Created: 1/14/1994

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Economic Intelligence Weekly





Francophone Africa: Caught Belneeri Paris and fhem

of lhe African franc zone monetary union (CFA) nave devalued then common currency in iht wakeame of beinkmamhip between France and the IMF over inppori for their ailing eeonoeniea. Pirithowdown with tbe Fund by announcing this pat! September that it intended lo link furtherupMrl-particultrly Tor the dominant economics of Senegal. Cameroon, and Cole tTlvoire-to their obtaining tew IMr standby pro-rams French pcelcy implicitly challenged the Fund toits insolenceevaluation of the overvalued CFA francad: it.rpeni.on Of French support for CFA foreign debt col igiiions Drtpite thb threat, (be IMF held linn in u, inKalertceondition for any farther financial supportranco phone Africa. France's capttalBtlcn now presents the IMF and World Bank with an anpeoccdented cwor tuntty to shape comprehensive reform piam in the CFA countries but also increases the ta'kclihocd that Ihe region wiU ctptci increased aid and better debt relief terms from intcinational donors. France'sexposition toa devaluaton affords it the appear, ante of acceding to the measureast resort in steunng new aid for its former colonics and enables It to shift Ihe blame toe any ensuing political unrest to Washington and international financial institution*

On tbe French Dole

In recent years. Senegal, tameroon. and Cote d'lvoire hive become increatir.gly dependent on France for dueci budgetary assistance because of suspended IMF loan program* and dwrndling export revenues.l three ecuathes had failed to reach key fiscal and structural adjustment targets, resulting In Ihe suspension of IMF enhanced structuralfacilitiestandby aewrnents wonh several hundred million dollars:

Cameroon, after failing to meet its obligations under an ISO million standby programost rightsit million standby granted al

the endaounde steadfastly failed to

reduce iu operating budget. Stem paras.auI hem-

morrhates, and keep transparent government

Senegal'sillion ESAFexpired innd Dakar has nnce been unabletandby loan wiih the Fund because of Its failure to boost government (evemset and control public-sector wages.

Cote d'luetic forfeited the third trancheillion standby -hen it admined toSO million deficit infter having earnerO million surplus. |

With the tost of lhat aid. Dakar. Abidjan, and Yaourade turned lo Paris for assistanceost of short-term obligations. Including IMF and World Bank loans and public-seetcr:

tammy W


is at serious aboul reform at toe IMF and implies ttstrepared lo sutpend peymenis on behalf of In Francophone ward* il ihey do tag respond- French officials alto believe (hat ibeirto wppori these eouoiiiei hat had theeffect of subsidizing the Fund's. en I

Further austerity could trig-er putlyau general strikes because of mine publics] unrest in all three countries. Various rxrblie-tettor labor groups and unions have gone on strike in Cameroon in response to the December paycutt. Senegalese anionsuccessful ese-day warning strike in September snd continue to quarrel wilh Dakar over the austerity program launched in October fl

of Paosl motives, gcassiaeccinsVlassatiiy on the pan af ibt French bat increased pretaarr on Dakar, Abidjan, and Yaounde to move mote Quickly co refurm Indeed, antil) ihe thru jovcrn-cents 'argdy ig-ored wage ceiling target! ntabished by Iht IMF and Worlds Chsi servant laymTi advocated by Frtacc. Atresult, wigc eapen-dituret csintinued to dominate (he fiscal pi el arc.tat ti roue* asercaea of the optrarJng bsdgci if Cece d'lvont. it peeeent in Seoeaat tnd atame'ceo |J

Africanow swifllyreducing ihe sir* of rwmiof worktuaafcd is tan on tha political ritu assoeiaieo wnh theadnicui lint government uke direct responsibility for job creation and Income protectionbidjane'rec: Imm n'enptcc' "tae eutt aftc theysharp cent eaaresi. la uhnically riven Ctme*-run, embattled President Biya relsts nn the tasport of hu ethnic group, whichreponderance of gcneinrncnt ;obs

hese obatacles. Dakar. Abidjan, and Ytounde began to take ntpt in put ihtir ft seal hauteorder laic Ian year Byovernment spending, CFA traderstteaVn imptcne-stent in citcinal baltneet ihrougn the suppression cf con tumet demand, ludging from (he teiulttng politieal unrest in each country, the cuu have been real tnd torsi> fell

la October. Senegal implemented a" at toss iheercent salary cut for ptibhc tmptoyre*erccni oil for ikote in ikt private lector

Ctmeracu tui twbue scttrx Ineeeaetkm year, slash ng salaries by at muchcrccBI in Januaryercent in December

IMF Mtdaasaas kta Hard Una

Akey IMF demand foe new financial auiiiance to Francophone Africa hatevil mi lor. of their icennsoa currency, the CFA franc. ARaotsgb Parts had boraad that the cemtrnwed sundeeT betwece Use two tides -ouk! force the IMF to lehti lit insistenceignificant ektva.Uailcnt, the Fund held Aim. Faced wilh the prospectutolf af French aidew accord wiih thr IMF. CFA lenders finally decided toeads of testeat in Dakat onanuary lohammeievaluation strategy Aflei soma initial bickering, (he leaders airecd on Ihe

erceni devaluation Mmasdrd by tke Fund. France oantemtd tocuu'c dcsDtetbe cent ta in uamrncrcisl ictscttt in tbe region I

Desptic the Afttcaet' ccnsxsssan on dmlutata. ihe IMF it alto likely to continue itsedec tiOni in the public tcciot wage billondition far new standby programs Wilh Iha derailment ofadjustment programs in each country because of aaessseftnd wageoth (be IMT aad the World Bank are convinced that fiscal discipline aleegdevaluation olfet the only hopeeal rcdBCcion in wages necessary iore Francnpfionccompel-tivesess To tke dismay of thetbe Fund tad the Bant aito are loagbenmi iheir

ir'rum HHH

nTfiTTHtarguedagrrista wage cut. advocatingros-ins la0mctnment employer



Mmlmj th* Hot of (be Sjiutlon

aprtulalion presents ibe IMF and World Bank instiiaiioni with an unprecedented opportunity le ihapr comprehensive reform plana for the CFAhe dS-year-cdd rued parity between the CFA aid French franc, hu been the majoe siurablingblock for IMF tlabULtationnable to stuck curreni account defieid through adjustment of the term* of trade, reform programs had uiereuaingly become relianteal of internal adjustment Hraiogit* in areat web ai governmeni dorneaiic ar-rears, ta* admialstrairon, and subsidization of public emcrpriae* tbat were too cumberteene to administer aad monitor or wbicb paid only incremental divi-dendt. Mcreover. French lofcrance of African resit tatw to major cuts lit bloated cavil payrolls undermined pubuc-secior reform, ihat were meant lo redttee Importto chromic trade

SO pereenl of bilateral debt owed by (ower middle tacome couniriet. itttmpis i

Al the tame lime. France's tenacious erppowioa io devabailco will enable it lo avoid damage from any negattve. political falloul In recent weeks. Paxil ap-psars to have maintained ils Influence over the politi-eal libertliration uitder way In eachparticular, the transition invoire following ifce death Of Proidem Hoaphouel Boigney. Putts down-to.the.wire opce-silion to devaluation altoIi io save face with Wesiern audiences by tfleedtnt il the appearance of acceding io theas aresort intw IMF facility for it) former colonies.

African perception* thai devaluation batey goal of miernational deuvon meant, however, that CFA countries will probably eipeet increased ate) and eerier debt relief terms ftom them. France will no doubl urge CFA leaders lo demand such an increase in bght of its loudly proclaimed more to forgli*

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