Establishing monetary union in the sadc region is one of the ultimate goals of the sadc protocol on trade and a key milestone in the drive for deeper integration in sadc. The most dramatic episode in the history of monetary unions is of course emu, in many ways a unique undertaking a group of fully independent states, all partners in the european union, that have voluntarily agreed to replace existing national currencies with. This paper investigates the readiness of the east african community eac for a monetary union by assessing if countries meet the optimum currency criteria. Evolution of the west african monetary union and west african monetary zone. The african monetary union amu is the proposed creation of an economic and monetary union for the countries of the african union, administered by the african central bank. The euro zone and both of the cfa franc zones would be examples of full monetary union.
Last year nigeria, the largest west african monetary union wamu member, reported inflation of 6. Section 3 states the problem that the decision to set up a monetary institute in the sadc region is political and that the sadc integration process is not clear in terms of where the region is heading. The above strands in the literature have not been structured to present a holistic. Money of the west african monetary union wikimedia. Central african economic and monetary community cemac. Apr 17, 2014 african monetary union stirs criticism of france. Aug 08, 2017 launching a single currency will also require creating and empowering new regional institutions, such as the west african central bank, to manage or supervise monetary policy for the member countries. East african trade bloc approves monetary union deal reuters. The customs union was formally completed in 2010, and common market protocol was signed in 2009. West african monetary union financial definition of west. Is west african monetary zone wamz a common currency.
Vacancies at uemoa west african economic and monetary union. In terms of membership, the largest merger occurred in 2005, when the paper, alliedindustrial, chemical and. Despite relatively strong growth of credit to the private sector and government, money growth remained moderate in 2012 at about 8 percent year on year because of a significant contraction in net foreign assets nfa. Under british colonial rule, anglophone west africa made up of gambia, ghana, british cameroon, nigeria and sierra leone used a common currency, the. Hence, corresponding policy implications from the plethora of studies may also vary depending on contexts. Monetary union is defined in the literature as involving two components. Later this year i expect that the heads of state of each of the partner states of the east african community eac will sign the protocol for the introduction of the eamu. These changes have helped to strengthen their institutional framework and have contributed to fostering closer regional integration by giving rise to economic unions as of 1994. A literature survey on proposed african monetary unions. Economic community of west african states wikipedia. Toward a monetary union in the east african community. Eac discusses harmonization of fiscal, budgetary frameworks the east african community needs to build its capacity to produce robust statistics as well as create a credible surveillance and enforcement mechanism to underpin its transition to a monetary union, a workshop on harmonizing fiscal and budgetary frameworks today heard in arusha. For the latest official comments from eac on eastern african monetary union see here.
The central and west african monetary unions, the oldest monetary unions in economic history, have undergone major changes in the past fifty years. Agreement between the government of the united states of. Mergers and acquisitions 50 years of african monetary. The arrival of the euro widens monetary unions in africa. Introduction in the context of a general revival of regional cooperation on the african continent during the 1990s, gabon, cameroon, the central african republic, chad, the republic of the congo and equatorial guinea decided to give new impetus to their regional economic cooperation. Opposition to a north american monetary union exists high up in the governments on both sides of the canadaunited states border. Such a union would call for the creation of a new unified currency, similar to the euro. The institute is to undertake technical preparations for the establishment of a common west african central bank and the launching of a single currency for the west african monetary zone wamzzone. From 1995 to 2007, there were 31 union mergers in the united states. If monetary union is to work it will involve both sound fiscal policy and a slow, reversible process of integration involving a network of exchange rate pegs. A literature survey on proposed african monetary unions munich. In 1994 was created the west african economic and monetary union waemu by seven west african countries using the cfa franc common currency. The east african monetary union eamu is an important stage in the process of east african community eac regional integration. The east african community began moving towards monetary union in 2000 when the treaty reestablishing the community came into force.
Despite of that work with monetary integration in the region goes ahead even though the pace is much slower than had been the official political ambition. Southern african development community monetary union. Collectively, these countries comprise an area of 5,114,162 km 2 1,974,589 sq mi, and in 2015 had an estimated population of over 349 million. Towards a common currency in the east african communityeac. Commission sets out roadmap for deepening europes economic. Since 1975, the waemu member states created with seven others west african states cape verde, gambia, ghana, guinea conakry, liberia, nigeria and sierra leone the economic. Countries are expected to attain headline inflation of a maximum eight per cent, a fiscal deficit including grants of not more than three per cent of gdp, a public debttogdp ratio of 50 per cent and forex reserves of at least 4. Moving toward a monetary union and forecastbased monetary policy in east africa 201011 the countries of the east african community eac are committed to implementing a monetary union within the next few years. It is the incompleteness of these complementary reforms which themselves reflect deeply divided views on the degree of political integration that monetary union.
A common market, a monetary union, and ultimately a political federation of east. Calibrating the model to evaluate the proposed monetary union in the east african community, it is found that central bank uncertainty would be a significant aspect in the net welfare effect of monetary union. Considerations for south sudan joining the east african monetary. The major benefits of a monetary union are the reduction in transaction costs, economies of international reserves, the elimination of exchange rate risk and regionwide. African states ecowas members to form a monetary union mu. African monetary zone wamz, east african monetary union eamu, southern african monetary union samu and african monetary union amu. Falling prices in the cocoa and oil sectors two key exports for many of these african nations also threaten the project, making the process of diversification more difficult. African union sees single currency by 2021 reuters.
