FRANC ZONE, FOR AN EMANCIPATION BENEFITTING ALL

FRANC ZONE, FOR AN EMANCIPATION BENEFITTING ALL1
(APRIL 2018)
SUMMARY
France’s cooperation with Africa stands out because of the support it provides touching on
two core state powers: defense and currency. This type of support is appreciated south of the
Sahara, because the States there are still relatively young politically and often face threats.
Defense and currency involve areas of sovereignty. Consequently, any hint of neocolonialism
must be dispelled. In the area of defense, since the end of the Cold War, diplomats and military
personnel took special care to empower local stakeholders and to ensure that any French
actions took place under a transparent framework, validated by the international community.
Monetary affairs are not handled in the same way: the franc zone remains a taboo subject. In
addition to the fear, sometimes justified, of speculation against the CFA franc, there is the
questionable premise that criticism of the terms and conditions of the cooperation amounts to
attacking the underlying principle itself. It must be accepted or rejected lock, stock and barrel.
Any debate is therefore limited to a discussion of its simplest elements.
A step forward occurred in 2017. During the summer, the franc zone was the focus of public
protests involving civil society and African experts in particular. In the fall, the president of the
French Republic stated in public that he was open to any reform proposals made by African
officials. At the same time, discussions on the economic and monetary integration of the African
continent gained momentum, particularly in West Africa.
To allow this development to bear fruit, two temptations must be resisted.
The first would be an overhaul of the franc zone that is limited to symbols. Of course, the
latter are more or less indefensible, starting with the name of the CFA franc itself. The franc is
a French currency that even France has abandoned. The CFA acronym stands for… “French
Colonies of Africa” (a term later replaced, even if the acronym remained unchanged, with
“African Financial Community” in West Africa and “Financial Cooperation in Africa” in
Central Africa).
But settling for a reform of only symbols would be a terrible waste of an opportunity given the
challenges that await the zone. Major economic and social changes lie ahead over the next few
decades: the population in Africa will double by 2050, there will be widespread urbanization,
1 I want to thank Dominique Bocquet for all the comments and advise he gave me while this text has been prepared.
His technical skill as well as his intimate knowledge of the African reality have been of unvaluable help. As usual, the
opinions in the paper remain mine.

2
bringing with it massive population movements, and its integration into international trade will
be transformed. Its colonial heritage and the divide between French-speaking and English-
speaking Africa will no longer be relevant as economic lines of separation (even if they persist
as cultural realities). Monetary cooperation must be reformed to take on these challenges.
The second error would be to mistake these transformations for a challenge to the system of
stable exchange rates, which is still understandably favored in the countries concerned.
Today, the economic debate quite rightly gives stable exchange rates their proper due,
particularly with regard to the currencies in the developing countries, often the victim of
speculation. But there is in fact a wide range of options possible to ensure the stability of
exchange rates.
It is from this perspective that the present study aims to discuss the mechanisms of the franc
zone in detail and to pinpoint the necessary changes to be made.
It identifies four issues that are key to any reform.
- Decision-making rules must be aligned to be consistent with the exchange rate regime that
is supposed to characterize the zone. The regime consists of stable, but adjustable, exchange
rates. It can work perfectly in Africa as long as there is an external guarantee to act as a
lightning rod against speculation. But it should not be confused with an absolute inflexibility,
preventing any changes even when exceptional circumstances arise. Yet, practically speaking,
this is the current situation arising from the decision-making rules in place, inherited from the
past.
- Convergence mechanisms must be strengthened. The franc zone is made up of African
monetary unions (WAEMU and CEMAC) which, much like in the euro zone, consist of national
States that hold the non-monetary instruments of economic policy (in particular, fiscal policy).
Under such a configuration, economic convergence is vital to guarantee the success of
monetary union. This aspect is always initially underestimated on all continents. Despite
genuine efforts, particularly in West Africa, convergence mechanisms suffer from deficiencies
specific to the franc zone, both within the monetary unions and in the organization of their
relations with France. This leads to a lose-lose frame of mind. For the guarantor country, this
results in a poorly controlled financial risk (and expected to grow over time); for the African
side, it creates a recurring dependency on the guarantor
- Following the traces of the past, the perimeter of the franc zone must adapt to current
economic realities. Despite the membership of Equatorial Guinea in CEMAC and of Guinea-
Bissau in WAEMU, the borders still follow the divisions inherited from colonization, especially
those associated with French-speaking Africa and English-speaking Africa. This is evident in
the case of Ghana, which is practically an enclave in the franc zone but divided from its
neighbors by currency, even though it is the leading economy in the area. An enlargement
aimed at changing this would represent a major historical first. But this will be impossible to
achieve as long as the two prerequisites mentioned above have not been addressed.
- Monetary cooperation must bring with it a greater opening up of the world to the countries
involved. Financial stability, control of inflation and a link with a major international currency
are all advantages enjoyed by the African monetary union that should receive more recognition

3
from the European Union and the rest of the world. And yet, the coordination and relations
organized around monetary cooperation are strictly limited to France. It is normal to have a
specific institutional link established between the guarantor country and its African partners.
Yet, it is a shame that there is no organized relationship between the latter and the European
Central Bank and between the countries in the euro zone.
It is the ECB (and not the French Treasury or Banque de France) that sets the rates that make
up the floor rate for African interest rates in the franc zone. Similarly, the advantages to
businesses provided by the stability of the CFA-euro exchange rate is not limited to French
companies: it also benefits, equally, all companies in the euro zone. Forgoing the chance for
clear support from the other European countries for the franc zone represents another lost
opportunity.
Incidentally – and contrary to popular belief, it is the terms of the Treaty on European Union
that govern exchange rate agreements and not those of its Member States (regardless of their
commitment to financial cooperation with Africa).
*
* *
Based on these observations, this study sets forth a series of guidelines and proposals for the
future.
The name of the currency, the location for printing banknotes and the practical terms of the
guarantee are issues involving identity. A consensus can easily emerge for a fresh start with
respect to these aspects that can be chosen by the African side.
But going further, an overhaul of the franc zone is essential to prepare it for the upcoming
economic and demographic prospects facing the continent: modify the decision-making rules
to allow for a collective African sovereignty, establish an effective convergence, put together
the basis for an endogenous and sound monetary policy, relaunch regional integration, open
up the monetary cooperation to new contacts and partners and, lastly, use enlargement and the
modernization of this mechanism as a lever for mobilizing the international community and
private investors to support Africa.
It is only by reforming this cooperation, the only one of its kind in the world, that we can use
its achievements to further the development of Africa.

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PREAMBLE
A little over a half-century ago, faced with the rise of legitimate aspirations for independence,
France under General de Gaulle used its leadership to get ahead of events. At a time when its
African colonies were not yet forcefully demanding it, France proposed independence to all of
them. This foresight has, for several decades, given a unique legitimacy to French cooperation in
sub-Saharan Africa.
Today, the same sort of clear-sightedness is again necessary to clear away the last vestiges of
colonialism from the Franco-African relationship. Its point of focus must be the franc zone: despite
its undeniable contribution, it represents a relic of the past and presents obstructions which hinder
the cooperation from progressing. Without a fundamental transformation, growing political
difficulties are bound to arise in the coming years.
It is indisputable that the French Ministry of Finance and the Banque de France currently approach
their relations with their African counterparts with care and an open mind. That is not what is
being discussed here. It is the institutional framework in place that confines these relations to an
extremely narrow circle. A sort of omerta surrounds the franc zone familiar to officials while, among
African populations, the notion of the CFA franc is the focus of growing discontent. Civil society
mounted strong opposition to it in the summer of 2017. There is an identity component inherent
to this discontent that it would be dangerous to ignore.
For the past several years, France has declared itself open to change as long as it is proposed by its
partners. Indeed, the decision must rest in the hands of the Africans. Everyone must nevertheless
reflect upon the transformations that are desired. In addition, the enlargement of the franc zone
needs to be considered, especially in West Africa. Transforming this prospect into reality would
however make any reform even more necessary but also more delicate at the same time.
The CFA francs are dependent on the French guarantee. The possibility of this guarantee being
weakened in any way is, unavoidably, a cause for concern for the central banks and States
concerned. France must show bold leadership, by opening up possibilities, as well as generous, by
using its guarantee as a shield for any transition towards fully recognized monetary sovereignty in
Africa.

