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CFA Franc reform: WAEMU on a status quo while CEMAC is making subtle changes

CFA Franc reform: WAEMU on a status quo while CEMAC is making subtle changes
  • Comments   -   Wednesday, 30 December 2020 13:26

(Business in Cameroon) - ECO (the common currency proposed to replace CFA Francs in the West African Economic and Monetary Union-WAEMU) will not be launched this year as France and West African leaders announced previously, according to Ecofin Agency.

Indeed, to date, only the procedures initiated by France for the launch of that common currency are known. On December 10, 2020, the country’s parliament approved a special bill for the amendment of its monetary cooperation agreements with the WAEMU.

In an article published on its website on December 10, the Directorate General of the Treasury (DG Trésor) informed that the adoption of the special bill was a decisive step in the implementation of the reform initiated by the signature of a monetary cooperation agreement in Abidjan in December 2019.

Yet, that step is not enough for the issuance of ECO currencies in the WAEMU region. As a matter of fact, according to article 10 of the new monetary cooperation agreement referred to by the DG Trésor, the agreement will enter into force once the guarantee agreement becomes valid and it is subject to a notification from all the signatory states of the completion of their ratification procedures. Meanwhile, there is currently no sufficient information on the state of the signatory countries’ ratification processes. This could be on the agenda of those countries but the press releases from the ministers’ councils have not confirmed it.  

As for the guarantee agreement (which is the backbone of the new agreement), we know from a French parliamentary report that the Macron government is working on it in consultation with BCEAO (central bank of the WAEMU) officials. However, in the latest monetary policy report published by the regional institution in December 2020, there is no mention of those consultations.  

A final but not the least challenge is that Nigeria, the leading economic power of ECOWAS, a sub-regional organization of which the countries of WAEMU are individual members, has almost threatened to crack down on any unilateral adoption of the ECO.

Central Africa taking minor amendments

All these considered, it becomes obvious that the new currency project is at a standstill. According to Marc Le Fur (rapporteur of the French Parliament) who quotes WAEMU officials, the next probable dates mentioned are 2023 or 2025.

In the CEMAC (WAEMU twin zone), the monetary reform discussed is still not clear. On  August 1, 2020, anonymous investors revealed to Ecofin Agency that France and CEMAC were also preparing a revised monetary cooperation agreement. This statement was confirmed by  Mr. Le Fur.

"Admittedly, the agreement binding us to Central African countries will be different because France will still be represented in their Central Bank and they will still be subject to the deposit requirement. For the time being, our relationship with those countries will not change. But, we will go in the same direction as we are in now with West Africa if they explicitly request it,” he said.  

Even without a formal agreement, small changes are taking place in the CEMAC region. One of them is the tightening of conditions for the money transfers outside CEMAC.  There are even restrictions on country-to-country electronic transfers within the region. Finally, the Central bank BEAC is set on implementing the rule where all foreign currency earnings should be repatriated and centralized at the central bank before part of it is deposited in the operations account at the French Treasury.

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