Fahamu (Oxford)

Africa: 20 Years After Devaluation - What Is the Future for the CFA Franc?


The CFA franc is one of the symbols of the lack of sovereignty in African countries. This necessitates a break with the system and the creation of a sovereign currency which is one of the major conditions for the implementation of industrial policies to create value and jobs at the national and regional levels

'Money is not a technical issue but a political one, which affects the sovereignty and independence of nations.' Edouard Balladur (former French Prime Minister, Le Monde, 9 February, 1990)

'France is the only country in the world to have achieved the extraordinary feat of circulating its currency - only its currency - in a politically free country.' Joseph Tchundjang Pouémi (Cameroonian economist, author of Money, Servitude and Liberty: The monetary repression of Africa)


January 12, 1994, marked 20 years since France and the International Monetary Fund (IMF) imposed the devaluation of the CFA franc on African countries. The West African Economic and Monetary Union (WAEMU) was created in the aftermath. This event effectively demonstrated that African countries had no sovereignty over their monetary policies, largely dictated in the interests of France and following the monetarist credo of the IMF, Bank of France and the European Central Bank (ECB).

The 'benefits' which were expected from the use of the CFA franc were only a mirage. Indeed, it has neither promoted regional integration nor economic growth, let alone development! This is why the central argument of this paper is that as long as the issue of monetary sovereignty remains unresolved in accordance with the needs and development priorities of African countries, it is unrealistic to expect actual development in these countries. Money is an essential part of a country's sovereignty and a key instrument of a state which intends to control its' development process. [1] A sovereign currency is one of the basic conditions for the formation of a true regional market, without which there can be no sustainable industrialisation process. [2]

We know, for example, how the developmental states in South East Asia and South Korea, have used monetary and fiscal policy to promote strategic sectors of their economies, turning them into the 'Tigers' and 'Dragons' of the global economy.

The issue of industrialization was strongly emphasized at the joint African Union-CEA meeting in Abidjan (Côte d'Ivoire) in late March 2013.


The CFA franc was created by General de Gaulle December 25, 1945, after the liberation of France from Nazi occupation, thanks in part to the immense sacrifice of African soldiers. Originally, the acronym CFA meant 'French colonies in Africa.' Currently, it means 'African financial cooperation.' Apart from the Comoros, there 14 African countries using the CFA franc, eight in West Africa (Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo) and six in Central Africa (Cameroon, Central African Republic, Congo, Gabon, Equatorial Guinea and Chad).


In African countries, the operation of the Franc Zone is based on institutions such as the Conference of Heads of State, the Council of Ministers, Central Banks and National Committees of Credit.


The Conference of Heads of State is the supreme body of the Franc Zone. Decisions of Heads of State are taken unanimously. The Conference of Heads of State decides on the accession of new members, and oversees the withdrawal and expulsion of members of the Union.


Regarding the WAEMU, the Council of Ministers 'shall direct the Union, set monetary and credit policy, provide the financing activity and economic development of the States of the Union and determine the change in the parity of the currency unit of the Union,' according to the Statutes of the Central Bank of the States of West Africa (BCEAO).

In reality, experience has shown that the powers conferred by statute to the Conference of Heads of State and Council of Ministers are fictitious. For example, the 1994 devaluation was decided unilaterally by France, as confirmed by the statement of Mr Edouard Balladur, French Prime Minister at the time, 'The CFA franc was devalued in 1994 at the instigation of France, because we felt it was the best way to help these countries in their development.'[3]


In West Africa, there is the BCEAO, based in Dakar, which is the issuing institution of the eight member countries of the WAEMU. Its' counterpart in Central Africa is the Bank of Central African States (BEAC), based in Yaoundé (Cameroon), which represents the six members of the Economic and Monetary Community of Central Africa (CEMAC). Both banks have Accounts Operations at the French Treasury. This is one of the mechanisms of operation of the Franc Zone.


The agreements governing the Franc Zone are based on four key pillars:

- The fixed parity exchange rates between the currencies without any limitation. The CFA francs of the two African sub-regions (Central Africa and West Africa) have a fixed parity between them and are convertible.

- The guarantee of unlimited convertibility of the French Treasury for currencies issued by various African institutes in the Franc Zone.

- The freedom to transfer within the Area, which means, within each sub-region, between sub-regions and finally between the two and France. Ultimately, this means no exchange controls within the Franc Zone.