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INTRODUCTION
Established in 1945, the franc zone has been the subject of recurring criticism since the countries’
independence, both in Africa and in international circles. The benefits that it represents in terms
of stability is undeniable. However, it also embodies two characteristics that are hard to defend
nowadays: the remnants of a colonial link touching on an area of sovereignty and the indifference
of the monetary regime it symbolizes to the economic fundamentals of the countries concerned.
Except for the Africanization of the central banks’ management in 1972, the system has not
undergone much reform. Its obligations to France were reduced and regional integration of the
African member countries was encouraged. The “CFA franc” was devaluated only once in 70 years,
in 1994.
What is more, neither the introduction of the euro nor the recent innovations in the international
insertion of Africa triggered any official debates. There has not been any future-oriented
brainstorming on the “vision” of the franc zone. Over the years, France and its partners agreed to
minimize contextual changes. Their attitude has been that their monetary cooperation has had no
other salutary effect beyond that of continuity.
This silence is unhealthy. By discouraging any criticism through inertia, it feeds suspicions. Why
worry about the franc zone if it has no value? If it has one, what is there to fear from debate?
This silence can be partly explained by apprehensions. These can be found mainly on the African
side: the States and the central banks are always dreading any withdrawal of the French guarantee.
This situation is not conducive to the showing of boldness or imagination.
On the French side, the risks involved in enacting the guarantee are very real, as has been shown
in the past. However, this risk is not the main reason behind the silence. It is a form of benign
neglect, exacerbated by different levels of priorities: the same issues, vital to the African countries
in the franc zone, are of lesser concern in Paris. What is left unsaid is actually a quiet expression
(and tricky for the African side to denounce) of a neo-colonial relationship.
This situation is completely at odds with the renewal of the African continent and even in relation
to the initiatives taken by France in recent years to revitalize its relations with Africa: Economic
Conference in 2013 for a new partnership, launch of the Fondation AfricaFrance for shared
growth, creation of the Presidential Council for Africa…
After a quick presentation of the franc zone, Part One of this memo summarizes the criticisms
surrounding it and which are sometimes unfounded. It provides details regarding the true
weaknesses of the zone. Part Two proposes two development scenarios. Scenario I, focusing on
symbols, is appealing but it also runs the risk of missing an opportunity to introduce real and
necessary reform. Scenario II, which is much more complex to implement, is the path that we
recommend and is in the mutual interest of France and the African countries of the franc zone.

6
Principal recommendations: twelve proposals for monetary emancipation
1/ Pegging the currency to a basket of currencies instead of the euro
2/ Confirming the French guarantee
3/ Leaving the choice of the name of the currency and the location for printing banknotes in the hands of the African
authorities
4/ Replacing French officials with independent international administrators on the Council of the central banks
5/ Replacing the operations account with a BIS account if this is preferred by the African side
6/ Strengthening the economic coordination within the African regional unions
7/ Enlarging the WAEMU to include other countries in West Africa (apart from Nigeria)
8/ Relaunching regional integration with the support of lenders
9/ Establishing an annual summit of Heads of State including the President of the French Republic
10/ Progressively involving other countries in the euro zone and the ECB in the monetary cooperation
11/ Organizing general assemblies involving the participation of academic circles, businesses and civil society
12/ Launching a communication campaign around the strengthening of African currencies

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THE COUNTRIES AND … THE ACRONYMS OF THE FRANC ZONE
The franc zone includes, in addition to France, fifteen States in sub-Saharan Africa, fourteen of which are grouped
into two monetary unions. AFZC stands for African Franc Zone Countries2.
The West African Economic and Monetary Union (WAEMU)3 is made up of Benin, Burkina Faso, Guinea-
Bissau, Ivory Coast, Mali, Niger, Senegal and Togo. Its central bank is the BCEAO (Central Bank of the West African
States)4. The currency’s name is the CFA franc but it has a unique ISO code: XOF.
The members of the Economic and Monetary Community of Central Africa (CEMAC)5 are Cameroon,
Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon. Its central bank is the BEAC
(Bank of the Central African States)6. The name of the currency is also the CFA franc but its ISO code is XAF.
The Union of the Comoros is the fifteenth African member of the franc zone. This State’s central bank is the Central
Bank of the Comoros. Its currency is the Comorian franc and its ISO code is KMF.
Map of the WAEMU and the CEMAC
2 In French: PAZF or pays africains de la Zone franc
3 In French: L’Union économique et monétaire ouest-africaine (UEMOA)
4 BCEAO = Banque centrale des Etats d’Afrique de l’ouest
5 CEMAC = Communauté économique et monétaire de l’Afrique centrale
6 BEAC = Banque des Etats de l’Afrique centrale

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PART ONE: BLIND SPOTS AND OBSTRUCTIONS IN THE FRANC ZONE
In the 1980s and 1990s, the emergence of floating rates dominated international currency debates.
The franc zone was derided for its fixed exchange rates. It is a different matter today. The
contribution of fixed exchange rates to financial stability and to control over inflation is better
understood. Regarding this last point, the franc zone’s economic performance stands up rather well
in comparison to the rest of the continent. The guarantee it enjoys protects it against speculation.
In addition, the exchange rate does not seem to show any obvious misalignment7
.
But it is the political problem that has increasingly become a sensitive issue, as the protests held
during the summer of 2017 clearly showed. On top of that, there are practical rigidities, and even
total inertia, that are holding the future of the CFA franc in check.
I/ THE FRANC ZONE, A POLITICAL CHOICE IN DISGUISE
There is a technical dimension that is integral to any decisions involving currencies. However, the
process also always involves a political choice. In the case of the franc zone, it is twofold.
1/ The political link between African countries of the franc zone
The majority of the former French colonies chose to share a currency. This link has mainly been
organized around two regions (West Africa and Central Africa). It is based both on shared interests
and institutions, with frequent meetings at all levels, including the heads of State (annual summit
in each of the two regional unions).
As Jean-Michel Severino pointed out, one characteristic of inter-state relations in the franc zone
has been the low level of conflicts since the 1960s. This is in stark contrast to the other regions on
the continent, which has been marked by many deadly international conflicts (35 military conflicts
in Africa since 1960), and is a testament to the real ties that bind the franc zone countries.
2/ The choice of a link between the African countries of the franc zone and Paris
The backing provided by the French guarantee should also not be reduced to its mere technical
aspect. For better or for worse, it establishes a special link with France. This connection also
consists of regular encounters, with a biannual meeting of the Finance Ministers from the franc
zone, carefully prepared and deliberately held just before the major meetings of the IMF and the
World Bank.
7 In this respect, see the data compiled by Bruno Cabrillac in the article "La Zone franc, Malentendus et vrai débat", Telos,
23 October 2017.

