Cameroon’s finance minister and Central Africa’s top central banker both said yesterday there would be no devaluation of the CFA franc currency used by 14 states in Africa, denying market rumours.
The CFA franc is currently tied to the euro at a fixed exchange rate of one euro to 655.957 CFA francs, with the peg guaranteed by the French treasury. It was last devalued in 1994 — at that time versus the French franc — to allow the heavily indebted countries to export more.
“As I am talking to you now, I, as minister of finance, I don’t know where this rumour started. I only learnt about it on the Internet,” Essimi Menye told reporters in the Cameroonian capital Yaounde.
“How come the CFA franc will be devalued and I, Minister of Finance of Cameroon, am not aware? I can assure you there will be no such thing. Our economies are doing very well. And nobody can impose it (a devaluation),” he said.
The regional Bank of Central African States (BEAC) central bank expects the Central African zone of mainly oil-producing countries to register an average of just under five percent economic growth this year. Ivory Coast, the main member of the West African CFA zone, is bouncing back after this year’s post-electoral conflict brought its economy to a halt.
Menye said the overall economic situation of the CFA franc zone countries was different to that in 1994 because then all the countries were poor and heavily indebted, with little or no investment coming in.
While many analysts believe CFA zone countries would ultimately benefit from a devaluation because it would make their exports more competitive, many inside the zone fear the impact of more expensive food and fuel imports.
The governor of BEAC, also told Reuters on Monday that there should be no fear of a devaluation due to the crisis in the euro zone.
Speaking from the Yaounde headquarters of the BEAC, Lucas Abaga Nchama said the economic indicators that pointed to the 1994 devaluation were not the same today.
The BEAC’s monetary policy committee held an extraordinary meeting on last week to discuss the impact of the European Central Bank decision to cut interest rates by a quarter point to 1.25 percent in a surprise move on Nov. 3.
“When the CFA franc was devalued in 1994, a number of indicators were observed, our foreign currency reserve ratio was in the negative. We are required to have at least 20 percent of reserves, but today we are covered at 100 percent,” he said.
“Our current account is positive compared with the situation during the devaluation, so you can understand that looking at these indicators, there is no reason to talk about a potential devaluation of our currency,” Nchama told Reuters.
The IMF representative to Ivory Coast, the CFA zone’s biggest economy making up 40 percent of its GDP, Wayne Camard, told Reuters such a move seemed unlikely because West African economies were performing well, driven by high commodity prices.
“There is no sign of real exchange rate misalignment from Cote D’Ivoire (Ivory Coast). It can’t be totally excluded … but there would be no reason to devalue. It doesn’t make any sense,” he said.
“Why would you do that when the largest economy in the zone is in the process of getting its act together?” he said, referring to Ivory Coast, whose economy is bouncing back after years of crisis ending in a post-poll civil war this year.