.
Liberia and Guinea were farther away from the target, implying greater
effort must be made by these countries in joining the proposed monetary
union on the external reserves criterion.
32.Overall, an assessment of average economic distance between Member
States on the three primary criteria, excluding central bank financing,
showed that all Member States were some distance from the origin (ideal
target). Nigeria and Liberia were the closest country to the ideal target,
while The Gambia was farther but midway between the closest and farthest
8
countries. The farthest country from the ideal target was Guinea, followed
by Sierra Leone and Ghana. The Gambia was also to make efforts on the
basis of the three indicators, while the least but appreciable effort of joining
the monetary union was expected from Nigeria and Liberia.
33.On trade integration, the report noted that Member States of the WAMZ
continued to implement the ECOWAS trade integration Protocols and
Conventions within the framework of the ECOWAS common market
programme. These frameworks were collectively intended to create a
common market in stages beginning with a Free Trade Area (FTA), and
followed by a Customs Union. It was observed that the degree of intraWAMZ trade relative to the rest of the world continued to remain low,
averaging 1.21 percent during the period 2009-2012. The ratio increased
from 0.62 percent in 2009 to 1.74 percent in 2011 before declining to 1.52
percent in 2012. Similarly, intra-ECOWAS trade relative to the rest of the
world was below 10 percent. The low performance was partly explained by
limited complementarity of trade structures, infrastructural challenges such
as poor roads and communications systems as well as inadequate energy
supply that cause long delays at border crossings.
34.All the WAMZ Member States had signed the ECOWAS Trade
Liberalization Scheme (ETLS) Protocol and some had also ratified it. Apart
from Liberia, the rest were implementing the scheme. Procedures for
treating ETLS imports were not uniform across the countries, and the
smooth implementation of the scheme continued to be hampered by the
susceptibility of ETLS approved certificates to forgery, delay in issuing
notification for approvals, and lack of a real time updated record of
certified products and registered companies participating in the scheme.
35.With regard to the CET, the extraordinary session of the ECOWAS
Authority of Heads of State and Government held in Dakar, Senegal, on
October 25, 2013 endorsed the final structure of the CET as well as the
accompanying regulatory Texts. Three (3) Texts that were approved relate
to the regulation on i) safeguard measures, ii) anti-dumping measures and
iii) compensatory measures. All the Member States had agreed to adopt and
apply the ECOWAS CET rates, effective January 1, 2015.
36.On financial integration, the Interim Report noted that the nature and level
of financial sector development varied across the WAMZ countries.The
number of banks and bank branches continued to increase in some member
countries. While the number of banks increased in Guinea and Nigeria
between 2011 and 2012, it remained unchanged in The Gambia, Ghana,
Liberia and Sierra Leone. As at end-December 2012, The Gambia had 13
9
banks with 76 branches; Ghana, 25 banks with 862 branches; Guinea, 14
banks with 85 branches; Liberia, 9 banks with 66 branches; Nigeria, 21
banks with 5,050 branches; and Sierra Leone, 13 banks with 87 branches.
37.According to the report, the overall improvement in financial soundness
indicators showed that the industry remained safe and sound. The average
risk weighted capital adequacy ratio (CAR) remained significantly higher
than the 10.0 percent minimum requirement in all WAMZ countries. With
the exception of Liberia, bank profitability had been improving across the
Zone since 2010, partly explained by high interest margins as well as
increases in commission and fees. Return on Assets (ROA) had remained
above 2.0 percent in all countries, except Liberia and Nigeria.
Notwithstanding these positive developments, improving asset quality had
remained a key challenge for most member countries. With the exception
of Guinea and Nigeria, the ratio of non-performing loans to gross loans
(NPLs) had remained in double digits, relatively higher than the 10.0
percent tolerable limits. The high level of NPLs reflected increasing credit
risks on account of high lending rates, lapses in corporate governance in
some banks and continued prevalence of legacy loans.
