THE SLAVERY CHAIN OF THE CFA MUST END NOW
THE SLAVERY CHAIN OF THE CFA MUST END NOW…The New Expression 15-06-2022
The President of the Liberal Alliance Party, Deputy Mayor of the commune of Monatele, is sounding the alarm, so that the countries of the CEMAC zone are not lagging behind in the negotiations concerning the abolition of the CFA Franc.
Following the developments observed in West Africa in relation to a new currency in the ECOWAS space, recent rumors report behind-the-scenes negotiations this time at the CEMAC level on the same matter. What is the appreciation that the politician that you are has of this state of affairs?
I cannot hide my confusion because the importance of this subject entails an obligation to inform the people, because it is indeed a question here of a need to finally conquer the monetary sovereignty of our country. Turning the FCFA page imposes a requirement. That, as I have just said, of keeping the people informed because it is they who will bear the brunt of the shock in return that will be caused by the end of the “monetary bondage” decried in the early 1970s by my Professor of Economics in Ngoa Ekelle, Professor Tchuindjang Pouemi of late memory, servitude imposed on our country by France since the colonial era.
Crossing this stage should therefore not be the subject of secret negotiations between bureaucrats stuck in airy theories, while “the people scratch in vain a ground which refuses them the harvest”, to parody Clemenceau. This process must be publicly debated by the parliamentary authorities of our country and give rise to information of the citizens by the most authorized way of the Government.
Ending here and now with the Fcfa is as much a challenge, some will bet on risk, as an opportunity. Such an act requires a firm will to break which will be the mark of an economic emancipation that sovereign States fearlessly embrace.
However, there is a difference in approach between what is observed at ECOWAS and what is emerging here at CEMAC.
Indeed, and this is questionable. The adoption by ECOWAS of the principle of a new currency called ECO since the end of December 2019 seems to serve as a model for the negotiations which, curiously according to rumours, take place behind doors at CEMAC. In the end, everything happens as if ECOWAS, through a public debate on the issue, would benefit from the privilege of a “tailor-made”, while CEMAC will have to be content with a ready-to-wear formula” , until the very adoption of the name ECO, in CEMAC.
We must avoid this asymmetry which, if it persisted, would only be proof of a CEMAC zone still marked by greater submission to the former French colonial power. This observation requires in any case greater vigilance that a new currency in Central Africa does not obey the logic that prevailed at the time of the accession of our countries to independence where we saw France leave to stay better.
You seem to give this process a strong political content?
Indeed, and this is the place to underline that it is not a question of the simple adoption of a new currency name. This is indeed a paradigm shift in the nature of our currency and its relationship to the currencies of other countries with which we have trade and economic relations.
Isn’t this project also based on economic aspects?
Of course yes ! Moreover, we must here recall the conceptual foundations of what a currency is in order to grasp the importance of what will be at stake in this process.
The definition of money states that it designates what is generally accepted in payment for goods and services or in repayment of debts. The function of money is three-fold. The first function is that it serves as an intermediary of exchanges. The second function is that it provides a unit of account, that is, a measure of the economic value of objects or services. The third function is that it is a store of value, a purchasing power that can be transferred over time.
When we combine the definition and the function of money made above, the absolute political and strategic necessity of its mastery and control by the State is deduced. Currency is an inalienable attribute of sovereignty.
Therefore, money is not just a tool; it is an essential instrument of economic policy and governance.
And from a strictly economic point of view, what would be the areas of necessary change?
You have to tackle the problem at its root.
In the current system, the FCFA is governed by a fixed parity with I » Euro, i.e. it is exchanged with what is an anchor value by a fixed conversion rate from which is then deduced ‘its value against other currencies.
We are talking about the fixed parity thus understood as a guarantee that the countries of the Euro at the head of which is France gives to the value of our currency compared to other currencies. The price to be paid by our countries for this guarantee is a penalty to deposit in an “operation account” of the French Treasury a substantial proposal of our export earnings, that is to say our foreign exchange reserves.