- The centralization of foreign exchange reserves, which is accomplished at two levels. States centralize some of their reserves at their central banks. The other part of the reserves is centralized at the French Treasury. Indeed, due to the 'guarantee' of unlimited convertibility of the CFA franc in France, the African Central Banks are required to deposit 50 percent of their net foreign assets with the French Treasury.


If we are to believe its supporters, the four operating principles listed above and the attachment to a strong currency, like the Euro, would include several 'benefits' for African countries using the CFA franc. Among these hypothetical 'benefits', many often mention the 'macroeconomic stability' that would promote sustainable growth and the absence of currency risk. This, in turn, would create a favorable environment for attracting foreign investment and promote the integration of member countries. But the experience of more than half a century has shown that these 'benefits' and other 'assets' are illusory.


For example, the fixed exchange rate to a strong currency like the Euro and the low inflation that results provide macroeconomic 'stability' for African countries, which would be an 'asset' to stimulate economic growth. But experience has also denied that assertion. As will be shown later, the countries which comprise the Franc Zone are part of the 'poorest' of Africa.


The four principles underlying the operation of the Franc Zone, including the free movement of capital between African countries and France, take away any control by the Central Bank on capital movement within the area and weakens its ability to regulate capital movement between the latter and third countries. This double handicap explains the massive capital flight out of the Franc Zone, which is especially observed during times of political or economic crisis.

For example, the free transfer of capital between African countries and France represents a huge profit repatriation to French investors and their institutions and an exodus of household income from their country of origin. Thus, between 1970 and 1993, foreign investment in the African countries of the Franc Zone were estimated at $ 1.7 billion while the repatriation of profits and expatriated income would have amounted to $ 6.3 billion during the same period, nearly four times the level of foreign investment, says Nicolas Agbohou . These figures refute the view that the 'stability' of the Franc Zone promotes foreign direct investment (FDI). African countries that receive the most FDI are those that are rich in oil and mineral resources, not necessarily those with 'stable' currencies.


Contrary to the claims of its proponents, the CFA franc has not contributed to the integration of member countries.

IMPORTS: Between 2007 and 2011 the level of imports within the WAEMU was less than 12 percent of their total imports, while the level was less than 4 percent in CEMAC. In addition, intra-WAEMU trade is concentrated in three countries: Côte d'Ivoire, Mali and Senegal. Furthermore, the graph shows that the level of imports between WAEMU and CEMAC are negligible during the same period.

EXPORTS: In terms of exports, intra-WAEMU exceeded 14 percent in 2007, 2008 and 2010. On the other hand, within CEMAC, trade is negligible, at less than 2 percent, while trade between the two communities generally maintained an average of 2 percent between 2007 and 2011.

In conclusion, the percentage of imports and exports mentioned above are averages for countries in each Community. They can obscure more significant trade between two countries in the same Community, such as between Senegal and Mali or between Côte d'Ivoire and Mali. But it remains true that the existence of a common currency has not promoted the economic integration of African countries. Instead, the CFA franc was an instrument to perpetuate horizontal relations between France and its former colonies.


In view of the preceding information, the Franc Zone is much like a trap in which France has caught its former colonies, which use a currency over which they exercise neither sovereignty nor control. They have no opportunity to use it as an instrument of economic policy in the event of external or internal shocks. The operating principles of the Franc Zone represents a mortgage on the possibilities of development of these countries by permitting massive capital flight due to the ability to freely transfer capital between France and African countries, as indicated above.

Finally, the CFA franc does not reflect the fundamentals of African economies, as demonstrated by the price structure which has little to do with the standard of living in these countries. For example, we noticed that the capitals of African countries using the CFA franc are those where the cost of living is among the highest in Africa. In addition, the mechanisms mentioned above and institutional constraints related to 'guarantee' of convertibility of the CFA franc by France oblige African Central Banks to follow monetary policies that condemn the member countries to underdevelopment and the extraversion of their economies.


The results of African members of the Franc Zone over the past 50 years, in regards to economic and social planning, are staggering. For example, of the eight member countries of the WAEMU, seven are classified as 'least developed countries' (LDCs) by the United Nations and the other, Côte d'Ivoire, as 'Heavily Indebted Poor Countries' (HIPC) by the IMF. According to UNCTAD, in African LDCs, nearly 6 out of 10 people live on the equivalent of $ 1.25 a day, while nearly 9 out of 10 people live on the equivalent of $ 2 a day (UNCTAD, 2010). There are several factors which contribute to this situation, but certainly, the monetary question is among the most important factors. A useful illustration of this is the problem of financing the economies of African countries.


