## 1.      Effective Fund surveillance over the members of currency unions entails

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### Rationale and background
- Currency union members have devolved responsibility for policy areas central to Fund surveillance—notably monetary and exchange rate policies—to regional institutions.
- Formal discussions with regional institutions have been held in the euro area, CEMAC, ECCU, and WAEMU; only the EU institutions responsible for euro area policies have these discussions formalized as an integral part of Fund surveillance on individual members.
- At the conclusion of the 2004 biennial surveillance review, Directors called for formalization of discussions with regional institutions in CEMAC, ECCU and WAEMU to “strengthen surveillance over monetary and exchange rate policies, trade policies, and financial sector regulation and supervision.”

### Current practice — Euro area
- Modalities of regional discussions in the context of Fund surveillance over euro-area members were formalized in 1998.
- Key features of current euro-area modalities:
  - Annual Article IV consultations with individual members.
  - Twice-yearly staff discussions with EU institutions responsible for common policies in the euro area. Discussions are held separately from individual country discussions but are considered integral to each member’s Article IV consultation.
  - An annual staff report and a formal Board meeting on the first round of discussions; summing up expected to be cross-referenced in Article IV summings up for individual members.
  - An informal oral report to the Board on the second round of discussions to provide context for bilateral consultations that do not coincide broadly with the annual Board discussion.
  - To the extent possible, clustering of Article IV discussions with individual member countries around the discussions with regional institutions.
- Discussions with EU institutions cover monetary and exchange rate policies, and common policies including financial sector regulation and supervision, trade and competition policies, structural policies of relevance, and an assessment of the fiscal position of the euro area as a whole.

### Current practice — CEMAC, ECCU, and WAEMU
- Regular discussions have been held with regional institutions:
  - Since 1998 and 1999, respectively, discussions with WAEMU and CEMAC regional institutions have taken place once a year. Staff report is discussed in a formal Board meeting and a summing up is prepared.
  - Since 2003, discussions with ECCU regional institutions have taken place twice a year. Both sets of discussions are followed by a Board meeting, one formal with a staff report and summing up; the other informal, since 2004 involving an oral presentation supported by tables and charts.
- Focus of regional discussions:
  - Policies under the aegis of regional institutions and other policies of regional importance, including monetary and exchange rate policies, progress in macroeconomic convergence, common trade policy, banking supervision, and the consistency of fiscal and structural policies with existing exchange rate arrangements.
  - Policy discussions increasingly backed by analytical work—selected issues papers were included in documentation for the 2003 and 2004 consultations with the ECCU.

### Proposed modalities of surveillance for CEMAC, ECCU, and WAEMU
- Formalization is not expected to entail significant operational changes; it recognizes that regional discussions form part of Article IV consultations with individual members and would help strengthen surveillance and ensure uniformity of treatment across Fund membership.
- Proposed modalities comprise:
  - Article IV consultations with individual member countries. The frequency of these consultations would continue to be determined by country-specific circumstances.
  - Yearly staff discussions with regional institutions responsible for common policies in the currency unions. The discussions are held separately from individual member country discussions but are considered an integral part of the Article IV process for each member.
  - An annual staff report on the discussions with the regional institutions followed by a Board discussion, both considered an integral part of the Article IV consultations with individual member countries. The summing up of these discussions would be cross-referenced in the summings up of the Article IV consultations with the individual members. These discussions would focus on policies under the aegis of the regional institutions and, as relevant, other policies of regional importance.
  - A second round of staff discussions and an informal report to the Board, if needed, to provide adequate context for bilateral consultations with currency union members that do not coincide broadly with the annual Board discussion on the currency unions’ policies.
  - To the extent possible, clustering of the Board discussions for the Article IV with individual member countries around the regional Board discussions; clustering is more difficult in program countries but may be feasible with at least the largest members to ensure better integration of regional issues in bilateral consultations.
- Resource implications: Given the resemblance to current practice, the resource implications of formalization are expected to be negligible.
- Three decisions apply these modalities to the member countries in the three currency unions; texts are essentially similar (editorial differences in ECCU decision reflect that some ECCU members are dependent territories of a Fund member).

