France CFA: towards the end of the reserves at the Banque de France?

Obliged to centralize 50% of their reserves in the French public treasury, the African countries of the zone UEMOA will obtain the return of 5 billion euros from Paris. The first step in the reform process of the West African common currency.

Is this the end ofa part of Françafrique ? On May 20, 2020, France officially ended the CFA franc, five months after the agreement of December 21, 2019 concluded between Ivorian President Alassane Ouattara and Emmanuel Macron. Objective: the reform of the West African currency, which should soon be called the Eco. This agreement provides in particular for the end the deposit with the French Treasury of half of the foreign exchange reserves of the Central Bank of the zone. Until now, to be able to use the CFA franc, each country of the West African Economic and Monetary Union (UEMOA) must deposit half of its foreign exchange reserves in the French Treasury account. Ultimately, this practice must disappear.

French senators believe that "the introduction of this counterpart in the agreements of the 1970s was justified". It was then, according to elected officials, a guarantee: "It was then the most operational and efficient means for France to have visibility on the level of reserves of each of the central banks and 'it inquires about the financial risk represented by the guarantee ”. The national director of the BCEAO for Senegal, questioned by the French senators, indicated that it is "normal that the person who gives the guarantee seeks to cover its guarantee".

A transfer of 5 billion euros to the BCEAO accounts

More than a year after the agreement with the Ivorian president, France began the process of transferring 5 billion euros, which will be paid into the accounts of the Central Bank of West African States ( BCEAO). Gradually, it will be up to the BCEAO to choose where it invests its reserves. This should leave him the possibility of investing in the financial instruments of his choice. A symbolic first step in financial relations between France and the African continent. Even if Paris will continue to play its role of guarantor for this currency and will maintain a fixed parity with the euro. Until the creation of Eco in any case.

The Franco-Ivorian agreement provides for the act of closing reserve accounts at the Banque de France. But the calendar has been changed and, in particular because of disagreements between the various UEOMA countries, but also the health crisis, the delay recorded is significant. Among the heads of state reluctant to launch the Eco, we find in particular the Nigerian Muhammadu Buhari, the Ghanaian Nana Akufo Addo or the Guinean Alpha Condé.

The French Minister of Economy and Finance went to Abidjan to try to reassure the Ivorian authorities on France's desire to implement all the provisions provided for in the 2019 agreement. Among which, therefore, the end of the Banque de France reserves. Because the Eco - or its equivalent with another name - will be fixed at a basket of international currencies, from the euro to the dollar, including Asian currencies. The transfer of 5 billion euros from the French public treasury to the BCEAO is the first step in a process that continues to slip.