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"La colonisation est une question de vie ou de mort". Such was the argument of Paul Leroy-Beaulieu, a French economist, concerning the overture of imperialism in Africa. Imperialism was “necessary” to compete with fellow European powers in the race for economic growth. However, a century later, the geopolitical landscape has greatly changed, and imperialism made an error in the old world that no longer exists. Yet imperialism persists, transformed from the direct economic exploitation of foreign countries to a much more subtle monetary imperialism that still exists today through the existence of the CFA franc. The CFA franc is the name of two distinct monetary currencies – the West African CFA franc used in 8 countries and the Central African CFA franc used in 6 countries. Since 1999 both CFA francs have been pegged to the euro at a fixed exchange rate of €1 = F.CFA 655.957 and have brought about a lot of criticism regarding its impact on African economic development.
To understand the present effects of the CFA franc, it is important to understand its history. Due to the economic chaos caused by the Second World War, many Western countries adhered to the Bretton Woods agreement following the conference of July 1944. This format of monetary management, led by John Maynard Keynes and Harry Dexter White, aimed to promote economic reconstruction and development by setting fixed exchange rates with the US dollar, itself fixed to a gold standard. Thus, French ratification of the agreement meant a devaluation of the French franc to meet the US dollar. A strong devaluation should have occurred in the French colonies, so as to partake in this monetary cooperation. However, a strong devaluation in French colonies would have increased the cost of exports towards metropolitan France, thus decreasing her productive capacity. Therefore, France created the CFA and the CFP franc, disguised by René Pleven (French Minister of Finance) as “a show of her generosity and selflessness”. For the new CFA franc as of December 26th, 1945, 1 CFA franc was worth 1.70 French francs, reducing the cost of metropolitan imports from the French colonies.
What can be described as monetary imperialism refers to the persistence and intentional modification of this fixed exchange rate to the detriment of former French colonies. Since 1945, there have been two examples of exchange rate revaluations, as well as two nominal adaptations to the new French franc and to the Euro. It is important to differ between the revaluations and nominal adaptations as they have different effects on the real relative value of the currencies in terms of the other currency; the nominal adaptations of 1960 and 1999, the years of metropolitan currency changes, had no impact on the relative value of the CFA franc in terms of the old/new French franc or the euro. However, the revaluations of 1948 and 1994 had a significant impact on the relative value between the two currencies; In 1948, the fixed exchange rate was modified from F.CFA 1 = F.F. 1.70 to F.F. 2, following two devaluations of the French franc versus the US dollar that same year. This devaluation of the French franc in terms of the CFA franc did not have a predatory effect on the French colonies, as it made importing goods more expensive. Instead, it intended to boost metropolitan competitiveness and increase demand for domestic exports. This was not the case for the devaluation of the CFA franc in 1994. On the 12th of January 1994, the CFA franc saw its value drop by 50% overnight, meaning a CFA franc was worth 0.01 French francs as opposed to 0.02 the previous day (0.02 as opposed to 2 due to the nominal revaluation of 1960 which saw 100 old francs = 1 new franc). This significant devaluation of the CFA franc cut the price of metropolitan imports from the former colonies by half. This can be seen as monetary imperialism as the devaluation of the currency had a devastating impact on local economies as export revenue was slashed and by extension GDP.
What aggravates this monetary imperialism is the lack of monetary sovereignty the adherents experience. Member countries are obliged to deposit half of their foreign exchange reserves with the French Treasury, as well as effectively having no control over the exchange rate with the French currency. Moreover, France holds a de facto veto on the monetary boards of both CFA franc zones. This is reinforced by the fact that the CFA franc must and can only be converted into the French currency to be converted into a third currency. In this context, the adherent countries cannot use monetary policy as a tool for economic development, greatly hindering growth in some of the poorest regions in the world. It is no surprise that membership of the franc zone is synonymous with poverty, demonstrated by the fact that 11 of its 15 adherents are classed as Least Developed Countries while the remainder have all experienced real-term economic decline since the franc’s creation in 1945.
Recent criticism of the CFA franc has sparked a new debate regarding its replacement in West Africa. A new wave of African economic literature accompanied by accusations from European politicians - such as Giorgia Meloni - has put pressure on France to change the status quo. In 2019, Alassane Ouattara (President of the Ivory Coast) and Emmanuel Macron announced an initiative to replace the West African CFA franc with the Eco, ratified by the French National Assembly in 2020. This agreement ends the obligation to deposit 50% of their foreign exchange reserves with the French Treasury and gives complete fiscal and monetary independence from France. The Economic Community of West African States (ECOWAS) has committed itself to launching the Eco currency by 2027, bringing hope for economic development without foreign intervention. The Central African CFA franc however is still very much in use with little debate regarding its change.
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