A shameful anniversary: The CFA franc at 80

On December 25 and 26, 1945, the French provisional government declared the CFA franc, the franc of the French colonies in Africa, to the newly formed International Monetary Fund (IMF). This new unit of account was to circulate throughout the French empire in sub-Saharan Africa, including Madagascar and Réunion.

Unlike England, post-war France chose to give the currencies of its colonies a strong external value: when it was created, 1 CFA franc exchanged for 1.70 metropolitan francs. By 1948, it took two metropolitan francs to obtain one CFA franc. A “strong” currency of this type acts as a subsidy on imports and a tax on exports.

During the war, trade relations between the metropole and its African colonies had become strained. The French economy, which was in dire straits and uncompetitive, needed such a monetary arrangement to regain its market share and benefit from captive markets. The CFA franc was thus created with a view to involving the colonies in the economic reconstruction of the metropole and also to give the latter more room for maneuver in a world dominated by the hegemony of the US dollar. With the creation of the franc zone, France was able to purchase imports from its empire on credit, without spending any dollars, and to use its colonies’ dollar export earnings for its own account. This “exorbitant privilege” helped to prop up the value of the franc, which was devalued ten times between 1948 and 1986.

Starting in the 1960s, with the process of decolonization, colonial currency zones on the continent were gradually dismantled. Only the franc zone survived in the rigor of its coloniality. Co-opting elites, repressing dissident leaders, imposing various sanctions, intimidation, blackmail, and assassinations: these are the “idyllic methods” that Paris has used to maintain the historical anomaly and moral incongruity that the CFA franc has become over the decades.

A colonial currency and an obstacle to development

Eight decades after the creation of the CFA franc, there has been no significant institutional change apart from the relocation of the headquarters Bank of Central African States (BEAC) and the BCEAO to Yaoundé and Dakar and the replacement of the franc by the euro as the anchor currency. The original management principles, and economic orientation remain in place. The so-called reform of the West African CFA franc by Macron and Ouattara in 2019-2020 is a sleight of hand that has never fooled vigilant analysts: the legal tutelage of the French Treasury, free transfer of capital and incomes, and fixed parity – and therefore the obligation to accumulate foreign exchange reserves in euros, often invested in European sovereign debt securities – have not disappeared.

Some diehards continue to trumpet that the “foreign exchange reserves” of the West African CFA countries have been “repatriated” by the French Treasury without ever indicating how accounting entries could ever be “repatriated” anywhere. Euro deposits can never “leave” the (European) banking system that issued them! This is true of any currency. One might have expected a debate on the restitution of the monetary gold reserves of West African CFA countries held by the Banque de France. On this matter, there is only silence. Faced with the false claim that the CFA franc has become an African currency, one need only recall the illegal financial sanctions imposed on certain dissident leaders by the BCEAO and the WAMU (West African Monetary Union) under orders from the French Treasury: Côte d’Ivoire under Laurent Gbagbo, Mali under Assimi Goïta, and Niger under Abdourahmane Tiani. Under French auspices, these three countries have seen their governments illegally denied access to their own accounts with the BCEAO and the domestic financial system.

In other words, eight decades later, the two central banks issuing the CFA franc have still not been able to implement monetary policy independently of the technical and legal supervision of the former colonial power. While the Seychelles, with a population of 121,000, can manage its own national currency with a floating exchange rate without the need for external supervision, the countries of the African franc zone, with a population of over 220 million, are still forced to behave in 2025 as if they did not have bankers, financiers, and economists capable of managing a currency in a sovereign manner.

Despite eight decades of “monetary cooperation,” France has still not taught its former colonies how to print banknotes and mint coins. This “cooperation” is very convenient financially, given that printing CFA francs is an important outlet for the Banque de France: more than half of its printing activity, according to a Banque de France economist.

Eight decades later, none of the usual objectives of monetary integration have been achieved on the African side. Intra-zone trade is weak, ridiculously weak in Central Africa in particular (1.5% on average of total foreign trade from 1995 to 2021). Financial inclusion rates, in the strict sense (possessing a bank account), are among the lowest on the continent and in the world. There has been very little structural transformation. Most countries are still classified as “Least Developed Countries.” When they do not belong to this category, they have a real GDP per capita that is lower than their peak levels achieved decades earlier.

