CFA franc
CFA franc is the name of two currencies used by 210 million people in fourteen African countries: the West African CFA franc, used in eight West African countries, and the Central African CFA franc, used in six Central African countries. The ISO currency codes are XOF for the West African CFA franc and XAF for the Central African CFA franc. Although the two currencies are commonly called CFA franc and have the same value, they are not interchangeable. It is therefore not a common monetary zone but two juxtaposed zones.
Both CFA francs have a fixed exchange rate to the euro guaranteed by France: €1 = F.CFA 655.957 exactly. To ensure this convertibility guarantee, member countries were required to deposit half of their foreign exchange reserves with the French Treasury, but this requirement was dropped in 2019 for the West African CFA franc. This requirement remains unchanged for the Central African CFA franc, which wasn't reformed in 2019.
These currencies have been criticized for restricting the sovereignty of the African member states, effectively putting their monetary policy in the hands of the European Central Bank. Others argue that countries using CFA franc are all equal and that CFA franc "helps stabilize the national currencies of Franc Zone member-countries and greatly facilitates the flow of exports and imports between France and the member-countries".
On 22 December 2019, it was announced that the West African currency would be reformed and replaced by an independent currency to be called Eco. In May 2020, the French National Assembly agreed to end the French engagement in the West African CFA franc, including the foreign reserve deposit requirements, thereby facilitating the transition to the Eco. Despite initial plans for a monetary union by late 2020, setbacks including the COVID-19 pandemic, global geopolitical uncertainties, and failure to meet criteria resulted postponements, with the fifth launch target date set for July 2027.
Usage
CFA francs are used in fourteen countries: twelve nations formerly ruled by France in West and Central Africa, plus Guinea-Bissau, and Equatorial Guinea. These fourteen countries have a combined population of 210.4 million people, and a combined annual GDP of US$313.7 billion.Name
Between 1945 and 1958, CFA stood for Colonies françaises d'Afrique ; then for Communauté française d'Afrique between 1958 and the independence of these African countries at the beginning of the 1960s. Since independence, CFA is taken to mean Communauté Financière Africaine or Coopération financière en Afrique centrale.History
Creation
The CFA franc was created on 26 December 1945, along with the CFP franc. The reason for their creation was the weakness of the French franc immediately after World War II. When France ratified the Bretton Woods Agreement in December 1945, the French franc was devalued in order to set a fixed exchange rate with the US dollar. New currencies were created in the French colonies to spare them the strong devaluation, thereby making it easier for them to import goods from France. French officials presented the decision as an act of generosity. René Pleven, the French Minister of Finance, was quoted as saying:Exchange rate
The CFA franc was created with a fixed exchange rate versus the French franc. This exchange rate was changed only twice, in 1948 and in 1994.Exchange rate:
- 26 December 1945 to 16 October 1948 - F.CFA 1 = 1.70 French franc. This 70 centime premium is the consequence of the creation of the CFA franc, which spared the French African colonies the devaluation of December 1945.
- 17 October 1948 to 31 December 1959 - F.CFA 1 = 2 French francs
- 1 January 1960 to 11 January 1994- F.CFA 1 = NF 0.02
- 12 January 1994 to 31 December 1998- F.CFA 1 = F 0.01. An overnight 50% devaluation.
- 1 January 1999 onwards - F.CFA 100 = €0.152449 or €1 = F.CFA 655.957.
Changes in countries using the franc
In 1960, the period of global decolonization began, marking the end of European empires on the African continent. France disappeared from the map, leaving behind the CFA franc, a legacy of colonization, which circulates in almost all former French possessions in Africa. Over time, the number of countries and territories using the CFA franc has changed as some countries began introducing their own separate currencies. A couple of nations in West Africa have also chosen to adopt the CFA franc since its introduction, despite the fact that they had never been French colonies.- 1960: Guinea leaves and begins issuing Guinean francs.
- 1962: Mali leaves and begins issuing Malian francs.
- 1973: Madagascar leaves and begins issuing its own francs, the Malagasy franc, which ran concurrently with the Malagasy ariary.
- 1973: Mauritania leaves, replacing the franc with the Mauritanian ouguiya.
