Franc zone monetary unions to reinforce Franc CFA

The respect of the nominal convergence policy by countries of the Franc Zone is imperative for any meaningful development.

The Economic and Monetary Community of Central Africa (CEMAC), the West African Economic and Monetary Union (WAEMU), and the Comoros, all monetary unions of the Franc Zone, have set as objective to ensure that the common currency-the CFA Franc remains strong.

To this effect, the convergence mechanism which analysis every six months the macroeconomic situation of each sub-region every six months is in place. The follow up of this macroeconomic policy has four nominal convergence criteria.

The conference of Ministers of Finance of the Franc Zone, Governors of Central Banks of the monetary unions and heads of financial institutions, met in Yaounde from April 8 to 9, 2016, to evaluate the implementation of the policies by the 15 countries that make up the Franc Zone. Priority is monitoring of budgetary deficits.

Emphasis was for governments to manage their budgets so as to stay out of deficits, making sure that budgetary deficits stay at an acceptable level. For the CEMAC region, an obligatory savings of 20 per cent on oil revenue on annual basis to provide cushion to countries during stormy weathers has been instituted.

Public debts are closely monitored with countries not allowed to have public debt in excess of 70 per cent of GDP. The other two criteria pertain to inflation. Prices are a key determinant of monetary policy, experts say. Monetary policies are strong when prices are good. The convergence criteria are that inflation must stay below 3 per cent and many countries of the CFA Franc Zone like Cameroon are respecting these, going by the interim report for 2015. The last criteria has to do with the non-accumulation of arrears.

This has as objective to protect small and medium size enterprises. Commissioners of the monetary bloc revealed that they oblige governments to pay all arrears within 60 days so as to facilitate the execution of policies. It is however difficult given that it is declarative, but commissioners evaluate at the end of each fiscal year, laying emphasis on the fact that governments do not owe suppliers of goods and services.

Delegates to the Yaounde confab were unanimous that countries should intensify the development of other sectors of the economy like agriculture and industrial services. They argue that there are alternative revenue sources that can cushion the fall in oil prices. Ensuring that the most vulnerable in society are protected through the establishment of well targeted social system is reccomended.