EXCLUSIVE: CFA zone in search of monetary sovereignty
YAOUNDE, (CAJ News) – THERE are rising calls for the French-speaking African countries to ensure the independence of their currencies from the former colonial powerhouse, France.
The countries’ currencies are enmeshed in the pre-colonial era, decades after independence from the European country.
The currency is in use in Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo-Brazzaville, Equatorial Guinea, Guinea Bissau, Ivory Coast, Mali, Niger, Senegal and Togo, among others.
Ongoing debate is a result of the former coloniser still holding significant amounts of the foreign reserves of its erstwhile colonies in the French Treasury, as well as the continued use of the CFA currency, whose convertibility is still guaranteed by the French Treasury.
At a recent conference in Yaoundé, Cameroon, analysts called for such ties to be severed.
“We need to put this debate on the table because it is a democratic process, said Dr Daniele Anaba, a lecturer at the University of Yaounde.
Taking a cue, Professor Fondo Sikod of the University of Yaounde said the CFA was established to cope with colonial realities. When it was established in 1945, the currency was known as the “Franc des Colonies françaises d’Afrique (CFA)” or Franc of the French colonies in Africa.
It came as a response to the financial needs of French nationals who were working in the territories.
“They needed to be paid and part of their money was kept in France and part of it was paid to them in the colonies, and this part that was paid to them in the colonies was given a different denomination to the one used in France.
“That process that was carried over through independence and that is how it happened that there was a Franc with different values,” Sikod said.
After independence of the African countries, Sikod said, it became known as the “Franc de la Communauté Française d’Afrique” (Franc of the French African Community).
“It is that process that was carried over through independence and that is how it happened that there was a Franc with different values,” Fondo said.
With the new CFA directly pegged to the French Franc, the economist now believes such an arrangement is outdated and outmoded.
He said it was a measure to ensure that the currency of the colonies had some convertibility.
“But as the economies of these colonies have grown, there is not more need for that, because what gives strength to a currency is the economy.”
Rather than advocate that the CFA Zone countries should each come up with their own currencies, Sikod advocated that the CFA be maintained as the currency of the 14 member states, without the Euro peg.
The CFA has been pegged to the euro in the wake of France renouncing its own currency, the French Franc and joining the Euro. It has since enjoyed a stable exchange rate of 656 to the Euro.
“The CFA should be allowed to float and find its own value among other currencies without having to go through the euro,” Sikod, a professor of Economics, exclusively told CAJ News Africa.
Chadian President, Idris Debby, as his country recently celebrated the 55th anniversary of independence, sparked the debate.
Debby insisted on monetary sovereignty.
“Today, the CFA is guaranteed by the French Treasury. But this is an African currency…it’s our currency. What now needs to be done is to make this currency concretely ours so that we can make it convertible; and a currency that will enable African countries still using the CFA to develop. I think it’s a courageous decision that our French friends should take.”
Debby also highlighted outdated clauses in the monetary arrangement with France, suggesting that these be reviewed.
He called the continent to “cut off a cord that is keeping Africa from taking off.”
While Debby did not specifically name the clauses holding back Africa’s development, Cameroon’s Financial Engineer, Thomas Babissakana, said it was in reference to the so-called “Operational Account” that the two central banks that run the CFA Zone have in the French Treasury.
The Operational Account has evolved.
Babissakana said from 1945-1973, if Africans exported for instance, raw materials to the tone of US$100 billion, all that money was deposited in the French Treasury.
From 1973-2005, if Africans exported goods worth $100 billion, they were obliged to drop $65 billion in the French Treasury.
Beginning September this year, if they exported goods to the same amount, they would deposit half in the French Treasury.
“This whole setup is to enable France obtain raw materials from Africa without paying.
“The account also serves to settle France’s financial deficits or pay off its debts and a third consequence is that France uses the account for political control,” Babissakana argued.
Sikod said there was need to sever the arrangement.
“These countries (African countries using the CFA) are supposed to have developed enough discipline to be able to handle their own foreign reserves the way they want and not keep it under somebody’s supervision,” said Sikod.
France has signalled its readiness to discuss all these issues.
In October, during a meeting with Finance Ministers and central bank governors from the 16 African states, the Minister of Finance and Public Audits, Michel Sapin, said the Franc Zone was neither a fixed zone nor a historical one.
“It is a dynamic. If there are propositions, both from an intellectual and political basis, we will discuss these propositions together in the same spirit of respect and equality,” he said.
– CAJ News
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