CFA franc
Encyclopedia
The CFA franc is the name of two currencies
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 used in Africa which are guaranteed by the French treasury. The two CFA franc currencies are the West African CFA franc
West African CFA franc
The West African CFA franc is the currency of eight independent states in West Africa: Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Sénégal and Togo. The acronym CFA stands for Communauté financière d'Afrique...

and the Central African CFA franc
Central African CFA franc
The Central African CFA franc is the currency of six independent states in central Africa, Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon. CFA stands for Coopération financière en Afrique centrale...

. Although theoretically separate, the two CFA franc currencies are effectively interchangeable.

Both CFA Francs currently have a fixed exchange rate
Fixed exchange rate
A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.A fixed exchange rate is usually used to...

 to the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

: 100 CFA francs = 1 former French (nouveau) franc
French franc
The franc was a currency of France. Along with the Spanish peseta, it was also a de facto currency used in Andorra . Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money...

 = 0.152449 euro; or 1 euro = 655.957 CFA francs.

Although Central African CFA francs and West African CFA francs have always been at parity and have therefore always had the same monetary value against other currencies, they are in principle separate currencies. They could theoretically have different values from any moment if one of the two CFA monetary authorities, or France, decided it. Therefore West African CFA coins and banknotes are theoretically not accepted in countries using Central African CFA francs, and vice versa. However in practice the permanent parity of the two CFA franc currencies is widely assumed.

CFA Francs are used in fourteen countries: twelve formerly French
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...

-ruled African countries, as well as in Guinea-Bissau
Guinea-Bissau
The Republic of Guinea-Bissau is a country in West Africa. It is bordered by Senegal to the north, and Guinea to the south and east, with the Atlantic Ocean to its west....

 (a former Portuguese
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...

 colony) and in Equatorial Guinea
Equatorial Guinea
Equatorial Guinea, officially the Republic of Equatorial Guinea where the capital Malabo is situated.Annobón is the southernmost island of Equatorial Guinea and is situated just south of the equator. Bioko island is the northernmost point of Equatorial Guinea. Between the two islands and to the...

 (a former Spanish
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...

 colony). The ISO currency code
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...

s are XAF for the Central African CFA franc
Central African CFA franc
The Central African CFA franc is the currency of six independent states in central Africa, Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon. CFA stands for Coopération financière en Afrique centrale...

 and XOF for the West African CFA franc
West African CFA franc
The West African CFA franc is the currency of eight independent states in West Africa: Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Sénégal and Togo. The acronym CFA stands for Communauté financière d'Afrique...

.

Name

Between 1945 and 1958, CFA stood for ("French colonies of Africa"); then for ("French community of Africa") between 1958 (establishment of the French Fifth Republic
French Fifth Republic
The Fifth Republic is the fifth and current republican constitution of France, introduced on 4 October 1958. The Fifth Republic emerged from the collapse of the French Fourth Republic, replacing the prior parliamentary government with a semi-presidential system...

) and the independence of these African countries at the beginning of the 1960s. Since independence, CFA is taken to mean (African Financial Community), but in actual use, the term can have two meanings (see Institutions below).

Creation

The CFA franc was created on 26 December 1945, along with the CFP franc
CFP franc
The CFP franc is the currency used in the French overseas collectivities of French Polynesia, New Caledonia and Wallis and Futuna. The initials CFP originally stood for Colonies Françaises du Pacifique...

. The reason for their creation was the weakness of the French franc
French franc
The franc was a currency of France. Along with the Spanish peseta, it was also a de facto currency used in Andorra . Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money...

 immediately after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

. When France ratified the Bretton Woods Agreement
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...

 in December 1945, the French franc
French franc
The franc was a currency of France. Along with the Spanish peseta, it was also a de facto currency used in Andorra . Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money...

 was devalued
Devaluation
Devaluation is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged....

 in order to set a fixed exchange rate
Fixed exchange rate
A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.A fixed exchange rate is usually used to...

 with the US dollar. New currencies were created in the French colonies
French Colonies
"French Colonies" is the name used by philatelists to refer to the postage stamps issued by France for use in the parts of the French colonial empire that did not have stamps of their own...

 to spare them the strong devaluation, thereby facilitating exports to France. French officials presented the decision as an act of generosity. René Pleven
René Pleven
René Pléven was a notable French politician of the Fourth Republic. A member of the Free French, he helped found the Democratic and Socialist Union of the Resistance , a political party that was meant to be a successor to the wartime Resistance movement...

, the French minister of finance
Minister of the Economy, Finance and Industry (France)
The Minister for the Economy, Industry and Employment , or Minister of Finance for short, is one of the most prominent positions in the cabinet of France after the Prime Minister....

