Economists recommend Sao Tome and Principe’s currency be benchmarked against euro [ 2007-07-05 ]
Sao Tome, Sao Tome and Principe, 5 July - International experts Wednesday recommended that Sao Tome and Principe benchmark its currency – the dobra - against the euro in order to make gains in foreign transactions and ensure macroeconomic stability.
The recommendation was made at a conference held Tuesday and Wednesday in Sao Tome entitled “Choice of exchange rate regime / opportunity and challenge for Sao Tome and Principe,” organised by Columbia University in the United States in partnership with the country’s parliament and the Sao Tome journalists’ association.
One of the speakers, a professor from Lisbon’s Universidade Nova and former Portuguese finance minister, Luís Campos e Cunha, recommended that the Sao tome authorities joined the group of currencies benchmarked against the euro as it is the main currency used in the archipelago’s transactions.
He said that 86 percent of exports and 65 percent of imports to Sao Tome and Principe were carried out with Euro zone countries, namely Portugal, the Netherlands and Belgium.
Campos e Cunha said that benchmarking the dobra against the euro would give the country a “solid and stable” currency and that along with internal economic reforms it could gain greater credibility for its monetary policy.
He also said that adopting the euro would have the immediate benefit of reducing transaction costs, by eliminating exchange rate differences.
Similarly to Cape Verde, the economist talked about the possibility of Sao Tome and Principe adopting a fixed exchange rate policy against the euro in order to more easily access loans from the Portuguese treasury to support its balance of payments and boost currency reserves, Based on a potential agreement between the two countries.
(macauhub)
