Finance

CEMAC: Symposium suggests "deep" reform of the CFA Franc

CEMAC: Symposium suggests "deep" reform of the CFA Franc
Tuesday, 22 November 2022 15:23

The CFA Franc reform being demanded since 2019 concerns the current mechanisms for monetary cooperation with France.  

Last November 17-18, a symposium was held in Libreville, Gabon, on the theme "Currency and Development in Central Africa." During the symposium, university professors, economists, and other civil society actors from the CEMAC zone mostly supported deep reforms of the CFA Franc.

"I think this work clearly shows that the monetary cooperation with France needs to be reformed. But, as far as the types of reforms needed are concerned, opinions are divided. Some will for instance be contented with a change of the currency name, given its symbolic meaning. However, the vast majority believe deep reforms are needed, not just a name change,” explained Professor Alain Kenmogne Simo, associate professor of law.

Parity with the Euro

An example of the deep reforms called for is a change in the exchange rate policy, notably the abandonment of the fixed parity with the Euro for a floating or intermediate exchange rate regime.

"Between the floating exchange rate and the fixed exchange rate, there is a range of intermediate exchange rate policies. We are moving towards an intermediate policy and not on the euro-pegging scheme. We think the pegged scheme is outdated because we have new ambitions and a new development strategy since the international environment has also changed,”  said Professor Gabriel Zomo, a professor at Omar Bongo University in Libreville.

For the economist, at the time the CFA Franc was adopted, France was the major trade partner of CEMAC countries (Cameroon, Central African Republic, Congo, Gabon, Equatorial Guinea, and Chad). Nowadays, however, the list has changed with the CEMAC region’s trade with countries like China and other Asian countries growing significantly in recent years, as Nouveau Gabon reports.  

In context, "limiting our reserves to a single currency prevents us from being as flexible as we could have been if we were to diversify the reserves. Reserves should normally be built per our trades with partners. As China, Brazil and Turkey are positioned as the major partners, why build our reserves only in Euro?’ asked Dieudonné Mignamissi, associate professor of economics.

"Reserves are used to facilitate trade with foreign countries. So, if we have reserves in the Chinese currency, in US dollars, in Euro... I think we would have a more flexible policy for trade with foreign partners,” he added.  

For Professor Gabriel Zomo, CEMAC countries should target a low exchange rate given the quality of the products they offer on the international market. "Generally, parties that offer tech-intensive products have strong exchange rates. This is the case in Germany. However, when parties offer ‘low-end’ products, they tend to target lower exchange rates because they need to sell. This is why pegging the CFA Franc to the Euro is problematic. This tends to overvalue our currency even though we offer ‘low-end products,” he illustrated.

Good governance

The participants at the symposium believed that reforming the CFA Franc would not be enough to boost the development of the CEMAC region.  

"…whatever the name or the monetary reform implemented, if they are not backed by public action and economic reforms, it would not help us achieve the development we all wish for. So, another set of reform is needed alongside the monetary reform,” said Professor Alain Kenmogne Simo. Geoffroy Foumboula Libeka, a member of Copil Citoyen, a Gabonese civil society, added that "the most important thing is not to change the currency.”

As long as there is no discipline in budget management or there are no sanctions punishing misappropriation of public funds, we can change as many currencies as we want, we can give any name we wish to those currencies but nothing will change. Good governance is the priority,” he said.  

The CFA Franc is a currency created in 1945 back in the colonial era. Literally, in French, it means “Francophone African colonies’ currency.” It is the base of monetary cooperation with France. The name evolved in 1972, after independence, to become “Franc [currency] for financial cooperation in Central Africa.”

Since 2019, CEMAC Heads of State have been on the move to change the main mechanisms governing monetary cooperation with France. The mechanisms are namely the guarantee of unlimited convertibility of the currency issued by the BEAC, the fixity of the exchange rate, unrestricted transfer between BEAC member countries and France, and the centralization of reserves in an Operations Account opened at the French Treasury.

Sandrine Gaingne

On the same topic
DRC launches campaign to diversify investors in government securities 98% of bonds now held by banks; aim is to reduce risk and broaden...
Verdant Capital has invested $3 million in Nigerian fintech Bfree to help recover distressed loans in Africa. The deal will allow Bfree to...
Côte d’Ivoire will receive $234 million for a sustainable urban mobility project in Abidjan. Gambia will receive $32.2 million to build...
Stanbic IBTC and Zenith Bank cut monthly card spending abroad to $500 and $200 Foreign reserves fall by $3.5 billion in six...
Most Read
01

• Inflation within the West African Economic and Monetary Union (UEMOA) fell to a two-year low of 0....

UEMOA: Inflation Drops to 0.6% in May, Driven by Lower Food Prices
02

• Qatar Airways and Kenya Airways establish strategic agreement, introducing a third daily flight be...

Qatar Airways Expands its Network in Africa, Building Presence in Kigali, Johannesburg, and Nairobi
03

• Interbank volumes rose 18.7% in May, while rates declined across the market• The BCEAO cut its mai...

WAEMU Sees Easing Conditions on Regional Interbank Market
04

• EY is preparing to leave Francophone Sub-Saharan Africa by 2026• The exit could unlock $500 m...

EY’s Exit Creates $1bn Opportunity in Francophone Africa Consulting Market
05

As cybersecurity asserts itself as a pillar of digital sovereignty in West Africa, technology-free z...

Cybersecurity Key to Côte d'Ivoire's Tech Future– VITIB's N'ZI
Enter your email to receive our newsletter

Ecofin Agency provides daily coverage of nine key African economic sectors: public management, finance, telecoms, agribusiness, mining, energy, transport, communication, and education.
It also designs and manages specialized media, both online and print, for African institutions and publishers.

SALES & ADVERTISING

regie@agenceecofin.com 
Tél: +41 22 301 96 11 
Mob: +41 78 699 13 72
Média kit : Download

EDITORIAL
redaction@agenceecofin.com

More information
Team
Publisher

ECOFIN AGENCY

Mediamania Sarl
Rue du Léman, 6
1201 Geneva
Switzerland

 

Ecofin Agency is a sector-focused economic news agency, founded in December 2010. Its web platform was launched in June 2011. ©Mediamania.

 
 

Please publish modules in offcanvas position.