France has monetary cooperation agreements with three African monetary areas: the West African Monetary and Economic Union (WAEMU), the Central African Economic and Monetary Community (CEMAC) and the Union of the Comoros.
In reality, the term “CFA franc” refers to three different currencies and is the source of some confusion – and sometimes even the subject of falsehoods.
Here are some frequently asked questions.
The CFA franc is the common currency for the Franc Zone, created in the 1930s on the eve of the Second World War. It is made up of three areas, each of which has its own central bank and currency:
- The West African Economic and Monetary Union (UEMOA) of 8 Member States: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. These countries use the West African CFA franc (XOF);
- The Economic and Monetary Community of Central Africa (CEMAC) of 6 Member States: Cameroon, the Central African Republic, Chad, the Congo, Equatorial Guinea and Gabon. These countries use the Central African CFA franc (XAF);
- The Union of the Comoros uses the Comorian franc (KMF).
Monetary cooperation offers a stable economic framework for economic policies in the three areas.
Pegging to the euro has several advantages: it gives economies better resilience to macroeconomic shocks and helps control inflation by ensuring the stability of the currency, which is conducive to trade and investments.
The relative resilience of the Franc Zone countries compared to the rest of Africa during the 2020 public health crisis is indicative of that: 0.3% growth in 2020 as against 1.7% recession in sub-Saharan Africa (IMF, October 2021). Pegging to the euro is not an issue for the Zone’s exports, particularly for economies that export commodities that are priced on international markets.
No. Each country is free to leave the Franc Zone, either temporarily (like Mali) or permanently (like Guinea, Mauritania and Madagascar).
These States made the sovereign decision to create or join the Franc Zone (like Guinea-Bissau, the only non-Francophone member) and stay there.
The participation of member countries is based on bilateral agreements and, since 1962, cooperation agreements with regional monetary unions.
Monetary sovereignty and decisions are the responsibility of the three common and independent central banks, where governors from the Member States of the Franc Zone sit:
- Central Bank of West African States (BCEAO) in Senegal;
- Bank of Central African States (BEAC) in Cameroon;
- Central Bank of the Comoros (BCC).
Monetary policy decisions are taken at regional level.
France has only minority representation within the monetary policy committee and the board of governors of the BEAC (1 French governor out of 7).
Since the reform of monetary cooperation in the UEMOA announced in 2019 (see below), France no longer has a presence in the governing bodies of the BCEAO.
The Board of Governors of the BCC is made up of 8 members, half of whom are designated by the French Government.
For France, monetary cooperation offers a forum for dialogue with all the Zone’s States and promotes a stable macroeconomic framework for the implementation of economic policies. France is naturally committed to the development of its partners, including economic development.
Monetary cooperation between France and the UEMOA was implemented under an agreement from 1973.
At the request of France’s African partners, it was decided that this cooperation needed modernizing. The French President mentioned the need for this reform in his interview with the Jeune Afrique magazine in November 2020. It is coherent with his November 2017 speech at the University of Ouagadougou and was recalled at the New Africa-France Summit in October 2021.
Following discussions between the stakeholders that had been underway for several years, a new monetary cooperation agreement between France and the UEMOA was signed on 21 December 2019 during a French Presidential visit to Côte d’Ivoire. There are four aspects of the agreement:
- A new name for the currency: the UEMOA authorities indicated their desire to switch from “CFA franc” (XOF) to “ECO”. The currency’s name is a matter for our UEMOA partners only;
- Abolition of the obligation to centralize exchange reserves on a financial account at the French Treasury;
- France’s withdrawal from the governance bodies;
- Simultaneous creation of ad hoc mechanisms for dialogue and risk monitoring (including reporting).
The exchange regime remains unchanged however, with the fixed parity between the euro and the ECO and continued convertibility ensured by France.
The 2019 agreement is accompanied by a guarantee agreement, in application of the agreement signed with the BCEAO.
The change to the currency’s name, its terms and its schedule are a matter for the UEMOA in full sovereignty.
African central banks issue orders to produce banknotes and coins, under a contract with a manufacturer, in this case the Bank of France (Banque de France).
The production of CFA franc notes and coins, and those of some 20 countries, has been carried out at Chamalières by the Bank of France since its creation in 1945.
The Franc Zone Heads of State and Government may decide mutually to change the place of printing.
Many other African currencies are also produced in third countries, as not all countries have dedicated printers:
- The Guinean franc, Ethiopian birr, Ugandan shilling and Botswana pula are produced in the United Kingdom;
- The Mauritanian ouguiya, Eritrean nakfa, Tanzanian shilling and Zambian kwacha are produced in Germany;
- The Liberian dollar is printed in the United States.
Similarly, the euro is not printed in all 19 countries in the euro area. Notes are printed by 11 presses throughout the European Union.