This article aims to describe the system known as the ‘CFA Franc’ as it stands today, with its advantages and disadvantages. It will not give the history of this well-established financial package nor a political analysis of the system; articles on these two subjects are easy to find elsewhere.

The CFA franc is the name of two currencies common to 14 countries in Central and West Africa, namely the Central African Economic and Monetary Community (CEMAC) and the Economic and Monetary Union of West Africa. (UEMOA). The UEMOA franc is issued by BCEAO (Central Bank of West African States) and that of CEMAC is issued by BEAC (Central Bank of Central African States).

Four principles govern the operation of the CFA franc:

  1. The French public treasury provides its guarantee of unlimited convertibility of the CFA franc into euros; the CFA franc is pegged to the euro under the responsibility of the European Central Bank (ECB) of which the governor of the Banque de France is a director.
  2. Conversion into euros is made at a fixed exchange rate of one euro for 655,957 CFA francs. The countries of the franc zone must deposit 50% of their foreign exchange reserves with the French Treasury in an account called the operations account.
  3. The CFA Franc is freely transferable between member states and to any country in the world.
  4. Reserves are centralized in both BCEAO and BEAC banks.

But do the member states of the franc zone really benefit from the CFA Franc?

The CFA Franc is currently the subject of passionate debate between supporters and opponents. Supporters claim we must not touch the current system while the opponents say we must exit the CFA franc. Moderates propose a revision of the system.

French President Emmanuel Macron addressing his Ivorian counterpart Alassane Ouattara said in early September 2017 that “Today the franc zone offers monetary stability, but it is not without certain challenges (…) We share, I believe, a common vision on the significance of the zone. But I think we need to modernize it, open a new path with a lot of pragmatism, and I think that’s what we want to engage in together. ”

Concretely, for the French President, there are three axes for this:
– abolish France’s right of veto;
– maintain a minimum level of foreign exchange reserves in place but transfer control of the accounts to those who are entitled, that is to say, the central banks of the franc zone;
– negotiate a limited issuing power of central banks and launch a competitive tender for the services of printing the currency.

It is the first time that the supreme authority of France has spoken out for a reform of the franc zone.

For the Belgian AEFJN antenna, the question of the CFA franc system is important as the development of the fourteen member countries depends specifically on their membership of the franc zone. However, the CFA franc system is generally beneficial to the 19 member states of the European Union belonging to the euro zone, more particularly to France, and to the detriment of the economies of African member countries; moreover, it maintains the control of the Euro zone member states, and more particularly of France, over the economies of African member countries and therefore over African policies.

document in pdf  PRESENTATION FRANC CFA JANVIER 2018 (2)

Christian Roberti

AEFJN Belgium