Reserve centralisation persists indirectly through purchases of French debt

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 (#corroborates, via linked claim)

Despite the closure of the operations account, there is nothing a priori to prevent the BCEAO from using its foreign exchange reserves to buy French government debt securities. As we have seen, the BEAC, for example, has made a habit of investing the non-mandatory portion of its foreign exchange reserves in French Treasury debt securities. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 376 (#corroborates, 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 (#corroborates, via linked claim)

Categorization

• XREF: connects to: Reserve centralization persists indirectly even after the operations account closes; 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; Closing the operations account may not end the centralisation of reserves — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 376 (+3 more)

Related

• Reserve centralization persists indirectly even after the operations account closes (similarity 0.91)
• When franc zone accounts are in credit, the central banks finance the French Treasury (similarity 0.91)
• Closing the operations account may not end the centralisation of reserves (similarity 0.90)
• Operations account balances reflect trade flows, not parked savings reserves (similarity 0.87)
• African central banks have periodically earned negative real returns on their French-held reserves (similarity 0.87)
• The French Treasury holds accounts in each franc zone central bank (similarity 0.85)
• African operations-account credits function as preferential loans to France (similarity 0.85)
• African franc-zone reserves effectively grant France subsidized loans below market rates. (similarity 0.83)
• African countries lost 250 billion CFA francs by depositing reserves in operations accounts (similarity 0.82)
• The CFA system requires African central banks to deposit half their reserves with France. (similarity 0.82)
• African central banks must deposit half their reserves at the French Treasury (similarity 0.81)
• African states have effectively paid the French Treasury to hold their reserves. (similarity 0.79)
• French Treasury supervision is the backbone of the CFA system’s operations (similarity 0.79)
• France’s guarantee is backed by pooled African reserves and French central bank seats (similarity 0.78)

Broader Connections

• When franc zone accounts are in credit, the central banks finance the French Treasury #corroborates (0.75) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 106
• Closing the operations account may not end the centralisation of reserves #corroborates (0.70) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 376
• African operations-account credits function as preferential loans to France #corroborates (0.65) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 251
• Fixed parity and credit compression make France the zone’s privileged creditor #expands (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 252