The introduction of a new regional currency in West Africa which is expected to replace the CFA franc has been delayed, said Ivory Coast President Alassane Ouattara, as cited by media.
The delay reportedly comes due to the economic implications of the conflict in Ukraine and lingering effects of the COVID-19 pandemic on regional economies.
According to the president, the countries have made major strides in terms of preparing their economies to adopt a new currency, but this progress has been derailed by the pandemic and general global turbulence.
"There’s been significant progress on the issue of convergence, particularly in terms of inflation, growth and deficit," Ouattara is quoted as saying. However, the pandemic caused "a significant deficit and inflation, especially in countries with currencies with flexible exchange rates."
He noted that given these macroeconomic imbalances, the introduction of a common regional currency will probably be delayed for at least a few years.
The eight member states of the UMEOA, all of which are former French colonies except for Guinea-Bissau, agreed to reduce economic ties with France and replace the seven-decade-old CFA franc in 2019 with a launch of a new currency called eco in 2020.
The CFA franc is tied to the euro and is guaranteed by the French Treasury. Therefore, by introducing the eco, the countries wanted to gain monetary and fiscal independence .
But in September 2020, President Ouattara stated that due to the pandemic, the introduction of the new West African currency wouldn't happen for at least five years.
There's also a parallel move to create a single currency for the whole of West Africa. The broader Economic Community of West African States (ECOWAS), of which the states of UEMOA are members as well, plans to launch its own common currency by 2027. The 15 members of the regional bloc also formally adopted the name of eco for their new currency.
To implement these plans in practice, the members of ECOWAS, including the UEMOA states, must meet specific convergence criteria such as a single-digit inflation rate. In this particular field, progress is reported to be slow.
One of the criteria that must be achieved before the new currency is introduced is a fiscal deficit of no more than 4% of GDP. But in 2022, according to the West African Monetary Union, the West Africa's budget deficit was 7% of GDP.