AFRICAN governments should forge closer co-ordination of government budgets and financial systems before considering the introduction of a common currency, African Development Bank chief economist Mthuli Ncube said on Wednesday.
"To get a single currency takes a lot of fiscal co-ordination and unified banking regulations," he said in an interview with Bloomberg TV Africa in Rwanda’s capital, Kigali. "There is a lot that needs to be put in place."
The five-nation East African Community — which includes Kenya, Tanzania, Uganda, Rwanda and Burundi — says it will meet targets on inflation, fiscal deficits and public debt ratios before implementing a monetary union and a unified currency by 2023.
Meanwhile, the West African monetary zone, comprising Ghana, Guinea, Nigeria, Liberia, Sierra Leone and Gambia, are planning a similar move by next year after a decade of delays.
The eight-nation West African Economic and Monetary Union, a group of French-speaking nations, already use the CFA franc as a common currency, which is pegged to the euro. In southern Africa, Lesotho, Namibia and Swaziland are in common monetary area with SA and all peg their units to the rand.
These regional arrangements precede a goal set by the African Union to adopt a shared currency used across the continent and establish an economic and monetary union by 2028.
"What we will see is regional groupings, we already have one in southern Africa, the rand monetary area, West Africa’s CFA zone and maybe an East African shilling," Mr Ncube said on the sidelines of the annual African Development Bank meeting. "But you have to do it regionally, you can’t do it continent-wide."
The spread of the European debt crisis served as a lesson about the risks of accelerating currency integration.
