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CFA Franc: where is West Africa?

 

A year ago French Presidents Emmanuel Macron and Ivorian Alassane Ouattara announced the end of the CFA franc in the eight countries of the West African Economic and Monetary Union (Uemoa). This currency common to fifteen African countries, including the Comoros, the CFA for “French colonies in Africa”, had been created on December 26, 1945, about fifteen years before the independence of the French colonies. The countries using this currency are divided into two zones, eight in West Africa, six in Central Africa, and the Comoros constituting separate monetary unions. West Africa is one of the most active sub-regions at the community level since the creation of the Community of West African States and concrete projects such as the free movement of goods and people, a single passport, etc. Thus in 2019, this zone, which as a whole comprises fifteen countries in total, launched on June 29, 2019 in Abuja its process of creating a common currency, the eco. Previously, it was therefore noted that the eight countries using the CFA franc within it are extirpated. And this is in substance the announcement that was made on December 21, 2019 in Abidjan by the two heads of state.

On the French side, France did ratify on December 10 the monetary cooperation agreement concluded a year ago by Paris and the States of the West African Monetary Union. However, the eco, the future West African currency, is still not on the market, and many concrete questions still remain unresolved.

Eco / CFA franc: what changes?

Besides the symbolic change of the name of the currency, the advent of the eco will change two things. First, France will stop participating in the governance bodies of the West African Economic and Monetary Union (Uemoa).

Then, the Central Bank of West African States (BCEAO) will no longer have to deposit half of its foreign exchange reserves with the Banque de France, an obligation that was seen as a humiliating dependence on the France by detractors of the CFA franc. “These are two particularly symbolic questions that crystallized almost all of the criticisms addressed to the CFA franc”, assures AFP a source at the Elysee.

One thing does not change, however: the indexation of the currency to the rate of the euro, which brings stability to the economies of the countries of the zone, but also makes them dependent on the monetary policy of the European Central Bank. “This Macron-Ouattara reform is a bluff. The framework of monetary policy remains unchanged, it just focused on annoying symbols such as the name, ”laments Ndongo Samba Sylla, economist at the Rosa-Luxembourg Foundation in Dakar.

“The issue of parity was meticulously discussed before the announcement of the reform and the response from our African interlocutors […] was that it was desirable to maintain this parity, essentially for reasons of attractiveness, “replied a source at the Elysee, acknowledging a” legitimate “debate.

Another monetary union in Central Africa, separate from the WAEMU, also uses the CFA franc and is not currently affected by the reform.

A common currency… with whom?

The announcement of the new common currency concerns the WAEMU countries that used the CFA franc: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. But the idea of ​​a larger eco is regularly evoked, by integrating other countries like Ghana and especially Nigeria, economic heavyweight of the continent which weighs 70% of the GDP of the sub-region.

On many occasions, the Minister of Finance, Zainab Shamsuna Ahmed, has however reiterated that West African countries are not ready for any monetary union, as long as they do not meet the convergence criteria: a budget deficit does not not exceeding 3%, inflation less than 10% and debt less than 70% of GDP. “The question behind all this is to know what is the degree of solidarity to which African countries are ready with each other? It’s a difficult debate with a lot of unspoken words, ”analyzes Togolese economist Kako Nubukpo.

What is missing to launch the eco?

“The eco does not yet exist. Today, we are still with the CFA franc. We have the impression of going in circles ”, deplores the former Minister of Prospective and Evaluation of Public Policies of Togo who is preparing a report on the modalities of transition between the two currencies. The Covid has forced states to review their priorities but the epidemic is not the only reason for this sluggish implementation. “What blocks it is a purely political problem: there are dissensions between the leaders of French-speaking Africa,” said Franco-Ivorian economist Youssouf Carrius.

According to several observers, Côte d’Ivoire, the zone’s main economy along with Senegal, is in no particular hurry to make things happen. Several times, President Alassane Ouattara has defended the CFA franc, “a solid currency”, whose parity with the euro ensures economic stability.

Pay in CFA francs, until when?

The end of the CFA franc assumes above all the printing of new banknotes. For now, they are still printed in Chamalières, in the center of France, in a printing house of the Banque de France. No date has yet been released to change tickets. “It’s an African calendar. There will be this question in the subjects that will be debated at the next Africa-France summit in July 2021 ”, assures the Elysee.

An opinion shared by Lambert N’Galadjo Bamba, adviser to the Ivorian Ministry of Economy and Finance: “We had to update the roadmap due to the coronavirus crisis and give ourselves more time to work on convergence. All these processes take time, it takes a few more years ”before the actual launch of the eco. “The Europeans took nearly thirty years to get their euro,” recalls economist Ndongo Samba Sylla.

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