On the Eco Currency for West Africa (The Francophonie Eco) – Sulayman Gaye

1) The Eco, it is understood will be pegged to the Euro. Pegging has both pros and cons. Pegging the Eco against the Euro can stabilize inflation in Ecozone if the Eurozone enjoys stable inflation ( price satellite). On the other hand, pegging can lower the price of exports while increasing those of imports thereby spelling an unfavorable Balance of Payments (BoPs) in the Ecozone.

Solution: The West African Central Bank should do two things: (1) Float the Eco instead of pegging it OR if we decide to peg, devalue the Eco to the Euro such that exports will be more expensive than imports in order to enjoy favorable BoPs. China did that when it pegged the Yuan to the USD until Tim Geithner, the then US Treasury Secretary would accuse China of currency manipulation because they revalue the RMB such that exports became more expensive than imports for a trade balance and eventual surplus.

West Africa should also recalibrate the Institutional arrangement of the West African Central Bank to accommodate “Sovereign Money Creation” where created money becomes a fiscal stimulus package to be injected into the economy for development.

2) The issue of printing rights of the Eco. The Eco being printed in France or in West Africa to me does not make much difference. Both have security vulnerabilities as corruption is everywhere. One danger in printing in France that stands out is that, in case of a fallout with France, France can withhold printed funds and cause a currency shortage in the Ecozone( West Africa).

Solution: West Africa should try to print its own currency (Eco) instead of outsourcing it to French Companies to curb security vulnerabilities. Again west Africa should also curb corruption if they intend to print the Eco.

Good things about the Eco Arrangement!

1) The hundreds of billions of dollars that West Africa deposits( pays) to the French Treasury is eliminated.

2) France has no more direct influence at the West African Central Bank.

Note that the ideal project would have been for the whole of West Africa to have one Eco currency, be it ‘Francophonie or Anglophonie’.