The CFA Franc Currency Regime as a Neo-colonial Tool for Monetary Subordination
Abstract:
The CFA Franc currency regime is a mechanism that binds France with 14 countries in West/Central Africa. There are four inter-related principles that constitute the CFA system: (1) The fixed exchange rate (2) The free movement of capital (3) The free convertibility of the currency (4) The centralization of foreign exchange reserves (Pigeaud and Sylla, 2021). All four principles operate in tandem with the Operations Account.
Advocates for the CFA franc regime have claimed that it promotes sound macroeconomic policy by maintaining price stability in a region blighted by horror cases of inflation. However, this orthodox view is disputed by many critical African scholars such as Amin, Pouemi, and Sylla. This dissertation aims to uncover the mechanisms of monetary subordination and explain how the CFA franc is able to be sustained by the French state, unimpeded.
As such, the guiding research question is: How does France continue to use the CFA franc currency regime as a neo-colonial mechanism for monetary subordination in West/Central African states?
This paper appraises the work of Pigeaud and Sylla and argues that four inherent handicaps exist in the CFA system that operate as a mechanism of monetary repression. These handicaps are: (1) An excessively rigid exchange rate (2) A problematic pegging to the euro (3) The underfinancing of African economies (4) The free movement of capital that generates massive financial bleed-out (Pigeaud and Sylla, 2021).
Through empirical analysis of quantitative data, this paper shows that the four embedded handicaps of the CFA system have operated as a mechanism of monetary repression. The currency regime continues to exist due to its service to France as an anachronism of the French state at the service of the Françafrique.
This paper uses historical case studies to illustrate that France has not hesitated to resort to violent tactics such as assassinations and coup d’états to maintain its grip on the CFA system. This is due to the exuberant economic and political privileges it gains from defending its interests in the franc zone which continue to serve the French political establishment and African ruling classes alike.