38.Quoting and trading in the WAMZ national currencies by deposit money
banks remained limited. The low participation in the programme was partly
due to the lack of mechanism for clearing and settlement of accumulated
long positions. To address this challenge, WAMI prepared a paper to
institutionalize the quoting and trading process for the consideration of the
authorities. However, the modalities of formal framework for quoting and
trading were still being reviewed.
39.The report further noted that banking supervision and regulation in the zone
continued to be centred on strengthening compliance with the revised 29
Basel Core Principles (BCPs) and migration to Basel II and III. In addition,
all countries have or were in the process of implementing the International
Financial Reporting Standards (IFRS). The College of Supervisors of the
WAMZ continued to provide the platform for enhancing financial stability
and collaboration among regulators in the zone including the harmonisation
of banking supervisory processes.
40.Regarding WAMZ Payments System Development Project, the Interim
Report noted that the Project was running efficiently. In the Gambia and
Sierra Leone, all components of the Project had been implemented.
Progress continued to be recorded in Guinea and Liberia.
10
41.Ghana and Nigeria had transitioned to the System of National Accounts
(SNA)1993 and were partially migrating to newer version (SNA 2008).
Both countries produce annual and quarterly GDP estimates based on ISIC
Revision 4. The Gambia, Guinea, Liberia and Sierra Leone had partially
transited to SNA 1993) and they produce only annual series using the
production (supply) approach. The compilation of Consumer Price Index
(CPI) in all the WAMZ Member States was based on the harmonized
classification system, the COICOP (12 functions). In Ghana and Nigeria,
the coverage was all national households, with rural, urban breakdown of
the composite monthly national index published regularly. Both countries
rebased their CPI baskets and base years (Nigeria 2010 and Ghana 2012) to
be more reflective of current consumption patterns.
42.The Interim Report noted further that ratification and domestication of key
legal instruments was a major activity for Member States under the WAMZ
legal agenda. The WAMZ legal instruments must be ratified by all Member
States and incorporated into national law, where applicable, before the
commencement of the monetary union. The Report outlined the status of
ratification and domestication of key statutes as follows:
 WAMZ Agreement – Ratified by The Gambia, Guinea,Nigeria
and Sierra Leone
 WACB Statute (Revised) – Approved by Council but not yet
signed by the WAMZ Authorities.
 WAMZ Secretariat – Signed by the WAMZ Authorities but not
ratified by the Member States.
 WAFSA Statute – Approved by Council but not yet signed by the
WAMZ Authorities.
 Banking Statute – Approved by Council but not yet signed by the
WAMZ Authorities.
 Non-Bank Financial Institutions Statute – Approved by Council
but not yet signed by the WAMZ Authorities.
43.The Report further highlighted some constitutional implications that would
arise from the ratification of the WACB Statute. The loss of sovereignty in
respect of national currencies to a supra national body, that is the WACB,
would create conflict in respect of the provisions of some constitutions. For
example, by Article 183 of the Constitution of Ghana, the Bank of Ghana
was the sole authority to issue the currency of Ghana.
44.The Constitution of the Republic of The Gambia in Article 161 also
granted sole authority to the Central Bank of The Gambia to issue its
currency. It continued in Article 161 (3) to appoint the Central Bank as the
11
sole banker of the government and the principal depository bank for all
funds raised for or on behalf of the Government. There were provisions for
appointment of the Board of Directors, among others.
45.The Report identified key challenges confronting Member States as regards
the formation of the monetary union on January 1, 2015 as follows:
 Compliance with the convergence criteria: Achieving and sustaining
the fiscal deficit to GDP and inflation criteria have been particularly
challenging for some member countries. During the assessment period
(2009- June 2013), one country (Liberia) complied with all four primary
criteria in 2009 and 2010, while Ghana and Nigeria satisfied all the
criteria in 2011 and June 2013, respectively.
 Ratification and domestication of legal statutes and agreements:
most Member States were yet to ratify and domesticate the WAMZ
legal instruments. In addition, some countries would require
constitutional amendments to enable them to adopt the single currency.
