On February 15, 2024 local time, in Ouagadougou, Burkina Faso, the "Alliance of Sahel States" held a ministerial meeting. Photo/Visual China
"We no longer accept to be a cash cow for France. ”
In February 2024, Abdourahmane Tchiani, the leader of Niger's military regime, told the media that a major currency reform could be on the horizon.
Recently, the topic of currency reform in West Africa has been dominating the news hot spots on the African continent and in France. Earlier, after the military governments of Burkina Faso, Mali and Niger formed the "Union of Sahel States", the finance ministers of the three countries issued a joint statement planning to issue a new currency to replace the CFA franc, which is still used in the region. He was followed by Senegal's new president, Bassirou Diomaye Faye, who also announced that he would abolish the CFA franc after his election in March.
After World War II, France began issuing CFA francs in the French colonies of Africa. Over the past 79 years, this monetary system has survived the ups and downs of the Bretton Woods system, the collapse of the colonial system, and the establishment of the European Union. Through the CFA franc system, the continent's abundant and cheap resources were continuously exported to France, supporting the second largest power in Europe.
On the other hand, more and more West African countries regard the CFA franc as a "colonial legacy" and strongly oppose and criticize it.
The above-mentioned remarks of the leaders of the West African regimes have also aroused the tension and pessimistic expectations of French public opinion on Franco-African relations. In this regard, French Foreign Minister Stéphane Séjourné (Stéphane Séjourné) recently calmly said that France has no opinion, and pointed out that Faye's election will face more uncertainty.
In fact, since independence, West African countries have never ceased to fight for monetary independence. However, the financial seeds planted by France on the eve of the demise of colonialism have taken root in all aspects of the CFA franc zone society, and France's guarantee of the CFA franc is both a constraint and a guarantee of exchange rate stability. In the past, monetary reforms in many countries have either failed or delayed implementation due to high inflation.
You Tao, deputy director of the French-speaking Development Research Center at Sichuan University of Foreign Chinese, observed that today, West African society, which is still the financial and economic lifeline of France, does not seem ready for change. The vigorous new round of reform may be just a piece of dust raised by the wheels of history.
Real reform or empty slogans?
Since the Union of Sahel States announced that it would introduce a new currency, the topic of currency reform has returned.
In February 2024, Ibrahim Traore, the leader of Burkina Faso's transitional government, told the media: "It's not just about currency, we're going to cut all the ties that keep us in slavery." ”
In contrast, Malian Prime Minister Choguel Maiga's speech was more modest and cautious. He reassured the population to be patient, as the new monetary plan will take time to fully assess all the implications.
In the Sahel, Mali is the only country that has actually issued a new currency.
In 1962, Mali withdrew from the West African Economic and Monetary Union and issued the Mali franc, but was eventually forced to return to the franc zone due to aggressive targets and soaring inflation, at which time the Mali franc was worth only half the value of the CFA franc. Mayiga knows better than his allies that establishing monetary sovereignty is not as simple as printing new banknotes.
Previously, as a result of the military coup, the EU-backed ECOWAS launched sanctions against the three Sahel countries, preventing them from accessing the WAEMU regional financial markets for financing and obtaining budget funds. As of February 2024, the total outstanding bonds of the three Sahel countries are about 2.7 trillion CFA francs (31.84 billion yuan), and they have missed repayment deadlines several times. The new changes could further prevent the three countries from obtaining financing from regional and international capital markets in the future.
Many of the experts interviewed were not optimistic about the monetary reform because the pace was too fast.
"The new military regime has not even reached a consensus within ECOWAS, let alone recognized by the international community. You Tao said.
It is worth noting that the reform proposed by the Faye government has a distinctly nationalist character, reminiscent of the 2019 monetary reform package, which coincided with the 2020 presidential elections in Niger, Burkina Faso, Togo and Côte d'Ivoire.
You Tao pointed out that these regional governments or ruling parties aim to get more votes by advocating for currency reform. "The monetary reform complicates monetary and financial issues with more political and military factors. Zhao Yongsheng, director of the French Economic Research Center at the University of International Business and Economics, said it was hard not to suspect that this was just a slogan.
To date, the three Sahel countries and Senegal have not announced a specific date or procedure for the monetary reform.
In fact, France's control of the CFA franc zone for more than half a century has left the latter heavily dependent on France and the European Union.
In addition to monetary and financial dependence, "the West African CFA franc region has a homogeneous export structure, mainly exporting raw materials and primary agricultural products, and is politically highly dependent on French support, with new leaders often taking advantage of France to get to power." Tao Tao, a doctor at the Center for African Studies at Shanghai Normal University, said that the abolition of the CFA franc could lead to a currency run and a sharp depreciation of the currency, and high prices of imported goods could exacerbate runaway inflation. In addition, uncertainty will trigger a large exodus of foreign capital.
"West African countries may not be able to afford the pain of currency reform. He said.
