The Franczone: Unloved, But Difficult To Replace
BMI View: Africa's Franczone currency arrangement is widely criticised, but a lack of appealing alternatives means that the system is unlikely to be significantly changed over the coming five years. Reform of some kind is, however, inevitable over the longer term.
Criticism of Francophone Africa's monetary ties to Europe are growing, with one high-profile academic recently describing the Euro-pegged CFA franc as a form of 'monetary nazism'. We expect controversy regarding the region's increasingly archaic currency arrangements to continue, but believe that a combination of French pressure and institutional inertia will prevent any significant shift during the next five years. Change is, however, inevitable over longer term, and we map out three possible scenarios.
Africa's franczone is made up of two economic blocs, the Union Economique et Monétaire Ouest-Africaine (UEMOA) and the Communauté Économique et Monétaire de l'Afrique Centrale (CEMAC). The two unions roughly correspond to administrative boundaries within the former French colonial empire. Each bloc uses a currency pegged to the euro at the same rate (655.957/EUR) but the two units are not interchangeable. The two unions' monetary policies are set by regional central banks, and the convertibility of the currency is guaranteed by the French treasury.
|Africa - Countries Using The CFA Franc|