9
This link has not prevented the gradual decline in the French market share in the countries
concerned. But it is an incontrovertible fact and displays a form of interdependence. Yet, it remains
confined in the realm of unspoken matters. This commitment of support is only presented under
its monetary angle, particularly since the end of the Cold War.
The richness of the exchanges brought about by monetary cooperation are never spoken of, as if
it involved a furtive relationship. The official relationship is left solely to the Finance Ministers as
if its scope was strictly financial and monetary. There is no provision for a meeting of the heads of
State that includes the French president.
This unspoken aspect of the political link is sure to foment doubts regarding identity in an Africa
with a complex relationship to its colonial past that is difficult to untangle.
II/ MONETARY PROCEDURES AS SOURCES OF CONFUSION
1/ Certain practical aspects feed into suspicions in Africa of neo-colonialism
- The name “franc” is still used, even though the French franc no longer exists. African
countries appear to be not only subordinate to France but, what is more, attached to the old France
by way of a currency, to which it has in fact cut its own ties. The term of CFA, which is now only
ever used in acronym form, also covers the later designations, the first one having stood for the
French Colonies of Africa (Colonies françaises d’Afrique (sic)).8
- Part of the foreign exchange reserves must be held by the French Treasury. The African
countries of the franc zone are bound by obligation to centralize their reserves in the regional
central banks and the latter must then deposit at least 50% of their operations account in the French
Treasury. Some see in this African savings which “benefit France”.
- The pegging of the currencies to the euro was never the subject of debate even though
the trade flows in Africa have recently diversified. While the euro zone still represents an
important share of the “AFCZ” (African Franc Zone countries), this share has been falling
following an increase in exchanges with emerging countries, especially with Asia. In light of this
development, the fixed rate with the euro can no longer be taken for granted.
2/ It is also the victim of misinformation in France, which leads to misunderstandings,
even among well-informed officials …
8 The CFA acronym was created in 1945 at the same time as the franc zone and was intended to designate the franc of the
French colonies of Africa. Officially, it is today the franc of the African Financial Community (Communauté Financière
Africaine) in the WAEMU countries and the Financial Cooperation in Central Africa (Coopération financière en Afrique) in the
CEMAC countries. The legacy of it keeping the same acronym can be considered a mere anecdote. It can also be seen as a
sign of conservatism, a worrisome sign for the system given the low level of sensitivity it shows for the currency’s political
and identity dimensions.

10
A number of French officials think that Paris handles the issuing of money, a responsibility
that falls to the African central banks. Many believe that only one CFA franc exists, whereas
the existence of two issuing banks necessitates distinguishing between the BCEAO franc and the
BEAC franc9
, as well as the Comorian franc. If such an imprecise grasp of the facts is the norm in
France, should we be surprised at the fantasies circulating in Africa?
The notion of a franc zone is misleading. Officially, France is a stakeholder in the Agreements
that established it. But it is not a part of the monetary and financial area that this notion designates.
The CFA franc is not accepted outside of the AFZC, even in France (where the banknotes cannot
even be exchanged). No specific leeway is granted to the movement of capital to France10
.
III/ THE SHORTCOMINGS OF THE FRANC ZONE LIMIT ITS BENEFITS
Leaving aside the debate regarding fixed-flexible exchange rates, the franc zone has economic
shortcomings that are not really justified, and which limit its potential benefits.
1/ It is less than optimal for the African countries who are its members
The inflexibility of the system of reserves sometimes deters the States from instituting
savings
The AFZC are prohibited from setting up sovereign funds in foreign currencies, even in profitable
years for basic commodities (it could be a disguised means for renationalizing the reserves). Yet,
they can become borrowers on the international markets. Thus, there is an imbalance between their
holdings and their debt.
To be sure, the franc zone encourages its members to exercise financial prudence. But these States
have never had to directly concern themselves with convertibility, a privilege won with difficulty
elsewhere. This sometimes results in risky behavior in terms of external debt and currency exchange
risks.
Despite the extent of fluctuations in terms of trade, it is almost impossible to change the
fixed rates
The tendency of the African countries in the franc zone to specialize in raw materials and primary
commodities can lead to wide variations in the terms of trade. Yet, within each regional union, the
fixed exchange rate can only be adjusted following the unanimous decision of the Member States,
a condition hard to fulfill given their differing views most of the time.
9 Or even a “BCEAO Zone” and a “BEAC Zone” since the banknotes from one region are not accepted in the other.
10 There is of course an exception regarding the freedom of transfers linked to current transactions, a freedom guaranteed
in the Franc Zone to all destinations.

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The atypical example of the devaluation of the CFA franc in 1994
This devaluation was an exception that… confirms the rule. It only occurred after well over a decade of misalignment and
stagnation. Not only did the French guarantee artificially prop up the CFA franc, but Paris had to disburse considerable sums
to succor anemic public treasuries, sometimes even standing in for them to honor their external obligations. In the end, the CFA
France was devaluated by 50%, a drastic blow to savers and rather unusual for a fixed exchange rate system but made necessary
by the extent of the misalignment over time. Very well-prepared technically speaking, it was considered an economic success:
growth took off again and competitiveness was reestablished in the long term. However, this adjustment only became possible
following a political mobilization at the highest levels in a France that was still very influential on the continent and, at the
time, in a strong position after considerable and extensive work on its cooperation on macroeconomic aspects (this was done
under the impetus of Jean-Michel Severino, the Director of Development at the time at the French Ministry of Cooperation).
The process was carried out from beginning to end by Paris, with the support of the Bretton-Woods institutions.
Incidentally, all of this was only able to come about with the help of a ruse. A franc zone summit could not be officially convened
because any announcement of such an unusual meeting would have set off rampant speculation. To avoid this, the Heads of
State were invited to attend a summit in Dakar on 12 January 1994… of ASECNA (an agency handling air traffic control
in Africa)!
As well as the rigidity “over time”, there is also a de facto rigidity geographically speaking:
the reluctance to disassociate the two regions (West Africa and Central Africa). Legally and
economically, there is nothing to account for this unwillingness. Be that as it may, in 1994, the same
devaluation rate was applied to both regions, in the name of identical treatment, even though the
fundamental elements differed (the CEMAC countries are almost all oil exporters).
Currently, owing to the drop in oil prices, the CEMAC region is falling ever deeper into crisis. Yet,
it has already begun defending its right to the same fate as the WAEMU region (which, for its part,
fears becoming vulnerable in the case of a devaluation one day of the “CEMAC” franc).
We are therefore dealing with a double taboo: the inviolability of the rate of exchange and
the indivisibility of the two zones. To work properly, should there be a proven and lasting
necessity, fixed exchange rates must be adjustable. This is not the case.
2/ It includes aspects that are pointless and trying for France
France finds itself accused of neo-colonialism even though it is shouldering risks. In Africa,
the prevailing impression is one of unequivocal dependence benefitting only Paris. And yet, with
the no-limits guarantee, this dependency involves a significant element of reciprocity.
Likewise, the holding of African reserves, for which it receives rebukes, does not offer the
advantages that some imagine. These reserves no longer hold any monetary interest for France
owing to its membership in the euro zone. In the event that the convertibility guarantee should

