On the monetary front, the CFA Franc Zone’s member countries dismantled the federal structure that united them [French West Africa and French Central Africa] during French occupation and erected trade barriers instead. The CFA franc issued by two sub-regional central banks (BCEAO and BEAC) are not interchangeable. As a result, regional trade and economic integration have been stifled.
The ensuing economic difficulties were exacerbated under President François Mitterrand, whose prime minister, Pierre Bérégovoy, pursued a strong French franc – a policy that ultimately led to a massive 100% devaluation of the CFA franc in 1994. And the euro’s appreciation against the dollar from 2002 until very recently meant that the shift in the CFA franc’s exchange-rate peg from the French franc to the euro caused a repeat of that scenario. With the bulk of their exports denominated in US dollars and their imports priced mainly in euros, chronic structural deficits have wrecked the Franc Zone economies, and the prospect of a second devaluation looms larger by the day.
What is in it for France?:
More appalling is the fact that France guarantees the CFA franc’s free convertibility into hard currency, originally on the condition that all 15 Franc Zone countries surrender 100% of their foreign reserves to the French Treasury. The amount was reduced to 65%, and then 50%, in 2005, but France still deducts its share directly from these countries’ export earnings.
Moreover, the mandatory 20% foreign exchange cover stipulated in the convention signed with France in 1962 now stands at 110%. And a foreign-exchange control enacted in 1993 ensures that only France benefits from this capital drain by limiting the free flow of capital to France alone. The ensuing massive capital flight has bled the region’s economies and eroded their competitiveness.