CFAF

The CFA franc (in French: franc CFA, or just franc in everyday conversation) is a currency used in 12 formerly French-ruled African countries, as well as in Guinea-Bissau (former Portuguese colony) and in Equatorial Guinea (former Spanish colony).

CFA stood for Colonies françaises d'Afrique ("French colonies of Africa") between 1945 and 1958, and then for Communauté française d'Afrique ("French community of Africa") between 1958 (establishment of the French Fifth Republic) and the independence of these African countries at the beginning of the 1960s. Since the time of their independence, CFA can have two meanings (see Institutions below).

The CFA franc was created on December 26, 1945, along with the CFP franc. The reason for the creation of these francs was the weakness of the French franc immediately after the Second World War. When France ratified the Bretton Woods Agreement in December 1945, the French franc was devalued in order to set a fixed exchange rate with the US dollar. New currencies were created in the French colonies to spare them the strong devaluation of December 1945. René Pleven, the French minister of finance, was quoted saying: "In a show of her generosity and selflessness, metropolitan France, wishing not to impose on her far-away daughters the consequences of her own poverty, is setting different exchange rates for their currency." The CFA franc was created with a fixed exchange rate vs. the French franc. The exchange rate vs. the French franc was changed only twice: in 1948 and in 1994.

Exchange rate:

• December 26, 1945 to October 16, 1948 - 1 CFA franc = 1.70 FRF (FRF = French franc). This 0.70 FRF premium is the consequence of the creation of the CFA franc which spared the French African colonies the devaluation of December 1945 (before December 1945, 1 local franc in these colonies was worth 1 French franc).
• October 17, 1948 to December 31, 1959 - 1 CFA franc = 2.00 FRF (the CFA franc had followed the French franc's devaluation vs. the US dollar in January 1948, but on October 18, 1948 the French franc devalued again and this time the CFA franc was revalued against the French franc to offset almost all of this new devaluation of the French franc; after October 1948 the CFA was never revalued again vs. the French franc and followed all the successive devaluations of the French franc)
• January 1, 1960 to January 11, 1994 - 1 CFA franc = 0.02 FRF (January 1, 1960: 100 'old' francs became 1 'new' franc)
• January 12, 1994 to December 31, 1998 - 1 CFA franc = 0.01 FRF (sharp devaluation of the CFA franc to help African exports)
• January 1, 1999 onward - 100 CFA franc = 0.152449 euro or 1 euro = 655.957 CFA franc. (January 1, 1999: euro replaced FRF at the rate of 6.55957 FRF for 1 euro)

The 1960 and 1999 events are merely changes in the currency in use in France: the relative value of the CFA franc vs. the French franc / euro changed only in 1948 and 1994.

The value of the CFA franc has been widely criticized as being too high, which many economists believe favors the urban elite of the African countries which can buy manufactured goods cheaply at the expense of the farmers who cannot easily export agricultural products. The devaluation of 1994 was an attempt to reduce the value of the CFA franc.

Institutions

Strictly speaking, there actually exist two different currencies called CFA franc: the West African CFA franc (ISO 4217 currency code XOF), and the Central Africa CFA franc (ISO 4217 currency codes XAF). They are distinguished in French by the meaning of the abbreviation CFA. These two CFA francs have the same exchange rate with the euro (1 euro = 655.957 XOF = 655.957 XAF), and they are both guaranteed by the European Central Bank, but the West African CFA franc cannot be used in Central African countries, and the Central Africa CFA franc cannot be used in West African countries.

• The West African CFA franc (XOF) is just known in French as the Franc CFA, where CFA stands for Communauté financière d'Afrique ("Financial Community of Africa"). It is issued by the BCEAO (Banque Centrale des États de l'Afrique de l'Ouest, i.e. "Central Bank of the West African States"), located in Dakar, Senegal, for the 8 countries of the UEMOA (Union Économique et Monétaire Ouest Africaine, i.e. "Benin
  • Burkina Faso
  • Côte d'Ivoire
  • Guinea-Bissau
  • Mali
  • Niger
  • Senegal
  • Togo

These 8 countries have a total population of 75.5 million inhabitants (2003) and a combined GDP of 36.96 billion USD in 2003. This is about the same population and GDP as Vietnam.

The other countries of West Africa such as Ghana or Nigeria are due to join the countries of the UEMOA in 2006 to establish a single currency for the whole of West Africa. However, the sheer size of Nigeria makes this project very hazardous.

• The Central Africa CFA franc (XAF) is just known in French as the Franc CFA, where CFA stands for Coopération financière en Afrique centrale ("Financial Cooperation in Central Africa"). It is issued by the BEAC (Banque des États de l'Afrique Centrale, i.e. "Bank of the Central African States"), located in Yaounde, Cameroon, for the 6 countries of the CEMAC (Communauté Économique et Monétaire de l'Afrique Centrale, i.e. "Cameroon
  • Central African Republic
  • Chad
  • Republic of the Congo
  • Equatorial Guinea
  • Gabon

These 6 countries have a total population of 34.15 million inhabitants (2003) and a combined GDP of 28.3 billion USD in 2003. This is about the same population as Tanzania, and the same GDP as Kazakhstan.

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