Extract D suggests that some leaders within the Economic Community of West African States (ECOWAS) are calling for strict regional surveillance with the power to penalise non-compliance with regional fiscal benchmarks, such as a fiscal deficit ceiling.

Extract D: Fiscal Rules and Convergence in the West African Monetary Zone (WAMZ)

The drive towards the 'Eco' single currency has renewed debates among member states of the Economic Community of West African States (ECOWAS) regarding the strictness of macroeconomic convergence criteria. To establish a stable monetary union, member states agreed to a set of fiscal benchmarks, including a fiscal deficit limit of 4% of GDP and a gross public debt limit of 60% of GDP.

However, many member states, most notably Ghana, have struggled to meet these targets as they attempt to finance critical infrastructure projects to support long-term economic development. In Ghana, large-scale public investment, including the Tema Port expansion and domestic energy transmission projects, pushed the budget deficit and public debt levels significantly higher. Critics argue that complying with a rigid regional fiscal constraint would choke off necessary public investments, whilst supporters argue it is vital to prevent unsustainable debt accumulation, currency depreciation, and hyperinflation.

With rising debt-servicing costs across the region, some leaders are calling for regional surveillance with the power to penalise non-compliance. Others argue that sovereign nations must maintain the flexibility to run counter-cyclical fiscal policies to buffer against gold and cocoa commodity price shocks and external crises.