12
come into play, owing to its very construction, these reserves would disappear (the guarantee would
take on the form of an unlimited and unconditional overdraft in the operations account) 11
.
Another inconsistency almost never pointed out: it is generally assumed that French companies
enjoy a special privilege as a result of the fixed rate. In the eyes of some, this advantage constitutes
the “hidden” motive behind France’s commitment. What is overlooked is that any advantage to be
had from the fixed CFA-euro rate also applies to the other euro zone countries (who do not share
in any of the risks).
In short, France alone takes on the financial risk without compensation, receiving hardly any
credit for this in the eyes of Africa, and any commercial benefits to be had are shared with the
entire euro zone! Given the abnormal longevity of its guarantee and the extraordinary nature of the
cooperation tool that it represents, this is, at the very least, a wasted opportunity.
This refers in part to a curious particularity of the franc zone: its management by Paris
without almost any association on the part of the European Union.
3/ The unilateral management of the franc zone, or the pitfalls of one-on-one Franco-
African discussions
These one-on-one talks cannot be taken for granted:
- companies in the euro zone all benefit on an equal basis from the fixed euro-CFA exchange rate;
- the European Union is now the competent authority when it comes to exchange rate agreements
(contrary to a widespread belief in Paris: see the note in the appendix on the “The Franc Zone and
the European Union”);
- the absence of a direct relationship between the African central banks and the ECB is harmful
from the moment a decision is taken by the latter that affects their monetary policy.
When signing the Maastricht Treaty in 1991, France sidestepped the topic of external agreements
such as the franc zone out of fear of weakening the Economic and Monetary Union process. In
1998, its clear qualification for the euro allowed the minister at the time to wrest out, at the request
of the African countries, a conditional endorsement.
Later however, France once again acted as if monetary cooperation in Africa was strictly a national
competence. The benefits of the changeover to the euro, one of the two most important world
currencies over the French franc, were not pointed out to African opinion even though it involved
a notable gain in status for the CFA francs (especially when the trade flows with the European
11 In addition, the rules for payment are dissymetrical, in a way that tends to favor the African central banks. When the
operations account shows a credit balance, a payment is received, up to the limit of the mandatory part of the reserves at
the marginal rate applicable to central bank interventions. This rate is around 100 basis points higher than the open market
rate (even though it concerns demand deposits). Moreover, since 2015, a floor rate has been introduced. In contrast, in the
case of an overdraft, the applicable rate is 1%, then 2% and, above a certain threshold, the one used by the euro monetary
market is applied, without taking into account the inherent risks of the situation. On top of that, there is a foreign exchange
guarantee in SDRs that was introduced as early as 1974, intended to protect the mandatory share of African reserves
against depreciation. This guarantee, which is also dissymmetrical, is only applicable to a credit balance.

13
Union represented the overwhelming majority of external trade in sub-Saharan Africa)12
. The
obligations which the franc zone are subject to under the European Union are rarely spoken of
and are generally underestimated (see the appendix).
France’s go-it-alone policy can be explained by short-term concerns which tend to become
permanent by themselves. The main one involves the criticisms expressed by certain European
countries regarding the franc zone. As they were never associated or informed in detail about this
cooperation, they often express their reservations and at times a tough stance against it (including
in multilateral forums). African officials see in these reservations a possible threat. Thus, they are
naturally inclined to focus on the bilateral framework of relations with France that they are used
to.
Nevertheless, on a long-term basis, this lost opportunity is substantial for the African
monetary unions: they are deprived of the chance to form a relationship with Europe and
of international recognition.
In the eyes of African opinion, the message is strange: how could it not be disturbed at seeing
France, so committed to European economic and monetary union, treat its monetary cooperation
with Africa as a strictly national matter? Because of the off-kilter nature of the one-on-one Franco-
African monetary relationship, it can only further nourish the suspicions regarding Paris.
IV/ THE INFLEXIBILITY OF THE FRANC ZONE MASKS A NUMBER OF WORRYING DEFICIENCIES
1/ The franc zone “as it is” or the three pieces of the puzzle
As can be seen from the work of the Banque de France, the “franc zone” covers three distinct
elements (and in theory divisible): the monetary unions (i), their exchange rate regimes (ii) and
monetary cooperation with France (iii).
(i)The regional monetary unions
Setting aside the Comoros, a Nation-State, the true foundation of the “franc zone” is structured
around its two Monetary Unions, WAEMU and CEMAC. It is at this level that an onerous
transfer of sovereignty takes place, the Member States having renounced their right to issue coins
and agreed to restrictions in terms of the monetary financing of their deficits.
CFA francs are issued by the BCEAO and the BEAC. The latter have been granted a relative degree
of independence, particularly regarding the safe tenure of their monetary policy committee
members. They have access to resources and infrastructure that sets them apart from most local
12 Today still, even with a share of the European market in decline on the African continent, the fact that the CFA
franc is pegged to the euro makes the job of international operators easier. For a global, American or Asian country,
the fixed CFA franc rate is of course not that of the country of origin but it is a familiar rate and a currency risk that
they are used to managing.

14
institutions. Banking supervision commissions that are chaired by the governors of these central
banks have also been set up. The monetary financing of any deficits is governed by each zone13
.
(ii)The exchange rate regime
Its main feature is its fixity based on an exchange rate parity pegged to the euro and by a
certain degree of freedom of capital movement. This is limited to day-to-day operations, a
limitation in line with Article VIII of the IMF’s Articles of Agreement, which was signed by the
monetary unions in 1996. Convertibility only takes effect within the zone.
(iii)The monetary cooperation agreements with France
Essentially, they can be compared to swap arrangements between France and each of the African
central banks. Yet, they are often seen as a sort of constitutive charter of the franc zone, and are
manifested during the formal meetings of the finance ministers. Thus, there is a bit of mythology
surrounding it all, much like the image of the “franc zone” itself. The most interesting aspect
is what it… dissimulates.
2/ The African shortcoming of the franc zone: the weakness of regional integration
The AFCZ have existed a long time without any regional integration. Until the 1990s,
customs tariffs and trade agreements remained national competences in these countries.
Historically, the franc zone did not come about as the result of a “European-type” process
(economic convergence resulting in monetary union). Just like the sterling zone that came
before, it arose under the form of a union of capital transfers.
Franc zone and former sterling zone: shared origins as unions for transferring capital
The objective was to allow for the repatriation of income generated by the colonial economy back to the homeland and, more
generally, the proper functioning of the empire. These unions increased in importance following the loss of the gold standard and
the rise in trade restrictions. They then enacted the freedom to move capital between colonies and the home countries. This
freedom allowed the colonial system to function.
The sterling zone disappeared in the 1970s. The freedom to move capital between the African countries of the franc zone and
France lasted until the beginning of the 1990s. France’s adoption of the freedom of capital movements towards all then led to
its coming to an end as the AFZC did not wish to adopt the latter.
13 The rules are still being fine-tuned. Plans include limiting the refinancing of sovereign debt held by the banks,
which was used as an indirect way of financing the national treasuries.

15
It is not until the 1990s that customs unions and a regional economic coordination were set up and
launched in the franc zone, notably under the impetus of European cooperation. This is how the
WAEMU and CEMAC were born.
This process is invaluable. Yet, a quarter century later, the common market remains unfinished
business in West Africa (region with traditions of exchanges) and it exists for the most part in name
only in Central Africa (forest regions with traditionally limited exchanges and, today, under the
influential sway of oil income).
In West Africa, WAEMU is structured as concentric circles: its members belong to a much larger
entity, ECOWAS (Economic Community of West African States), which stretches from Senegal
to Nigeria and which Morocco has decided to join.
In January 2017, ECOWAS decided to become a customs union. It is a challenge for WAEMU. If
the process is successfully completed, the BCEAO franc might have to face devaluations due to
internal competition within this new common market, a prospect that argues in favor of an
enlargement of WAEMU (or the establishment of a monetary union under ECOWAS).
3/ The franc zone myth, smokescreen to cover the weakness of regional institutions
The “franc zone” myth today conceals not only the weakness of regional integration but also the
limits of the central banks’ authority.
For a wide variety of reasons (relatively young States seeking affirmation, weakness of the regional
framework, doubts with respect to central bankers…), the Member States of the monetary unions
do not demonstrate a great deal of trust in their central banks. Their appointing authority and print
capacity lets them exert pressure on the regional reserves.
This has two consequences:
- the central banks sometimes have the tendency to hide behind the guarantor country in order to
safeguard their authority. They thus contribute to perpetuating the myth of the franc zone, even if
certain States end up sharing their attitude (which allows for the tabling of discussions and local
power relations);
- the monetary unions have not undergone any real process of further integration, even after painful
crises (like what happened in the euro zone following the Greek crisis).
This is one of the motivations behind the “cult of continuity” in the franc zone and the tendency
to leave things left unsaid. Thus, we come full circle with policies that have become taboo to
mention.
Some African officials even see in the symbols of the link with France (especially the name of the
currency and the existence of an operations account) a token of the lasting nature of the guarantee.
This belief places them at right angles to local societies, which are kept outside of any debate as a
result of the closed-off functioning of the monetary institutions.

