Book contents
- Frontmatter
- Contents
- List of figures and tables
- Preface
- List of acronyms and abbreviations
- 1 Introduction and overview
- Part I Unrecorded trade in goods and currencies
- Part II Foreign exchange constraints
- 4 Dollars for sale: inflation and the black market premium
- 5 The public debt constraint in the CFA Zone
- 6 Currency crises, food, and the “Cola nut” effect
- Part III Longer-term growth in African countries
- General conclusion
- References
- Index
5 - The public debt constraint in the CFA Zone
Published online by Cambridge University Press: 26 May 2010
- Frontmatter
- Contents
- List of figures and tables
- Preface
- List of acronyms and abbreviations
- 1 Introduction and overview
- Part I Unrecorded trade in goods and currencies
- Part II Foreign exchange constraints
- 4 Dollars for sale: inflation and the black market premium
- 5 The public debt constraint in the CFA Zone
- 6 Currency crises, food, and the “Cola nut” effect
- Part III Longer-term growth in African countries
- General conclusion
- References
- Index
Summary
Introduction
The exchange rate between the CFA Franc and the French Franc remained fixed from 1948 to January 1994. This was a credible commitment to prevent inflation. Exchange rate stability, obtained without exchange controls, had been made possible by two basic rules: (i) the ability of the governments of the member countries of the CFA Franc Zone to finance their deficits by printing money is drastically restricted, and (ii) the French treasury provides a virtually unlimited credit line (the “compte d'opérations”) to the two central banks (the BCEAO in the UEMOA (West Africa), and the BEAC in the CEMAC (Central Africa)). Moreover, all member countries were required to pool a large share of their foreign reserves (generally 65%). Allechi and Niamkey (1994) argue that this is a net cost to participants. These two rules provide the CFA Franc with a guarantee of convertibility that makes it a “hard currency.” As a result, it is an international currency inWest and Central Africa, held as an inflation-proof asset by many people in Nigeria, the former Zaïre, etc. The governments of the CFA countries are thus able to extract some seigniorage from asset holders of neighboring countries.
- Type
- Chapter
- Information
- Trade, Exchange Rate, and Growth in Sub-Saharan Africa , pp. 105 - 133Publisher: Cambridge University PressPrint publication year: 2006