Alarm Bells Ringing in Yaounde:

Speculations pointing to another devaluation of CFA Franc

-But MINFI says this cannot happen here and now

-Also denies rumours that the state coffers are drying up

By Ojong Steven Ayukogem in Yaounde

Finance Minister, AlamineOusmaneMey, working to stabilize exchange reserves

The Cameroon Ministry of Finance has debunked rumours spreading on social media about an imminent devaluation of the Franc CFA in the Cemac zone. Authorities of the MINFI in Yaounde say even if the arguments advanced by the proponents for devaluation may appear plausible at face value, the situation of the Cameroon economy now, and the level of its exchange reserves lodged in operations accounts at the French treasury are not as bad as to warrant a devaluation of the Franc Cfa at this time.

                Besides, the MINFI authorities argue that the macro-economic indicators notably the growth rate and the huge debt burden are not such that can favour a devaluation of the currency at this time. For one thing, if the currency is devalued by 50% as it is already speculated then the already huge external debt of the country would more than double.

                Any devaluation of the Franc CFA at this time will be very disastrous for the economy of the country. This is because the economic indicators are not such that can favour such devaluation,” said a source at the MINFI, who noted that it was in cognizance of the nefarious consequences of such devaluation that President Paul Biya convened an extra-ordinary meeting of Cemac Heads of State, in Yaounde, on 23 December 2016, to counter the arguments for a possible devaluation, which arguments were already gaining grounds both in France and within the Cemac Zone.

                “Being the visionary that he is, President Biya did not want Cameroonians to suffer the disastrous consequences that such devaluation could invite on the already suffering masses. That was why he convinced his counterparts of Cemac zone to adopt resolutions that rather suggested alternative measures to stabilize the exchange reserves at the French treasury and also make good the bad economic situation of these countries. Some of these measures included notably a drastic cut in importation, drastic cuts in public spending, stabilization of exchange reserves among others,” noted our interlocutor, who indicated that presently the level of Cameroon’s exchange reserves stands at slightly above 50%, up from the 20% that it must drop to warrant a devaluation of the currency.

“So, if we consider the level of our exchange reserves, and giving the measures taken to stabilize these reserves, you realize that the situation is not as alarming as it is being presented by the proponents for devaluation,” reassured our source, who however did neither gave concrete figures to back his arguments nor talked about the level of the exchange reserves of the other Cemac states, some of which reserves are said to be at an all time low at best and/or completely depleted at worst.  

                It should be noted that in a release issued by the opposition party, Les Patriotes (formerly called PADDEC), it is explained that authorities of the French treasury have already written to the French President, Emmanuel Macron, urging him to consider an eventual devaluation of the Franc CFA in the Cemac zone.

                The arguments advanced for such devaluation are that the situation of the exchange reserves in the operation accounts lodged at the French treasury is intolerably low. The communiqué points out that this very bad situation of the operation accounts of Cemac countries is in great contrast with that of countries in French West Africa (CEDEAO), notably Cote d’Ivoire and Senegal.

                It notes further that unlike the CEDEAO countries that have cut down on importation and are consuming locally produced goods, CEMAC countries depend sorely on importation to provide even basic food items like garlic, rice and flour. And because these countries must dip their hands into their exchange reserves to initiate any financial transactions with foreign countries, these reserves are bound to suffer.

                It is worthy to note that while French authorities want the Franc CFa devalued in the Cemac zone, they are even contemplating revaluing the Franc CFa in The CEDEAO zone this, because of the good management of their exchange reserves that have remained relatively very stable, unlike the reserves of Cemac countries.

According to the communiqué, it is suggested that the Franc CFA be devalued by 50%. This means that the exchange value of the Franc CFA vis-à-vis the euro will be 1 Euro to 1300 FCFA. Presently 1 Euro changes for 650 FCFA.

                Meanwhile the Franc CFA in the CEDEAO zone will change at 1 Euro for 500 Franc CFA.

It should be noted also that apart from devaluation that is being evoked here, the warning bells are also ringing about a progressive depletion of the state coffers. But the authorities at the MINFI have also dismissed this as baseless, saying that it is a false alarm.

                “You can’t talk of a country’s coffers getting dry when taxes are still being collected and customs and other revenues are also being collected. Current fiscal reforms are such that it is now possible to generate as much as 4000 billion from taxes unlike in 1993 when it was difficult to generate even 700 billion,” noted the MINFI source, who boasted further that “You cannot talk of dry coffers in a country that pays its workers regularly, settles its internal and external debts with ease and is executing its greater ambitions projects according to plan.”