The Eco is the proposed name for the common currency that the West African Monetary Zone (WAMZ) plans to introduce in the framework of Economic Community of West African States (ECOWAS). After its introduction, the goal is to merge the new currency with the West African CFA franc (used by most French-speaking members of ECOWAS since 1945) at a later date. This will create a common currency for much of West Africa.
For the Eco to be implemented, ten convergence criteria, set out by the West African Monetary Institute (WAMI), must be met. These criteria are divided into four primary and six secondary criteria. Up to the fiscal year 2011, only Ghana has been able to meet all the primary criteria in any single fiscal year.
The four primary criteria to be achieved by each member country are
A single-digit inflation rate at the end of each year
A fiscal deficit of no more than 4% of the GDP
A central bank deficit-financing of no more than 10% of the previous year’s tax revenues
Gross external reserves that can give import cover for a minimum of three months.
The six secondary criteria to be achieved by each member country are:
Prohibition of new domestic default payments and liquidation of existing ones.
Tax revenue should be equal to or greater than 20 percent of the GDP.
Wage bill to tax revenue equal to or less than 35 percent.
Public investment to tax revenue equal to or greater than 20 percent.
A stable real exchange rate.
A positive real interest rate.