16
An illustrative example of the limits of the African monetary unions: the textbook case of a
transition to floating exchange rates
The African monetary unions probably could not weather the shock of a switchover to floating exchange rates, a proposal that
is still put forward today by some economists. In reality, the current fixed parity only gives the central banks
limited room for maneuver. They must “provide the currencies” if the Member States present them with CFA. In
addition, their interest rate policies are constrained by the euro zone’s and could not easily remain significantly lower than the
latter’s for a long period of time. This limited room for maneuver can be reconciled… with the current political reality of
monetary unions: a modest delegation of the sovereignty of these monetary unions’ Member States to the central banks.
The floating of rates would destroy this precarious balance. Monetary policy would gain in autonomy, implying
a significant delegation of sovereignty to the central banks. In particular, the latter could exercise much greater freedom in setting
policy interest rates since they would no longer be obliged to take into account those of the euro zone. Very likely, the States
might not view this in a favorable light. If – which would likely be the case – the floating of rates is not “pure”, the thorny
question of interventions would come up, and therefore exchange rate policy. The States would most certainly not be willing to
entrust it to the central banks in such a situation, but they would no longer be able to collectively exercise the right in regional
intergovernmental bodies as that requires a unanimous decision. There is nothing that ensures that the monetary unions could
successfully stand up to such a test.
It is therefore not surprising that along with the suspicions of neocolonialism, it is also conjectured
that the situation exclusively benefits the local elite. However, this latter point has to be qualified
because the recent economic history of another continent has shown that keeping a tight rein on
inflation can actually protect the poorest, as illustrated by a case in Brazil14
.
The fact remains that a sense of ownership of the monetary institutions is not really encouraged
among the African populations. This is not conducive to the maturing of democracy in African
society, nor does it foster peaceful north-south relations. What purpose does it serve to have a
commitment as strong as the monetary guarantee if it makes France an object of resentment?
4/ The coordination of economic policies, a game with three unpredictable players: the
regional bodies, France and the IMF
The regional bodies ensure the coordination of economic policies that is fictitious to some
extent. Certainly, there are rules. They are not however subject to sanctions and the reality of
figures is not always verified. A certain “peer pressure” is at work because countries observe each
other and see the reserves as “common property”. In practice, however, the “coordination” of
14 For more information, see the work focusing on the franc zone carried out by Patrick Guillaumont and Sylviane
Guillaumont-Jeanneney, the founders of CERDI (Center for Studies and Research on International Development,
University of Auvergne, Clermont-Ferrand). See also the opinion written by Pierre Jacquemot and published by the
IRIS on 21 September 2017, Faut-il tuer le franc CFA ? (“Should the CFA franc be killed off?”) (in French)

17
economic policies is the outcome of a game with three players, with a distribution of roles that is
unstable.
France is the second stakeholder in this coordination. It passes on messages through bilateral
channels, either through a regional union or by way of a particular country when their situation
deteriorates. It is motivated by the risk of finding itself having to cover its guarantee and driven by
the wish to see the franc zone, which it regularly champions, achieve the best performances
possible. Its guarantee makes France a sort of policeman of last resort.
Nonetheless, its influence today collides with strict institutional and policy limitations It is exercised
through essentially bilateral relationships (France-franc zone, France-regional unions, France-
African Franc Zone Countries …). By definition, bilateral channels are not the most suited to
holding a frank dialogue on economic policies: it leads to self-censorship owing to the political cost
that inherently comes with strict policy. This is one of the reasons why a multilateral framework is
generally favored in international relations involving dialogue on economic policy.
This Franco-African bilateral dialogue is then held at the level of the finance ministers. The latter
operate of course under the authority of the heads of state (whose political clout cannot be
overemphasized in Africa). The absence of regular encounters between the French Head of State
and his African counterparts is conspicuously felt in this area. Only a dialogue with the former has
the potential to induce his African peers to truly take ownership of the conclusions of any talks
with France.
Theoretically, the French Minister of Finance can use the threat of a withdrawal of the guarantee
to ensure that he is heard; but this weapon of last resort should only be used in the case of a serious
breakdown, not to give life to a permanent coordination and prevent imbalances.
The third actor is the IMF. According to its Articles of Agreement, its mission is certainly not to
intervene in countries not undergoing, strictly speaking, balance of payment difficulties (owing to
the convertibility guarantee). A short time ago, France allocated bilateral adjustment assistance
unilaterally. Since 1993, aware of the limits in its ability to exercise pressure, it now works to help
let the IMF take the lead15
.
There is still some ambiguity in this area since only a need for financing, and thus deteriorating
circumstances, allows this lever to fully function. Considered nonetheless as essential, the IMF is
not involved in any of the Zone’s bodies.
The coordination is therefore lopsided. It is therefore not surprising that there are huge
shortcomings. One of them is the rapid increase, in a way that is sometimes completely out of
control, since 2010, of the external debt of the African Franc Zone countries. This major variable
has evaded scrutiny. The resumption of this circle of debt represents a development with no current
solution and an uncontrolled risk. It is therefore a significant nuance in terms of the stability of the
Zone’s gains. Despite the lessons of the past, it shows the limits of the coordination.
15 The Abidjan doctrine, announced in May 1993, stated that French adjustment assistance would no longer be
allocated to any country without an IMF agreement. This gives the Funds a lever to assert its conditionalities.

18
Overall, the myth of the franc zone conceals the frailty of the channels in exercising any
influence on the part of the … guarantor. At the same time, this myth tends to discourage the
African countries from pursuing a strengthened economic coordination, the only forward-
looking solution for them and the sole way in which to ensure the soundness of CFA francs in the
long-term.
The appearance, like what happened in the 1980s, of early warning signs of a debt crisis, which
would be socially painful for the African countries, costly in budget terms for France and dangerous
for the exchange rate, calls for action to be taken before it is too late.

19
PART TWO: ONE LITMUS TEST, TWO SCENARIOS
The new five-year period in France coincides with the ECOWAS’ decision to establish a
customs union. This propitious concurrence can be used to remedy the deficiencies in the franc
zone. Failing that, it is not at all certain that another opportunity will present itself (apart from a
crisis which would make any reform much more complex). Thus, a sort of “moment of truth” has
arrived for the monetary cooperation with Africa. There are two possible scenarios.
I/ SCENARIO I: A REFORM TARGETING THE SYMBOLS
The symbols of the link to France are all subjects that allow for a change in the image of
the CFA franc at little cost. Doing away with the essential elements of these symbols (name of
the currency, operations account, presence of French on the councils of administration of the
African central banks…) would clearly signal a step forward towards “African monetary
independence”.
The AFZC do not necessarily all wish to exercise such an option (possibly seen as a loosening of
the link with France). But it would be tricky for them to refuse given how much it appears to be a
unilateral advantage for the African side. If one country were to take the initiative, it would be
difficult for the others to stand in opposition.
Such a movement would be in line with the previous adjustments to the franc zone, which showed
a clear preference for opting for the simplest solutions.
This movement would seem consistent with the regional monetary prospects taking shape today
in West Africa, with the possibility of enlarging the WAEMU16
.
The “targeting of the symbols” scenario thus offers three advantages: the image of African
emancipation, simplicity and a “signal” aimed at the countries likely to join WAEMU. France could
possibly be tempted to go along:
- the operations account is not vital for Paris. As has been seen, as soon as the guarantee comes
into play, the African reserves, because of how they are set up, would no longer be a factor;
- having abandoned the franc, it cannot object to a change in name of the CFA;
16
For a long time, the blueprint prescribed for all of West Africa was for a preliminary monetary union made up of
ECOWAS countries outside of the franc zone, which would then move closer to WAEMU.
This plan seems to have been abandoned, for two reasons: the overwhelming weight of Nigeria made any monetary
union of which it would not be the pilot unrealistic, and the overpowering clout of its oil economy sets it apart from
the rest of West Africa. The current blueprint under consideration provides for a monetary union of all the West
African countries without Nigeria (which can in any case forgo a monetary union). The WAEMU could possibly
serve as the crucible of such a union, which would then go through its own enlargement to include, if appropriate,
Ghana, the second largest economy in the region after Nigeria.