Again, African countries must deposit half of their foreign exchange reserves in France, in exchange for the 'security' of the convertibility of the CFA franc. This gives the French the right to closely monitor monetary policy and even economic policies of African countries, through, inter alia, the presence of two French directors having the same powers and privileges as other members. Indeed, institutional ties with France compel African Central Banks to adopt monetary policies contrary to the interests of member economies.


In West Africa, the BCEAO gives priority to the fight against inflation, similar to the ECB, while African countries have problems expanding their production capacity and creating jobs for millions of citizens, especially young people. This policy of the BCEAO is even more absurd, since even in large countries experiencing the current crisis, central banks have strayed from their usual monetarist orthodoxy. In the United States, the Federal Reserve has followed an aggressive monetary policy since the financial crisis erupted in September 2008, in order to cope with the recession and restart the economy. Thus the interest rate of the Fed is between 0 and 0.25 percent, probably the lowest since the Great Depression of the 1930s. At the same time, the Fed has injected tens of billions of dollars in cash into the economy each month. To date, it is estimated that it has put over two trillion dollars into circulation since August 2008.

The ECB is not far behind. Despite the Germany's aversion to the ECB's intervention, it decided to buy the debts of troubled European countries in order to prevent the collapse of their economies and the risk of the Euro area disintegrating. In Japan, the third largest economy in the world, since Shinzo Abe's ascension to prime minister, the Bank of Japan (the Central Bank) has followed the lead of the Fed by pursuing a very aggressive monetary policy, despite criticism by European countries and the IMF. For him, the priority is the fight against deflation arising from an anemic economy for nearly a decade.

The BCEAO condemns the Member States, including the 'poorest' of the world (LDCs), to depend on sources of public or private external financing (issuance of Treasury bills and bonds in the financial markets) or loans from the international financial institutions with the stringent conditionalities with which we are familiar. Worse, such a policy makes member countries increasingly dependent on 'budgetary support' of Western countries, which further reduces their abilities to function and makes them more vulnerable to external pressures.


The dependence on external funding is compounded by the fact that the national banking system contributes very little to the financing of African economies, especially for small and medium enterprises (SMEs), which constitute the bulk of the industrial sector in these countries. For example, in Senegal, the second largest economy in the WAEMU, the banking system doesn't contribute more than 19 percent of GDP to finance the economy, according to a Senegalese employer. (4)

The President of the WAEMU Commission has publicly criticized and even denounced the lack of bank financing for the economies which are part of the Union. This is mainly due to the fact that banks charge very high interest rates of around 12 percent on their loans to SMEs while bond yields for states are approximately 6 percent. Criticizing the behavior of commercial banks in the WAEMU, a representative of the Senegalese private sector says that in Senegal 'banks are cautious and only exist to manage client's savings.' (5)

This situation means that commercial banks have enormous liquidity. This helps to weaken the role of the Central Bank, which does not exercise effective control over interest rates and has little influence on the lending policies of commercial banks. Moreover, the governor of the BCEAO implicitly recognized this when the president of Senegal, Macky Sall, mentioned the high cost of interest rates in the WAEMU, during the celebration of the 50th anniversary of the BCEAO. The governor confessed his institution's impotence towards primary banks, stressing that the only possible course of action was to start negotiations with them so that they would agree to lower their interest rates. When the Monetary Policy Committee of the BCEAO had lowered its key rate by 25 basis points, the Governor said 'logically, banks must follow!' [6]


Monetary sovereignty is the power to decide the issue of money and the implementation of monetary policy in a country to achieve economic and social objectives set by sovereign countries. In all African member countries belonging to the Franc Zone, constitutions contain articles which state that 'sovereignty belongs to the people' and that the sovereign people decide monetary policy 'through their representatives.' In the countries of the WAEMU, all constitutions say that the issue and monetary policy are 'sovereign acts'. But the reality is different, because they do not have their own currency!

Theoretically, in this Union, responsibility for monetary policy rests with the Council of Ministers of member countries, monetary policy is entrusted to the Board of Directors of the BCEAO and is entrusted to the Governor, with the assistance of the national Committees of Credit.

But France's commitments to 'ensure unlimited convertibility of the CFA franc' are offset by the abandonment of the sovereignty of African countries over monetary policy. In fact, the agreements signed with France ensure its supremacy over the monetary policies of the WAEMU countries, as illustrated by the working mechanisms of the area and the monetary policies of the BCEAO and BEAC, recalled above.

