Countries with weak economies, such as those of the Economic Community of West African States (ECOWAS), need currencies with fixed and not floating exchange rates, says Aimé Tchabouré Gogué, a retired professor of Economics at the University of Lomé.
According to him, “(fixed) parity encourages trade among countries” and this gives some stability to the currency.
The Togolese economist affirms that the privileged relations that West African Francophone countries had with France at the beginning of the independence justified the fixed parity with the French Franc, and subsequently with the Euro.
With the advent of the Euro, this parity has been questioned with critics saying though Europe uses a common currency, France continues to guarantee the parity of the F CFA.
Regarding trade exchanges, despite commercial transactions among countries of the CFA zone and Europe, trade with emerging Asian countries, such as China and India, and South American countries such as Brazil, have warranted a greater diversification of the economies of the zone.
Mr Gogué noted: “The instability of our currency without fixed parity combined with the weakness of our economies can cause a regular depreciation and bring along inflation that could be difficult to manage and control.”
He cautioned that in the event of renouncing the fixed parity of the F CFA with the euro, one should take into consideration the strength of the currencies of our trading partners, and also the real weight of the economies of our countries to sustain a currency without parity.
“The impact of an unstable currency on weak economies could be dangerous for countries that are going through economic and structural problems,” he warned.
The Togolese academic says a unique currency for the 15 members of ECOWAS will materialise without any problem, only if the convergence criteria and monetary policy are respected, so that the laxity of some States in matters of economic policies will not penalize others.
He, however, pointed out that the fixed parity of the F CFA with the euro comes with a problem of independence and sovereignty of countries using the currency.
Sometimes, there are challenges among ECOWAS in decision-making relating to the determination of some monetary policies because the F CFA is guaranteed by the French Treasury.
Mr Gogué called for “political courage” to find appropriate solution to the question of parity by considering the economic weight of the countries and of the region, as well as diversification of their trade in the new world order.