African central banks have periodically earned negative real returns on their French-held reserves

Evidence

When the operations accounts are in credit, we can therefore say that the central banks are financing the French Treasury because they are putting their foreign exchange reserves at its disposal. In that case the French Treasury pays them interest. By contrast, when the operations accounts are in debit position, the central banks must pay interest to the French Treasury. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 106 (#expands, via linked claim)

In this way, it manages to preserve its foreign reserves, as explained in Chapter 2. Even if its trade balance is deficient vis-à-vis the African countries of the franc zone, it can regulate this deficit in its own currency. Moreover, when the African countries of the franc zone register a trade surplus vis-à-vis the rest of the world, France has access to foreign currency at more economically advantageous conditions than it would otherwise face if it borrowed that same currency. In other words, when the operations accounts of the African countries are in credit, France obtains loans at preferential conditions compared to those prevailing on the financial markets. Thus, through the system of the operations account, the African countries grant France greater financial resources than it would have if it had to rely solely on its own means. Describing this mechanism, the economist Joseph Tchundjang Pouemi spoke of ‘drainage by accounting’. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 251 (#expands, via linked claim)

The BEAC, the BCEAO and the BCC are responsible for issuing the currency and ensuring the monetary and financial stability of their respective zones. They supervise the banking system. The BCEAO and the BEAC have national agencies in each of their member countries: branches that facilitate the circulation of banknotes and coins, the execution of payments and the monitoring and evaluation of economic activity. Depending on the country, they may have auxiliary agencies in specific locations. The BCC manages the official foreign exchange reserves of the Comoros, while the BEAC and the BCEAO manage the official foreign exchange reserves of the countries of their monetary union through a ‘common pot’ (comprising the contributions of each state). According to the terms of the monetary agreements, they must, as noted above, deposit 50 per cent of their reserves at the French Treasury. With the remaining 50 per cent they are free to do what they want, but it should be noted that they often use it to buy bonds denominated in euros (especially in the case of the BEAC) or to reinvest them in French government bonds or other French securities. In short, all roads lead to Paris. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 112 (#expands, via linked claim)

Categorization

• XREF: connects to: African franc-zone reserves effectively grant France subsidized loans below market rates.; African countries lost 250 billion CFA francs by depositing reserves in operations accounts; African central banks must deposit half their reserves at the French Treasury — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 112 (+5 more)

Related

• African central banks must deposit half their reserves at the French Treasury (similarity 0.91)
• African franc-zone reserves effectively grant France subsidized loans below market rates. (similarity 0.91)
• African countries lost 250 billion CFA francs by depositing reserves in operations accounts (similarity 0.90)
• The CFA system requires African central banks to deposit half their reserves with France. (similarity 0.90)
• France’s guarantee is backed by pooled African reserves and French central bank seats (similarity 0.88)
• When franc zone accounts are in credit, the central banks finance the French Treasury (similarity 0.88)
• Reserve centralisation persists indirectly through purchases of French debt (similarity 0.87)
• African states have effectively paid the French Treasury to hold their reserves. (similarity 0.86)
• African operations-account credits function as preferential loans to France (similarity 0.86)
• The French Treasury holds accounts in each franc zone central bank (similarity 0.85)
• France granted African states nominal monetary rights while denying them in practice (similarity 0.83)
• Unlimited CFA convertibility is guaranteed by the French Treasury lending as needed (similarity 0.83)
• Operations account balances reflect trade flows, not parked savings reserves (similarity 0.82)
• French Treasury supervision is the backbone of the CFA system’s operations (similarity 0.82)
• CFA francs are non-convertible among the three African franc-zone sub-units (similarity 0.81)

Broader Connections

• When franc zone accounts are in credit, the central banks finance the French Treasury #expands (0.70) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 106
• African operations-account credits function as preferential loans to France #expands (0.65) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 251
• African central banks must deposit half their reserves at the French Treasury #expands (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 112
• The CFA guarantee arrangement secretly benefits France at Africa’s expense #corroborates (0.55) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 146
• France granted African states nominal monetary rights while denying them in practice #exemplifies (0.50)
• France has allocated zero euros to guarantee CFA franc convertibility #contradicts (0.50) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 246