Reform of West African currency is some way off

Subject

West African franc.

Significance

Despite apparent growing domestic opposition to the CFA franc in recent years, regional government efforts to defend its integrity have increased, particularly among the Central African Economic and Monetary Community countries (CEMAC). On the West African Economic and Monetary Union (WAEMU) side, an uptick in the volume and issuers of Eurobonds has increased dependence on the key feature of the CFA franc -- its unlimited convertibility to euros guaranteed by the French Treasury.

Impacts

• Complacency among WAEMU countries could replace macroeconomic instability in CEMAC as the main threat to the CFA franc.
• As the sole CEMAC country without an IMF package, Equatorial Guinea will come under growing pressure to finalise negotiations for one soon.
• Greater progress towards macroeconomic convergence in the CFA zone will shield its members from the proposed ECOWAS ‘Eco’ zone.