African Central Bank to discuss a single currency

African Central Bank to discuss a single currency

Central Bank governors in Africa meet to discuss a single currency. Decades after discussions began, is a single currency in African really likely?

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Central Bank governors in Africa meet to discuss a single currency. Decades after discussions began, is a single currency in African really likely?

Background

Many believe that having a single currency across the continent would not only attract further investments but would also help to deliver a world class infrastructure, in turn driving the implementation of major projects across the continent. This would therefore make it possible for the whole African continent to become a world economic power, able to elevate millions of people out of poverty.

Regional currencies

There are two “regional currency unions” across Africa, using both the Central African CFA franc and the West African CFA franc, however several other countries in the South are linked together by a “common monetary area” based on the South African rand.

Requirements

Prior to the establishment of any central currency it would be necessary for the creation of a central African bank. There are currently three financial institutions in Africa, including African Central Bank (ACB) which would be expected as part of the transition to take over the responsibilities of the African Monetary fund. On completion of this transition the African Central Bank would not only become the home of the African Monetary fund, but would also take on the regulation and dispensing responsibilities of the new single African currency.

Discussions regarding the implementation of a single currently in Africa have been taking place for many years, in fact as early as 1963 the Organisation of African Unity (OAU), the predecessor of the African Union, began planning a single currency. The projected rollout date however continues to move, the Association of Governors of African Central Banks announced in 2003 that they expected Africa to have both a Pan-African central bank and a single currency by 2021, however by 2015 they had changed his expected delivery date to 2030.

There are concerns from some of the African nations with weaker economies that they could actually lose out if the continent established a single currency. Additionally, some of the African countries with the closest ties to the Franc zone (CFA) in France, may not be enthusiastic about the creation of a single currency.

Considerable efforts are however being made by representatives across the African Union to speed up this regional integration to 2025, however being able to achieve both an African Monetary fund as well as a common currency within the next ten years continues to be seen as a significant challenge, including the fact that the continent has an annual infrastructure funding gap of approximately $50 billion.

Efforts do however continue even though many people believe that the single currency is not the solution to Africa’s problems, and that the focus should instead be moved to resolving issues such as; corruptions, civil conflicts, poor infrastructure and low investments.

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