, was quoted as saying:
"In a show of her generosity and selflessness, metropolitan France
Metropolitan France
Metropolitan France is the part of France located in Europe. It can also be described as mainland France or as the French mainland and the island of Corsica...

, wishing not to impose on her far-away daughters the consequences of her own poverty, is setting different exchange rates for their currency."

Exchange rate

The CFA franc was created with a fixed exchange rate versus the French franc
French franc
The franc was a currency of France. Along with the Spanish peseta, it was also a de facto currency used in Andorra . Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money...

. This exchange rate was changed only twice: in 1948 and in 1994.

Exchange rate:
  • 26 December 1945 to 16 October 1948 – 1 CFA franc = 1.70 FRF (FRF = French franc). This 0.70 FRF premium
    Premium
    Premium may refer to:* Premium , a promotional item that can be received for a small fee when redeeming proofs of purchase that come with or on retail products....

     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).
  • 17 October 1948 to 31 December 1959 – 1 CFA franc = 2.00 FRF (the CFA franc had followed the French franc's devaluation versus the US dollar in January 1948, but on 18 October 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 versus the French franc and followed all the successive devaluations of the French franc)
  • 1 January 1960 to 11 January 1994 – 1 CFA franc = 0.02 FRF (1 January 1960: the French franc redenominated, with 100 "old" francs becoming 1 "new" franc)
  • 12 January 1994 to 31 December 1998 – 1 CFA franc = 0.01 FRF (sharp devaluation of the CFA franc to help African exports)
  • 1 January 1999 onward – 100 CFA franc = 0.152449 euro or 1 euro = 655.957 CFA franc. (1 January 1999: euro
    Euro
    The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

     replaced FRF at the rate of 6.55957 FRF for 1 euro)


The 1960 and 1999 events were merely changes in the currency in use in France: the relative value
Relative value
Relative value is the attractiveness measured in terms of risk, liquidity, and return of one instrument relative to another, or for a given instrument, of one maturity relative to another...

 of the CFA franc versus 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 farmers who cannot easily export agricultural products. The devaluation of 1994 was an attempt to reduce these imbalances.

Changes in countries using the franc

Over time, the number of countries and territories using the CFA franc has changed as some countries began introducing their own separate currencies. A couple of nations in West Africa have also chosen to adopt the CFA franc since its introduction, despite the fact that they were never French colonies.
  • 1949: French Somaliland
    French Somaliland
    French Somaliland was a French colony in the Horn of Africa. Established after the French signed various treaties between 1883 and 1887 with the then ruling Somali Sultans, the colony lasted from 1896 until 1946, when it became an overseas territory of France....

     (Djibouti) leaves and begins issuing Djiboutian franc
    Djiboutian franc
    The franc is the currency of Djibouti. The ISO 4217 currency code is DJF. Historically it was subdivided into 100 centimes.- History :...

    s
  • 1960: Guinea
    Guinea
    Guinea , officially the Republic of Guinea , is a country in West Africa. Formerly known as French Guinea , it is today sometimes called Guinea-Conakry to distinguish it from its neighbour Guinea-Bissau. Guinea is divided into eight administrative regions and subdivided into thirty-three prefectures...

     leaves and begins issuing Guinean franc
    Guinean franc
    -First Guinean franc:The first Guinean franc was introduced in 1959 to replace the CFA franc. There were 1, 5, 10 and 25 francs coins with banknotes in 50, 100, 500, 1000, 5000 and 10,000 francs denominations. A second series of banknotes was issued in 1960, without the 10,000 francs...

    s
  • 1962: Mali
    Mali
    Mali , officially the Republic of Mali , is a landlocked country in Western Africa. Mali borders Algeria on the north, Niger on the east, Burkina Faso and the Côte d'Ivoire on the south, Guinea on the south-west, and Senegal and Mauritania on the west. Its size is just over 1,240,000 km² with...

     leaves and begins issuing Malian franc
    Malian franc
    The franc was the independent currency of Mali between 1962 and 1984. Although technically subdivided into 100 centimes, no subdivisions were issued.-History:...

    s
  • 1967: Réunion
    Réunion
    Réunion is a French island with a population of about 800,000 located in the Indian Ocean, east of Madagascar, about south west of Mauritius, the nearest island.Administratively, Réunion is one of the overseas departments of France...

     leaves for French franc
  • 1973: Madagascar
    Madagascar
    The Republic of Madagascar is an island country located in the Indian Ocean off the southeastern coast of Africa...

     leaves (in 1972, according to another source) and begins issuing its own francs
    Malagasy franc
    The franc was the currency of Madagascar until January 1, 2005. It was subdivided into 100 centimes.-History:The first francs to circulate in Madagascar were French francs...