20
- participation in the governance is a more sensitive matter because any participation would involve
gaining access to information regarding the monetary management of African central banks.
Moreover, this participation has already been substantially reduced17
. There still remains however
a small amount of room for maneuver to decrease it further without eliminating it completely.
Doing away with these symbols might be viewed by Paris as a way to make an inexpensive gesture
with an added moral benefit thrown in.
However, this scenario would leave most of the weaknesses of the franc zone in place.
(i) Any change to the exchange parity would become even more problematic. In 1994,
French influence was key to the decision being passed.
(ii) The smaller countries could come out weaker at the end of this process, which would
most likely be imposed by the bigger countries in the Zone and, given the reduced presence of
France, these larger players could more easily dictate policy.
(iii) This would undoubtedly represent a singular opportunity to modernize the CFA franc
that, once lost, may not come again.
(iv) The prospects for enlargement could turn into a fool’s bargain. Any enlargement requires
prior European authorization, a fact that many African leaders are unaware of. Assuming that it
comes to fruition, the French guarantee would be greatly weakened in the long term if the regional
economic coordination is not strengthened. The enlargement would make it financially more
significant (Ghana alone has a greater population than the Ivory Coast and its population might
exceed 50 million people by 2050) and politically more… uncertain (French public opinion might
not understand why such a risk is being taken for non-francophone countries if the opportunities
are not clearly explained).
In hindsight, this scenario might be viewed as a lost opportunity.
II/ SCENARIO II: AN IN-DEPTH REFORM
This scenario would consist of exercising French prerogatives to strengthen and modernize
the franc zone.
This would imply a strong initiative. France would need to accept a review of its prerogatives in
return for the launch of a process to deepen regional integration and to increase the international
community’s support of African monetary unions.
Three basic conditions must be met to ensure that the proper historic importance of such
an initiative is not lost: wide-ranging emancipation that can go forward unchallenged, specific
17 Within the BCEAO, France holds one of eight seats on the Council of Administration and one of fifteen seats on
the Monetary Policy Committee. Within the BEAC, it holds two of fourteen seats on the Council and on the
Monetary Policy Committee. There may be grounds for considering that its place should be limited to seats only on
the monetary policy committees, which decides to a certain extent on the issuing of the currency guaranteed by
France.

21
modernizing goals and a timetable that includes a period of increased protection to avoid any
speculation.
1/ The components of emancipation
France could formally confirm that the name of the currency and the location for the printing
of banknotes are sovereign decisions to be taken by the African Franc Zone Countries. It would
pledge to agree with their opinion, whatever it may be, at all times. This symbolic gesture should
not create any difficulties. It would be appreciated.
In order to not expose itself to accusations of this being a mere cosmetic reform, a more decisive
transformation is needed. The best option would consist of getting the African side to open up to
the possibility of choosing a basket of currencies, instead of the euro alone, to anchor their
monetary union.
This revolutionary option (in light of the franc zone and its history) would create a considerable
surprise effect. It would be mutually beneficial without the associated risks that might initially be
conjectured.
The raw materials that the African countries specialize in are for the most part traded in dollars.
Having a currency that is pegged exclusively to the euro implies additional uncertainties. In concrete
terms, a decrease in the price of basic commodities combined with a drop in the dollar’s strength
against the euro can cause them to suffer a triple whammy (loss of income from the basic
commodities, which is made worse by the dollar’s decline as well as the handicap involved in
exporting processed products). An African decision to partially introduce the dollar would decrease
this risk for the countries concerned. More generally speaking, it would also reduce their exposure
to euro-dollar fluctuations18
.
This change would be compatible with France’s interests as the guarantor. Indeed, the risk
of a misalignment in the exchange rate would diminish and, with it, the risks of exposure under the
guarantee. Nevertheless, this guarantee would still act as a lighting rod to protect the partner
countries from currency speculation, which is often ruthless in the developing world.
The political inconvenience for Paris –possibly being subject to criticisms for favoring currencies
other than the euro – could be handled. These currencies would not have to be chosen by France,
which has a long history involving the notion of a currency basket (Ecu, SDRs, among others …).
It would not be difficult to secure a certain preference for the euro from the African monetary
unions for an extended period of time.
18 This is the conclusion that was reached by Morocco in 2017. As the largest holder of phosphate reserves in the
world, it managed to increase its revenue from this raw material by modernizing its Cherifian Phosphates Office
(OCP). Having long pegged its currency, the dirham, to a currency basket, it recently strengthened the share of the
dollar within this basket (60% euro and 40% dollar, compared to 80-20 previously). This example demonstrates that
it must be remembered that the adoption of a currency basket should not be confused with currency “flotation”. It
goes together with fixity, which then operates according to an average currency value, one that is weighted but just as
precise as in the case of an anchor made up of a single currency.

22
At the same time, a long-term commitment could be asked of the monetary unions, which would
involve placing a significant share of their reserves in euro, an elegant solution with respect to the
Europeans and with regard to the Africans as well (who would then seem to appear to be
supporting the euro instead of being dependent on it).
2/ The keys to modernizing the regional monetary unions
The presence of French representatives on the bodies of the African central banks and the
existence of the operations account are felt in different ways. Even so, the former avoid remaining
among themselves and the latter are elements of transparency. They should be replaced by formulas
which take these types of concerns into account.
France could accept the reassigning of the seats it holds to independent international
administrators19
. The latter would be chosen by the African heads of state on the basis of a
proposal drawn up by an international panel (for example: governors of the African central banks,
governor of the Banque de France, president of the ECB).
France could also accept the replacement of the operations account with an account at the
BIS20
.
The composition of the basket of currencies, an African decision, should be subject to a
decision-making rule in each regional union that takes realities into account (reinforced majority
and not unanimity of the States), in cooperation with France (nihil obstat to the basket with respect
to the exercise of its guarantee). This would also be the ideal opportunity to review decision-making
mechanisms with regard to exchange rates21
, without drawing any undue attention to the matter, a
potential source of speculation.
It is essential that the economic coordination within the regional unions be strengthened. The
example of the euro zone is, among others, one of the sources of inspiration available to Africans.
The crisis that erupted in this area in 2009 is proof, if any were needed, that there is often a tendency
to underestimate the need for convergence and coordination that is inherent in monetary unions.
A tangible strengthening would be based on the following elements: modernization of the
convergence criteria, introduction (in time but in accordance with a predetermined date) of
sanctions for non-compliance of essential commitments and transparency of State accounts that is
to be verified internationally (independent statistical authority that is also qualified in terms of
public debt). However, the criteria content and monitoring control methods should first and
foremost be conceived in accordance with regional realities, while also taking development issues
and financing into account.
19 The idea of independent administrators has been espoused by Patrick Guillaumont (Quel avenir pour les francs CFA ?,
FERDI, 2017)
20 Bank for International Settlements. Solution mentioned by Pierre Jacquemot (document cited)
21 There are two possible procedures for taking decisions regarding exchange rates: a reinforced majority similar to
what is used in determining the composition of the basket of currencies or, if necessary, a reverse majority voting
rule, with a trigger that is linked to real effective exchange rates.

