The fall in the rate of the euro, of regarding 16% once morest the dollar over one year, has consequences as far as Central and West Africa. This depreciation indirectly affects the CFA franc, indexed to the European currency and used in fifteen African countries. It increases the cost of their imports and fuels soaring energy and food prices, already under pressure since the Russian war in Ukraine and the numerous export restrictions introduced in the process.
In Ivory Coast, which was rocked by food riots in 2008, the government has frozen the prices of seven staples, including sugar, rice and palm oil, until at least September . Senegal subsidizes wheat imports and tries to promote the cultivation of local cereals such as millet, sorghum or even cowpea, which are rich in protein. In Togo, President Faure Gnassingbé declared at the end of June that subsidies of up to 20 million dollars (19.7 million euros) each month were not “viable” for the country’s finances and that it would instead favor an import substitution strategy.
For countries heavily indebted in dollars, the devaluation of the CFA franc weighs heavily on public finances. “When the CFA franc loses 20% of its value once morest the dollar, this means that the repayment of the debt denominated in dollars increases by 20%, Explain Kwami Ossadzifo Wonyra, economist at the Togolese University of Kara. However, many low-income countries have had to borrow in dollars to deal with the Covid-19 pandemic.. In Senegal, they alone represent 40% of the external debt.
The only winners from this depreciation are exporters from countries in the zone. « But the competitiveness effect linked to the fall of the CFA franc is limited by the fact that exports, mostly made up of raw materials, are mainly denominated in dollars,” downplays Carl Grekou, an economist at the Center for Prospective Studies and International Information.
Debate on the usefulness of the CFA franc
This drop in the euro has revived the debate on the usefulness of the CFA franc, whose acronym stood for “French colonies in Africa” until 1958, and which is accused of maintaining African economies in a relationship of dependence on towards France. Its supporters insist on the stability it offers. The currency is not subject to speculative attacks, due to its fixed exchange rate, and guarantees moderate inflation. “But this stability comes at a high price, observe Kwami Ossadzifo Wonyra, because by giving priority to the fight once morest inflation, we do not have an expansionary monetary policy that opens the floodgates of credit and promotes investment. » Finally, this stability mainly benefits some people. “Europeans can import raw materials and other products without risking exchange rate variations and the African wealthy classes consume European products more easily”, added Carl Grekou.
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