    , which ran concurrently with the Malagasy ariary
    Malagasy ariary
    The ariary is the currency of Madagascar. It is subdivided into 5 iraimbilanja and is one of only two non-decimal currencies currently circulating . The names ariary and iraimbilanja derive from the pre-colonial currency, with ariary being the name for a silver dollar...

     (1 ariary = 5 CFA francs)
  • 1973: Mauritania
    Mauritania
    Mauritania is a country in the Maghreb and West Africa. It is bordered by the Atlantic Ocean in the west, by Western Sahara in the north, by Algeria in the northeast, by Mali in the east and southeast, and by Senegal in the southwest...

     leaves, replacing the franc with the Mauritanian ouguiya
    Mauritanian ouguiya
    The ouguiya , also spelt "ougiya," is the currency of Mauritania. It is the only circulating currency other than the Malagasy ariary whose division units are not based on a power of ten, each ouguiya comprising five khoums .The ouguiya was introduced in 1973, replacing the CFA franc at a rate of 1...

     (1 ouguiya = 5 CFA francs)
  • 1974: Saint-Pierre and Miquelon
    Saint-Pierre and Miquelon
    Saint Pierre and Miquelon is a self-governing territorial overseas collectivity of France. It is the only remnant of the former colonial empire of New France that remains under French control....

     leaves for French franc
  • 1984: Mali
    Mali
    Mali , officially the Republic of Mali , is a landlocked country in Western Africa. Mali borders Algeria on the north, Niger on the east, Burkina Faso and the Côte d'Ivoire on the south, Guinea on the south-west, and Senegal and Mauritania on the west. Its size is just over 1,240,000 km² with...

     rejoins (1 CFA franc = 2 Malian franc
    Malian franc
    The franc was the independent currency of Mali between 1962 and 1984. Although technically subdivided into 100 centimes, no subdivisions were issued.-History:...

    s)
  • 1985: Equatorial Guinea
    Equatorial Guinea
    Equatorial Guinea, officially the Republic of Equatorial Guinea where the capital Malabo is situated.Annobón is the southernmost island of Equatorial Guinea and is situated just south of the equator. Bioko island is the northernmost point of Equatorial Guinea. Between the two islands and to the...

     joins (1 "franco" = 4 bipkwele
    Equatorial Guinean ekwele
    The ekwele or ekuele was the currency of Equatorial Guinea between 1975 and 1985. Although nominally divided into 100 céntimos, no subdivisions were issued...

    )
  • 1997: Guinea-Bissau
    Guinea-Bissau
    The Republic of Guinea-Bissau is a country in West Africa. It is bordered by Senegal to the north, and Guinea to the south and east, with the Atlantic Ocean to its west....

     joins (1 "franco" = 65 pesos
    Guinea Bissau peso
    The peso was the currency of Guinea-Bissau from 1975 to 1997 and was divided into 100 centavos. It replaced the escudo at par. In 1997, Guinea Bissau adopted the CFA franc of the West African States, using a conversion rate of 65 pesos to the franc....

    )


Note : Réunion and Saint-Pierre and Miquelon currently use euro as part of the French Republic.

European Monetary Union

In 1998, in anticipation of Economic and Monetary Union of the European Union
Economic and Monetary Union of the European Union
The Economic and Monetary Union is an umbrella term for the group of policies aimed at converging the economies of members of the European Union in three stages so as to allow them to adopt a single currency, the euro. As such, it is largely synonymous with the eurozone.All member states of the...

, the Council of the European Union
Council of the European Union
The Council of the European Union is the institution in the legislature of the European Union representing the executives of member states, the other legislative body being the European Parliament. The Council is composed of twenty-seven national ministers...

 addressed the monetary agreements France has with the CFA Zone and Comoros
Comoros
The Comoros , officially the Union of the Comoros is an archipelago island nation in the Indian Ocean, located off the eastern coast of Africa, on the northern end of the Mozambique Channel, between northeastern Mozambique and northwestern Madagascar...

 and ruled that:
  • The agreements are unlikely to have any material effect on the monetary
    Monetary policy
    Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...

     and exchange rate policy
    Exchange rate regime
    The exchange-rate regime is the way a country manages its currency in relation to other currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many of the same factors....

     of the Euro zone
  • In their present forms and states of implementation, the agreements are unlikely to present any obstacle to a smooth functioning of economic and monetary union
    Economic and Monetary Union of the European Union
    The Economic and Monetary Union is an umbrella term for the group of policies aimed at converging the economies of members of the European Union in three stages so as to allow them to adopt a single currency, the euro. As such, it is largely synonymous with the eurozone.All member states of the...

  • Nothing in the agreements can be construed as implying an obligation for the European Central Bank
    European Central Bank
    The European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...