For those who defend this system, the fixed peg of the FCFA to the Euro makes it possible to control or contain the inflation of international goods traded by linking it to that which is observed in the monetary zone of the anchor currency which is here I ‘Euro.
However, the analysis revealed that this advantage is offset by several major disadvantages. The first and most important disadvantage is the limit that this system imposes on the monetary policy of our country. The second major drawback is q. ; the shocks hitting the euro zone are mechanically transmitted to the countries of the CFA zone independently of the economic situation of our countries. The third disadvantage is that a fixed parity encourages banks and companies to speculate on the anchor currency to the detriment of our currency by keeping a large part of their financial resources in Euros outside the country.
It is the high cost of these inconveniences that makes the exit from the F CFA a pressing necessity.
Technically, what are the areas where this important change will take place?
Three aspects must be involved for a successful change of our monetary system to a new currency specific to our country or our CEMAC countries.
The first component will be the creation of a central bank with extended powers. Coming out of the current monetary supervision regime, it is necessary for Cameroon and the countries of the sub-region which would join it to acquire a Central Bank which ensures the issuance of our currency, which is the last lender to the Banks through refinancing, supervises and regulates banking activity, facilitates the operation of the payment system, and above all, regulates the money supply to achieve macroeconomic objectives relating to growth, support for business activity, control inflation, unemployment, exchange rate, balance of payment.
The second part of the reform will have to relate to the establishment of a basket of currencies as a determinant of a flexible parity of our currency, rather than the current system of fixed parity with the euro. The system that would best protect our interests would be that the “FAKO”, the name that we suggest giving to our currency by referring to the highest peak on the Atlantic coast of the continent, will therefore be endowed with a parity backed by the basket of the currencies of our main trading partners weighted in relation to the relative weight of our trade with each of them.
These will include European Euro, US Dollar, Chinese Yuan, Japanese Yen, Indian Rupee, South African Rand, Indian Ruble, Brazilian Real. It will then be contractually established to use a settlement system for our exports or our imports providing that 50% of the payments are made in the currency of the partner country, which would allow us to build up our foreign exchange reserves in this currency, putting us thus in capacity to be able to pay for our purchases at the time in their currencies. The balance of 50% of the settlement of the operations will have to be made in FAKO, which would support the demand and the price.
The third aspect is the reappropriation of our monetary sovereignty to make it an instrument of support for the economy. The example of the USA’s vigorous reaction to the COVID 19 pandemic, by massively injecting cash into the economy, is a perfect illustration of a government’s room for maneuver in the event of a serious economic and financial shock. .
We can also recall how the same USA faced the “sub-prime” crisis in 2008 by massively injecting money to bail out companies so that they did not go bankrupt. Thus, our Central Bank sovereignly issuing money will be able to engage with the Government in an expansionary monetary policy by injecting liquidity into the economy through “open market” operations In a circumstance like that of Covid 19, it is an increase in liquidities would encourage the recovery of the economy because it would result in a stimulation of demand combined with support for supply.
In the current socio-political context, do you think the time is right for this operation?
What if! I would even say that in the current situation where the Government seems somewhat disoriented economically after the DSCE did not produce the expected effects, the time is therefore propitious for Cameroon to initiate this structural transformation by relying on this new currency and above all by taking advantage of the margins offered by a decorseted monetary policy.
Imagine what a breath of fresh air it will be if the Government injected the equivalent of 1000 billion FCFA of our new currency into the productive system and direct support to the populations, thus exerting an impetus on investment and consumption, we would see a tremendous rebound in our economy.
The United States and the countries of the North do nothing but run their printing presses intelligently. Why must we remain timorous by imposing on our hard-working people the scarcity of money? Our country must play the role of locomotive of the sub-region in what will turn out to be the second independence of our country.
