On Saturday 21 December 2019 eight West African countries (Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo) agreed to reform their common currency, the CFA franc, applying major changes to it, firstly a change of the name, from CFA to ECO. What will change?
The CFA franc is the name of two different currencies, one adopted by West African countries (the West African CFA franc, XOF), and the other one adopted by six Central African Countries (the Central African CFA franc, XAF), even though they are two separate currencies, they have always been at parity and are both guaranteed by the French treasury.
In fact, they were created on 26 December 1946, for the French colonies, in order to facilitate imports from France. Moreover, although they are no longer French colonies but independent countries, they still keep strong connections with France, in fact, The Bank of France holds half of the currency’s total reserves, CFA notes and coins are printed at a Bank of France facility in the town of Chamaliere, and its value is now pegged to that of the euro (1 euro = 655 CFA).
These are also some of the main reasons why the CFA is seen by many as a form of interference by France in its former African colonies, moreover critics argue that they have no say in deciding about monetary policy, and in exchange for the guarantees provided by the French treasury, African countries channel more money to France than they receive in aid.
This is why after the announcement about made by Ivory Coast’s President Alassane Ouattara many Africans cheered and applauded. During his speech in Abidjan, the country’s economic capital, he declared that there will be “three major changes” to the West African CFA, the first will be “a change of name”, it will be called Eco. Furthermore, France will stop holding “50 percent of the reserves in the French Treasury” and will withdraw “French governance” related to the currency. However, the value of the Eco will still be pegged to that of the Euro, like the CFA.
Macron hailed it as a “historic reform”, adding: “The Eco will see the light of day in 2020.”
As said before, many west Africans were cheering after this announcement, for what they see as a turning point towards a future of greater independence, however, not everyone agrees on this. Mor Gassama, economist and researcher at the Cheikh Anta Diop University in Dakar, says that in his opinion the introduction of the Eco is a victory that has to be celebrated with great modesty because there are still many unclear areas abut its introduction.
“These are just words at the moment because the problem in Africa, as everyone knows, is not just a problem of money”
“It is first and foremost a problem of the management of public funds. If a head of state does not respect his commitments, if the best resources we have are squandered or not used according to our priorities, whatever the name of the currency, it will not do much good. The decision is more political than economic.” Mor Gassama, source: http://www.dw.com
Moreover, others think that a West African monetary integration does not make sense without the integration of countries like Ghana or Nigeria and that it is very unrealistic that there will be the Eco for the whole of West Africa in 2020, due to lacking economic and political foundations, like a statute for a new central bank or a harmonization of banking legislation, that currently does not exist.
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