The CFA Franc Parity Change: An Opportunity to Restore Growth

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Periodical article

Title:	The CFA Franc Parity Change: An Opportunity to Restore Growth
Authors:	Devarajan, Shantayanan Hinkle, Lawrence E.
Year:	1994
Periodical:	Afrika Spectrum
Volume:	29
Issue:	2
Pages:	131-151
Language:	English
Geographic terms:	French-speaking Africa Subsaharan Africa
Subjects:	franc zone devaluation economic policy Economics and Trade international relations Development and Technology
Abstract:	On 11 January 1994, the Heads of State of the CFA countries decided to change the parity of the CFA franc from 50 CFA francs to 100 CFA francs per French franc and to adopt complementary economic reforms to restore growth. The decision to devaluate changed a parity which had been fixed for 45 years. This paper discusses why the parity change was necessary and what additional reforms will be necessary in the CFA countries. On the basis of recent economic analysis by the World Bank it examines the dimensions of the recent crisis in the CFA countries, the causes of the crisis and the resulting downward deflationary spiral, the desirability of preserving and strengthening the two monetary unions in the area, the failure of the internal adjustment strategy previously pursued and the need for a major policy change, the nature of the comprehensive economic reforms that must follow the parity change in order to restore growth, reduce poverty, and repair the regional financial system, and the political context in which reforms must be implemented. Bibliogr., notes, sum. in French and German.