### Appendix — Key characteristics: overview
- Two notable features across the three currency unions:
  - All three currency unions are part of a broader economic integration process. CEMAC and WAEMU are economic unions; ECCU members are also members of the Organization of Eastern Caribbean States (OECS). Other aspects of economic integration are less advanced than in the European Union and policy coordination is still incomplete.
  - Each currency union maintains a pegged exchange rate:
    - ECCU: regional central bank operates a quasi-currency board to the U.S. dollar.
    - CEMAC and WAEMU: exchange rate is pegged to the euro and convertibility is guaranteed by the French Treasury.
- The appendix describes (i) historical background; (ii) key institutions; (iii) policy responsibilities; (iv) policy convergence; and (v) data provision.

### Appendix — CEMAC and WAEMU: institutions and policy responsibilities
- Historical background:
  - CEMAC established in 1999; WAEMU established in 1994. Together they form the CFA franc zone.
  - The two currency unions comprise 14 members: 8 in WAEMU (Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Togo and Senegal), and 6 in CEMAC (Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea, and Gabon).
- Institutions:
  - The Conference of Heads of States and the Conference of Heads of States and Governments are the supreme policy-making institutions of CEMAC and WAEMU, respectively.
  - The Councils of Ministers implement decisions and are responsible for conduct of regional surveillance and ensuring members’ policies are consistent with community objectives.
  - The Executive Secretariat of CEMAC and the Commission of WAEMU oversee observance of treaties and implementation of decisions.
  - Regional central banks: Bank of Central African States (BEAC) and Central Bank of West African States (BCEAO) are responsible for monetary operations. Governors are appointed by the Councils of Ministers; Executive Board members appointed by member countries (according to country size in BEAC, and two members per country in BCEAO). National Credit Commissions oversee monetary policy in member countries.
  - Regional Banking Commissions—Commission Bancaire de l’Afrique Centrale (COBAC) and Commission Bancaire for CEMAC and WAEMU—regulate and supervise credit institutions.
- Policy responsibilities:
  - Monetary policy is conducted by regional central banks subject to CFA franc arrangement constraints. Instruments include charges on credit to banks (refinancing or discount windows), reserve requirements, and open market operations (WAEMU). In CEMAC, central bank credit to member governments is subject to a cumulative limit of 20 percent of budgetary revenue in the previous year.
  - Fiscal policy is the prerogative of individual member countries; fiscal discipline is subject to regional surveillance given its importance for peg sustainability.
  - Banking supervision: conducted by regional Banking Commissions headed by regional central bank Governors. Prior agreement of the Executive Secretariat of the Banking Commissions is required for licensing of any credit institution by national authorities. Banking Commissions have limited authority to impose sanctions on banks without consent of the Minister of Finance in the affected country.
  - Trade policy: coordinated by the Executive Secretariat and Commission in CEMAC and WAEMU. Progress in formulating common regional trade policy and establishing regional free trade areas; both have common external tariffs.
  - Other structural policies remain national prerogatives; initiatives exist to harmonize legal and regulatory environments (business laws, investment charters, competition policy).

### Appendix — Box 1: The CFA Franc Arrangement (CEMAC and WAEMU)
- Combined, CEMAC and WAEMU constitute the CFA franc zone; two formally distinct currencies (West African CFA franc in WAEMU and Central African CFA franc in CEMAC) with almost identical arrangements between central banks and the French Treasury (France represented on executive boards of the two regional central banks).
- Operating rules of the CFA franc zone:
  - Fixed parity against the euro, adjustable after consultation with the French government and unanimous decision of all member countries.
  - Convertibility of the CFA franc at the rate of €1 = CFAF655.957.
  - Guarantee of full convertibility through establishment by each central bank of an operations account with the French Treasury with market-related yields of charges.
  - Free capital mobility between the two regions and France.
  - Pooling of foreign exchange reserves in each monetary area.
- Each central bank must:
  - Maintain at least 65 percent of their foreign assets in the operations account.
  - Provide for exchange cover of at least 20 percent of their sight deposits.
  - Impose a cap on accumulated credit extended to each member country of 20 percent of the previous year’s public sector revenue.
- Aside from the 1994 devaluation, the parity between the CFAF and the French franc/euro has remained unchanged. The move to EMU third stage and the creation of the euro replaced the peg to the French franc by the euro and required informing ECOFIN about any change in parity. The agreement between the French Treasury and the CFA zone members is of a budgetary nature and does not oblige the ECB to support the peg (EU council decision of November 23, 1998). ECOFIN’s consent is needed for any change to the extent or nature of the arrangements.

