Switch to Desktop Site
 
 

Central Africa's francs sag under weight of soaring US interest rates

About these ads

Paris's former colonies in Africa have quietly watched their French-pegged currency fall by more than 20 percent since the beginning of the year, and 40 percent in the last 18 months. TMitterrand government about the burden that high US interest rates have put on the French economy, little has been said about the way Francophone states have been affected by the high rates. For the most part, these are economies that are problem- ridden in the best of times. But with soaring US rates, West and Central African governmetns have come upon even harder times.

In January 1980, it took 200 Central African francs (cfa) to buy a dollr's worth of goods. A year later, it required 240 cfa, and today the cost is 290 cfa.

But unlike France, with its ample foreign reserves and strong industrial base , the franc countries can do nothing to change that trend. The cfa is tied -- at a fixed rate of 50 cfa to 1 French franc -- to the fortunes of their former ruler's currency.

The results of the drop in purchasing power for the Francophone countries are far-reaching, though largely predictable.

Prices for dollar-denominated imports -- including oil, rice, and automobiles -- have skyrocketed, throwing already hard- pressed trade balances further into the red. Foreign reserves, perilously low in many of the 13 countries, are being drained to pay for essential imports like rice and petroleum, and governments are scampering to buy whenever possible in France because the franc and the cfa are interchangeable. The practice reinforces a dependence many of the countries were struggling to break.

Non-French firms are feeling the pinch, as their products become less competitive. Many are already shifting to French products when they can, cutting profit margins or asking suppliers for a break in price.

Next

Page:   1   |   2   |   3


Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.

Share

Loading...