By Adolf Kaure.
The Governor of the Bank of Namibia Johannes !Gawaxab said the debate of introducing an African currency for the whole continent is still a far cry from reality.
!Gawaxab made these remarks during a Common Monetary Areas (CMA) governors’ meeting recently held in Swakopmund.
“To achieve this, we know that macroeconomic convergence is a prerequisite. To achieve this noble objective, we need similarities in inflation, debt levels, fiscal policies, and banking rules to mention but a few,” said !Gawaxab.
The meeting, which was organised by the Bank of Namibia invited CMA-partners – South Africa, Lesotho and Eswatini – to discuss the notable shift in global economic structures and the roles their countries play in this evolving landscape.
The central bank’s governor further said that the weakening Rand in most recent times has led to intense debates in countries participating in the CMA.
“The spill-over-effects have been acute as most of our smaller countries are net importers of goods and services. We shouldn’t shy away from pointing this out and reflect on mitigating strategies in light of the direct but varied impact in each of our countries.”
“Whilst acknowledging these concerns, it is the considered view of the Bank of Namibia that the benefits of its membership in the CMA outweigh the costs,” he said.
The rising cost of living has led to many CMA members considering disbanding from the US dollar.
!Gawaxab however stated that the US is able to borrow at lower interest rates than it would be able to otherwise since other countries are effectively subsidizing its debt.
“Governors, we need to take note of debates around currencies and de-dollarisation. The dominance of the US dollar as a reserve currency has become topical again. Many are mooting alternative currency regimes for international trade.”
“We all are familiar with the idea of the exorbitant privilege of the US dollar. One of the key arguments for the exorbitant privilege is that the USA is able to run persistent trade deficits without experiencing the same consequences as other countries,” said !Gawaxab.
This is because other countries are willing to hold US dollar as a reserve asset which increases the demand for US dollar in the international market.
Headline inflation in the CMA remains elevated and averaged 6.4% for the first quarter of 2023, but the nature of the inflation challenge is changing. There is hope, however, as the shocks that drove up inflation have started to wane leading to declining inflation.
The Common Monetary Aera central bank governors from the left, Emmanuel Letete of Lesotho, Lesetja Kganyago of South Africa, Johannes !Gawaxab of Namibia and Phil Mnisi of Eswatini. (Photograph courtesy of Bank of Namibia)
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