### Appendix — Policy convergence (CEMAC and WAEMU)
- CEMAC:
  - In 1999, the Council of Ministers adopted a regional plan to promote macroeconomic convergence. Convergence criteria:
    - (i) a primary fiscal surplus;
    - (ii) a ceiling on the public debt-to-GDP ratio of 70 percent;
    - (iii) inflation less than 3 percent; and
    - (iv) no increase in domestic or external government arrears.
  - Committee on Multilateral Surveillance conducts quarterly regional surveillance exercises with assistance of BEAC.
  - Introduction of convergence objectives had limited success; 4 out of 6 countries are in violation of at least one criterion.
  - Multilateral surveillance monitors additional indicators: reserve cover, revenue-to-GDP ratio, ratio of public sector wage bill to revenue, current account deficit as share of GDP, and ratio of external debt service to exports.
  - Fiscal balance criterion complemented by a “structural fiscal balance” defined as the primary balance based on the five-year average of oil revenue to account for oil price volatility.
- WAEMU:
  - In 1999, Convergence, Stability, Growth, and Solidarity Pact introduced as addendum to the WAEMU Treaty. Convergence criteria divided into primary and secondary criteria.
  - Primary criteria:
    - (i) a fiscal surplus;
    - (ii) a ceiling on the public sector debt-to-GDP ratio of 70 percent;
    - (iii) an average annual inflation rate of at most 3 percent; and
    - (iv) the nonaccumulation of domestic and external payment arrears.
  - Secondary criteria include the civil service wage bill, public investment, tax ratios, and the current account.
  - The original target date for meeting the convergence criteria was specified in the Treaty (text truncated in source).

### Data provision and technical work
- IMF Balance of Payments Committee established a Currency Union Technical Group (CUTEG) including representatives from CEMAC, WAEMU, and ECCU to prepare an appendix for the next revision of the Balance of Payments Manual. The appendix will include conceptual and methodological guidance on compilation of balance of payments and international investment statistics in currency unions and other regional economic and monetary arrangements.

*Source: _122105 - 1.      Effective Fund surveillance over the members of currency unions entails*

### 2002. Since by end-2002 many member countries were in non-compliance, the

### Data provision (WAEMU / CFA zone)
- With the exception of Equatorial Guinea, all CFA zone member countries participate in the IMF General Data Dissemination System (GDDS).
- AFRISTAT was created in 1993 to advise the national statistical institutes of member states.
- The IMF’s regional technical assistance center in West Africa (AFRITAC-West) has contributed to improving macroeconomic statistics in WAEMU countries.
- Ongoing obstacles to a regional database include harmonization and reconciliation of national statistics.

### Eastern Caribbean Currency Union (ECCU) — Historical background
- The ECCU was established by the member countries of the Organization of Eastern Caribbean States (OECS) in 1983; its members are also members of the OECS.
- Historical lineage:
  - 1965: the British Caribbean Currency Board (BCCB) was replaced by the Eastern Caribbean Currency Authority (ECCA).
  - 1976: the peg was shifted from the British pound to the US dollar.
- ECCU membership (eight member countries and territories): Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines (independent states), and Anguilla and Montserrat (United Kingdom territories).
- The six independent OECS states and Montserrat are also members of CARICOM, established in 1973.

### Institutions
- The Authority of Heads of Government of the member States of the OECS is the supreme policy-making institution of the organization.
- The Central Secretariat of the OECS is the principal institution responsible for the general administration of the Organization.
- The East Caribbean Central Bank (ECCB) was established in 1983.
  - The Monetary Council meets three times a year and is the highest decision-making authority; each member government appoints one member of the Council.
  - The Board of Governors comprises eight Directors, plus the Governor and the Deputy Governor, who are appointed by the Monetary Council.

