Franc zone countries are determined to launch a new currency. Pierre Jacquemot, a researcher associated with Iris, debunks the untruths of the debate on the end of the CFA franc and analyzes the future challenges of the monetary union.
After 75 years of existence, the franc zone is on its way out, at least for eight West African countries, members of the WAEMU1. The controversy, often furious, surrounding its operation should cease, to make way for the fundamental question: the choice of economic policy to strengthen the integration of all West African economies.
Abidjan’s historic decision
After taking the advice of his counterparts in the region, Ivorian President Alassane Ouattara announced on December 21 that the currency of the eight countries will soon be called the “Eco” and no longer the CFA franc (Communauté financière d’Afrique), that the operating account opened with the French Treasury and into which half of their foreign exchange reserves are deposited will soon be repatriated to Africa, and that the positions of French representatives in WAEMU’s governing bodies will be abolished. This is a salutary change that has been long awaited and should satisfy many of the critics of the old neo-colonial system.
The response has three main aspects. The first and most visible aspect is obviously the change in the name of the currency. Under its present name, the CFA franc (which in West Africa, it should be remembered, has been the franc of the African Financial Community since the treaty of the Monetary Union of West Africa of May 12, 1962, replacing the franc of the French colonies in Africa) is dead. At least it will soon die when the exchange between CFA francs and ecos takes place, a process that will eventually involve the production of new banknotes. As with the abandonment of the French franc in favor of the euro, during a transition period, prices could be displayed simultaneously in ecos and CFA francs according to the defined conversion rate, and purchases paid for either in CFA bills or by bank transfers to accounts denominated simultaneously in ecos and CFA francs. The disappearance of the West African CFA franc does not imply the disappearance of the Central African CFA franc, issued by the Central Bank of Central African States (BEAC), but, as we shall see, makes it likely that it will be replaced by another denomination, which cannot be the eco. The difference in denomination will seal the distinction between the two issuing zones, which are often mistakenly confused under the misleading term “CFA zone.
Second, France will no longer be present on the Board of Directors of the Central Bank of West African States (BCEAO), where it had a statutory minority seat, exercising an advisory and supervisory role, or even, as seems not to have been taken for granted, on the Monetary Policy Committee…
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