23
A process to enlarge the WAEMU could be considered. It is highly desirable. Such a prospect
would be a strong force of mobilization for the countries concerned, the African continent and the
lenders. Where appropriate, it would be tangible proof that the divide between French-speaking
and English-speaking Africa (and consequently “FrancAfrica”) could be overcome.
Innovative approaches should be used to relaunch the process of regional integration,
drawing inspiration from the European example during the 1990s, being careful however to not be
bound by an overly strict adherence (see the informal integration approaches favored in Asia and
the example of OHADA22
in Africa). The Agence Française de Développement (AFD)23
today has
at its disposal an incomparable wealth of information regarding Africa and enjoys an excellent
reputation among the development financing institutions. Its expertise and initiatives could be
called on, providing benefits in this area as well as others.
The political impact of these changes might be significant in Africa and in the international
community. Such momentum should definitely be seized on to mobilize the national States and
lenders to provide support to the regions concerned: financing of the major infrastructure projects,
promoting further regional integration and supporting macroeconomic reforms.
This last point must not be overlooked. Strengthening the economic coordination will be a
challenging process. To convince the regions to commit to this process, it is essential that lenders
award a sort of “bonus” for efforts made locally.
As for the institutions of the franc zone, the following changes would be introduced: an
annual summit of monetary cooperation with Africa would be organized, the biannual meeting of
ministers would become the Ministerial meeting on monetary cooperation with Africa, the
secretariat of the franc zone would become the secretariat of monetary cooperation with Africa.
These two bodies could, by mutual agreement, open up its proceedings to observers from the
European Union and the African Union.
Perhaps in time, France might become open to taking steps in the future towards the creation of
pan-African monetary institutions (initially in the form of meetings of data exchange and
benchmarking of African currencies, in time through the creation of an African monetary fund).
France might study the means by which it could enhance its guarantee in calculating its ODA.
Enlargement: the representative case of Ghana
In the context of the monetary debate within ECOWAS, Ghana appears to be at the forefront. Bringing this country closer to
WAEMU should therefore be considered. Having it join this monetary union is now a real possibility. Such an event would
drastically change the situation. It would argue in favor of an extensive overhaul of the WAEMU, for several reasons.
Ghana’s weight in the region is considerable: its GDP exceeds that of any other WAEMU member, including the Ivory Coast
(respectively a GDP of 42 and 36 billion USD). However, the challenges of convergence would be exacerbated by differences
in macroeconomic policy. Ghana has used its budgetary policy disproportionately with respect to its franc zone neighbors. Its
22 Organization for the Harmonization of Business Law in Africa (OHADA)
23 French Development Agency

24
inflation rate has usually been higher. Its currency, the cedi, has regularly depreciated, but a stabilization of its exchange
rate is being pursued.
Economically speaking, establishing closer ties with its neighbors, first and foremost with the Ivory
Coast, makes good sense in terms of development. Politically, it would be breaking new ground given the country’s
anglophone and pan-Africanist traditions.
Only a greatly strengthened WAEMU might be able to simultaneously attract Ghana and respond to
the challenges of its joining. A transition period should most likely be planned to progressively link the fixed exchange
rates and to gradually set up the appropriate convergence mechanisms. Such a partnership would send out a clear
message of change and renewal.
3/ The conditions of a successful transition
The success of any overhaul of the franc zone is conditional upon the fulfilment of three
conditions.
a/a dialogue with African authorities marked by trust
France has already declared, at the highest levels, that it is open to any proposals coming from its
African partners. It must confirm that there is room for major changes without calling into question
its guarantee. It must not be afraid to open up the debate in order to remove the inevitable
inhibitions that might impede any African initiatives. The terms and conditions will then have to
be discussed formally, while being mindful of the inescapable technical dimension of the issues.
In particular, the consultation must operate on three levels: the level of the governors and economic
and monetary experts, the level of the ministers and governments and the level of the heads of
State (who could be invited to a first summit on the future of monetary cooperation with Africa).
A diplomatic campaign aimed at explaining this process to the other countries and African regional
groups would be welcome.
b/ communications emphasizing the strengthening of the currency
Any announcement regarding reforms is likely to trigger speculation. Great care must
therefore be taken in preparing any announcement. In substance, the essential message should be
that it is not a question of doing away with the pillar of the French guarantee, but to bolster it with
a pillar made up of more solid African regimes. The French guarantee must therefore be formally
confirmed and the message to be disseminated is one of strengthening the BCEAO and BEAC
francs.
The strengthening of economic coordination and regional integration are the key requirements
for any reform24
. Exacting requirements and a high degree of plausibility with respect to the
implementation are needed.
24 The rapid adoption of a basket of currencies is a distinct challenge. It is important to offer leeway in this regard to
the African side to make it clear that there is no longer any obligation inherited from the colonial link. Then, the
choice of a timetable, terms and conditions will fall to them.

25
While it does not have the same responsibilities as the African States in managing their day-to-day
relations with their civil societies, this does not mean that France should just accept continual
misunderstandings regarding the nature of its cooperation. General Assemblies on monetary
cooperation with Africa, to be organized at the time of the reform, would facilitate meaningful
debates with non-state actors (representatives from academic circles, economic and social interest
groups, civil society). Inter-African comparisons should be encouraged (for example, in the form
of symposiums focusing on the different African monetary regimes). This might be helpful in the
discussion of monetary issues, allowing it to go beyond the case of a CFA franc inherited from the
past and, in this way, retaking control and reframing it as their own.
c/ methodical international and European support
Legally, France is obliged to inform the European Union of any major reform projects as well as
any enlargement of the zone covered by its guarantee. Besides procedural concerns, it must work
on associating its European partners to a greater extent and on promoting cooperation between
the ECB and the African central banks.
CONCLUSION
Along with the support provided in the areas of security and defense to a number of African States,
its monetary support is the pillar that sets France’s relationship with Africa apart from that of the
other industrialized countries.
It is not mere coincidence that these two areas touch on sovereign issues: Africa can be
differentiated from the rest of the world in light of its difficulties in “transitioning to a State”, a
political construct that did not form part of its traditions prior to colonization, and it is continually
colliding with persisting tribal traditions, but is also inexorably heeding the call of the Westphalian
order of the world. The fact that France, more so than others, has managed to stand by Africa in
spite of this difficult terrain is a key advantage in terms of its cooperation and the reach of its
influence.
However, issues touching upon sovereignty require that the cooperation remain above all
suspicion. This implies the showing of restraint, unflagging efforts to empower local stakeholders
and a transparent framework for intervention, discussed with the rest of the international
community. Regarding political and military matters, the sloughing off has progressively been
carried out since 1989, owing to the sheer tenacity of Paris’ political will.
All things being equal, the same forward-thinking and strong will are now required in the monetary
domain. The future of this cooperation and its contribution to Africa depend on it.

