France Guarantees Euro Peg for West Africa’s Common Currency
France Guarantees Euro Peg for West Africa’s Common Currency
France will continue to guarantee the euro peg of west and central Africa’s common currencies and sees no need to devalue the units.
The coronavirus outbreak has limited inflows of hard currency to the monetary blocs of mostly former French colonies that are struggling with the collapse of oil prices, lower trade and the flight of investors to safe havens.
“We do not see a need for adjusting the exchange rate. So that is not on the agenda,” Odile Renaud-Basso, the head of the French Treasury, said in an telephone interview Monday. “We have the commitment to support the currency.”
The French-backed currency has two versions. The West African CFA franc is used by the eight countries that make up the West African Economic and Monetary Union and the central African CFA franc is used by six nations. All of these, except Guinea-Bissau and Equatorial Guinea are former colonies of France. The states have to keep half of their reserves in France, on which the French Treasury pays a 0.75% interest rate.
The West African bloc and France agreed to changes on the currency in December last year, including the requirement to keep half of reserves with the former colonial power.
Foreign exchange reserves for the central bloc were 5.3 trillion CFA francs ($8.8 billion) on May 10, representing almost five months’ worth of imports, the Bank of Central Africa States said in a statement.
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