Mboweni: African monetary union a long way off

Africa is a long way off a common monetary union as the continent continues to struggle to harmonise economic policies, South Africa’s central bank Governor Tito Mboweni said on Tuesday.

”A lot of changes need to take place before we can have a common monetary union,” he said at an international banking conference in Sun City, about 120km north-west of Johannesburg.

”Infrastructure networks and intra-continental trade is still very poor. These are some of the practical things we have to fix before we can get to a monetary union,” adding he was critical of the approach taken to set up an Africa central bank.

The Organisation of African Unity first mooted the idea of an African Central Bank (ACB) and common currency in 1963 but little progress has been made, with many countries still mired by bloody conflicts and poor infrastructure.

Its successor, the African Union, has rekindled the plan and has proposed a central bank be set up in Nigeria to help the continent compete against other regions.

But Mboweni said pushing for its establishment ahead of integrating macroeconomic policies would not work.

”We need to have a common understanding of statistics … before we can have a common consumer price index. There has to be a common understanding on political leadership about fiscal discipline,” he said.

”What should be the agreed criteria among all countries on budget deficits?”, he posed.

A single currency was unlikely because countries repeatedly failed to meet the objectives they have set towards achieving that goal.

”When we set targets and dates we think they won’t come. I’m personally critical of the approach taken to establish the ACB. It is easy to go to meetings and agree on these things but the challenges we face are much bigger than the niceties of brotherhood and sisterhood,” he said.

Mboweni earlier told delegates he would not speak on domestic monetary policy during the speech, two days before an interest rate decision.

”I have been instructed not to speak about monetary policy here at home … there’s a meeting starting tomorrow [Wednesday] so I can’t speak about that,” he said.

The Reserve Bank will announce its decision on interest rates at 1pm GMT on Thursday. Markets are divided over whether it will raise the repo rate again after lifting it by 300 basis points to 10% since June last year to tackle rising inflation.

The targeted CPIX inflation measure has stayed outside the bank’s 3% to 6% band for five months, but some indicators show demand and growth may be easing, clouding the outlook. – Reuters

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