### Policy responsibilities
- The ECCB maintains the U.S. dollar peg through a quasi-currency board arrangement and issues the common currency, the Eastern Caribbean dollar, pegged to the U.S. dollar since 1976 at EC$2.70=US$1.
- The ECCB Act places a floor on external reserves at 60 percent of the demand liabilities (reserve money) of the ECCB, resulting in an implicit ceiling on domestic assets of 40 percent of reserve money.
- The ECCB has maintained a reserve cover of more than 95 percent.
- ECCB policy instruments include discount and rediscount rates, reserve requirements, differential rates and ceilings for various types of transactions, and credit to members in accordance with specific rules.
- Responsibility for regulating and supervising banks and systemic nonbank financial institutions in the ECCU is shared between the ECCB and the Ministry of Finance of each member country.
- The 1983 ECCB Agreement Act and the 1993 Uniform Banking Act established the ECCB’s regulatory and supervisory jurisdiction over commercial banks and other licensed financial institutions, including offshore banks affiliated with local banks.
- Fiscal policy is the prerogative of individual governments but subject to regional surveillance.
- Trade policy positions of the member countries are coordinated by the CARICOM Secretariat; a common external tariff has been adopted (not fully implemented by all countries).
- The Conference of Heads of Government of CARICOM decided in 1989 to create the Caribbean Single Market and Economy (CSME), scheduled to come into force in 2005.
- While the OECS treaty provides for cooperation beyond monetary, exchange rate policy, and trade, progress in other structural policy areas has been limited.

### Policy coordination (ECCU)
- In 1998, the Monetary Council of the ECCB adopted fiscal benchmarks to support the quasi-currency board arrangement, to be achieved by 2007:
  - a surplus on the government current balance of 4-6 percent of GDP;
  - an overall government budget deficit of no more than 3 percent of GDP;
  - a total central government debt outstanding of no more than 60 percent of GDP;
  - debt service payments of no more than 15 percent of current revenue.
- In practice, fiscal policy coordination in the ECCU remains weak; the benchmarks were agreed by the Monetary Council but have not been integrated into the national budgets or laws.

### Data provision (ECCU)
- All ECCU member countries participate in the GDDS.
- The regional technical assistance center (CARTAC) provides technical assistance in national accounts, CPI, and balance of payments statistics.
- Remaining regional data weaknesses concern coverage, quality, and timeliness of trade, labor market, balance of payments, fiscal, debt, and price data.

*Source: _122105 - 2002. Since by end-2002 many member countries were in non-compliance, the*

### 1.      Effective Fund surveillance over the members of currency unions entails

### 1.      Effective Fund surveillance over the members of currency unions entails

### Rationale and background
- Currency union members have devolved responsibility for policy areas central to Fund surveillance—notably monetary and exchange rate policies—to regional institutions.
- Formal discussions with regional institutions have been held in the euro area, CEMAC, ECCU, and WAEMU; only the EU institutions responsible for euro area policies have these discussions formalized as an integral part of Fund surveillance on individual members.
- At the conclusion of the 2004 biennial surveillance review, Directors called for formalization of discussions with regional institutions in CEMAC, ECCU and WAEMU to “strengthen surveillance over monetary and exchange rate policies, trade policies, and financial sector regulation and supervision.”

### Current practice — Euro area
- Modalities of regional discussions in the context of Fund surveillance over euro-area members were formalized in 1998.
- Key features of current euro-area modalities:
  - Annual Article IV consultations with individual members.
  - Twice-yearly staff discussions with EU institutions responsible for common policies in the euro area. Discussions are held separately from individual country discussions but are considered integral to each member’s Article IV consultation.
  - An annual staff report and a formal Board meeting on the first round of discussions; summing up expected to be cross-referenced in Article IV summings up for individual members.
  - An informal oral report to the Board on the second round of discussions to provide context for bilateral consultations that do not coincide broadly with the annual Board discussion.
  - To the extent possible, clustering of Article IV discussions with individual member countries around the discussions with regional institutions.
- Discussions with EU institutions cover monetary and exchange rate policies, and common policies including financial sector regulation and supervision, trade and competition policies, structural policies of relevance, and an assessment of the fiscal position of the euro area as a whole.

### Current practice — CEMAC, ECCU, and WAEMU
- Regular discussions have been held with regional institutions:
  - Since 1998 and 1999, respectively, discussions with WAEMU and CEMAC regional institutions have taken place once a year. Staff report is discussed in a formal Board meeting and a summing up is prepared.
  - Since 2003, discussions with ECCU regional institutions have taken place twice a year. Both sets of discussions are followed by a Board meeting, one formal with a staff report and summing up; the other informal, since 2004 involving an oral presentation supported by tables and charts.
- Focus of regional discussions:
  - Policies under the aegis of regional institutions and other policies of regional importance, including monetary and exchange rate policies, progress in macroeconomic convergence, common trade policy, banking supervision, and the consistency of fiscal and structural policies with existing exchange rate arrangements.
  - Policy discussions increasingly backed by analytical work—selected issues papers were included in documentation for the 2003 and 2004 consultations with the ECCU.

