The West African monetary union announced landmark economic reforms on Saturday, including the renaming of its common currency the CFA Franc to the Eco, and a weakening of financial ties to former colonial master Paris.
The CFA economic bloc will keep its new currency pegged to the euro, but will no longer keep 50% of their reserves in the French Treasury, Ivory Coast’s President Alassane Ouattara said during a press conference in the capital Abidjan.
France will also no longer have a representative on the board of West Africa’s central bank, Ouattara said during a two-day visit by French President Emmanuel Macron.
Ouattara called it a “historic day for West Africa,” and a landmark moment in regional integration:
“This decision shows our determination to create an integrated regional market, dynamic and a source of prosperity for us and for future generations,” Ouattara said.
West Africa’s CFA Franc, which stands for the “Communaute Financiere Africaine” (African Financial Community) was created by former French President Charles De Gaulle in 1945. The economic system is a relic of the region’s colonial past, Macron said.
“These reforms put an end to a system that has maybe played out its role and will hopefully lead to greater regional economic mobility and stability,” Macron said.
Macron signalled that France will continue to play a role in the Eco by ‘guaranteeing its economic stability.’
The new currency will be used in the economic bloc of eight West African countries, including Benin, Burkina Faso, Guinea Bissau, Ivory Coast, Mali, Niger, Senegal and Togo, who have a combined GDP of around $108.5bn, and population of 101.8m, according to World Bank figures.
ECOWAS plans to launch the Eco in 15 countries in 2020, but may hit hurdles in ensuring all countries meet the required criteria by then.
The CFA Franc will remain in use in a six-nation economic zone in Central Africa consisting of former colonies Cameroon, Chad, Central African Republic, Congo Republic and Gabon. It will also be used in Equatorial Guinea.
There are two ways to describe the decision to dissolve the CFA franc, said François Heisbourg, a senior advisor for Europe at UK think-tank the International Institute for Strategic Studies.
The first being that “West Africa loses a colonial relic and will now enjoy the benefits of monetary independence,” he wrote on Twitter. “[The second is that] Africa loses its European-backed version of the euro and will no longer enjoy the benefits of monetary stability.”
IMF chief Kristalina Georgieva disagreed, saying she welcomed the currency reforms that retain key elements of stability, while the IMF stands ready to support regional authorities in implementing “this important initiative.”
“The announced measures build on WAEMU’s [West African Economic and Monetary Union] proven track record in the conduct of monetary policy and external reserve management. In recent years, the WAEMU has recorded low inflation and high economic growth, the fiscal situation has improved, and the level of foreign exchange reserves has increased,” she said in a statement on Saturday.
“The reforms also maintain key elements of stability that have served the region well, including the fixed exchange rate with the euro and the guarantee of unlimited convertibility provided by France.”
Under the previous system, the French Ministry of Finance invested the 50% of reserves deposited in the French treasury in the French stock exchange with unknown returns, says Former African Union Ambassador to the US, Arikana Chihombori-Quao, an ardent campaigner for France to end its “colonial relationship” with CFA zone West African countries.
“We are giving France over $500bn a year, and no-one is talking about it,” Chihombori-Quao said in a video posted to Twitter in April 2019. She was dismissed from her position as AU Ambassador to the US in October 2019.
H.E. Dr Arikana Chihombori Quao
When colonizers left Africa (1958 – 1961)
France made Francophone countries sign a PACT to continue colonization
France said we built schools, roads, etc, it’s colonial debt you’ll pay into perpetuity
France takes over $500bn yearly from Africa pic.twitter.com/MnlZwfWnrg
— Izwe Lethu (@LandNoli) April 13, 2019