France’s strong-franc policy worsened CFA countries’ competitiveness

Evidence

The socialist government of François Mitterrand, elected in 1981, had effectively adopted a strategy of ‘competitive disinflation’: having failed in his attempt to revive the French economy, he wanted to achieve greater price competitiveness by reducing France’s inflationary gap vis-à-vis competing countries. This plan included the pegging of the French franc to the German mark, a strong and credible currency in the eyes of financial markets. The French franc appreciated as a result, causing the CFA francs to strongly appreciate as well. The result was a significant deterioration in the competitiveness of the African countries of the franc zone. The policy of the ‘strong franc’ penalised them all the more as their main African trading partners, Nigeria and Ghana, meanwhile saw their currencies depreciate. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 206 (#expands, via linked claim)

The fact that the CFA franc’s parity was set at an artificially high level, as we saw in Chapter 1, penalised African products: they were hard to sell on world markets, except in the context of the commercial preferences granted by the metropole. Conversely, the high external value of the CFA franc favoured imports, especially from the metropole. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 128 (#corroborates, via linked claim)

Categorization

• XREF: connects to: The CFA franc was deliberately overvalued against the metropolitan franc.; Fixed exchange rates force austerity when competitiveness declines; France’s own anti-inflation policies against the mark caused the CFA overvaluation that forced crisis. (+21 more)

Related

• France’s strong-franc policy transmitted its appreciation shock to the CFA zone (similarity 0.95)
• France’s own anti-inflation policies against the mark caused the CFA overvaluation that forced crisis. (similarity 0.95)
• The CFA franc’s fixed peg forced colonies to absorb French devaluations helplessly (similarity 0.91)
• The 1939 franc zone was designed as a defensive shield for France’s economy (similarity 0.91)
• The same strong euro that hurts France devastates African export competitiveness (similarity 0.90)
• An overvalued CFA franc penalised African exports while favouring imports from France (similarity 0.89)
• The CFA franc was deliberately overvalued against the metropolitan franc. (similarity 0.89)
• A strong CFA franc forced colonial trade to flow through metropole markets. (similarity 0.89)
• The 1994 devaluation capped decades of Paris refusing to adjust the overvalued CFA franc (similarity 0.88)
• An overvalued CFA franc was engineered to reorient colonial trade toward France (similarity 0.88)
• The CFA franc’s parity was set without regard for local economic realities (similarity 0.87)
• The CFA franc was a political choice that deprived non-adapting African actors of credit (similarity 0.86)
• A strong euro penalizes French exports far more than German ones (similarity 0.86)
• Euro appreciation deteriorates franc zone trade balances (similarity 0.85)
• Eurozone membership merged CFA extraction with neoliberal austerity, worsening African prospects. (similarity 0.85)

Broader Connections

• France’s strong-franc policy transmitted its appreciation shock to the CFA zone #expands (0.95) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 206
• An overvalued CFA franc penalised African exports while favouring imports from France #corroborates (0.70) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 128