The CFA Franc: France's Colonial-Era Currency Arrangement and Its Contested Legacy

When France’s African colonies gained independence around 1960, most did not gain full monetary independence alongside it. Fourteen of them (eight in West Africa and six in Central Africa, a group that today includes former Portuguese and Spanish colonies Guinea-Bissau and Equatorial Guinea as later additions) continued using the CFA franc, a currency created by France in 1945 (the acronym originally stood for “franc of the French colonies in Africa”) and pegged at a fixed exchange rate, first to the French franc and then, from 1999, to the euro. Independence agreements and follow-on monetary cooperation accords bound these states into a system where their central banks were required to deposit a large share of their foreign exchange reserves (initially the full amount, later reduced to 65 percent from 1973) in a French Treasury operating account, with French officials holding seats on the central banks’ governing boards to help oversee monetary policy. Critics, including a number of African economists and pan-Africanist commentators, have long described this whole framework as a “colonial pact” or instrument of “Françafrique,” the informal but durable network of financial, military, and political ties France maintained with its former colonies after independence, arguing that it left these nations without genuine control over their own monetary policy despite formal sovereignty.

Defenders of the arrangement, including many French and some African officials over the decades, have countered that the peg delivered a genuine benefit: low, stable inflation and currency convertibility that protected CFA franc economies from the currency crises and hyperinflation that hit several other African states, at the cost of ceding some monetary flexibility. Both views have circulated for decades, and the debate is real rather than settled: it’s less a question of contested facts than of how to weigh currency stability against loss of policy control, a live economic argument rather than a matter with one side clearly “right.”

The system has changed materially since the current wave of criticism intensified in the 2010s. In December 2019, the eight West African CFA states, organized as the West African Economic and Monetary Union, agreed with France to end the 50-percent reserve deposit requirement (the level it had stood at since 2005) and remove French representatives from the West African central bank’s board; France’s parliament ratified the change into law in May 2020, and it took effect for those countries. Those eight countries also announced plans to eventually rename their currency the “eco” as part of a broader ECOWAS single-currency project, but as of the mid-2020s, that renamed, independent currency has not actually launched; the target date has been pushed back repeatedly, most recently to 2027, and in the meantime those countries still use a CFA franc pegged to the euro, just without the reserve-deposit rule. The six Central African CFA states, by contrast, agreed to no comparable reform: they still deposit 50 percent of their reserves with the French Treasury today. So “still enforced today” is accurate for Central Africa’s CFA franc zone, but no longer accurate, in its strictest form, for West Africa’s, a distinction frequently lost in both critical and defensive accounts of the system.