 Payment of contributions to statutory funds such as SCF and
WACB Capital:As at September 30, 2013, Member States’
contribution to the WACB Capital amounted to just USD28.82 million
out of USD100.00 million. The total contributions made in respect of
the Stabilisation and Cooperation Fund totalled USD33.6 million out of
USD50.0 million. The Gambia was the only country that had fully paid
up her contributions to both funds, while Ghana and Sierra Leone fully
paid up their contributions to the SCF.
 Presence of asymmetric shocks: The WAMZ economies were prone to
relatively large asymmetric shocks, especially terms of trade shocks.
Many of the economies had the same structural characteristics and lack
economic complementarities, having undiversified production structures
and exports dominated by a few primary products.
 Low level of intra-WAMZ trade:This was partly due to poor transport
network, unstable power and water supply, as well as poor compliance
with ECOWAS trade and trade related protocols. The existence of nontariff barriers and road blocks, as well as high transport costs of imports
continued to increase the cost of domestic production.
 Partial capital account liberalisation: With the exception of The
Gambia, Member Stateshad not fully liberalized their capital accounts.
12
Various restrictions on outflows continued to exist including restrictions
on money market instruments, real estate,commercial banking and
institutional investors. Controls on capital mobility constituted a major
barrier to the attainment of capital markets integration in the WAMZ.
Discussion on the State of Preparedness Interim Report
46.Members of the Technical Committee commended WAMI for the quality
of the report and made the following observations:
Convergence Issues
(i) The need for more analytical discussion of the challenges and policies
that Member States should undertake to address the slow pace of
progress towards convergence;
(ii) The need to undertake an assessment of the extent to which
recommendations made in previous surveillance mission reports have
been implemented by Member States;
(iii) Given the persistent non-compliance of Member States with the WAMZ
convergence criteria, there may be the need to revisit the criteria and
propose necessary modifications to be more reflective of the structural
characteristics of the economies of Member States. In particular, there
is need to examine the fiscal criterion in view of the significance of
grants and infrastructure needs of Member States;
(iv) Nigeria as the sub-regional leader should lead the integration process;
(v) The global economic and financial crisis affected Member States’
progress towards achievement of macroeconomic convergence which
was not captured in the report;
(vi) There is need to undertake gap analysis on the Abuja Action Plan in
order to identify concrete and practical measures to ensure compliance
with quantitative and structural benchmarks;
Legal and Institutional Issues
(vii) The need to stress the status of ratification and domestication of the
WAMZ Statutes;
(viii) The need tohighlight the institutional prerequisites for effective take-off
of the monetary union especially the establishment of the WACB,
WAMZ Secretariat and WAFSA;
(ix) The need for commitment and political will to drive the integration
process forward;
(x) The need for Member States to pay up their contributions to statutory
funds such the WACB capital and the Stabilisation and Cooperation
Fund (SCF);
13
(xi) The need to assess the readiness of all stakeholders of the WAMZ
monetary union project, especially the players in the private sector;
Data Issues
(xii) There is a discrepancy between the data reported on WAMZ intra-trade
and the database at the ECOWAS Commission and that the informal
component of intra-regional trade was not captured in the official
statistics; and
(xiii) The need to update the country macroeconomic data used in the report.
B. Presentation of Progress Report on WAMZ Payments System
Development
47.The Director of ICT and Payments System, Mr.WilBako Freeman,
presented the report. He noted that the WAMZ Payments System
Development Project in The Gambia, Guinea, Liberia and Sierra Leone
funded by African Development Bank (AfDB) with UA19m (about
$30m) was drawing to a close with completion of the Project in The
Gambia and Sierra Leone where all components had gone live and were
running efficiently. Implementation in Guinea and Liberia were also at
various stages of completion. The official launch of the Project in The
Gambia and Sierra Leone was being organized by the National Central
Banks (NCBs) in collaboration with West African Monetary Institute
(WAMI) and AfDB.
