The CFA franc, a seven-decade-old currency shared by more than a dozen states in West Africa, has found itself in the spotlight over calls for it to be scrapped.
Here is a fact file:
– Colonial origins –
The CFA franc is used by 14 nations in western and central Africa. Their 155 million people account for 14 percent of Africa’s population and 12 percent of its GDP, according to the International Monetary Fund (IMF).
The CFA — its initials come from the French words for African Financial Community — was launched on December 26, 1945, as a “franc of the French colonies of Africa.”
The money then morphed into two geographic variants, for western Africa and central Africa.
The first comprises eight countries in the West African Monetary Union — Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo — whose Dakar-based issuing authority is the Central Bank of the West African States.
The other is the Central African Economic and Monetary Union, comprising Cameroon, the Central African Republic, Chad, Equatorial Guinea, Gabon and Republic of Congo. Its issuing authority is the Cameroon-based Bank of the Central African States.
– European link –
The currency’s value was moored to the euro after its introduction two decades ago, at a fixed rate of 655.96 CFA francs to one euro.
The Bank of France holds half of the currency’s total reserves, but France does not make money on its deposits stewardship, annually paying a ceiling interest rate of 0.75 percent to member states.
The arrangement guarantees unlimited convertibility of CFA francs into euros and facilitates inter-zone transfers.
CFA notes and coins are printed and minted at a Bank of France facility in the southern town of Chamalieres.
Both regional African banks that supervise the CFA variants have established price stability as their overriding objective.
– For and against –
Detractors blast the CFA franc as a “post-colonial” arrangement which prevents countries from exercising sovereignty over their currency, or which enables France to maintain influence in Africa.
Supporters praise it for aiding monetary stability because of its indirect peg to the euro.
Amid ever louder calls for reform, Paris says it is open to discussions.
Options range from a symbolic name change to pegging the CFA against a basket of currencies including the euro, the US dollar, and Chinese yuan, thus taking Africa’s main trade partners into account.
Some voices are urging the transfer of CFA reserves to other institutions and an end to strict monetary policy in order to spur development and job creation.
– Swap it for an ‘eco’? –
The 15 member states of the Economic Community of West African States (ECOWAS) have agreed to adopt a single currency, the “eco”, as early as next year.
As the eight members of the West African Monetary Union are members of ECOWAS, the West African CFA franc would then disappear.
Many analysts suspect the “eco” plan is over-ambitious. They cite disparities in the nations’ respective economies and their budget capacities, as well as the many technical challenges of launching a new currency.