The parity between the euro and the dollar could also affect Africa

CFA franc banknotes (Illustrative image).

© ISSOUF SANOGO/AFP

Text by: RFI Follow

2 mins

For the first time in nearly 20 years, the euro touched parity with the US dollar on Tuesday 12 July.

If the weakness of the euro will have consequences on inflation and the purchasing power of European households, it could well also have consequences on the African continent.

This is particularly the case for States whose currency is the CFA franc, because it is indexed to the euro.

States may then find it more difficult to repay their debt and pay for imports.

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African exporters of raw materials should be winners of

this monetary parity

, according to Yves Ekoué Amaïzo:

“ 

All those

who export

, of course if prices remain stable, will be in a favorable position because they will be able to export more in quantity, not necessarily in monetary value

, explains the Togolese economist, head of the Think Tank Afrocentricity

.

And the opposite, those who import will simply have these import prices become more expensive.

And so people will see that most of these prices, unfortunately for everything that is daily to them, are likely to soar.

 »

Another expected consequence, the debt of the States is likely to increase, he continues:

“ 

There is a whole system called debt service.

We reimburse a part on a regular basis.

And depending on your capacity, therefore your governance, you are capable or not of being able to honor this debt service.

Debt servicing is quite simply and mechanically likely to increase.

And that means recourse essentially to donors, in particular the International Monetary Fund.

 »

However, the economist sees it as an opportunity for States to improve their logistics performance and develop local sectors.

According to Togolese economist Yves Ekoué Amaïzo, English-speaking African countries that do not have the CFA franc could also suffer the consequences of the euro-dollar parity.

Charlotte Cosset

►

 To read also: 

The CFA franc, a whole story

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