48.The report outlined the main components of the project as follows:
 Real Time Gross Settlements System and Scriptless Securities
Settlement Systems (RTGS/SSS)
 Automated Cheque Processing and Automated Clearing House
(ACP/ACH) Systems
 Core Banking Application (CBA)
 Infrastructural Upgrade
49.It was explained that the project was progressing steadily in Guinea and
Liberia, with the go-live date for Guinea being revised to April 2014.
50.The delay in the engagement of contractors for the Infrastructural
Upgrade in Liberia and the late resumption of implementation by the
contractors posed a major challenge to the timely completion of the
project in Liberia. The agreed completion date of 30th November, 2013
had been revised to February 2014 with best efforts because of the
delayin implementation by the contractors. He explained that this might
lead to a delay in the delivery and installation of equipment by the major
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components solution providers and subsequent training and customization
by them.
51.The presentation also noted that due to these anticipated delays, WAMI
had written to AfDB requesting for an extension of the end date of the
project to December 2014.
Discussion on the WAMZ Payments System Development Progress
Report
52.Delegates thanked the presenter and took note of the issues raised.
C. Presentation of Report on the 6th WAMZ Trade Ministers’ Forum
53.The Director, Operations and Regional Integration, Mr.Abdoulaye Barry,
presented the report on the Sixth Forum of the West African Monetary
Zone (WAMZ) Trade Ministers held at Grand Hotel de l’Indépendence,
Conakry, Republic of Guinea, on December 13, 2013.
54.On trade integration in the WAMZ, overall assessment of the
performance of Member States showed that the degree of intra-WAMZ
trade stood at 1.54 percent at the end of 2012. On the direction of trade,
all the Member States export more to Europe and the USA, and import
more from Asia, indicating that WAMZ Member States trade more with
the rest of the world than with themselves.
55.The report noted further that, following the recommendation of the Fifth
WAMZ Trade Ministers’ Forum for WAMI to do a trade facilitation
project, the Institute prepared a concept note, seeking support from the
World Bank.Accordingly, the World Bank had offered to conduct a Trade
and Transport Facilitation Assessment (TTFA) for the Member States of
the WAMZ.
56.The report also highlighted the trade in services programme of the
International Trade Centre (ITC) that sought to build the export capacity
of service providers from developing countries. The programme was
centred on three key pillars: trade intelligence, institutional strengthening,
and enhancement of services of SMEs. With regard to trade intelligence,
ITC had developed a range of materials and tools to assist policy-makers,
trade support institutions (TSI) and service providers to get quantitative
and qualitative information on services. On the second pillar, the Centre
worked with trade promotion agencies (TPAs) and business associations
to strengthen their services export promotion functions. The third pillar
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was about the enhancement of SMEs’ service export readiness through
provision of training, advisory services and coaching.
57.Also highlighted was the proposed regional Sealink Project which was an
initiative to facilitate and deepen intra-regional trade and integration. The
Project sought to remedy the absence of dedicated safe and modern fleet
by encouraging and facilitating Atlantic short-sea trade in the West and
Central African regions. It was to be executed by a Special Purpose
Vehicle (SPV), Sealink Promotional Company Limited (“Sealink”),
which was incorporated in 2011.
58.The Trade Ministers made a number of recommendations that proffer
solutions to the challenges militating against effective implementation of
ECOWAS trade and trade-related protocols. They also encouraged
Member States to support the Sealink Project and take steps to access
technical assistance offered by the International Trade Centre for trade in
services export.
Discussions on the Report of the 6th WAMZ Trade Ministers’ Forum
59.After expressing their gratitude, the delegates took note of the report.
D. Presentation of WAMI Work Programme and Proposed Budget –
FY 2014
60.The Director, Finance and Administration, Mr.AdeniyiKarunwi,
presented the Work Programme and the Proposed Budget. He noted that
the Work Programme (2010 – 2015) revolved around five strategic pillars
which sought to enhance the effective delivery of the Institute’s mandate.