Since the devaluation of 1994, they have continued to deprive Africans of the illusion that there was a small degree of monetary 'sovereignty' they still possessed. Indeed, after the reform of 2010, the BCEAO, following the model in Western countries, became 'independent' in relation to Member States. They have established a Monetary Policy Committee (CMP), responsible for the definition and conduct of monetary policy, in which a representative of the French Treasury has voting rights. The President of the WAEMU Commission has only a consultative vote!

The episode of the 1994 devaluation was undoubtedly the best illustration of the loss of sovereignty of African countries on 'their' currency, the CFA franc. Indeed, the Heads of State and Government present in Dakar were locked for hours in a large hotel in the Senegalese capital, accompanied by the French Minister of Cooperation and the director of the French Treasury [8] along with the Director General International Monetary Fund (IMF). They came to inform of the devaluation decided by France, with the support of the IMF.

We can note that neither the President of the French Republic at the time, François Mitterrand, nor his Prime Minister Edouard Balladur, had deigned to make the trip to Dakar. This shows the degree of 'consideration' they had for the Heads of State and Government in Africa!

The vicissitudes of this humiliation were related by a newspaper as follows: 'In Dakar, 14 Heads of State and Government of African countries were gathered for thirty hours in a hostage situation, forced to sign an agreement in order to recover the freedom.' Have they learned from this terrible humiliation? Apparently not, since no one proclaims any intention of breaking or challenging the current system.


To better understand how African countries have undermined any possibility of development by agreeing to use a currency issued by France to protect its interests and perpetuate its domination, let us briefly examine the nature of money.


Money is at the heart of the modern economy. It is one of the essential parts to the functioning of economies. The example of the 'currency war' between China and the United States is a good illustration of the key role played by money in the economy of a country and in international economic and financial relations.


In economics textbooks, money is generally attributed to three functions: as a unit of account, medium of exchange and store of value. The unit of account function allows you to compare economic variables, giving each a monetary value. The medium of exchange function allows trade transactions for goods and services and eliminates barter, the direct exchange of physical quantities of goods, which is a complicated process and has evident limitations. Finally, functioning as a store of value gives the currency the character of temporality and makes a link between the present and the future.

But money should not be reduced to these three functions. It has a social and political dimension, because it influences the daily acts of individuals. So money plays a role in social ties, or in other words, it is an expression of social relations. Karl Marx demonstrated that underlying the production and circulation of goods, are social relations, the relationship between real human beings who express themselves. But money is not a commodity like any other. It is the 'general equivalent' standard by which to measure all other goods. Therefore, it is the most complete expression of social relations.

Money has an important social dimension which is greater than all three functions listed above. That is why some economists argue that money is an instrument which contributes to the socialisation of individuals. It is classified as an institution whose primary mission is to serve the public good. As such, money is a public good belonging to any society. It cannot be privatized. That is why the issue of money is the sole responsibility of the State, as a symbol of unification and representation of the collective will of a country.


The exclusivity of currency issue by the state is also linked to the fact that money is a symbol of sovereignty, reinforced by its social and political dimensions. The power to mint money has always been recognized as an attribute of national sovereignty. This explains why the creation of a national currency is among the first acts asserting sovereignty for a country that has obtained its freedom and independence. That is why it is the state, as a symbol of public authority, has the exclusive right to issue the currency used throughout the space under its jurisdiction (Ruffini, 1996).

Therefore the currency, the same as the flag or the national anthem, is one of the symbols that demonstrates the sovereignty of a country. That sovereignty cannot be granted: it is won through struggle. In the current global crisis, we see greater ability to manoeuvre available to countries that exercise full sovereignty over their currency by using adjustments in monetary policies (exchange rate, interest rate, liquidity provision to the banking system) to better cope with the crisis.

In view of all the preceding information, the CFA franc is the symbol of constrained sovereignty and an instrument of domination which hinders the development of African countries.


Is it possible for Senegal to develop only apart from the countries of the region, meaning developing without regional integration? Another fundamental question: is it possible for these countries to 'emerge' in the current capitalist system while respecting the rules defined by the most powerful countries to maintain their domination? Is it not essential to break with the current paradigm, initiating a certain disconnect? A key element of this disconnect is the end of the CFA franc and the birth of a sovereign currency. Indeed, there can be no emergence without breaks and challenges to this situation and the building new institutions adapted to the needs of African countries. We cannot emerge if we do not have sovereignty over our own policies.

