South Africa’s central bank chief said adopting a region-wide common currency was a political project, and then spelled out exactly why it would probably never happen.
“What do you need to have an African currency? You need to have macroeconomic convergence,” South African Reserve Bank Governor Lesetja Kganyago said Tuesday during a wide-ranging interview with Metro FM radio.
That means getting inflation and debt levels among nations on the continent to be at similar levels, as well as consistent fiscal policies and banking rules. “Absent those, it’s impossible,” he said during an event hosted at the Soweto Theatre in southern Johannesburg.
The Brics group of nations — which comprises Brazil, Russia, India, China and South Africa — has floated the feasibility of introducing a common currency in response to the fallout from higher interest rates in the US, as well as the use of the dollar as a sanctions instrument by Washington.
“If the Brics political leaders say that is where they are going, us as technocrats, all we can say to them is, if you want it, you’ll have to get a banking union, you’ll have to get a fiscal union, you’ve got to get macro-economic convergence,” Kganyago said. “And importantly, you need a disciplining mechanism for countries that fall out of line with it. And the euro project demonstrated just that.”