The CFA franc, short for “Franc des Colonies Françaises d’Afrique” (Franc of the French Colonies of Africa), is a currency created in 1945 by France for its African colonies. Today, it is still used by 14 African countries divided into two monetary zones: the West African Economic and Monetary Union (WAEMU), which includes eight West African states, and the Central African Economic and Monetary Community (CEMAC), composed of six Central African countries. Together, these countries form the “franc zone,” whose currency is directly tied to the euro and benefits from an unlimited convertibility guarantee by the French Treasury.
A Controversial Currency
Despite this apparent stability, the CFA franc has long been a source of discord. Many African economists argue that this currency hinders the economic development of the countries that use it. They particularly criticize the fact that these countries’ foreign exchange reserves must be deposited in a special account at the French Treasury, depriving them of independent control over their currencies. Indeed, each country in the franc zone is required to place 50% of its foreign exchange reserves in this account, a rule that severely limits their capacity to enact independent monetary policies or manage economic crises.
The critics go further, asserting that the CFA franc keeps African countries in a dependent relationship with France. They argue that this currency benefits only a small African elite close to power, as well as French and multinational companies that find the stability of this currency favorable for their investments. Conversely, for local economies, the CFA franc represents a major obstacle to diversification, industrialization, and competitiveness in the global market.
A Double-Edged Stability
One of the arguments made by proponents of the CFA franc is the stability it offers African economies. Thanks to its peg to the euro, the CFA franc benefits from the credibility of the European currency, thus providing protection against inflation, which can ravage other African countries with more volatile national currencies. However, this same stability prevents the franc zone countries from devaluing their currency to make their exports more competitive, a strategy commonly used by many nations to stimulate growth.
Moreover, the fixed exchange rate between the CFA franc and the euro means that fluctuations in the euro have a direct impact on African economies, without these countries having the ability to respond by adjusting their own currency. For instance, when the euro appreciates against the dollar, it makes African exports more expensive and therefore less competitive in international markets.
Reform Promises That Remain Unfulfilled
Faced with repeated criticisms and the rise of Pan-African movements calling for the end of the CFA franc, French authorities have, on several occasions, made statements suggesting that reforms to the system are possible. In 2010, Christine Lagarde, then French Minister of the Economy, said, “It is not up to France to decide whether the current system is appropriate or not.” This stance was echoed by Michel Sapin in 2016, who declared, “It is up to the affected states to take responsibility.”
Despite these declarations, concrete reforms have been rare, and attempts to exit the CFA franc system often meet with internal and external resistance. In 2019, a symbolic step forward seemed to have been made with the announcement by Ivorian President Alassane Ouattara and French President Emmanuel Macron of the creation of the ECO, a new currency to replace the CFA franc in West Africa. However, this project has remained largely dormant, primarily due to disagreements among regional countries and pressure from former European partners concerned about maintaining economic stability in their former colonies.
A Thwarted Monetary Independence
Why, then, is it so difficult for African countries in the franc zone to exit this system? The answer lies in the complexity of the historical, economic, and geopolitical ties that bind these countries to France. The CFA franc is not only an economic tool but also a lever of power for France in Africa, allowing it to maintain a dominant influence in its former colonies. In addition to its indirect control over foreign exchange reserves, France continues to participate in the decision-making bodies of the central banks governing the franc zone, further limiting the African states’ room for maneuver.
The continuation of the CFA franc also benefits a segment of the African elites, who see it as a guarantee of stability for their own economic interests. These elites, often close to the corridors of power, play a key role in perpetuating the system, to the detriment of the majority of the population, which bears the brunt of this monetary dependence.
An Uncertain Future
As the debates surrounding the CFA franc intensify, the future of this currency remains uncertain. While some voices, notably those of young African economists and activists, call for a radical break with the system, others advocate a more gradual approach, fearing that a sudden exit from the CFA franc could trigger significant economic disruptions.
Nevertheless, as long as the issue of monetary sovereignty is not fully addressed, it is unlikely that African countries will truly escape the CFA franc trap. This is no longer a matter of mere cosmetic reforms but rather a true economic emancipation that would allow them to fully control their own destiny. For now, France seems to play the role of a benevolent observer while maintaining a firm grip on the mechanisms governing this controversial currency.
