By Sabine CessouPosted on 21-12-2019Changed on 21-12-2019 at 20:39
Ivorian President Alassane Ouattara announced this December 21, alongside Emmanuel Macron, the upcoming disappearance of the FCFA for the benefit of the eco in West Africa. The currency created in 1945 by France in the two African regions of its colonial empire circulates in 14 countries of West and Central Africa which form the "franc zone", in addition to the Comoros. Or 173 million inhabitants. Since Independence, it has evolved while continuing to be debated.
The franc of the French Colonies of Africa (CFA) was born by decree, at the same time as that of the French Colonies of the Pacific (CFP, Indochina), on December 25, 1945. On that day, the provisional government of France led by General de Gaulle ratifies the Bretton Woods agreements . He made his first franc-dollar parity declaration to the brand new International Monetary Fund (IMF). It is a technical measure without much debate, as indicated by the title of the decree, " fixing the value of certain currencies of the overseas territories denominated in francs ".
The "franc zone" created de facto by France with its colonies, where it locally emits currencies which bear the name of "franc", was already formalized in 1939, by means of another decree establishing exchange controls in mainland France and "Outre-Mer". This area was split in two in 1945: inflation was lower in the colonies during the Second World War than in the mainland. Suddenly, when it was created, the CFA franc is stronger than the French franc (FF), since it is worth 1.70 FF. It is based on four main principles: fixed parity guaranteed by the French Treasury, convertibility and freedom of capital flows in the franc zone, in addition to the centralization of the currency reserves of local issuing institutes, deposited with the French Treasury . When the French franc devalued on October 17, 1948 against the dollar, the value of the CFA increased mechanically. It goes to 2 FF.
Independence
At the time of Independence, things get complicated. In 1954, Indochina disappears and with it the CFP. Vietnam, Laos and Cambodia will create their respective currencies, the dong, the kip and the riel. Morocco and Tunisia, independent in 1955 and 1956, replaced the "Tunisian" and "Moroccan" francs, one by restoring the dirham in 1959, the other by minting its currency, the dinar, in 1958. Algeria , a French settlement colony where the French franc is in circulation, established the dinar in 1964, two years after its independence.
In 1958, Guinea's “no” from Sékou Touré to the French Union proposed by De Gaulle signified an exit from the franc zone, accomplished in 1960 with the creation of a “Guinean franc”. This motto cuts ties with the former metropolis, contrary to what its name suggests. In Modibo Keïta's Mali, the Parliament refused to sign in May 1962 the treaty establishing the West African Monetary Union (WAMU), which would become the West African Economic and Monetary Union (UEMOA), in 1994. The country went out in the wake of the franc zone and had the "Malian franc" made in Czechoslovakia. He will join the franc zone much later, in 1984. As for the president of the newly independent Togo, Sylvanus Olympio, he also rejects the WAMU treaty and intends to mint currency. He was assassinated on January 13, 1963, in conditions that remained mysterious , at the time when the statutes of a Togolese Central Bank were published, which would never see the light of day.
For its part, the CFA did not change its acronym, but in 1958 became the franc of the " French Community of Africa ". After independence, in 1962, its "F" rather corresponds to " the African Financial Community " in the WAMU (Ivory Coast, Dahomey, Upper Volta, Niger, Senegal, Togo). Nuance: the same franc is that of "Financial Cooperation in Central Africa" for the members of the Monetary Union of Central Africa (UMAC), Cameroon, Gabon, Congo-Brazzaville, Central African Republic and Chad. If we talk about CFA everywhere, the currency is split in two, each region having its international ISO code, XOF and XAF. The two CFAs are convertible with all currencies, as well as between them. The Comorian franc (KMF) is part of the family, as a distant cousin of the franc zone.
New French franc and sling wind
When the new French franc was created in January 1969 by General de Gaulle, for a value of 100 old francs, the CFA changed mechanically again from 2 to 0.02 FF. Critics of the independence period reappear. The Egyptian economist Samir Amin advocates in 1969, in a report that bears his name, the change to national currencies, with the CFA as a common currency and no longer unique. It takes up recommendations already made in 1960 by the Senegalese Daniel Cabou, governor of Saint-Louis, who argued for a " african payments union ".
► Read also: The CFA franc zone, a space of “solidarity”
A sling movement started from the end of the convertibility of the dollar into gold, decided by Nixon in August 1971, ending the fixed exchange rate regime inherited from Bretton Woods. From that date, the dollar begins to fluctuate. " Africans say to themselves that with the rise in the prices of raw materials, they lose with the exchange rate because of the fixed and not floating parity of the CFA compared to the FF, explains the Togolese economist Kako Nubukpo, in a factual way, on a subject he knows well, being one of the main current critics of the CFA. They aspire to a stronger currency that would allow them to import more. "
Nigerian President Hamani Diori, who commissioned the Samir Amin report, is supported by Congo-Brazzaville, Cameroon and Togo. In January 1972 he asked Georges Pompidou, his French counterpart, to reform the franc zone. The sling encourages Mauritania to leave the area to create the ouguiya, and Madagascar to restore the ariary in place of the Malagasy franc (or "Malagasy franc") in May 1973.
