Is it time to abandon the CFA franc?
Amid the crisis in the eurozone and speculation about another devaluation of the CFA franc, policy makers in West and Central Africa are faced with new calls to change their relationship to France and the euro.Is it time to abandon the CFA franc?
YES: Cherif Samif Sy, Secretary general, Association Sénégalaise des Economistes.
For Africans, it is time to drop the CFA franc. It does not reflect all the economies it covers, which is the role of a currency. The zones do not have the same level of development, and the reference prices for the cost of labour are those that are applied in France! The cost of local labour is thus underpaid.This situation automatically leads to net and permanent transfers of resources towards the euro zone.
The CFA franc thus facilitates the pillage of resources. What is more surprising is the abandonment by African leaders of sovereignty on monetary questions. All is left to the French treasury, which keeps the reserves of the countries of the CFA zone in its coffers. However, to build an autonomous monetary zone, as African countries want to do, supposes that trade between the countries concerned accounts for at least 50 per cent [of their trade]. Unfortunately, we are far from that level.
NO:Abdourahmane Sarr, Founder of Centre d’Etudes pour le Financement du Développement Local(CEFDL)
The question is not whether to drop the CFA franc, but how to make the CFA franc exchange regime more compatible with the regional and international macroeconomic fundamentals of the CFA zone. At the same time I think that in keeping the current parity [with the euro], it is possible for us to introduce national currencies that are complementary and non-competitive with the CFA franc in order to energise our respective national economies. These currencies could permit access to credit, and an appropriate parity of these national currencies to the CFA would favour the monetarisation of subsistence economies and make our internal markets competitive.
Not yet:Kako Nubukpo, Head of economic analysis and research, UEMOA.
A brutal devaluation, like the one of 1994, will be unable to resolve the problems of the attachment of the CFA franc to the euro. One ought to ask the more global question of the pertinence of the exchange regime and the cost of managing an extroverted currency for the populations of the Union Economique et Monétaire Ouest-Africain (UEMOA) region.
From a strictly economic point of view, it seems more reasonable to envisage a flexible exchange system based on a calculated index from a basket of currencies. The system would have the advantage of assuring the Banque Centrale des Etats de l’Afrique de l’Ouest of a progressive apprenticeship in monetary management and send, through a less rigid exchange rate, regular signals of the state of their economies. The challenge is to make millions of small producers competitive and self-sufficient.
This article was first published in the November edition of The Africa Report, on sale at newsstands,
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