France has bowed to popular pressure in west Africa by agreeing to scrap the name of the CFA franc and loosen its supervision of the currency union as Paris seeks to reshape relations with its former African colonies.
Established in 1945, the CFA franc has been used in two African monetary zones, one for eight west African countries and the other for six mostly petro-states in central Africa. Critics say the currency is a “colonial relic” that preserves the dominance of Paris and French companies in the region by removing French currency risk at the cost of monetary and fiscal independence.
The monetary revamp, which will initially only be implemented in the west African monetary area, was announced on Saturday during a visit by Emmanuel Macron to the Ivory Coast, where the French president also said that colonialism had been “a profound mistake”.
Mr Macron has said he wants to dismantle the “Francafrique” sphere of influence with former African colonies in favour of more normal, business-oriented relations free of any colonial taint. He has also sought to encourage French business interests in non-francophone states such as Nigeria and Ethiopia.
“The question of the CFA franc crystallises numerous debates and criticisms of the supposed role of France in Africa,” Mr Macron said in Abidjan, Ivory Coast’s economic hub.
The French president said he welcomed the launch of the “Eco”, which will replace the CFA franc in west Africa in 2020. “I see your youth criticise us in a way for continuing an economic and monetary relation that they judge to be, and I quote them, postcolonial.”
Ivorian president Alassane Ouattara said it was an “historic day for west Africa”.
“The CFA franc is dead,” French newspaper Le Journal du Dimanche declared.
Since 1999, the CFA franc has been pegged to the euro and members have had to keep half of their foreign reserves in France. A French official has sat on the board of the regional central bank in both zones.
Announcing the new arrangement on Saturday, Mr Macron said the renamed eco would still be pegged to the euro and guaranteed by France. However, countries using the currency will no longer have to keep half of their reserves at the French treasury, nor will there be a French representative on the currency union’s board. Further details have not been disclosed.
“France is leaving the governance of the whole system in west Africa,” said a senior French official. “It’s a significant move as through our presence in institutions we had an influence on the decisions taken by the currency union.”
Supporters of the currency, including Mr Ouattara himself, have argued that it has provided stability even in times of severe political stress such as during two civil wars in Ivory Coast, the latter from 2010-11.
French finance minister Bruno Le Maire said “a good balance” had been found in the new regime: “The zone keeps the exchange rate fixed with the euro . . . guaranteeing currency stability and protection against inflation.”
Opponents of the currency say it prevents countries from devaluing to counter external shocks and has hampered industrialisation by keeping the exchange rate artificially high. Some regard it as a useful arrangement — to the detriment of the poor — between France and the moneyed elites of francophone Africa, whose spending power is inflated.
The obligation for member states to keep half their reserves at France’s central bank has been a particularly sore point.
The renaming of the currency is symbolic: CFA originally stood for Colonies Françaises d’Afrique, or French Colonies in Africa.
The eight countries in the west African region had already intended to rename the currency as the eco and have long discussed a single west African currency that could eventually include other anglophone states, such as Nigeria and Ghana.
The six countries using the central African CFA are expected to decide how they wish to proceed next year, French officials said.