The revision of the CFA system was granted in December 1973, but not in the terms recommended by Samir Amin, author of Blocked West Africa, The political economy of colonization, 1880-1970 (Éditions de minuit, Paris, 1971). The main measure increases the level of foreign exchange reserves placed with the French Treasury from 100% to 65%. The West African Development Bank (BOAD) was created, with its headquarters located in Lomé, to please General Eyadéma, who dared to stand up to Pompidou on the CFA during an official visit in November 1972. " repatriation ”of the headquarters of the African central banks of the franc zone, located rue du Colisée, in the 8th arrondissement of Paris, is decided. The Africanization of executives then begins, even if physically, it was not until 1977 that the Central Bank of Central African States (BEAC) really moved to Yaoundé and the Central Bank of African States 'Ouest (BCEAO) in 1978 in Dakar.
The devaluation of January 12, 1994
Equatorial Guinea, the only Spanish-speaking country in Africa, enters the area of influence of France and adopts the CFA in 1985, eleven years before the discovery of its oil deposits. On the continent, the 1980s were those of structural adjustment, bringing the indebted countries into line with the liberal doxa in progress at the IMF and the World Bank, with deregulation of the economy and opening up to the free market. This real adjustment effort is made at the price of many sacrifices, instead of a monetary devaluation that the heads of state of the franc zone reject. Salaries are frozen, hirings frozen in the administration and cuts made everywhere, especially in social spending.
The fall in commodity prices and the depreciation of the dollar, from 1985, cause export earnings to decrease, squeezing budgets, and in turn the level of external debt. The failure of structural adjustment led France to consider a monetary devaluation, under the auspices of the IMF, which suspended its aid to the countries of the franc zone from 1991. From August 1993, the convertibility of the CFA was suspended, in because of rumors of devaluation, against the backdrop of capital flight from the franc zone. It becomes impossible to exchange CFA for any currency outside the franc zone, and impossible to convert XOF to XAF, even in the franc zone - a measure against speculation which was never lifted afterwards. In September 1993, the “Abidjan Doctrine”, or “Balladur Doctrine” - named after French Prime Minister Edouard Balladur - conditioned France's financial support on the adoption of IMF programs.
Devalue or not? Edouard Balladur is in favor, but Ivorian President Félix Houphouët-Boigny is fiercely against. French President François Mitterrand listens to the two opinions, but does not decide. In December 1993, Houphouët's death gave supporters of the devaluation a free hand. Under cover of a summit of heads of state of the franc zone concerning Air Afrique in Dakar, a devaluation of 50% of the CFA and 33% of the Comorian franc was imposed on January 11, 1994 on 14 heads of state African, who reluctantly sign in the presence of Michel Roussin, French Minister for Cooperation and Michel Camdessus, Managing Director of the IMF. Overnight, the CFA goes from 0.02 FF to 0.01 FF. The populations of the countries of the franc zone see their purchasing power halved. Support measures followed, as did a boost to the export of raw materials, but the shock was brutal.
Linkage to the euro in 1999 and controversies
In 1997, Guinea-Bissau, a former Portuguese colony, entered the franc zone, which it has been asking for since the end of the 1980s to get out of its inflationary spiral (45% in 1995). At the time of the Maastricht Treaty, Paris put forward the principle of "subsidiarity" to continue to manage the franc zone, which it can no longer reform, in principle, without consulting its European partners. What does subsidiarity mean? " Responsibility for public action, when necessary, rests with the competent entity closest to those who are directly affected by this action ", informs Wikipedia. France's main argument in favor of the CFA: economic stability and the assurance of good management, due to the convergence criteria in force in the franc zone, with inflation in principle limited to 3% per year, a public debt which cannot exceed 70% of GDP and a budget deficit limited to 3% of GDP.
The debates, led among others by African economists such as Kako Nubukpo and Mamadou Koulibaly, Ivorian opponent, gained in intensity in 2015, in a context of non-inclusive growth in Africa and crisis in Europe (public debt in Greece, campaign of Brexit). These economists believe that the CFA is too strong , compared to the weakness of the economies in which it circulates, and that it penalizes exports. Resumed by the supporters of a certain African nationalism like Kemi Seba, who burned a FCFA ticket in September 2017, the controversy is only swelling, while it should, logically, have no reason to 'to be. The Senegalese sociologist Lamine Sagna, specialist in money, recalls that these debates will become obsolete with the adoption of the common West African currency, the eco, provided for by the Economic Community of African States West for 2020. This December 21, President Ouattara therefore announced, in the presence of French Head of State Emmanuel Macron, that the eco will soon replace the FCFA in West Africa . The eight countries of the current franc zone in this part of the continent will, moreover, cut technical ties with the Treasury and the Banque de France, they will manage this currency themselves without interference from France.
► Also listen: The CFA franc, the reform, is it now?
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