According to World Bank data, Côte d’Ivoire, the largest country in the franc zone in terms of economic size, had a real GDP per capita in 2024 that was 21.6% lower than its peak in 1978. In other words, Côte d’Ivoire today is like a student who, after reaching the final year of high school, has been demoted to kindergarten. And since then, this student has been evaluated on the basis of his results between kindergarten and high school, while his peers, his former classmates, have already accumulated decades of professional experience. Such is the nature of the seemingly impressive growth rates of the WAMU since 2010.

Given the failure of the CFA system in all areas that matter, the last line of defense for its supporters, beyond the ramblings about hyperinflation, is the pseudo-argument that it brings “monetary stability.”

The myth of “monetary stability”

CFA countries have inflation rates that are far lower than the rest of the continent. But their monetary authorities deserve no credit for this. This situation is the almost automatic consequence of the CFA franc being pegged to the euro. Cape Verde, whose currency is also pegged to the euro at a fixed rate, had a lower inflation rate than all CFA countries except Benin and Niger over the period 2010-2022. In other words, countries that have chosen to peg their currencies to the euro tend to import the eurozone’s inflation rates.

Take the case of Senegal. Between 1996 and 2019, Senegal had an average annual inflation rate similar to that of France and Germany. Now, how credible is it for a country ranked among the “least developed” countries, such as Senegal, to boast that it has recorded lower inflation rates over the same period than the largest and most dynamic economies, such as the United States, the United Kingdom, India, Brazil, South Korea, Botswana, etc.? While in all these countries inflation is contained through policies designed to increase productive capacity, in CFA countries the fight against inflation consists of limiting financing to the economy and maintaining high rates of unemployment and underemployment. In the former, they limit general price increases by increasing supply; in the latter, they do so by depriving the majority of opportunities for productive work and maintaining an overvalued exchange rate.

Supporters of “monetary stability” rarely discuss why the CFA franc should be pegged to the euro. The same “monetary stability” could be achieved, for example, by pegging it to the US dollar, which remains the global currency for trade and finance. Some would argue that pegging to the euro is justified because Europe is our main trading partner. But this response is incorrect. Europe can be divided into two parts: the eurozone and countries outside the eurozone. The eurozone’s share of the WAMU’s foreign trade has been steadily declining. In 2024, according to the BCEAO, this zone accounted for 20.5% of the WAMU’s exports (with the Netherlands as the main buyer, 7.4%, well ahead of France, 2.8%) and 22.2 % of its imports (with France as the main European supplier, 7.9%). The same trends can be seen in the case of Senegal: in 2024, the eurozone accounted for 24.8% of its imports and 19.7% of its exports.

So why peg the CFA franc to the euro when nearly 80% of foreign trade transactions do not involve the euro zone (and are unlikely to be invoiced in euro)? Why are the oil-producing countries in the franc zone the only such countries in the world to have pegged their currency to the euro? The answer, and the only relevant one, to these two questions is as follows: it is the condition for benefiting from the French “guarantee,” which exists in name only.

In any case, pegging the CFA franc to the euro condemns CFA countries to a permanent monetary split in a predominantly dollar-denominated trading environment. They benefit from no phase of the economic cycle. When the euro appreciates (becomes more expensive) against the dollar, CFA countries lose export competitiveness, while imports in dollars become cheaper. Suppose that cotton exporters sell $100 worth of production at a rate of €1 = $1. They will receive approximately 66,000 CFA francs. However, if the euro appreciates and one euro is exchanged for two dollars, the same sum of $100 will only be worth 33,000 CFA francs. Exporters will have lost half of their income in CFA francs simply because the CFA franc is pegged to the euro. Conversely, a depreciation of the euro (becoming cheaper in dollar terms) is not necessarily good news. On the one hand, the price competitiveness of exports increases. On the other hand, the cost of imports (mainly in dollars) and the CFA franc burden of dollar-denominated debt tend to increase.

Contrary to the dishonest rhetoric of “monetary stability,” the experience is that fluctuations in the euro-dollar exchange rate occur daily and therefore have a permanent impact on the economies of CFA countries. According to Robert Wade, an economist whose work on developmental states is widely cited, the exchange rate is “the most important price a government has to get right in order to enable industrial policy to be effective.”

All this highlights the absurdity of the view that monetary reform will only be essential once CFA countries become industrialized or have smaller external deficits. How could a colonial currency designed to promote imports and consumption rather than domestic production ever spur industrial transformation? This type of reasoning is similar to that of a person buried deep in a garbage dump who commits to emerge from it only when he is clean!

