Is Africa ready for the end of the CFA franc? Those of us rooting for the end of this controversial currency need to seriously start thinking about how the economies of several countries will fare without it.
The fourteen African countries within the CFA franc zone would return to their own currencies, instantly creating barriers to inter-African trade. In addition to the affect on trade, dismissal the CFA franc will hopefully leave the French treasury no choice but to return foreign currency reserves to each country. If this were to happen, there is the question of whether each of these fourteen countries will have enough reserves to cover their monthly imports. Also, considering that these new independent currencies will be easy targets for currency speculators, there is concern that central banks may not have enough reserves to keep the currencies stable while insuring their convertibility.
Keeping the currency steady is crucial for paying off each country’s debt, which is why some are hesitant about losing the CFA Franc. It would be safe to assume that the International Money Fund (IMF) won’t see bailing out one of these countries as a priority, which increases the risk factor for them. France, which usually holds decision-making authority at the IMF, will likely be less interested in the plight of the former CFA countries’ reserves if they are no longer held at the French treasury. Which lender will be the last resort? Perhaps the African Union, but does it have the capability of handling such a task? These questions aren’t meant to dissuade Africans from considering greater monetary sovereignty. Instead, these concerns will hopefully focus African efforts on establishing serious alternatives to the CFA franc system. Addressing these questions will only make an end to the CFA more realistic and achievable.
