The convertibility guarantee costs France under 1.3 percent of GDP

Evidence

Ultimately, France once again demonstrated that its guarantee is a myth. It is sufficient to examine the budget laws of the years 2016, 2017 and 2018 to confirm this: as already stated in Chapter 2, the French government has not allocated any funds to ensure, if necessary, the convertibility of the CFA franc. The amount indicated on the line dedicated to the ‘monetary agreements’, which refers to the Treasury’s commitments towards the BEAC, the BCEAO and the BCC, is zero euro. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 246 (#contradicts, via linked claim)

The free convertibility of the currency, the third operational principle of the franc zone, means that CFA and Comorian francs can be exchanged for the French currency (first the franc, now the euro) without restrictions. This unlimited convertibility is guaranteed by the French Treasury: through the monetary agreements it has entered into with the African authorities, it has undertaken to lend all the money necessary to the central banks of the franc zone in the eventuality that they should exhaust their reserves. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 99 (#expands, via linked claim)

Ultimately, we are in the presence of a mechanism that defies belief: France uses its presumed role of ‘guarantor’ as a pretext and as a tool to blackmail its former colonies in order to keep them in its orbit, both economically and politically, as we will see in Chapters 4 and 5. Worse, the African states not only guarantee the convertibility of the CFA franc with their own reserves, but continue, in fact, to ‘guarantee’ France’s leading position in the global economy, by accruing important benefits to its economy. All the foundations of the CFA system are based on a mug’s game. Therefore, it is not surprising that African leaders, following their countries’ independence, immediately mobilised against the CFA franc. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 146 (#qualifies, via linked claim)

Categorization

• XREF: connects to: France’s convertibility guarantee was a fraud that would never actually materialize; African franc-zone reserves effectively grant France subsidized loans below market rates.; France’s CFA convertibility guarantee is backed by zero budgeted euros (+3 more)

Related

• France’s CFA convertibility guarantee is backed by zero budgeted euros (similarity 0.95)
• France’s convertibility guarantee was a fraud that would never actually materialize (similarity 0.95)
• Unlimited CFA convertibility is guaranteed by the French Treasury lending as needed (similarity 0.93)
• France has allocated zero euros to guarantee CFA franc convertibility (similarity 0.93)
• France kept sole CFA responsibility by convincing EU partners the guarantee cost nothing (similarity 0.91)
• French Treasury guarantees unlimited convertibility by lending money to franc zone central banks (similarity 0.91)
• CFA francs are non-convertible among the three African franc-zone sub-units (similarity 0.90)
• France’s convertibility guarantee enabled capital flight that depleted reserves and forced devaluation (similarity 0.89)
• CFA convertibility guarantee is cheap only because African economies stay small. (similarity 0.89)
• The CFA guarantee arrangement secretly benefits France at Africa’s expense (similarity 0.89)
• The French guarantee of the CFA franc was illusory since African reserves exceeded debts (similarity 0.89)
• CFA francs are not convertible anywhere in the world outside the French Treasury framework (similarity 0.87)
• France argued its CFA convertibility agreements were budgetary, not monetary, to escape EU oversight (similarity 0.87)
• France avoided needing dollars to buy from CFA-zone countries. (similarity 0.87)
• France’s guarantee is backed by pooled African reserves and French central bank seats (similarity 0.87)

Broader Connections

• France has allocated zero euros to guarantee CFA franc convertibility #contradicts (0.90) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 246
• French Treasury guarantees unlimited convertibility by lending money to franc zone central banks #expands (0.80) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 99
• The CFA guarantee arrangement secretly benefits France at Africa’s expense #qualifies (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 146