26
MAIN BIBLIOGRAPHICAL REFERENCES
Sylviane Guillaumont Jeanneney, Régimes de change et développement en Afrique, Economica, Paris, 2015
Sylviane Guillaumont Jeanneney and Patrick Guillaumont, Quel avenir pour les francs CFA ? FERDI working
document, May 2017
Nicolas Agbohou, Le franc CFA et l’euro contre l’Afrique, Editions Solidarité mondiale, Paris, 2016
Sortir l’Afrique de la servitude monétaire, A qui profite le franc CFA ? (collective work compiled under the guidance
of Kako Nubukpo, Martial Ze Belinga, Bruno Tinel, Demba Moussa Dembele), La dispute, Paris, 2017
Dominique Pilhon, Les taux de change, Collection Repères, Paris, 2017.
Benoît Claveranne, La Zone franc, Economica, Paris, 2005
Serge Michailof, Africanistan, L’Afrique en crise va-t-elle se retrouver dans nos banlieues ? Fayard, Paris, 2015

27
APPENDICES
APPENDIX I: CONTEXT FOR THE DEBATE ON FIXED OR FLEXIBLE EXCHANGE RATES IN AFRICA
A free-floating rate is rarely practicable in sub-Saharan Africa
A “self-regulating” currency market requires the existence of open and well-developed financial markets.
Only the financial markets present short run price elasticities that allow full play of the law of supply and
demand (day-to-day operations are not immediately impacted by exchange rates, which gives rise to
hysteresis effects). Yet, the markets in sub-Saharan Africa, with the exception of South Africa, are neither
developed nor open. A free-floating rate would therefore raise the risks, not only of failure to achieve its
objectives but of becoming a destabilizing element.
Variations in the terms of trade occur on a large scale
The riches of Africa in raw materials, combined with the low level of economic diversification make it a
price taker in international trade. It is therefore subject to ample and exogenous variations in the terms of
trade. Even though this reality may take on different forms (accentuated in the case of oil, reduced for
certain agricultural products), it is a constant factor. A priori, this does not argue in favor of a rigidity in
exchange rates.
Although it is not the answer in the short term to a drop in commodity prices, depreciation may be
what is needed in the long term
A country facing a sharp decline in its export earnings will not overcome this problem with a devaluation.
Depreciation will have very little impact on the volume of exports whose prices are fixed independently of
the exchange rate. It will of course drive up the cost of imports, but at the cost of a recessive effect in
addition to the impact of the fall in earnings.
On the other hand, in the case of a lasting decline in the terms of trade, it may prove necessary to let the
fixed exchange rate drop as part of a correction strategy to redress the balance of payments.
“Intermediary” regimes are widespread in Africa
The fixity of exchange rates has declined in sub-Saharan Africa. And yet, a free-floating rate has not taken
its place, except in South Africa. Intermediary regimes are therefore the ones that have stepped into the
void. Without going completely against these trends, the CFA franc stands clearly apart.
The effects of exchange rates on poverty are not well-known
According to Sylviane Guillaumont Jeanneney and Patrick Guillaumont, there is a great deal of literature
that attests to the benefits of keeping inflation in check (promoted through a system of fixed rates) for the
most disadvantaged groups, who are not in a position to protect their assets in the face of rapid currency
depreciation.
However, currency depreciation can help poor farmers if it stimulates growth and if their output is exported,
increasing their value over non-tradeable goods. This is generally the case in the African countryside (unlike
in China where agricultural products are usually sold on the domestic market and suffer under any currency
depreciation, which increases input but not earnings).
Not much is known about the effects of depreciation on urban poverty, which has become widespread in
Africa. According to Sylviane Guillaumont-Jeanneney, there has not been any academic research on this
topic in 20 years.

28
APPENDIX II: INFLATION AND GROWTH: LONG SERIES OF COMPARABLE DATA IN AFRICA
(Source: Banque de France)

29
APPENDIX III: THE FRANC ZONE AND THE EUROPEAN UNION: RULES OFTEN UNACKNOWLEDGED
Summary: France was authorized to maintain in force its franc zone agreements but prior authorization
from the European Union Council is required if the nature or the scope of the French guarantee are affected
or in the case of a structural change.
I/ During the changeover to the euro, a French argument was only accepted in part
The question of the franc zone agreements was not raised by France during the Maastricht Treaty
negotiations, mainly from fear regarding German reservations and concerns that achieving economic and
monetary union would be made more difficult. This omission was redressed in extremis, in 1998, on the eve
of the changeover to the euro and with the help of France’s favorable situation in light of its clear
qualification.
At the time, France invoked the budgetary nature (not monetary) of the support given to the franc zone. In
addition, it emphasized that the size of the economies in question limited the risks of any macroeconomic
impact for the European Union.
The Union’s decision was issued by the Council of Ministers on 23 November 1998 (less than six weeks
before the changeover to the euro…!). It did not quite accept the entire French line of reasoning, which
tended to present the monetary cooperation of the franc zone as an area of national competence.
The European decision did of course take note of the budgetary financing of the French guarantee, which
ensured that the common monetary policy would not be affected. Nevertheless, it did recall that exchange
rate policy was now an EU competence. Consequently, France could continue to manage the franc zone
agreements but with EU authorization and using a framework defined by this authorization.
II/ France was authorized to manage the franc zone agreements and to unilaterally conduct
relations with the African countries concerned
The day-to-day management of the cooperation and relations with the African States of the franc zone were
not really affected: France was authorized to handle it directly. This explains the impression of uninterrupted
continuity which prevailed, particularly in franc zone meetings where EU competence was rarely mentioned.
In this regard, the European Institutions (Commission, ECB and Economic and Financial Committee) were
simply supposed to be “kept regularly informed”.
In the specific case of a change to the fixed rate (viewed as falling under the management of the cooperation
since the exchange rate was fixed but not irrevocable), it is required that advance notice be given to the
European Union’s Economic and Financial Committee.
III/ Any change to the agreements requires a decision to be taken beforehand by the European
Union Council
Authorization was given on the basis of the existing agreements. Consequently, they cannot be modified
without the agreement of the European Union.
In this respect, two aspects are explicitly referred to in the decision: any change to the franc zone’s perimeter
(thus, any enlargement, a fact which France’s African partners are often unaware of) and any modification
of the provisions relating to France’s guarantee of the convertibility of the CFA franc.
In this case, the procedure requires a European Union Council decision to be taken based on a Commission
recommendation and after consultation of the ECB.

30
IV/ The failure to highlight the changeover to the euro was a lost opportunity
Owing to circumstantial reasons, this changeover took place very quietly. Since that time, France has not
seized the opportunity of associating its European partners (“providing information on a regular basis” to
the European bodies on the functioning of the Zone as stipulated in the 1998 decision could have provided
the ideal opportunity).
Furthermore, the many advantages of changing over to the euro were not highlighted by France to influence
African public opinion for political gain. Yet, the elevation in status for the CFA francs was notable.
With the French franc, they were pegged to a second-tier currency that was positioned below the dollar and
other strong currencies (deutschmark, yen). With the euro, the CFA francs are pegged to one of the two
most important international currencies under the framework of an international system that has itself been
rebalanced.
In addition to the greater area in Europe suddenly opened up to the franc zone and the enduring commercial
ties with this huge market25, there are two elements which should be emphasized.
1/ The fixed exchange rate is not only interesting for European companies. It is for most operators
all around the world: they are very familiar with euro currency risks. It is a currency risk involving a major
currency, which is nothing like the currency exchange risks associated with dealing with other African
currencies or even the risks involving the French franc (cf. 30% depreciation against the deutschmark
between 1980 and 1986). It is therefore an advantage in terms of the attractiveness and the international
insertion of the countries concerned.
2/ The “dependency” must be considered in comparison with the currencies of other developing
countries. Between 2014 and 2016, the currencies of countries as large as Egypt, Brazil and Russia lost a
great deal of their value as a result of external causes (Federal Reserve System policy and commodity prices).
These depreciations are signs of the monetary dependency of countries that do not belong to the circle of
developed countries and other major economic powers (China), and who are the ones most vulnerable to
speculation.
This puts the relative “dependency” of the franc zone somewhat into perspective when the anchor is
sufficiently large enough and stable: as long as a dependent relationship appears inevitable, is it not better
to reap the advantages, in compensation, of this stability (the case of the CFA franc, mainly as a result of
the external support it enjoys and which protects their markets)?
25 In 2014, WAEMU exports were respectively 37.9% to Europe, 39.3% to Africa, 8% to the Americas and 13.2% to
Asia. Origin of imports: 39.1% from Europe, 19.8% from Africa, 11.4% from the Americas and 29.4% from Asia
(Source: IMF).

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