At the moment, the CFA franc region is in a vicious circle. In the long run, the CFA franc system restricts socio-economic development, which in turn hinders the achievement of monetary independence in West Africa.
But the solution is still economic growth. "I believe that the first thing to do in the current Sahel Triple Alliance is to stabilize the regime, restore as much as possible the social production that has been disorganized by the war, and create a stable social and economic environment for attracting foreign investment. At least there is a complete set of alternatives and backup plans before exiting the franc zone, otherwise the monetary reform will remain a mere formality, he said.
On January 28, 2024 local time, in Niamey, Niger, supporters of the Alliance of Sahel States celebrate the announcement of Mali, Burkina Faso and Niger to secede from the Economic Community of West African States. Photo/Visual China
West Africa in the Great Power Game
In the face of the recent changes in the situation in many West African countries and the new currency issuance plan, French Foreign Minister Céjourne responded a few days ago that France does not need to comment on the future of the West African CFA franc, which is an issue of sovereignty of African countries, and France expressed its support.
This new attitude was evident in the early days of French President Emmanuel Macron's administration.
In December 2019, Macron signed an agreement with the eight countries of the West African Economic and Monetary Union (WAEMU) to end the use of West African CFA francs. According to the agreement, the new currency, Eco (ECO), will replace the West African CFA franc and enter circulation in 15 West African countries in 2020. At the same time, the agreement abolished the policy of depositing 50% of the foreign exchange reserves of West African countries in the French Ministry of Finance, after which France will no longer participate in the management of African countries.
However, Eco will remain unchanged at the level of the CFA franc against the euro in the past. "It's like old wine in a new bottle. You Tao pointed out that the new currency is still in line with the overall interests of France in terms of the direction of reform and interest preferences, and the change in France's attitude is still based on the consideration of interests.
At the end of the 20th century, France paid a high economic and political price for maintaining the CFA franc system. After the end of the Cold War between the United States and the Soviet Union, in order to ensure a fixed exchange rate between the CFA franc and the French franc, France provided multilateral aid to African countries up to more than one billion francs every year in the face of economic recession.
But the West CFA franc district is not grateful. African nationalism is at an all-time high, and there is a strong rejection of France's assertive attitude on the currency issue. At the same time, the United States, which is mindful of Africa's economic interests, has also begun to enter West Africa and compete with France in many fields.
Among them, the core of economic competition is the currency exchange rate system. In 1994, the United States, through international financial institutions, exerted pressure on France and the countries of the CFA franc area to reduce the exchange rate of the CFA franc against the French franc, and the West CFA franc depreciated by 50 per cent, leading to an explosion in import costs and prices, and the collapse of the purchasing power of hundreds of millions of West African households.
Since then, monetary policy has increasingly been seen as part of the sovereignty of West African countries. In August 2017, Kémi Séba, a social activist with dual Beninese-French nationality, burned a 5,000 CFA franc note in front of the headquarters of the Central Bank of West African States, marking the abolition of "colonial currencies" as a mainstream political movement in franc zone countries.
You Tao believes that the Macron government's gesture of breaking with the past, on the one hand, in order to improve France's image in Africa, on the other hand, can also get rid of the heavy colonial burden, in fact, it is conducive to France to lead the currency reform in West Africa in the future and maintain its influence in West Africa.
But it is undeniable that this influence is not as strong as it once was. After the coup d'état in the Sahel countries, the French garrisons were expelled one after another, and they repeatedly stressed the vow to break with France. The United States has remained silent about this, which is seen as a stab in the back to its ally France. Previously, it was with the acquiescence of France that the United States was able to build a military airfield and station troops in Niger. "Clearly, the United States is happy to see France's withdrawal from West Africa. You Tao said.
Unfortunately, the much-publicized 2019 monetary reform did not really materialize. The subsequent global pandemic and the food and energy crisis caused by the Russia-Ukraine war have put the reform on hold. The issuance of Eco and related reform measures have been postponed until 2027. "In effect, the question is thrown at the next leader of the Economic Community of West African States (ECOWAS). You Tao believes that it is still unclear whether it can be realized in 2027.
Senegalese economist Felwine Sarr admitted that this currency reform was "not a rupture or the expected great upheaval", but only "a symbolically favorable phase".
With regard to this yet-hopeless currency reform, it has also been reported that the new plan will replace the exchange parity of the CFA franc and the euro with a "foreign exchange basket" in order to make the exchange rate more flexible. These may include the US dollar, the Chinese yuan, and the British pound.
The colonial haze that you can't get out of
On the morning of January 13, 1963, the body of Sylvanus Olympio, then President of Togo, was found in a pool of blood one meter outside the door of the Togolese Embassy in the United States.
In the fourth year of Togo's independence, the father of the Togolese state, with his yet-to-be-unfinished plans for monetary independence, hastily left his homeland, which he had promised "to do everything in his power to guarantee" "prosperity without France."
