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               Have West, Central Africa Outgrown the CFA Franc?

   by Emilie Iob

   Debate over the CFA franc is once again stirring in West and Central
   Africa with some experts calling for a reform of the colonial currency.

   Some say the region has outgrown the CFA franc, arguing it should be
   unpegged from the euro or just abandoned altogether.

   Ivorian economist Seraphin Prao Yao wrote a book on the topic in 2012.
   He says the exchange rate of a country must take into account the
   weight of its commercial partners. And today, the eurozone is not our
   only partner anymore. He says member countries should also now be
   taking into account the U.S. dollar and Asian currencies.

   Yao says pegging the CFA to the euro makes the currency too rigid and
   too strong.

   France created the CFA franc for its African colonies in 1945. France
   guarantees a fixed exchange rate with the euro. In return, member
   states must deposit half of their currency reserves in the French
   treasury, something some analysts say has slowed development.

   The French finance minister said in April that France is open to
   changing this arrangement but that the initiative must come from member
   countries.

   The 14 countries using the CFA are divided into two monetary unions,
   but any country can decide to abandon the currency at any time.

   Both Guinea and Morocco created their own currencies at independence.
   Morocco is cited as a success story, while Guinea, with its years of
   chronic high inflation, is not.

   Economists warn that having your own currency carries risks. They point
   to current financial crises in Nigeria and Zimbabwe.

   ''Good governance seen as key

   Ivorian economist Antoine Ahua Jr. says that the strict monetary
   policies under the CFA franc have allowed member countries to have a
   stable and strong currency, which has allowed them to trade externally
   and to stabilize their economies.

   Even critics of the CFA franc agree there are risks and that good
   governance is key.

   Yao says simply untying the CFA franc from the euro will not
   automatically make member countries emerging economies. Leaders will
   need to really govern it well, he says.

   Earlier this year, Ivorian president Alassane Ouattara, a former
   governor of the Central Bank of West African States, credited the CFA
   franc with maintaining growth and keeping inflation under control.

   ''

   West Africa analyst at the London-based Chatham House, Paul Melly, says
   big economies like Senegal and Ivory Coast could break off on their own
   if they wanted to, but that's unlikely.

   "For the smaller countries, for a country like Benin or Togo, or for
   the Sahelian countries which are very exposed to the risk of drought
   every second year, the idea of breaking away onto their own, it would
   leave them very exposed to pressure. It would be much harder for them
   to maintain a stable currency and monetary position on their own,"
   Melly says.

   But it is an emotional topic for some who see the CFA currency as
   another vestige of colonialism to be cast off.

   Last year, Chadian President Idriss Deby said the region should instead
   have a "100 percent African currency."

   And the Economic Community of West African States has professed the
   goal of creating a common currency since the regional bloc's inception
   in 1975.
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   [1]http://www.voanews.com/content/africa-cfa-franc/3303384.html

References

   1. http://www.voanews.com/content/africa-cfa-franc/3303384.html