- 1974: Saint-Pierre and Miquelon leaves for French franc, which changed later to the Euro.
- 1975: Réunion leaves for French franc, which changed later to the Euro.
- 1976: Mayotte leaves for French franc, which changed later to the Euro.
- 1984: Mali rejoins.
- 1985: Equatorial Guinea joins.
- 1997: Guinea-Bissau joins.
European Monetary Union
- The agreements are unlikely to have any material effect on the monetary and exchange rate policy of the Eurozone.
- In their present forms and states of implementation, the agreements are unlikely to present any obstacle to a smooth functioning of economic and monetary union.
- Nothing in the agreements can be construed as implying an obligation for the European Central Bank or any national central bank to support the convertibility of the CFA and Comorian francs.
- Modifications to the existing agreements will not lead to any obligations for the European Central or any national central bank.
- The French Treasury will guarantee the free convertibility at a fixed parity between the euro and the CFA and Comorian francs.
- The competent French authorities shall keep the European Commission, the European Central Bank and the Economic and Financial Committee informed about the implementation of the agreements and inform the Committee prior to changes of the parity between the euro and the CFA and Comorian francs.
- Any change to the nature or scope of the agreements would require Council approval on the basis of a Commission recommendation and ECB consultation.
Criticism in France
Currency printed in France
The Banque de France is responsible for producing CFA franc notes and coins in its Chamalières factory, which is seen by some critics as a lack of sovereignty for African states.Currency devaluation
The countries of the CFA franc zone are seen as the preserve of the former guardian power, France, which leads to situation that sometimes fuels rumors of a devaluation of the CFA franc. The CFA franc is alleged by critics to be too strong a currency, with common complaints among critics the franc is overvalued by 10–15% distorting prices and dissuading capital investment in the two currency zones. Even if in the short term, the option of a devaluation seems to be excluded.Symbolism
For some African economists, the debate on economic realities should be prioritized over the symbols of the CFA franc.Right of veto
France retains a right of veto over the monetary policies of the states of the CFA Franc Zone of West Africa and Central Africa.Stability
For supporters of the CFA Franc, the economic stability that the CFA Franc provides lies in monetary cooperation. The underdevelopment of the countries in the franc zone is attributed to factors independent of their monetary and exchange rate policies.Profits of French companies
The actual flows of the CFA franc come mainly from Africa, with profits from African economies going to French companies.Criticism and replacement in West Africa
The currency has been criticized for making national monetary policy for the developing countries of French West Africa all but impossible, since the CFA's value is pegged to the euro. Others disagree and argue that the CFA "helps stabilize the national currencies of Franc Zone member-countries and greatly facilitates the flow of exports and imports between France and the member-countries". The European Union's 2008 assessment of the CFA's link to the euro noted that "benefits from economic integration within each of the two monetary unions of the CFA franc zone, and even more so between them, remained remarkably low" but that "the peg to the French franc and, since 1999, to the euro as exchange rate anchor is usually found to have had favourable effects in the region in terms of macroeconomic stability".Critics point out that the currency is controlled by the French treasury, and in turn African countries channel more money to France than they receive in aid and have no sovereignty over their monetary policies. In January 2019, Italian ministers accused France of impoverishing Africa through the CFA franc, and criticism continued from various African organizations. On 21 December 2019, President Alassane Ouattara of the Ivory Coast and President Emmanuel Macron of France announced an initiative to replace the West African CFA Franc with the Eco. Subsequently, a reform of the West African CFA franc was initiated. In May 2020, the French National Assembly agreed to end the French engagement in the West African CFA franc. The countries using the currency will no longer have to deposit half of their foreign exchange reserves with the French Treasury. In December 2024, in a report adopted by the French Foreign Affairs Committee, it was published that the reform of the CFA franc in 2019 had been incomplete, largely due to the reluctance of African heads of state to complete it.
In November 2024, the 'Tournons la Page' network and the Sciences Po Center for International Research published a survey on relations between West African and Central African countries from former French possessions. Nearly 95% of West Africans surveyed expressed their desire to leave.
The broader Economic Community of West African States, which includes the members of UEMOA, plans to introduce its own common currency for its member states by 2027, for which they have also formally adopted the name Eco.