### Proposed modalities of surveillance for CEMAC, ECCU, and WAEMU
- Formalization is not expected to entail significant operational changes; it recognizes that regional discussions form part of Article IV consultations with individual members and would help strengthen surveillance and ensure uniformity of treatment across Fund membership.
- Proposed modalities comprise:
  - Article IV consultations with individual member countries. The frequency of these consultations would continue to be determined by country-specific circumstances.
  - Yearly staff discussions with regional institutions responsible for common policies in the currency unions. The discussions are held separately from individual member country discussions but are considered an integral part of the Article IV process for each member.
  - An annual staff report on the discussions with the regional institutions followed by a Board discussion, both considered an integral part of the Article IV consultations with individual member countries. The summing up of these discussions would be cross-referenced in the summings up of the Article IV consultations with the individual members. These discussions would focus on policies under the aegis of the regional institutions and, as relevant, other policies of regional importance.
  - A second round of staff discussions and an informal report to the Board, if needed, to provide adequate context for bilateral consultations with currency union members that do not coincide broadly with the annual Board discussion on the currency unions’ policies.
  - To the extent possible, clustering of the Board discussions for the Article IV with individual member countries around the regional Board discussions; clustering is more difficult in program countries but may be feasible with at least the largest members to ensure better integration of regional issues in bilateral consultations.
- Resource implications: Given the resemblance to current practice, the resource implications of formalization are expected to be negligible.
- Three decisions apply these modalities to the member countries in the three currency unions; texts are essentially similar (editorial differences in ECCU decision reflect that some ECCU members are dependent territories of a Fund member).

### Appendix — Key characteristics: overview
- Two notable features across the three currency unions:
  - All three currency unions are part of a broader economic integration process. CEMAC and WAEMU are economic unions; ECCU members are also members of the Organization of Eastern Caribbean States (OECS). Other aspects of economic integration are less advanced than in the European Union and policy coordination is still incomplete.
  - Each currency union maintains a pegged exchange rate:
    - ECCU: regional central bank operates a quasi-currency board to the U.S. dollar.
    - CEMAC and WAEMU: exchange rate is pegged to the euro and convertibility is guaranteed by the French Treasury.
- The appendix describes (i) historical background; (ii) key institutions; (iii) policy responsibilities; (iv) policy convergence; and (v) data provision.

### Appendix — CEMAC and WAEMU: institutions and policy responsibilities
- Historical background:
  - CEMAC established in 1999; WAEMU established in 1994. Together they form the CFA franc zone.
  - The two currency unions comprise 14 members: 8 in WAEMU (Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Togo and Senegal), and 6 in CEMAC (Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea, and Gabon).
- Institutions:
  - The Conference of Heads of States and the Conference of Heads of States and Governments are the supreme policy-making institutions of CEMAC and WAEMU, respectively.
  - The Councils of Ministers implement decisions and are responsible for conduct of regional surveillance and ensuring members’ policies are consistent with community objectives.
  - The Executive Secretariat of CEMAC and the Commission of WAEMU oversee observance of treaties and implementation of decisions.
  - Regional central banks: Bank of Central African States (BEAC) and Central Bank of West African States (BCEAO) are responsible for monetary operations. Governors are appointed by the Councils of Ministers; Executive Board members appointed by member countries (according to country size in BEAC, and two members per country in BCEAO). National Credit Commissions oversee monetary policy in member countries.
  - Regional Banking Commissions—Commission Bancaire de l’Afrique Centrale (COBAC) and Commission Bancaire for CEMAC and WAEMU—regulate and supervise credit institutions.
- Policy responsibilities:
  - Monetary policy is conducted by regional central banks subject to CFA franc arrangement constraints. Instruments include charges on credit to banks (refinancing or discount windows), reserve requirements, and open market operations (WAEMU). In CEMAC, central bank credit to member governments is subject to a cumulative limit of 20 percent of budgetary revenue in the previous year.
  - Fiscal policy is the prerogative of individual member countries; fiscal discipline is subject to regional surveillance given its importance for peg sustainability.
  - Banking supervision: conducted by regional Banking Commissions headed by regional central bank Governors. Prior agreement of the Executive Secretariat of the Banking Commissions is required for licensing of any credit institution by national authorities. Banking Commissions have limited authority to impose sanctions on banks without consent of the Minister of Finance in the affected country.
  - Trade policy: coordinated by the Executive Secretariat and Commission in CEMAC and WAEMU. Progress in formulating common regional trade policy and establishing regional free trade areas; both have common external tariffs.
  - Other structural policies remain national prerogatives; initiatives exist to harmonize legal and regulatory environments (business laws, investment charters, competition policy).