The five pillars were: Macroeconomic Convergence and Statistical
Harmonization; Trade and Regional Integration; Financial Integration;
Payments System Infrastructure; and Institutional and Capacity Building.
61.According to the report, the total budgeted expenditure for 2013 was
US$4,073,057, while the actual expenditure was US$3,660,822 showing a
10.12percent surplus of US$412,234. This surplus was caused mainly due
to the vacant staff positions that were not filled during the year. The
consolidated budgeted expenditure, including donor grants, was
US$17,673,608 but the consolidated actual expenditure was
US$8,796,789 showing a consolidated US$8,359,868(47.30percent)
outstanding grant receivable and surplus in 2013.
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62.A consolidated sum of US$12,946,835, was proposed for 2014, out of
which donor grants amounted to US$8,626,666. WAMI’s internally
generated budget proposal was US$4,320,169 which was a 6.07percent
increase over that of 2013.
63.However, Member States’ proposed contributions werereduced by
2.80percent, from US$4,015,498 to US$3,902,934. The balance was to be
funded by Interest Income of US$5,000 and the 2013 Surplus of Income
over Expenditure of US$412,235.
Discussions on WAMI Work Programme and Proposed Budget –
FY 2014
64.Delegates thanked WAMI for a very detailed report and clear presentation
and made the following observations:
i. Noted the proposed WAMI Work Programme and budget for 2014 in
the sum of US$12,946,834.70 of which Member States’ contributions
amounted to US$3,902,934.45 as against US$4,015,497.53 in 2013,
representing a decline of 2.80 percent;
ii. The allocation made to Work Programme appear to be low relative to
the General Administrative expenses indicating a need to provide more
resources to the core mandate of the Institute;
iii. The decline in Member States’ proposed contribution to the 2014
budget due to savings made in-house;
iv. Collaboration with experts in Member States in undertaking the
empirical studies and in-house seminars highlighted in the Work
Programme would enhance their relevance;
v. The need for the budgetary contribution formula to be reviewed to
reflect current economic conditions of Member States;
vi. There has been a delay in the issuance of completion certificates to
solution providers as a result of non-ascertainment of completion of
work by Member countries.
V.
RECOMMENDATIONS
65.The Technical Committee hereby invites the Governors to consider and
adopt the following recommendations:
State of Preparedness – Convergence Issues
i. The final report on the state of preparedness to be presented by WAMI
by early June 2014 should include more analytical discussion of the
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challenges faced and policies that Member States should undertake to
address the slow pace of progress towards convergence;
ii. WAMI should undertake an assessment of the extent to which
recommendations made in previous surveillance mission reports have
been implemented by Member States. Also,gap analysis on the Abuja
Action Plan should be undertaken in order to identify concrete and
practical measures to ensure compliance with the quantitative and
structural benchmarks;;
iii. The convergence criteria should be revisited for necessary modifications
to be made to reflect structural characteristics of the economies of
Member States;
iv. Nigeria as the largest economy in the Zone should be encouraged to
drive the monetary integration process;
State of Preparedness – Legal and Institutional Issues
v. All Member States are urged to ratify and domesticate all outstanding
WAMZ Statutes;
vi. The final State of Preparedness Report should emphasise the state of
progress towards the establishment of the WAMZ Institutions such as
WACB, WAMZ Secretariat and WAFSA;
vii. Member States with outstanding obligations are urged to pay up their
contributions to statutory funds such the WACB capital and the
Stabilisation and Cooperation Fund;
viii. Member States are urged to intensify sensitisation programmes through
their national sensitisation committees;
ix. WAMI should consider collaboration with experts in Member States in
undertaking empirical studies and in-house seminars highlighted in the
Work Programme;
x. The final State of Preparedness Report to be presented in June 2014
should propose a suitable date and roadmap for the launch of the
monetary union if 2015 is not feasible;
State of Preparedness – DataIssues
xi. The trade data provided in the interim report should be updated to be
consistent with the database at the ECOWAS Commission and the
significance of the informal component of intra-regional trade should
be acknowledged;
xii. Other data concerns raised by delegates should be addressed in
consultation with the appropriate authorities;
Payments System Issue
xiii. WAMI should collaborate with beneficiary Member States of the
Payments System Project to ensure the prompt issuance of completion
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certificates to Solution Providers since extensive delays could have
financial implications for member countries;
Administrative Issues
xiv. The proposed WAMI Work Programme and budget for 2014 in the sum
of US$12,946,834.70 of which Member States’ contributions
amounting to US$3,902,934.45 as against US$4,015,497.53 in 2013,
representing a decline of 2.80 percent, should be endorsed;
xv. The WAMI budgetary contribution formula should be reviewed in line
with the relevant ECOWAS Protocol.