The CFA franc is one of the symbols of the lack of sovereignty in African countries. This necessitates a break with the system, with the creation of a sovereign currency which is one of the major conditions for the implementation of industrial policies to create value and jobs at the national and regional levels.


This subject has initiated discussions which all lead to the same conclusion: the CFA franc is not an instrument of development for African countries. Instead, it is one of the main obstacles to development. Therefore, it is imperative to put an end to its use and adopt a sovereign currency. In this perspective, we must support the ongoing process at ECOWAS, to create a common currency for all member countries, intended by 2020. But to achieve this, the pressure on our leaders, including those of the WAEMU area, must be maintained and even intensified.

Furthermore, the creation of a sovereign currency requires profound changes and sacrifices to ensure the success of the project. These changes are economic, social, political and even psychological. It includes sacrifices that both leaders and citizens must be prepared to accept if they want to recover their sovereignty, independence and dignity. Indeed, the path to emancipation and the freedom to decide for oneself necessarily requires sacrifices.

One of the conditions of success of the project is the establishment of rigorous discipline in the management of public finances, including keeping budget deficits within reasonable limits. In other words, it must be remembered that the success of such an enterprise will depend to a very large extent of careful management not only of money but also of the economy and especially the public sector to reduce deficits and their impact on public finances.

A second essential condition for success is the establishment of exchange controls and monitoring of capital flows in the area. Indeed, the creation of an independent African currency is incompatible with a policy of freedom of exchange, at least during a certain period. This control of capital movements is essential for rigorous management of foreign exchange reserves. A condition closely related to it is the reorganization of the banking system and the redefinition of its role in the new monetary and financial configuration.

On the macroeconomic, social and political level, the success of the new currency will depend on a certain number of actions.

The consumption habits of citizens and states should focus on consumption and use of goods and services produced locally. This is especially important for agricultural products in order to develop agriculture that can be both a great source of employment and increase demand for the industrial and service sectors.

In the same vein, the State and the private sector should prioritize the use of local resources and national expertise. For example, the state should focus on domestic organisations - artisanal and industrial - for public contracts and give priority to national or regional expertise in the managing its projects.

To further reduce unnecessary outflow of foreign exchange, states must introduce new tax policies that heavily tax luxury goods imports which significantly contribute to the outflow of foreign exchange and to balance of payments deficits. Such a measure can change the consumption habits of citizens, as indicated above. Similarly, a higher tax rate for high-income earners, who are the biggest consumers of luxury goods, should also be considered.

In addition, the state must drastically reduce their expenditures (reducing the number of ministries and privileges of their duties; eliminating unnecessary spending, reduced representation abroad, etc.). To reinforce this policy, there must be independent control ensuring and enforcing strict budgetary discipline in all parts of the State, including the Presidency.

The success of the project finally depends on the reduction of dependence on foreign countries, the ability to mobilize more domestic resources through innovative fiscal and monetary policies, driven by a true developmental state, as recommended by the CEA (2011) and UNCTAD (2007).

* Demba Moussa Dembélé is President of the Association for Research and Cooperation in Support of Endogenous Development (ARCADE). This text is an abridged version of a paper prepared for the "Days of the Senegalese economy", organized on 27 and 28 September 2013 by the Ministry of Economy and Finance, the Centre for Applied Economic Research (CREA) Version and FASEG on the theme "Regional economic integration and emergence in the WAEMU countries, problems and prospects"

The article was translated from French for Pambazuka News by Jeff Wilson.


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[1] We know, for example, how the developmental states in Southeast Asia and South Korea, have used monetary and fiscal policy to promote strategic sectors of their economies, turning them into the "Tigers" and "Dragons" of the global economy.

[2] The issue of industrialisation was strongly emphasized at the joint African Union-ECA meeting in Abidjan (Côte d'Ivoire) in late March 2013

[3] Statement in Jeune Afrique Economie, no. 178, April 1994

[4] See Le Quotidien, August 21, 2013, p. 6. The former Governor of the BCEAO, Charles Konan Banny, recognized the weakness of bank financing in WAEMU countries but tried to put the blame on businesses rather than banks themselves. Read his interview with the newspaper Le Quotidien on October 12, 2012, p. 9

[5] See Le Quotidien 8 June 2012, p.13

[6] See EnQuête, 7 March 2013, p.4 and Le Soleil, 9 April 2013, p.6


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