### Appendix — Box 1: The CFA Franc Arrangement (CEMAC and WAEMU)
- Combined, CEMAC and WAEMU constitute the CFA franc zone; two formally distinct currencies (West African CFA franc in WAEMU and Central African CFA franc in CEMAC) with almost identical arrangements between central banks and the French Treasury (France represented on executive boards of the two regional central banks).
- Operating rules of the CFA franc zone:
  - Fixed parity against the euro, adjustable after consultation with the French government and unanimous decision of all member countries.
  - Convertibility of the CFA franc at the rate of €1 = CFAF655.957.
  - Guarantee of full convertibility through establishment by each central bank of an operations account with the French Treasury with market-related yields of charges.
  - Free capital mobility between the two regions and France.
  - Pooling of foreign exchange reserves in each monetary area.
- Each central bank must:
  - Maintain at least 65 percent of their foreign assets in the operations account.
  - Provide for exchange cover of at least 20 percent of their sight deposits.
  - Impose a cap on accumulated credit extended to each member country of 20 percent of the previous year’s public sector revenue.
- Aside from the 1994 devaluation, the parity between the CFAF and the French franc/euro has remained unchanged. The move to EMU third stage and the creation of the euro replaced the peg to the French franc by the euro and required informing ECOFIN about any change in parity. The agreement between the French Treasury and the CFA zone members is of a budgetary nature and does not oblige the ECB to support the peg (EU council decision of November 23, 1998). ECOFIN’s consent is needed for any change to the extent or nature of the arrangements.

### Appendix — Policy convergence (CEMAC and WAEMU)
- CEMAC:
  - In 1999, the Council of Ministers adopted a regional plan to promote macroeconomic convergence. Convergence criteria:
    - (i) a primary fiscal surplus;
    - (ii) a ceiling on the public debt-to-GDP ratio of 70 percent;
    - (iii) inflation less than 3 percent; and
    - (iv) no increase in domestic or external government arrears.
  - Committee on Multilateral Surveillance conducts quarterly regional surveillance exercises with assistance of BEAC.
  - Introduction of convergence objectives had limited success; 4 out of 6 countries are in violation of at least one criterion.
  - Multilateral surveillance monitors additional indicators: reserve cover, revenue-to-GDP ratio, ratio of public sector wage bill to revenue, current account deficit as share of GDP, and ratio of external debt service to exports.
  - Fiscal balance criterion complemented by a “structural fiscal balance” defined as the primary balance based on the five-year average of oil revenue to account for oil price volatility.
- WAEMU:
  - In 1999, Convergence, Stability, Growth, and Solidarity Pact introduced as addendum to the WAEMU Treaty. Convergence criteria divided into primary and secondary criteria.
  - Primary criteria:
    - (i) a fiscal surplus;
    - (ii) a ceiling on the public sector debt-to-GDP ratio of 70 percent;
    - (iii) an average annual inflation rate of at most 3 percent; and
    - (iv) the nonaccumulation of domestic and external payment arrears.
  - Secondary criteria include the civil service wage bill, public investment, tax ratios, and the current account.
  - The original target date for meeting the convergence criteria was specified in the Treaty (text truncated in source).

### Data provision and technical work
- IMF Balance of Payments Committee established a Currency Union Technical Group (CUTEG) including representatives from CEMAC, WAEMU, and ECCU to prepare an appendix for the next revision of the Balance of Payments Manual. The appendix will include conceptual and methodological guidance on compilation of balance of payments and international investment statistics in currency unions and other regional economic and monetary arrangements.

