West African opinion divided over CFA franc reform

CFA franc banknotes. (AFP)
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Updated 25 December 2019

West African opinion divided over CFA franc reform

  • Experts questioned whether the change amounts to much but others thought it a step forward, although vital issues remain to be tackled

DAKAR: Plans to overhaul the CFA franc, a France-backed currency used by former colonies in West Africa, have drawn reactions ranging from skepticism to cautious optimism.

Some experts in the region questioned whether the change amounts to much but others thought it a step forward, although vital issues remain to be tackled.

Introduced in 1945 during colonial times, the CFA is linked to the euro under an arrangement that requires African members to lodge half their reserves in the Bank of France.

The deal provides currency stability — and a dampener on inflation — for the eight countries in the West African Monetary Union (WAMU).

They comprise Benin, Burkina Faso, Ivory Coast, Mali, Niger, Senegal and Togo, which are former French colonies, as well as Guinea-Bissau, a former Portuguese colony.

But the dependence on France, and even the name of the currency itself, are under fire.

Critics have directed withering fire, describing the CFA franc as a symbol of colonialism and past French meddling and an affront to economic sovereignty.

On Saturday, Ivorian President Alassane Ouattara and French President Emmanuel Macron announced a major shift.

Under it, the CFA franc will be renamed the “eco” and its member countries will no longer be required to keep reserves in France.

The currency will retain parity with the euro, and France will quit its managerial institutions.

However, France will provide backup, in the form of a line of credit, if WAMU countries hit a currency crisis.

The description of the change as “historic” ran into immediate flak.

“It’s six of one and half a dozen of the other,” the Ivorian opposition newspaper Notre Voie (“Our Way”) said, while the Quotidien de Dakar daily in the Senegalese capital said: “The outside has changed, but inside, nothing has moved.” Some economists agreed.

Senegalese expert Makhtar Diouf said the announcement was a “non-event” while Ivorian economist Mamadou Koulibaly, an opposition candidate in next year’s elections, said, “there are reasons for feeling confused.”

Donaldine Amangbedji, a researcher at the Abomey Calavi University in Benin, saw no tangible benefit for the public except for “stirring debate on possible alternatives.”

But Togolese economist Kako Nubukpo, a key figure in the attacks on the CFA franc, said the announcement was “marvelous news ... (a) historic moment.”

He cautioned, however: “We will however remain vigilant about the currency regime, which should be sorted out soon — the fixed parity (with the euro) is transitional.”

Senegalese economist Felwine Sarr, writing on Facebook, said the change was “a step forward, but not a revolution nor a fundamental break.”

“At the present time, this reform ... only concerns the most symbolic aspects, but leaves major components of the former relationship unchanged,” Sarr said.

Several important questions will have to be answered in the coming months.


China Pakistan Economic Corridor is a game-changer

Updated 25 min 7 sec ago

China Pakistan Economic Corridor is a game-changer

  • Project will strengthen bond between two countries who share history of good strategic relations

The China Pakistan Economic Corridor (CPEC), presently under construction at a cost of $46 billion, aims to improve Pakistani infrastructure and deepen the economic and political ties between China and Pakistan.

CPEC is advantageous to Pakistan but also carries substantial economic and strategic benefits for China.

Its importance for China is evident from the fact that it is part of China’s 13th five-year development plan.

CPEC will boost ties between China and Pakistan, which share a history of congenial strategic relations, over a versatile canvass of mutual interest extending over six decades.

In the past 65 years, both countries have developed strong bilateral trade and economic collaboration.

China is Pakistan’s largest trading partner in imports and exports. And CPEC is going further to enhance the lucrative economic cooperation between the two countries.

If realized, the plan will be China’s biggest splurge on economic development in another country to date.

Consul Syed Hamzah Saleem Gilani

It aims over 15 years to create an economic corridor between Gwadar Port to China’s northwestern region of Xinjiang through the 2,700 km long highway from Kashgar to Gwadar, railway links for freight trains, oil and gas pipelines and an optical fiber link.

The project will create nearly 700,000 new jobs and add up to 2.5 percent to Pakistan’s annual growth rate.

CPEC has undeniable economic and strategic importance for Pakistan and China. It has been called a game-changer for Pakistan because it will link China with markets in Central Asia and South Asia. Presently China is some 13,000 km from the Arabian Gulf with a shipping time of about 45 days.

CPEC will shrink this distance to merely 2,500 km (an 80 percent reduction).

The shipping time will reduce to 10 days (a 78 percent reduction). The bulk of China’s trade is through the narrow sea channel of the Strait of Malacca.

Top security analysts say that in the event of a future war in Asia, the US Navy could block the Strait of Malacca, which would suffocate China’s trade route. CPEC, besides providing an alternate route, will reduce the shipping time from China to Europe.

The largest part of the project would provide electricity to energy-thirsty Pakistan, badly affected by hours of daily scheduled power cuts because of electricity-shortages, based mostly on building new coal-fired power plants.

The plans envisages adding 10,400 megawatts of electricity at a cost of $15.5 billion by 2018. And after 2018 a further 6,600 megawatts, at an additional cost of $18.3 billion, will be added, doubling Pakistan’s current electricity output.

The CPEC brings many benefits for China and Pakistan, but it is also challenged by security-related and political threats.

There are two major sources of threat: Indian involvement, and the separatist rebellion in Baluchistan where the port of Gwadar is situated.

Both dimensions of threat are interconnected because recent arrests of Indian spies by Pakistan reveal that the Indian government is spending a huge amount of money and resources on sabotaging the CPEC project.

Apart from espionage activities, India is also supporting the Baloch rebels. Nevertheless, Pakistan is well-equipped, with adequate security and infrastructure support to effectively deal with such challenges. Operation “Zarb-e-Azb,” which has received international recognition, has flushed out the major chunk of extremists from Pakistan’s soil.

The political side of the project for Pakistan is also not rosy.

It is always difficult to achieve political consensus on an issue. The Kalabagh dam project, for example, which is considered to be extremely important in addressing Pakistan’s water-shortage problems, has been subjected to political controversy and still awaits construction.

Similar formulas are being applied to CPEC. Drums of provincialism are being beaten loudly to make CPEC another Kalabagh dam.

However, this time sanity has prevailed in the political leadership and controversies were nipped in the bud at an early stage. Besides the efforts of political leaders, the contribution of the Army chief should not go unappreciated.

He took a special interest in this project and provided — and ensured for the future — the Pakistan Army’s full support for the mega-economic project.

CPEC has the potential to carry huge economic benefits for the people of Pakistan and the region. According to a recent estimate, CPEC will serve three billion people, nearly half of the global population. Thus a huge economic bloc is about to emerge from this region.

On completion of the CPEC, Pakistan will become a connecting bridge to three engines of growth: China, Central Asia, and South Asia.

It will create many jobs and elevate Pakistan to high growth rates, which will ensure Pakistan’s stability and serve as a deterrent to extremism and violence.

The completion of CPEC is not going to be an easy task because it has attracted international conspiracies, against which it must be protected.

The economic dividends of this project, by connecting all the economies of the region, are going to be so high that once this project is in full-operation even our neighbor India might ultimately join the club for greater economic benefits.

 

The author is Pakistan’s press counselor in Jeddah

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