The BCAS has also made 90bn CFA francs available to the Development Bank of Central African States (DBCAS). In contrast, the 1994 devaluation ended a lost decade of poor commodity prices, large deficits and clear over-indebtedness that spread throughout the region. When the exchange rate is consistent with terms of trade valuation, the external sector tends to have a balanced situation: no overvaluation / no undervaluation of the exchange rate.It does not mean that the current account has to be balanced every time. The Bank of Central African States formed in 1972, replaced the Central Bank of Equatorial Africa and Cameroon as the currency manager and the region ’s banking supervisor. The culture and economy of the six countries who use the Central African CFA franc are diverse.
The Covid-19 shock will trigger a worldwide wave of business insolvencies All newer coins depict the acronym "CEMAC" for "Communauté Économique et Monétaire de l'Afrique Centrale". Since past high reserve levels were used as a kind of collateral for debt accumulation, debt ratios now appear less sustainable (e.g. We find that bilateral trade between CFA Franc members is below what would be granted by just gravity in 10 countries out of 14. The West African CFA franc is expected to be renamed to the "There are two different currencies called the CFA franc: the West African CFA franc (These eight countries have a combined population of 102.5 million people (as of 2013),These six countries have a combined population of 45.0 million people (as of 2013),In 1975, Central African CFA banknotes were issued with an Critics argue that in exchange for the guarantees provided by the French treasury, African countries channel more money to France than they receive in aid. A higher number of outperformers in the West also host existing trade hubs (e.g.
The XAF (Central African CFA Franc) is used by the members of the central African The countries using the currency will no longer have to deposit half of their foreign exchange reserves with the French Treasury. Most of the countries appear to be able to live with the CFA Franc and currency choice is just a matter of what should be the overall economic project in the years to come. Overvaluation is not granted for all CFA Franc countries or at all times.Terms of trade are a key mean reversion item. This shows that the economies in the region have less leeway now. The light and targeted lockdowns to fight the second wave of Covid-19 infections will constrain the pace of recovery. Even when the level of the exchange rate is consistent, a monetary union can experience bad times when some member countries are unable to repay their debts (Greece in the Eurozone, for eg. A monetary union for the broader ECOWAS can be consistent but such an eventuality would take (a long) time.A high level of intra-regional trade is a key pre-requisite to have a common currency area that works, because it increases the likelihood that its country members do not evolve in different directions, which would increase the likelihood of a currency union breakup.
Equatorial Guinea, the only former Spanish colony in the monetary union, joined it in 1983 and adopted the Central African CFA franc as its currency a year later. Stephane.COLLIAC@eulerhermes.com These indicators also mean some divergence between the countries, which is not the best thing for the sustainability of a monetary union. In 2019, a reform of the West African CFA franc was initiated.