3

How much foreign currency gets injected into the French economy every year from Africa because of CFA Franc alone?

How else is France profiting from this CFA arrangement?

5
  • What research have you done? Dec 21, 2022 at 7:42
  • @Trilarion, I read the Wikipedia article on CFA Franc, and either couldn't understand it because of economic or banking jargon, or the said info was absent.
    – user366312
    Dec 21, 2022 at 7:50
  • The question is a little trickier to answer than one might think. The condition of the CFA is that the participating countries must deposit half their foreign reserve currencies in the Bank of France. It is not easy to find the amount per year, but if you look at their reserve currencies as reported on Wikipedia and elsewhere, the total amount deposited should be half that. However, these foreign reserve currencies are held for the CFA countries in exchange for another currency—the CFA franc—and must be ready to be returned, as with the 5 billion euros worth for West Africa.
    – Obie 2.0
    Dec 21, 2022 at 14:41
  • 1
    The actual value, as with deposits to most banks, presumably comes from being able to lend out the additional funds and earn interest on them. That interest would be the actual added value for the French economy, and I do not know whether the French Bank reports numbers for it, though it could probably be estimated from publicly available information.
    – Obie 2.0
    Dec 21, 2022 at 14:42
  • Proving or disproving would require econometric analysis, but I wonder if maybe the fixed exchange rates may be fixed at a level favorable to France.
    – H Huang
    Dec 23, 2022 at 3:57

1 Answer 1

3

Not totally sure, but it now seems like:

0 - now (at least for 1 group of countries)
€5B - before 2021

Eighteen months after the announcement made in December 2019 by the French and Ivorian presidents, Emmanuel Macron and Alassane Ouattara, the financial authorities in Paris are beginning to return the foreign exchange reserves of African countries in the CFA zone of East Africa. West, a little over 5 billion euros.

Until now, the French public treasury had at its disposal the funds housed in an operating account at the Banque de France and which correspond to half of the foreign exchange reserves of the eight countries of the West African Economic and Monetary Union ( WAEMU). But, according to a source quoted by the very official Agence France Presse, the transfer of these funds corresponding to 5 billion US dollars was initiated by the French central bank. The institution "is in the process of transferring funds that belonged to African states," said a source familiar with the matter on Tuesday, May 4.

Le Point, May 2021

La réforme prévoit notamment que la BCEAO ne soit désormais plus tenue de déposer la moitié de ses réserves de change auprès de la Banque de France – qui les rémunérait –, une obligation vue comme une dépendance par les contempteurs du franc CFA.

La BCEAO « n'aura à l'avenir plus d'obligation particulière concernant le placement de ses réserves de change » et « sera libre de placer ses avoirs dans les actifs de son choix », avait expliqué à l'époque la présidence française.


The reform provides in particular that the BCEAO is no longer required to deposit half of its foreign exchange reserves with the Banque de France – which remunerated them * – an obligation seen as a dependency by critics of the CFA franc.

The BCEAO “will in future no longer have any particular obligation concerning the investment of its foreign exchange reserves” and “will be free to invest its assets in the assets of its choice”, explained the French presidency at the time.

Said reform also involved France giving up its representatives at the board of directors for the CFA.

background

If you read some of the articles, not everyone is convinced France has fully taken its fingers out of the CFA pie, but the restitution of funds has apparently taken place.

You also need to separate out concerns about sovereignty/colonialism vs actual economic harm. In past decades, French taxpayers have at times been out of pocket to support a certain French "engagement" in Africa which has benefited France in political terms (say the UN) and in business deals with favored big French corporations. Whether or not moneys expended by French taxpayers ever benefited African citizens as a whole, rather than their ruling elites is also uncertain. Does seem like CFA achieved favoring intra-CFA/France trading, at the expense of larger trade ties, which was probably its bigger intent, rather than the direct one this question supposes. On the other hand, having stable currencies is a problem for many poorer countries - however the CFA group has remained poor, making benefits uncertain at best.

i.e. truly knowing whom CFA was beneficial to is above my pay grade.

and it looks like there is another distinct CFA group which is not affected by the reform

The reform was negotiated throughout the second half of 2019 between France and the eight countries of the West African Economic and Monetary Union (UEMOA): Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo.

It does not currently concern the six Central African countries that use the CFA franc but form a separate monetary zone.

I assume the fund deposits would be in the general order of magnitude.

* Note that depositing funds somewhere to guarantee something does not preclude getting remunerated by interests rates.

2
  • 1
    The question asks about money injected into the French economy every year. The 5b € before 2021 is an amount that African countries deposited at the French central bank. So money injected into French economy would only be the interest the French central bank can get for using that money, not the 5b € themselvers.
    – quarague
    Dec 23, 2022 at 15:05
  • 1
    read the answer more carefully. the interest was not kept by the French. Dec 23, 2022 at 18:23

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .