CEMAC: a symposium proposes an “in-depth” reform of the CFA franc

(Business in Cameroon) – The reform of the CFA franc demanded since 2019 concerns the current mechanisms of monetary cooperation with France.

On November 17 and 18, a symposium was held in Libreville, Gabon, on the theme “Money and development in Central Africa”. During the symposium, university professors, economists and other civil society actors from the CEMAC zone overwhelmingly supported deep reforms of the CFA franc.

I think this work clearly shows that monetary cooperation with France needs to be reformed. But when it comes to the kinds of reforms needed, opinions are divided. Some will be satisfied, for example, with a change in the name of the currency, given its symbolic meaning. However, the vast majority think deep reforms are needed, not just a name change“, explained Professor Alain Kenmogne Simo, Associate Professor of Law.

Parity with the euro

An example of the profound reforms demanded is a modification of the exchange rate policy, in particular the abandonment of the fixed parity with the euro for a floating or intermediate exchange rate regime.

Between the floating exchange rate and the fixed exchange rate, there is a range of intermediate exchange rate policies. We are moving towards an intermediate policy and not towards euro-anchoring. We believe that the indexed regime is outdated because we have new ambitions and a new development strategy since the international environment has also changedsaid Professor Gabriel Zomo, a professor at Omar Bongo University in Libreville.

For the economist, at the time of the adoption of the CFA franc, France was the main trading partner of the CEMAC countries (Cameroon, Central African Republic, Congo, Gabon, Equatorial Guinea and Chad). Nowadays, however, the list has changed with the trade of the CEMAC region with countries like China and other Asian countries which has increased considerably in recent years, because New Gabon reports.

In context, “limiting our reserves to a single currency prevents us from being as flexible as we could have been if we were to diversify reserves. Reserves should normally be built up through our trade with our partners. Like China, Brazil and Turkey are positioned as major partners, why build up our reserves only in euros?” asked Dieudonné Mignamissi, Associate Professor of Economics.

Reserves are used to facilitate trade with foreign countries. So if we have reserves in Chinese currency, US dollars, Euros… I think we would have a more flexible policy for trade with foreign partners,” he added.

For Professor Gabriel Zomo, the CEMAC countries should aim for a low exchange rate given the quality of the products they offer on the international market. “As a rule, parties that offer technology-intensive products have high exchange rates. This is the case in Germany. However, when parties offer “low-end” products, they tend to aim for lower exchange rates because they need to sell. This is why the pegging of the CFA franc to the euro is problematic. This tends to overvalue our motto even though we offer “low-end,he illustrated.

good governance

The participants in the symposium felt that the reform of the CFA franc would not be enough to boost the development of the CEMAC region.

“…whatever the name or the monetary reform implemented, if they are not backed by public action and economic reforms, they will not allow us to achieve the development that we all want. Thus, another set of reforms is needed alongside monetary reformsaid Professor Alain Kenmogne Simo. Geoffroy Foumboula Libeka, member of Copil Citoyen, a Gabonese civil society, added that “the most important thing is not to change currency.”

As long as there is no discipline in budget management where there are no sanctions punishing the embezzlement of public funds, you can change as many currencies as you want, you can give these currencies any name you like but nothing will change. Good governance is the priority,” he said.

The CFA Franc is a currency created in 1945 during the colonial era. Literally, in French, it means “currency of the French-speaking African colonies”. This is the basis of monetary cooperation with France. The name changed in 1972, after independence, to become “Franc [currency] for financial cooperation in Central Africa.

Since 2019, CEMAC Heads of State have been in motion to evolve the main mechanisms governing monetary cooperation with France. The mechanisms are in particular the guarantee of unlimited convertibility of the currency issued by the BEAC, the fixity of the exchange rate, the transfer without restriction between the member countries of the BEAC and France, and the centralization of reserves in an operations account. open to the French Treasury.

Sandrine Gaingne

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