VI.
ANY OTHER BUSINESS
66.Sierra Leone sought information from Member States on policies
governing the operation of foreign exchange deposit accounts.
 The Gambia indicated that there were no restrictions.
 Ghanaindicated that the transfers from such accounts were allowed
but the policy discourages local transactions in foreign currency in
order to limit the extent of dollarization and in accordance to the law.
Therefore, all cash transactions must be tied to valid documentation.
 Guinea indicated that the operation of foreign account had been
authorised and currently up to 20,000 US dollars can be withdrawn
by account holders provided anti-money laundering guidelines are
respected. The policy objective for Guinea is to ensure exchange rate
stability of the national currency in order to engender the confidence
of economic operators.
 For Liberia, although there are no restrictions, cross-border exports of
foreign currency notes in excess of 10,000 US dollars is required to
be conducted through the banking system.
 Nigeria operates two sets of domiciliary accounts: exporters are free
to use export proceeds for their own transactions while for individuals
there is no limit on ordinary domiciliary accounts,provided funds are
sourced from abroad.
 The BCEAO explained that the only currency that is legal tender in
the UEMOA is the CFA Franc; however, non-residents are allowed to
open foreign currency deposit accounts with the authorisation of the
Minister of Finance.
 WABA indicated that the pressure on the cash demand of the dollar in
some countries is borne out of (i) the denomination of certain goods
and services locally in foreign currency; and (ii) import tariff
differentials among Member States. The solution to the problem, he
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noted, was to (i) ensure that goods and services in a country are
denominated and paid for in local currency; (ii) inculcate banking
culture through financial inclusion; and (iii) allow settlement of
intraregional trade in the local national currencies.
VII. VOTE OF THANKS
67. Mr. Ibrahim K. Lamin, Director, Financial Markets of the Bank of Sierra
Leone, moved the vote of thanks. The distinguished delegate thanked the
authorities of the Republic of The Gambia for the warm reception and
excellent facilities made available to delegates. He also thanked the
Chairman for his able leadership. He expressed his profound appreciation
to the Director-General of WAMI and his staff for the quality of the
documents presented during the meeting. Similar sentiments were
extended to delegates for cordial and candid discussions.
VIII. CLOSING
68. In his closing remarks, the Chairman of the Technical Committee,
Mr.AbdoulieJallow, expressed profound gratitude to delegates for the
fruitful deliberations and cordiality that they espoused during the entire
proceedings. He furthermore expressed his appreciation to the immediate
past chairman for his inspiring leadership during his tenure.He expressed
the optimism that the cooperation demonstrated will be sustained in order
to see the actualisation of the monetary union.
IX.
DATE AND VENUE OF THE NEXT MEETING
69.The venue and dates for the next meeting of the Technical Committee
would be communicated to Member States in due course.
DONE IN BANJUL, THE GAMBIA
ON THE 14TH DAY OF JANUARY, 2014
.................................................................................................
MR. ABDOULIE JALLOW
PERMANENT SECRETARY, MINISTRY OF FINANCE AND
ECONOMIC AFFAIRS OF THE REPUBLIC OF THE GAMBIA
AND CHAIRMAN OF THE TECHNICAL COMMITTEE OF THE
WEST AFRICAN MONETARY ZONE (WAMZ)
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