Regional integration and monetary unions in africa united. Establishing a monetary institute for the region as an. Herbert grubel, the first proponent of the amero, admits that american officials show no interest in the topic. Benin, burkina faso, ivory coast, mali, niger, senegal, and togo. The regional indicative strategic development plan implementation framework identified 2016 as the target for this milestone, which follows the establishment of the free trade. The most dramatic episode in the history of monetary unions is of course emu, in many ways a unique undertaking a group of fully independent states, all partners in the european union, that have voluntarily agreed to replace existing national currencies with one newly created money, the euro. A currency union also known as monetary union is an intergovernmental agreement that involves two or more states sharing the same currency. The west african monetary institute wamiinstitute was set up in accra, ghana, in january 2001 and began operations in march 2001. Completing europes economic and monetary union policy package. However, several regional monetary union projects are planned such as ecowas, comesa, sadc and eac and a common currency for africa is a longterm goal of the african union. Mar 04, 2009 an african monetary union is envisaged in the abuja treaty of 1991, but concerns abound that some member countries will lose out from a single currency, undercut by the disparate economic.
Central african economic and monetary union angela meyer. Inflation and output models are estimated, with the sample 1988. A full monetary union involves a single currency and central bank. Regional integration and monetary unions in africa. Asymmetric shocks, exchange rates, and risksharing. The eamu protocol was adopted in accordance with the eac treaty and signed on 30th november 20. West african economic and monetary union eight countries, a.
The same is true of they argue that the structural characteristics of african enhanced riskpooling through the financial system. Since the protocol provides for the east african central bank eacb to be independent of the governments, have 1. African monetary union stirs criticism of france bloomberg. Completing europes economic and monetary union european. Is west african monetary zone wamz a common currency area. The road to monetary union in east africa share this blog post on 30 november, the heads of state of the partner states of the east african community burundi, kenya, rwanda, tanzania and uganda met in kampala to approve the protocol for the establishment of an east african monetary union. West african economic and monetary union eight countries. Bbc news business african monetary union inches closer. The leaders of five east african countries signed a protocol on saturday laying the groundwork for a monetary union within 10 years that they expect will expand regional trade.
Both reports were prepared in the context of the eurosystems task of contributing to the smooth conduct of national policies on prudential supervision. Deepening the economic and monetary union is a means to an end. Nov 30, 20 the leaders of five east african countries signed a protocol on saturday laying the groundwork for a monetary union within 10 years that they expect will expand regional trade. In my view asongus paper clearly shows that monetary union should not be rushed through. Feasibility of proposed monetary unions in the eastern and.
Canada, the united states of america and mexico implementation would involve the three countries giving up their current currency units the u. Jun 09, 2018 already, uganda has announced plans to reduce investment in infrastructure in the runup to joining the east african monetary union in 2024. The paper analyzed the post merger effect, which is the ability of each bank to develop strong organizational capacity to employ good resources for strong competitive advantage in the nigerian economy and integration into african and global economies. The european central bank ecb is releasing two reports prepared by the banking supervision committee bsc. Major union mergers, alliances, and disaffiliations, 19952007. Use the free adobe acrobat reader to view this pdf file. On the feasibility of a monetary union in the southern africa development community, international journal of. This report evaluates how the eac can best move toward this objective, with a focus on fiscal policy considerations.
The economic community of west african states, also known as ecowas, is a regional political and economic union of fifteen countries located in west africa. West african monetary union bank for international. African monetary union eamu is one which will have profound effects on this region for decades to come. Launching a single currency will also require creating and empowering new regional institutions, such as the west african central bank, to manage or supervise monetary policy for the member countries. Hence monetary union can improve the monetary policy for its members if the pressures on the individual central banks are dissimilar. Benin, burkina faso, ivory coast, mali, niger, senegal, and togo guineabissau became a member of the west african.
The north american monetary union is a theoretical economic and monetary union of three north american countries. West african monetary integration and interstates risksharing. According to soyibo 1998 before ecowas was established in 1975, there were two monetary unions in west africa. He concedes that there wouldnt be very much benefit for the united states in an amero. The main objective of the central african economic and monetary community cemac is to promote the harmonious development of the member states in the context of the establishment of a true cemac common market free movement of persons, goods, capitals, and services by establishing an economic and monetary union. The reforms carried out by the federal government and monetary authorities and observed. Mergers and acquisitions involving the eu banking industry facts and implications and eu banks margins and credit standards. These states may not necessarily have any further integration such as an economic and monetary union, which would have, in addition, a customs union and a single market. Central african economic and monetary union angela meyer 1. If successful this would lead to monetary integration in eastern african and significantly reduce transaction costs of crossborder transactions, which exactly is the purpose of the eacs proposal for monetary union, but it would avoid the problems associated with lack of economic and political integration.
Monetary institute for the region as an interim step leading to a monetary union. Dr albert musisi, the commissioner in charge of macroeconomic policy in the ministry of finance, said the move would help the country meet the fiscal deficit target of three per cent. These states may not necessarily have any further integration such as an economic and monetary union, which would have, in addition, a customs union and a single market there are three types of currency unions. Desiring to enhance the friendship and spirit of cooperation between them. The central african economic and monetary community cemac was created in 1994 and became operational after the treatys ratification in 1999.
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