Macroeconomic Policy Convergence

Macroeconomic policy convergence, financial and monetary integration plays a significant role in providing efficiency, promoting public accountability and thus, stimulating economic growth. When macroeconomic policy convergence targets are set and committed to by African countries, reductions in economic fluctuations are expected, which contributes to further macroeconomic stability in a specific region. That follows when harmonization of key macroeconomic variables are in balance, for instance: rising gross domestic product, low inflation, declining fiscal deficit and a relatively balanced current account. Efficient macroeconomic policy convergence underpins successful cross-border financial and monetary integration that stimulates trade among countries. Yet, benefits of financial and monetary integration are dependent on the extent of trade among countries and the feasible trade creation on the continent. It is therefore imperative that macroeconomic policy convergence targets are properly endorsed by member States to achieve economic growth and development. In this regard, the coordination of endorsed macroeconomic policy convergence programmes is managed at both continental and regional levels, through the African Union and the regional economic communities respectively.[1]

In practice, monetary integration, in accordance with the sixth phase of the Abuja Treaty (a single currency by 2028, including an African Monetary Union and a Pan-African Parliament), is a slow-moving process with multiple initiatives of customs and monetary unions planned in the foreseeable future. To date, there are three customs and monetary unions in Africa – the West African CFA franc, the Central African CFA franc, and the South African rand – with an additional five planned: the West African Economic Zone, comprising ECOWAS and eventually merging with the West African CFA franc[2], EAC, the Customs and Economic Union of Central African States, SADC[3], and the COMESA initiative to establish a monetary union.[4]

Given the realization of further continental integration, the changing economic environment – following the BIAT initiative, TFTA and the recently launched CFTA negotiations – have revived the determination to fulfil further macroeconomic policy convergence, including financial and monetary integration. As a result, a deepened commitment to meet the macroeconomic policy convergence programme targets and subregional monetary schemes are expected by member States.