From: barnhart@netcom.com (Aaron Barnhart)
Subject: IPS:WEST AFRICA: CFA DEVALUATION PUT ON
Date: Sat, 15 Aug 92 15:08:13 GMT
Organization: Netcom
Reply-To: barnhart@netcom.com

opyright Inter Press Service 1992, all rights reserved.  Permission to re-
print within 7 days of original date only with permission from 'newsdesk'.

Reference: Trade & Finance
Title: WEST AFRICA: CFA DEVALUATION PUT ON HOLD


an inter press service feature

by peter da costa

banjul, august 11 (ips) -- trade between west and central
africa's economically-fragile states could be drastically
affected should the cfa franc that links france to its former
colonies be devalued in line with international pressure.

analysts and businessmen here conclude that unless concrete
standby arrangements are developed, a major slump in
intra-regional trade could result.

crucial informal cross-border trade -- known as re-export --
would suffer as cfa countries struggle to adjust to the rise in
import bills which would accompany a devaluatiion.

the doomsday scenario follows strong speculation late last
month that the french treasury would give in to international
pressure over the grossly over-valued cfa and cancel the parity
it has guaranteed at 50 cfa to one french franc since 1948.

many donors, among them the world bank and international
monetary fund (imf), have led calls for devaluing the cfa, west
africa's only convertible currency. they say the parity
sustains the uncompetitive nature of francophone exports and its
unhealthy fondness for luxury imports.

the donors believe the currency should more realistically
reflect the prevailing harsh economic climate faced by the 14
african countries of the cfa zone on which france effectively
imposed monetary union after independence.

continued french support, argue donors, is incompatible with
local economic structural adjustment programmes (sap).

cfa countries have succesfully rallied against devaluation,
insisting they need a strong currency for development. france
has tended to share the view that the fixed exchange rate is a
benchmark of stability and has consistently quashed devaluation
talk. membership of the franc zone keeps inflation at acceptable
levels and guarantees relative monetary stability.

france's president francois mitterrand responded to pleas
from four assurance-seeking francophone african leaders last
month when he gave an unequivocal thumbs-down to devaluation.
finance minister michel sapin confirmed that ''france naturally
maintains the guarantee (on convertability) that it grants these
countries under existing monetary cooperation agreements''.

sapin implied that as long as the leaders endured saps, the
cfa would remain a protected currency. (more/ips)


west africa: cfa (2)

burkina faso's president blaise compaore, one of four franc
zone leaders who petitioned mitterand, confirmed this when he
said: ''we have made a committment... to pursue vigorously the
restructuring of our economies in a certain number of ways that
exclude devaluation''.

the fate of these countries rest with france, which analysts
say can resist donor pressure for as long as it wishes.

''this business of (a single-european market) having an
impact on the cfa is rubbish'', believes prof. brendan walsh.
''i would say the position vis-a-vis france and the cfa remains
the same even after the single european act'', walsh told ips.

the conventional wisdom is that france's strong trading links
with its former colonies, coupled with a strong desire to
maintain a cultural influence in africa, will mitigate against
any sudden devaluation.

according to french analysts bruno coquetnand and jean-marc
daniel, devaluation would surely cripple francophone african
economies. they argue that it is not a necessary step for
adjustment and say even the imf has tempered its criticism of
the cfa's artificial strength.

the two influential economists blame the failure of
development policies on structural handicaps such as the lack of
infrastructure and dependence on unstable revenue sources such
as commodity exports.

nevertheless devaluation talk will continue year in year out.
cote d'ivoire, the world's largest cocoa producer and a major
coffee exporter, has suffered at the hands of world market
commodcty prices, and may be tempted to accept devaluation as a
short-term solution to its cashflow and political problems.

along with oil-rich gabon, the regionally influential and
relatively well-off cote d'ivoire may convince franc zone
members to devalue. however poorer cfa countries, including
those in udeac -- the central african franc zone -- may well
resist what could bring unprecedented austerity which in turn
might catalyse political crises.

france is also urging francophones to press ahead with plans
for regional economic integration, an issue topping the agenda
of a summit in dakar, senegal, last month of the 16-member
economic community of west african states (ecowas). the cfa is a
natural choice.

ecowas -- which since its inception in 1975 has tried to
promote intra-regional trade as a basis for an eventual single
currency -- has been crippled by a lack of political will
exacerbated by the existence within the community of umoa, an
umbrella of seven west african franc zone members.
(end/ips/pdc/oa/92)


-- 
Aaron (Barnhart@netcom.com) -- posting from Evanston, Illinois