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CFA franc zone: Impact of the fall of the euro on economies

21/04/2022
Categories: Economy/Forex

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Against the dollar, the euro fell by 14.2%. This situation has implications for the six CEMAC member countries and the eight WAEMU countries.

The value of the euro, the common currency of 19 European Union (EU) member countries, has fallen by 14.2% in recent months against the US dollar, causing the CFA franc, a currency used by the six CEMAC member countries and the eight WAEMU countries, to fall in its wake. This has led to a decline in interest rates on loans, and has discouraged investors, whose losses are reinforced by rising prices (inflation).

The decline in the value of the CFA against the dollar has an advantage for exports. In local currency, the turnover of companies in the sector should increase. But the challenge for regions that use it is that, due to the volume of imports, more will have to be spent in local currency to pay international bills. It should also be noted that one of the consequences of the decline in the value of the CFAF against the dollar is that its value has also declined against the yuan renminbi, the Chinese currency, and the dirham of the United Arab Emirates. The evolution of the CFAF also has an impact on trade between countries that use it and their English-speaking neighbors such as Ghana and Nigeria, whose currencies have been volatile over the past five years.

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