1. Introduction
In 1999, it was decided that a monetary union between the West African Economic and
Monetary Union (WAEMU) and six additional anglophone countries should be created to
comprise almost all member states of the Economic Community of West African States
(ECOWAS) members by 2004.1 In 2000, in the so-called Accra Declaration, it was decided
that by 2003 a second monetary union, the West African Monetary Zone between the non-
WAEMU, should commence before the unions would be merged in 2004.2 Part of the
process of monetary integration between the two areas are several convergence criteria with
respect to fiscal policy. In Accra, countries committed themselves to restrict central bank
financing of budget deficits to 10 percent of previous year’s government revenue, to reduce
budget deficit to 4 percent of GDP, to set up a convergence council to help coordinate
macroeconomic policy, and to set up a common central bank. Despite attempts to
coordinate these criteria with those applying to WAEMU members, some differences
remain (see Masson and Patillo 2001a). WAEMU members for instance aim for a balanced
budget, an average annual inflation rate of 3 percent and an overall debt to GDP ratio of
less than 70 percent. While, in general, WAEMU countries are much closer to fulfill the
criteria than the other countries, probably due to the much longer experience of regional
1 WAEMU comprises Benin, Burkina Faso, Cote d’ Ivoire, Guinea-Bissau, Mali,
Niger, Senegal and Togo, which is itself part of the larger CFA-Franc Zone. Other members
of ECOWAS are Cape Verde, Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone.
Cape Verde has a peg to the euro and has not signed the declaration. Mauritania, a founding
member of ECOWAS has withdrawn from the organization. For institutional details, see
Hernandez-Cata et al. (1998) and Masson and Patillo (2001 a). On the CFA-Zone, see e.g.
Fielding (2002).
2 In 2000, a West African Monetary Institute was assigned the task of preparing the
second monetary union. Since prospective member states (with the exception of Ghana)
have not fulfilled the convergence criteria, the second monetary union has been postponed
to give more time to fulfill the criteria. The monetary union for ECOWAS is now scheduled
to begin by July 2005. For details, see Ghanian Chronicle, February 7, 2003.