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At a meeting in Dakar on 12 January 1994 the representatives of the African franc zone countries decided to halve the value of the CFA franc. Although a devaluation had been expected, the decision was a psychological shock. The decision was presented in the media and perceived by public opinion as socially untenable and likely to destabilize many political regimes, some of them in the midst of a transition to democracy. Various commentators, economists and development experts have criticized the lack of preparation for devaluation and predict that it will not work. Others, especially IMF and World Bank experts, argue that devaluation was a necessary--not to say inescapable--adjustment without which the economies of the franc zone countries were headed for bankruptcy. Three months on, the facts do not seem to support the catastrophic predictions of the former. but the success expected by the latter remain subject to a whole range of conditions. Among these, social conditions are critical, since wage increases must be contained and any negative impact of the devaluation on the meagre incomes of the poorest social groups must be alleviated.
THE AFRICAN FRANC ZONE
The CFA franc was introduced in 1945, at a time when the French acronym CFA stood for French Colonies of Africa. After the colonies gained their independence the acronym survived, but with two new meanings: first, as the franc of the African Financial Community, minted by the Central Bank of the States of West Africa (BCEAO) and in circulation in Benin, Burkina Faso, Cote d'Ivoire, Mali, Niger, Senegal and Togo; and, second, as the franc of the African Financial Cooperation, minted by the Bank of the States of Central Africa and in circulation in Cameroon, the Central African Republic, Chad, Congo, Gabon and Equatorial Guinea. The Comoros, whose currency is the Comorian franc, are also a member of the franc zone. The CFA franc has been pegged to the French franc since 1948. The fixed exchange rate used to be 50 CFA francs for 1 French franc, but this dropped to 100 CFA francs for 1 French franc on 12 January 1994. The Comorian franc was devalued by 33 per cent only.
Until the early 1980s this fixed parity, guaranteed by the Bank of France, was a factor...