Franc-zone banks hold idle liquidity instead of lending to the economy.

Evidence

The underfinancing of the economies of the franc zone is all the more paradoxical because it takes place in a context of excess bank liquidity, a situation in which the reserves held by the commercial banks at their central bank are greater than the required reserves. This means not only that there is no money creation, but also that the available savings are not mobilised to facilitate the economic agents’ access to credit. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 310

Categorization

• XREF: connects to: Banks create money out of thin air when granting loans rather than lending savings; When franc zone accounts are in credit, the central banks finance the French Treasury — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 106; The CFA franc’s parity was set without regard for local economic realities

Related

• The French Treasury holds accounts in each franc zone central bank (similarity 0.85)
• When franc zone accounts are in credit, the central banks finance the French Treasury (similarity 0.84)
• French Treasury guarantees unlimited convertibility by lending money to franc zone central banks (similarity 0.83)
• The CFA central banks subordinate domestic credit to defending the euro parity. (similarity 0.83)
• Banks create money out of thin air when granting loans rather than lending savings (similarity 0.83)
• Scarce CFA credit causes savings scarcity, not the reverse. (similarity 0.83)
• The CFA franc structurally denied credit to economic actors outside colonial accumulation (similarity 0.83)
• France does not deposit its own reserves into the shared franc zone pot (similarity 0.82)
• The CFA system’s credit repression causes savings scarcity, not the reverse (similarity 0.82)
• France avoided needing dollars to buy from CFA-zone countries. (similarity 0.82)
• The franc zone’s pooled reserves create both vertical France-African and horizontal inter-African solidarity (similarity 0.82)
• Franc-zone central banks must restrict domestic credit to defend the fixed euro parity (similarity 0.81)
• The CFA system requires African central banks to deposit half their reserves with France. (similarity 0.81)
• African states have effectively paid the French Treasury to hold their reserves. (similarity 0.80)
• Unlimited CFA convertibility is guaranteed by the French Treasury lending as needed (similarity 0.80)

Broader Connections

• When franc zone accounts are in credit, the central banks finance the French Treasury #complicates (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 106
• The CFA franc’s parity was set without regard for local economic realities #qualifies (0.50)