*Source: _122105 - 1.      Effective Fund surveillance over the members of currency unions entails*

### 2002. Since by end-2002 many member countries were in non-compliance, the

### _122105 - 2002. Since by end-2002 many member countries were in non-compliance, the

### Data provision (WAEMU / CFA zone)
- With the exception of Equatorial Guinea, all CFA zone member countries participate in the IMF General Data Dissemination System (GDDS).
- AFRISTAT was created in 1993 to advise the national statistical institutes of member states.
- The IMF’s regional technical assistance center in West Africa (AFRITAC-West) has contributed to improving macroeconomic statistics in WAEMU countries.
- Ongoing obstacles to a regional database include harmonization and reconciliation of national statistics.

### Eastern Caribbean Currency Union (ECCU) — Historical background
- The ECCU was established by the member countries of the Organization of Eastern Caribbean States (OECS) in 1983; its members are also members of the OECS.
- Historical lineage:
  - 1965: the British Caribbean Currency Board (BCCB) was replaced by the Eastern Caribbean Currency Authority (ECCA).
  - 1976: the peg was shifted from the British pound to the US dollar.
- ECCU membership (eight member countries and territories): Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines (independent states), and Anguilla and Montserrat (United Kingdom territories).
- The six independent OECS states and Montserrat are also members of CARICOM, established in 1973.

### Institutions
- The Authority of Heads of Government of the member States of the OECS is the supreme policy-making institution of the organization.
- The Central Secretariat of the OECS is the principal institution responsible for the general administration of the Organization.
- The East Caribbean Central Bank (ECCB) was established in 1983.
  - The Monetary Council meets three times a year and is the highest decision-making authority; each member government appoints one member of the Council.
  - The Board of Governors comprises eight Directors, plus the Governor and the Deputy Governor, who are appointed by the Monetary Council.

### Policy responsibilities
- The ECCB maintains the U.S. dollar peg through a quasi-currency board arrangement and issues the common currency, the Eastern Caribbean dollar, pegged to the U.S. dollar since 1976 at EC$2.70=US$1.
- The ECCB Act places a floor on external reserves at 60 percent of the demand liabilities (reserve money) of the ECCB, resulting in an implicit ceiling on domestic assets of 40 percent of reserve money.
- The ECCB has maintained a reserve cover of more than 95 percent.
- ECCB policy instruments include discount and rediscount rates, reserve requirements, differential rates and ceilings for various types of transactions, and credit to members in accordance with specific rules.
- Responsibility for regulating and supervising banks and systemic nonbank financial institutions in the ECCU is shared between the ECCB and the Ministry of Finance of each member country.
- The 1983 ECCB Agreement Act and the 1993 Uniform Banking Act established the ECCB’s regulatory and supervisory jurisdiction over commercial banks and other licensed financial institutions, including offshore banks affiliated with local banks.
- Fiscal policy is the prerogative of individual governments but subject to regional surveillance.
- Trade policy positions of the member countries are coordinated by the CARICOM Secretariat; a common external tariff has been adopted (not fully implemented by all countries).
- The Conference of Heads of Government of CARICOM decided in 1989 to create the Caribbean Single Market and Economy (CSME), scheduled to come into force in 2005.
- While the OECS treaty provides for cooperation beyond monetary, exchange rate policy, and trade, progress in other structural policy areas has been limited.

### Policy coordination (ECCU)
- In 1998, the Monetary Council of the ECCB adopted fiscal benchmarks to support the quasi-currency board arrangement, to be achieved by 2007:
  - a surplus on the government current balance of 4-6 percent of GDP;
  - an overall government budget deficit of no more than 3 percent of GDP;
  - a total central government debt outstanding of no more than 60 percent of GDP;
  - debt service payments of no more than 15 percent of current revenue.
- In practice, fiscal policy coordination in the ECCU remains weak; the benchmarks were agreed by the Monetary Council but have not been integrated into the national budgets or laws.

### Data provision (ECCU)
- All ECCU member countries participate in the GDDS.
- The regional technical assistance center (CARTAC) provides technical assistance in national accounts, CPI, and balance of payments statistics.
- Remaining regional data weaknesses concern coverage, quality, and timeliness of trade, labor market, balance of payments, fiscal, debt, and price data.

*Source: _122105 - 2002. Since by end-2002 many member countries were in non-compliance, the*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2005/_122105.pdf_