The killer disappeared into the night of the previous night. Although Étienne Eyadéma, who carried out the coup d'état at the time, claimed to be the assassin, more suspicions pointed to France. Just days before his assassination, President Olympio had considered secession from the franc zone and devised a new currency to replace the CFA franc, which had been in use since its colonization.
After World War II, in order to protect its colonial interests, France enclosed the French colonies in Africa into the franc zone, and the issued African francs were fixed with the French francs. In the 60s of the 20th century, as African countries became independent, France forced these countries to sign a series of unequal bilateral and multilateral "cooperation agreements" to preserve this unique monetary system.
The currency cooperation agreement stipulates that the West African CFA franc is pegged to the French franc, at exchange parity and freely convertible within the franc zone. In exchange, the Central Bank of West African countries will have to remit all of its gold and foreign exchange reserves to its operating account with the French Central Bank.
By building the monetary system, France has been able to extract Africa's abundant raw materials to recover from World War II, but it has also undermined opportunities for West African countries to benefit from their own resource wealth, You told Southern Weekly.
This basic monetary system framework has continued to this day, and although the proportion of foreign exchange reserves handed over by West African countries to France has gradually decreased from 100% to 50% later, "such a large amount of foreign exchange reserves cannot be used in the French treasury, and the yield is extremely low, and the West CFA franc region, which lacks its own development funds, has to resort to international financial institutions or aid and commercial loans, bear higher interest rates, and sometimes have to accept certain political and economic conditions." You Tao said.
Since then, financial policy decisions in West Africa have been firmly in France's hands. With France's accession to the European Union, the CFA franc has shifted to the euro, and West African countries have been forced to follow in the footsteps of France and the eurozone by adopting a long-term monetary tightening policy, forcing African banks to reduce credit to local companies and African countries.
For West African countries, which are in ruins, this is almost the same as stifling hopes for economic prosperity. "Because the long-term tightening of monetary policy has increased the difficulty of corporate financing, which is not conducive to the development of local enterprises. You Tao explained.
In addition, the West African CFA franc is pegged to the French franc or the euro, which increases the export price of goods from West African countries and lowers the price of imported goods. Tao Tao, a doctor from the Center for African Studies at Shanghai Normal University, told Southern Weekend that most commodity exports are denominated in US dollars, and since the euro has generally been stronger than the US dollar since its inception, the price of goods is much more expensive for buyers, and the export competitiveness of West African countries has been weakened. And because of the low cost of imports, the heavy reliance on imported goods has also hindered the development of industrialization in West Africa.
The first leaders of the CFA franc zone countries, who were well aware of the pitfalls of the franc system, sought to reform and paid a heavy price for it. Olympio was the first African president to be assassinated, following Burkina Faso's president, Thomas Sankara, who also refused to surrender monetary sovereignty, and Mali's president, Modibo Keïta, who was ousted by France-allied coupers. And Guinea, which launched a new currency, fell into economic collapse.
For a time, talking about the franc became taboo for West African politicians. They realized that, with the intervention of France, advocating monetary independence would mean economic collapse or regime overthrow.
Pierre Mesmer, the former head of the French foreign intelligence agency SEDECE, revealed in his memoirs that in order to prevent West African countries from achieving monetary independence, France had intercepted grain shipments to create famine and counterfeited and distributed new currencies to paralyze the country's economy.
"In this way, it will be difficult to build a political system that can meet the interests and concerns of the majority of citizens, and it will be difficult to improve the ecological environment of national governance. You Tao said. According to the 2019 Ibrahim Africa Governance Index, nearly 40 percent of West CFA franc countries have governance scores below the continent's average, and the remaining 60 percent barely reach the average.
"For France, on the contrary, the CFA franc zone remains an important part of its global influence to this day. Zhao Yongsheng, director of the French Economic Research Center at the University of International Business and Economics, told Southern Weekend that the CFA franc zone has long handed over a considerable amount of "seigniorage" and foreign exchange reserves, providing France with a large amount of stable funds.
"More critically, the raw materials produced by West African countries are still of great importance to French industry today. For example, Niger has always been one of France's three major suppliers of uranium ore, providing the latter with cheap uranium resources, Tao said.
In 2022, about two-thirds of France's electricity came from nuclear power plants, with about one-fifth of the uranium coming from Niger, according to data released by the European Atomic Energy Technical Commission (Comité technique Euratom). The coup d'état in Niger in 2023 also failed to end French uranium mining there. In addition, uranium ore is also an important raw material for nuclear weapons, and a stable supply of uranium ore is an important guarantee for France to maintain its nuclear deterrent.
Horace Campbell, a professor at Syracuse University in the United States, said bluntly: "Without Africa's resources, France will be reduced to a second-rate country." This is why France has always refused to relinquish control of the CFA franc zone.
Contributing writer for Southern Weekly, Chen Heqiu
Editor-in-charge: Yao Yijiang