Dominique Strauss-Kahn and the CFA franc – ‘The current system has to be seriously cleaned up’
Depending on how it is done, reform of the CFA franc zone will be real emancipation, or simply another way to preserve French influence in Africa.
Be careful! This seem to be Dominique Strauss-Kahn’s key message when he receives Jeune Afrique in a famous Parisian brasserie on a beautiful spring afternoon in May. A year ago, the former French minister of Economy, Finance and Industry published, via Parnasse International, his consulting firm, a study entitled “CFA franc zone, An emancipation to benefit everyone“.
The thirty-page book which has drawn heavy criticism, suggests twelve ways to reform monetary cooperation between France and the 14 countries in West and Central Africa.
For example, Kako Nubukpo, the former Togolese minister of Long term strategy and public policy evaluation praised the “commendable work done by the former IMF Managing Director in his capacity as an academic economist”, but also criticised him for defining “the method to preserve French influence in Africa”.
It is not surprising that “DSK”, who now advises the Heads of State of Congo-Brazzaville and Togo (an activity he refuses to speak on due to ‘client confidentiality’) carefully weighs his words and insists that “it is up to Africans to choose what is best for them”.
Jeune Afrique: In 2018, you published a study proposing several avenues for reforming the CFA franc zone. It’s the first time that a top-level French personality who has played a leading political role in the past has broken the taboo surrounding the CFA franc. What made you decide to take the plunge?
Dominique Strauss-Kahn: It is difficult to claim to be interested in the development of Africa – particularly French-speaking Africa – without asking oneself the question of its monetary system, especially when it is the subject of criticism, sometimes justified and sometimes a little less so. It seemed to me that the time had come to try to calm and broaden the debate. This concerns the link between the CFA franc and the euro. The subject should therefore concern all Europeans, and not just the French. One way or another, we had to get involved and take a stand.
Did the fact that you are the advisor to some African heads of state on budgetary matters – and debt – influence your decision?
Of course, but less than the interest I have always had in Africa. When I was at the IMF, I carried out a complete overhaul of the Fund’s relations with African countries following the Dar es Salaam conference in 2009. In publishing this study, my objective was not to promote my ideas at all costs but rather put forward a point of view that was as open and selfless as possible based on my acquired experience. Some consider that the CFA franc has harmed African countries and that it must disappear. I think they’re exaggerating. Others believe, on the contrary, that it has played a formidable role. I think they are also exaggerating. The reality is that it has had advantages and disadvantages, but the important thing now is to ask what is best for the future. And that is above all for Africans to decide. I think their politicians and many African economists are very familiar with the subject but I am happy to be able to contribute to this debate.
You propose holding a summit for the heads of state of the CFA franc zone, with the French president in attendance. Basically a kind of Françafrique summit. Is this not in contradiction with the emancipation that you are advocating?
My objective was simply to bring all high-level stakeholders to the table. But I have also said on several occasions that other Europeans, starting with the Germans, should be involved and that non-European international experts should sit on the boards of central banks in order to open and broaden the debate. You know that political and military events unfortunately give French and African leaders the opportunity to meet frequently. The currency issue is also worth a meeting!
What would be the purpose of such a meeting then?
I think we have to get out of the unsaid. In the calmest, most peaceful and constructive way possible, all the parties concerned– and France, of course, is concerned – must find a solution that is most beneficial to everyone. The current system must be seriously cleaned up and rigidities must disappear. If this is achieved, I believe that maintaining a monetary zone linked to the euro has many advantages.
You recommend the removal of what you call “symbols that are indefensible”, particularly, the name and place of printing of the CFA franc. You also say that the accounts with the French Treasury could be advantageously replaced by other accounts opened at the Swiss-based Bank for International Settlements (BIS). But the BCEAO, for example, already has an account at the BIS!
We need to distinguish two things. First, the place where central banks deposit their reserves. The fact that BCEAO (Central Bank of West African States) already has an account at the BIS shows that it could easily deposit all its reserves there. Contrary to what many of its critics claim, the famous account is in no way an advantage for the French Treasury. This may have been the case, to some extent, in the past, when the CFA franc had to stand alone and all precautions were good for the taking, but it is no longer the case today with the euro. Then there is the unlimited guarantee which should not be placed solely on France but on all European countries. The latter must be concerned about the importance of providing an anchor for a single African currency.
You also propose a review of the peg of the CFA franc to the euro.
It is an exchange rate regime that, in the long term, creates rigidity which is of no benefit to the countries concerned. It is very true that in 1994 a violent devaluation had to be carried out, because this fixed parity could not be maintained at the level as it was. Perhaps it would have been better to have had a more flexible system allowing for a regular evolution of parity. That being said, whether the exchange rate regime is fixed or floating, there is no magic solution. Every exchange rate regime has its advantages and disadvantages. Although not everyone agrees, I think that the link between the CFA and the euro offers a number of advantages for Africans, provided they regain control of their currency.
And that is not currently the case?
For Africans, the peg of the CFA franc to the euro is a kind of neo-colonialism. The fact that some African central bank managers are French, and that when difficulty arises, they have to discuss it with France, gives Africans the feeling that they are not completely autonomous in monetary matters. We could very well, and this is the evolution I propose, ensure that this autonomy is affirmed and based on a new cooperation.
This article was first published in Jeune Afrique