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BREAKING:Burkina Faso,mali And Niger Hint At A New West African Currency

By admin Mar 16, 2024
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Burkina Faso, Niger and Mali, three former French colonies, have experienced military coups in recent years. They’re now all ruled by military regimes. They also formed a new defence alliance, known as the Alliance of Sahel States (AES).

The Economic Community of West African States (Ecowas) has condemned these coups and imposed sanctions on the countries involved. In response, these countries decided to withdraw from Ecowas. However, they remain members of the West African Economic and Monetary Union (Uemoa). Uemoa has a common currency, the CFA franc, which is issued by the Central Bank of West African States (BCEAO).

The BCEAO and the Banque de France are bound by cooperation agreements that include the deposit of a portion of foreign exchange reserves at the Banque de France and France guaranteeing the CFA franc.

What conditions must be met for a multilateral currency to work?
To successfully launch and maintain a multilateral currency, several key factors must be considered.

First, macroeconomic and budgetary policies must be closely coordinated. Rigorous harmonisation of economic and budgetary policies between participating countries is imperative to guarantee the stability of the currency’s value and prevent trade imbalances. This will help maintain the confidence of economic players and promote regional growth.

Second, robust monetary management institutions must be established. Strong institutions responsible for currency management, like a common central bank, are essential. This central bank must have adequate authority to implement an independent and stable monetary policy. This will ensure the preservation of the currency’s value and address cyclical fluctuations.

Third, creating an integrated common market is vital. The unrestricted flow of goods, services, capital and labour is key to driving economic growth and enhancing regional cooperation. The current framework provided by the West African Economic and Monetary Union offers a significant advantage in this regard.

The transition to a new currency typically introduces a level of uncertainty among economic actors and trading partners, as questions arise about the currency’s value, convertibility and stability. This adjustment phase can lead to a temporary slowdown in trade.

The perceptions and attitudes of external partners matter when a new currency is announced. Some trading partners may exhibit reluctance or express doubts regarding its reliability and credibility. This could diminish their willingness to continue trading with member countries of the zone.

Could the move isolate them?
The creation of a new currency by these three countries may indeed raise questions about their potential isolation. However, such an initiative should not automatically lead to a diplomatic rupture or total marginalisation.

To avoid this, proactive communication, constructive cooperation and balanced, inclusive regional economic integration are key. This will help mitigate the risks of isolation for Burkina Faso, Mali and Niger in their monemtary journey

By admin

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