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Central Bank Chief Insists CFA Won 

By Muto Mulema

For the second time in weeks, Lucas Abaga Nchama, governor of the Bank of Central African States, BEAC, has declared that the franc CFA is not at risk of devaluation and shall not be devalued on any account next year. The Equato-Guinean central banker made the announcement Monday following a meeting of the monetary commission of CEMAC.

The news comes to allay fears within the sub-region that the spiraling effects yielding from an increasing public debt at the French Treasury could leave a devastating impact on the value of the francs CFA. The franc CFA, used in former French African colonies grouped in two monetary unions is pegged to the euro and its fixed parity to the EU currency is guaranteed by the French Treasury which also lodges their foreign reserves.

According to the statutes of both the West African and Central African central banks, a representative of the French Treasury sits on the management board of the banks with a right to veto any decisions. At the moment, the French Treasury which keeps foreign reserves from the former colonies has come under immense pressure as President Nicolas Sarkozy battles to provide support to the EU Central Bank so as to save the euro from collapse.

Fears of a possible devaluation were raised last November in media reports hinting that French President Nicolas Sarkozy had commissioned two Heads of State in the respective monetary unions to divulge the news of a possible devaluation in January 2012. Cameroon’s Finance minister at the time, Essimi Menye, as well as the central bank chief dismissed the claims.

In 1994, following a drop in the volume of exports from the sub-region in the aftermath of a chronic economic crisis, the French Treasury got local monetary authorities to enact a 50 percent devaluation of the franc CFA. This dealt a heavy blow on the ailing economies that were recovering from a season of political tension.

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