     (ECB) or any national central bank
    Central bank
    A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

     to support the convertibility of the CFA and Comorian franc
    Comorian franc
    The franc is the official currency of Comoros. It is nominally subdivided into 100 centimes, although no centime denominations have ever been issued.-History:...

    s
  • Modifications to the existing agreements will not lead to any obligations for the European Central or any national central bank
  • The French Treasury will guarantee the free convertibility at a fixed parity between the euro
    Euro
    The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

     and the CFA and Comorian francs
  • The competent French authorities shall keep the European Commission
    European Commission
    The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....

    , the European Central Bank and the Economic and Financial Committee informed about the implementation of the agreements and inform the Committee prior to changes of the parity between the euro and the CFA and Comorian francs
  • Any change to the nature or scope of the agreements would require Council approval on the basis of a Commission recommendation and ECB consultation

Institutions

Strictly speaking, there actually exist two different currencies called CFA franc: the West African CFA franc (ISO 4217
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...

 currency code XOF), and the Central Africa CFA franc (ISO 4217
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...

 currency code 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 French treasury (Trésor public
Trésor public
The Trésor public is the national administration of the Treasury in France. It is headed by the general direction of public accountancy in the Ministry of the Economy, Finance and Industry....

), 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.

West African

The West African CFA franc (XOF) is just known in French
French language
French is a Romance language spoken as a first language in France, the Romandy region in Switzerland, Wallonia and Brussels in Belgium, Monaco, the regions of Quebec and Acadia in Canada, and by various communities elsewhere. Second-language speakers of French are distributed throughout many parts...

 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
Dakar
Dakar is the capital city and largest city of Senegal. It is located on the Cap-Vert Peninsula on the Atlantic coast and is the westernmost city on the African mainland...

, Senegal
Senegal
Senegal , officially the Republic of Senegal , is a country in western Africa. It owes its name to the Sénégal River that borders it to the east and north...

, for the 8 countries of the UEMOA (Union Économique et Monétaire Ouest Africaine, i.e. "West African Economic and Monetary Union"):

Central African

The Central Africa CFA franc (XAF) is just known in French
French language
French is a Romance language spoken as a first language in France, the Romandy region in Switzerland, Wallonia and Brussels in Belgium, Monaco, the regions of Quebec and Acadia in Canada, and by various communities elsewhere. Second-language speakers of French are distributed throughout many parts...

 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 Yaoundé
Yaoundé
-Transportation:Yaoundé Nsimalen International Airport is a major civilian hub, while nearby Yaoundé Airport is used by the military. Railway lines run west to the port city of Douala and north to N'Gaoundéré. Many bus companies operate from the city; particularly in the Nsam and Mvan neighborhoods...

, Cameroon
Cameroon
Cameroon, officially the Republic of Cameroon , is a country in west Central Africa. It is bordered by Nigeria to the west; Chad to the northeast; the Central African Republic to the east; and Equatorial Guinea, Gabon, and the Republic of the Congo to the south. Cameroon's coastline lies on the...

, for the 6 countries of the CEMAC (Communauté Économique et Monétaire de l'Afrique Centrale, i.e. "Economic and Monetary Community of Central Africa"):

In 1975, Central African CFA banknotes were issued with an obverse unique to each participating country, and common reverse, in a fashion similar to euro coins.

Equatorial Guinea
Equatorial Guinea
Equatorial Guinea, officially the Republic of Equatorial Guinea where the capital Malabo is situated.Annobón is the southernmost island of Equatorial Guinea and is situated just south of the equator. Bioko island is the northernmost point of Equatorial Guinea. Between the two islands and to the...

, the only former Spanish colony in the zone, adopted the CFA in 1984.

See also

  • Economy of Africa
    Economy of Africa
    The economy of Africa consists of the trade, industry, and resources of the people of Africa. , approximately 922 million people were living in 54 different countries. Africa is by far the world's poorest inhabited continent...

  • Comorian franc
    Comorian franc
    The franc is the official currency of Comoros. It is nominally subdivided into 100 centimes, although no centime denominations have ever been issued.-History:...

  • Currencies related to the euro
  • CFP franc
    CFP franc
    The CFP franc is the currency used in the French overseas collectivities of French Polynesia, New Caledonia and Wallis and Futuna. The initials CFP originally stood for Colonies Françaises du Pacifique...

  • List of French possessions and colonies
  • French colonial Empire
    French colonial empire
    The French colonial empire was the set of territories outside Europe that were under French rule primarily from the 17th century to the late 1960s. In the 19th and 20th centuries, the colonial empire of France was the second-largest in the world behind the British Empire. The French colonial empire...


External links


} (in French, but more extensive than the English version)

Other

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
x
OK