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Leaving Africa’s Colonial-Era Currency Will Be Hard, But May Be Wise

Burkina Faso, Mali, and Niger are contemplating an exit from the CFA franc zone, which has its roots in French colonialism. Despite the challenges involved, the authorities in these countries could make a new currency arrangement work, as long as they are committed to fiscal rigor.

LONDON – Exiting a longstanding currency union – as Burkina Faso, Mali, and Niger propose to do by leaving the CFA franc zone, comprised of West African states that use the French-backed currency pegged to the euro – is not a decision to be taken lightly. For the departing members, in particular, alternative monetary arrangements could prove elusive and better solutions may be overlooked.

Furthermore, while other former French colonies – including Tunisia in 1958, Algeria in 1964, and Mauritania and Madagascar in 1973 – successfully left the franc zone, the context was Bretton Woods. Accordingly, the order of the day was comprehensive capital controls, strong international support for decolonization (notably from the United States), and symbolic, rather than substantive, shifts in currency pegs – propitious circumstances which no longer apply.

Nevertheless, exiting from the CFA franc zone may be wise. The zone has long stagnated, uncertainties are already elevated by the security and governance issues these countries face, and the deep sense of the currency’s illegitimacy as a symbol of continued French hegemony constitutes a permanent vulnerability.