If you think it is bad enough that the majority of the former French colonies in Africa fall in the "Bottom 50" of the least developed countries in the world, spare a thought for this fact: Poor as they are, they have, for over six decades, been depositing 65% of their foreign reserves in the French Treasury in Paris--thanks to an archaic colonial arrangement linking their local currency, the CFA franc
, to the French franc and now the euro.
Answer: The CFA franc
region represents a state-controlled zone of cooperation with, interestingly, the levers of control based in Paris, from where the priority is the interests of France.
Last year, the Maghreb currencies of Algeria, Morocco and Tunisia, the CFA franc
, the Kenya shilling, and the Nigerian naira all enjoyed sustained exchange rate stability which was offset by the weakness of the Rand monetary bloc comprising South Africa, Lesotho, Namibia and Swaziland.
The index representing the currencies of Algeria, Botswana, Ghana, Kenya, Mauritius, Morocco, Mozambique, Nigeria, South Africa, Tanzania, Tunisia, Uganda, Zambia, Zimbabwe, and the CFA franc
Monetary and credit targets under the program have been set within a regional framework, consistent with the objective of containing inflation and maintaining adequate external reserves to ensure the stability of the CFA franc
Like the CFA franc
, the proposed new 'single currency' would be freely convertible.
After a difficult start, Burkina Faso was broadly successful in implementing a comprehensive adjustment program centered on the devaluation of the CFA franc
, which occurred in January 1994.
In West and Central Africa, the CFA franc
appears well-supported by the prudent fiscal and monetary policies overseen by the Banque de France.
For the African countries who use the CFA franc
as their common currency, a recent book on the march of the euro, the EU common currency to which the CFA was pegged in January 1999, holds a lot of lessons.
The ESAF loans replace the current one-year IMF stand-by arrangement approved on March 2, 1994 (see Press Release 94/9) to support the adjustment program adopted by Senegal shortly after the CFA franc
devaluation on January 12, 1994.
The CFA franc
, pegged to the euro at (fixed parity 655.
Against this background, and in consultation with other members of the CFA franc
zone facing similar problems, the government decided to broaden its strategy of economic adjustment by devaluing the CFA franc