The real costs of maintaining a fixed exchange rate

If all you have to do is peg your currency to the euro or the dollar to import low inflation rates, why don’t non-CFA countries do so? The answer is that maintaining a fixed parity often involves real costs – significant opportunity costs.

Since 1960, the CFA countries of West Africa, individually with the exception of Côte d’Ivoire and collectively, have accumulated external deficits – in their trade balance and, more generally, in their current account – notably due to an overvalued exchange rate and a lack of adequate domestic financing to substitute for imports of essentials. In other words, these countries continually “lose” foreign exchange when they trade with the rest of the world, whereas maintaining a fixed exchange rate requires the accumulation of sufficient official foreign exchange reserves. The question is: how can external deficits and a fixed exchange rate be reconciled over more than six decades? In most countries in the South, prolonged external deficits, leading to a decline in foreign exchange reserves, result in frequent devaluations or depreciations of their currencies.

In the case of the CFA system, chronic foreign currency indebtedness is the method used to accumulate foreign exchange reserves and thus defend the fixed parity: before creating CFA franc financing, the central bank must first ask member countries to take on debt in hard currency. The volume of foreign exchange reserves available, obtained through the issuance of hard currency debt, determines the volume of potential financing. In other words, for increasing the financing of the development of the economy, foreign currency debt must also increase! But this is unsustainable in the medium and long term. Southern countries can be plagued by sovereign debt crises for various reasons. In the case of the CFA system, periodic debt crises are a functional necessity. There is no escaping them. They lead to in arrears to the domestic private sector, unmet social obligations to pensioners, students, and other social groups, and, tellingly, in being addicted to IMF loans. From 1960 to 2023, the 14 current CFA countries received 200 loans from the IMF, representing one-third of total loans to the continent. With 22 and 19 loans respectively, Senegal and Côte d’Ivoire are among the IMF’s most regular African clients.

Since economic growth in CFA countries depends on increasing financial dependence, it can be said that they are literally “borrowing” their economic growth. Sooner or later, this “borrowed” growth will have to be repaid, either in the form of exporting a growing share of their economic surplus (increased debt servicing, repatriated profits and dividends, etc.), or in the form of austerity policies that are as disastrous as they are unpopular. This is the scenario unfolding before our eyes. Discussions about “hidden debts” in Senegal are just the tip of the iceberg when it comes to the financial distress of WAMU countries. The external public debt service of the eight WAMU countries was $32.8 billion between 2012 and 2023, compared to at least $47.8 billion expected for the period 2024-2028 alone.

This massive debt was fueled in particular by the issuance of bonds in foreign currencies – Eurobonds – often obtained at rates above 5%, a significant portion of which was redeposited with the French Treasury, which paid interest on them at rates below 1%. This explains why France, despite criticism and its tarnished image on the continent, has never considered withdrawing from a system in which African countries subsidize their own economic and financial exploitation.

Conclusion

Eight decades later, the leaders of CFA countries continue to harbour illusions about the CFA franc and refuse to take responsibility. The illusory nature of the ECOWAS single currency project is becoming increasingly apparent to those who doubted it, with the withdrawal of Mali, Burkina Faso, and Niger from ECOWAS, and the alignment of Nigeria under Tinubu with French Imperialism.

Having your own currency is certainly no guarantee of economic success. However, not having this macroeconomic instrument at the national level means depriving yourself of the possibility of exercising financial, credit, and industrial policy autonomy, and adopting ambitious social protection and employment policies.

As any truth about Africa still has to be validated by a White, or non-African, epistemic authority, despite the warnings of Professor Cheikh Anta Diop in his day, I would like to quote here a former chief economist of the World Bank:

“On CFA, my lips are unfortunately supposed to be sealed. The CFA Franc is a currency peg that the French had arranged with its former colonies in West and Central Africa. Despite the switch over of France from the franc to euro, the peg, now vis-à-vis the euro, continues, which gives the ECB an enormous amount of power over these West African economies.

The peg cuts down on currency risk but handicaps this region in terms of trade and exports capacity. However, this is treated as a topic that you cannot even mention in West Africa because it may give ideas to nations, like Senegal, to break out of the peg. Before I set out on my West Africa mission I was advised by my senior colleagues in Washington and also by the Communications department not to ever bring up this topic when in Africa. To me this smacks of colonialism—don’t even plant ideas in the minds of the colonized. I violate this stricture and raise the topic in my conversations with ministers and central bankers. However, and this I regretted later, I did not raise this when the media was present because I did not want to get a phone call from Washington.” (Kaushik Basu, Policymakers’ Journal, 2021).