Financial Arrangements of Countries Using the CFA Franc
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International Monetary Fund. Research Dept.
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Publication Date:
01 Jan 1969
eISBN:
9781451947298
Language:
English
Keywords:
SP; investment; support price; CFA franc; balance of payments; central bank; EEC country; Tariffs; Credit; price support
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THIS PAPER describes the financial arrangements of the CFA franc countries among themselves and with France and the EEC. The CFA franc countries are defined as those independent African states that have established monetary arrangements with France through so-called Operations Accounts with the French Treasury: the seven members of the West African Monetary Union (Union Monétaire Ouest Africaine—UMOA)—Dahomey, Ivory Coast, Mauritania, Niger, Senegal, Togo, and Upper Volta—of which the common central bank is the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO); the five Equatorial African countries—Cameroon, the Central African Republic, Chad, Congo (Brazzaville), and Gabon—where the issue of currency is vested with the Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC); and the Malagasy Republic, the central bank of which is the Institut d’Emission Malgache (IEM). Throughout the text of this paper, the term “CFA countries” should be understood to include the Malagasy Republic.1

Abstract

THIS PAPER describes the financial arrangements of the CFA franc countries among themselves and with France and the EEC. The CFA franc countries are defined as those independent African states that have established monetary arrangements with France through so-called Operations Accounts with the French Treasury: the seven members of the West African Monetary Union (Union Monétaire Ouest Africaine—UMOA)—Dahomey, Ivory Coast, Mauritania, Niger, Senegal, Togo, and Upper Volta—of which the common central bank is the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO); the five Equatorial African countries—Cameroon, the Central African Republic, Chad, Congo (Brazzaville), and Gabon—where the issue of currency is vested with the Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC); and the Malagasy Republic, the central bank of which is the Institut d’Emission Malgache (IEM). Throughout the text of this paper, the term “CFA countries” should be understood to include the Malagasy Republic.1

THIS PAPER describes the financial arrangements of the CFA franc countries among themselves and with France and the EEC. The CFA franc countries are defined as those independent African states that have established monetary arrangements with France through so-called Operations Accounts with the French Treasury: the seven members of the West African Monetary Union (Union Monétaire Ouest Africaine—UMOA)—Dahomey, Ivory Coast, Mauritania, Niger, Senegal, Togo, and Upper Volta—of which the common central bank is the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO); the five Equatorial African countries—Cameroon, the Central African Republic, Chad, Congo (Brazzaville), and Gabon—where the issue of currency is vested with the Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC); and the Malagasy Republic, the central bank of which is the Institut d’Emission Malgache (IEM). Throughout the text of this paper, the term “CFA countries” should be understood to include the Malagasy Republic.1

All these states were under French administration before their independence in 1959/60. All of them maintain special economic and financial relationships with France, and they are “associated” with the European Economic Community (EEC). The purpose of the present paper is to study the working of these special arrangements on monetary, financial, and trade matters, bringing up to date an earlier study.2

The CFA franc owes its name to a decree of the French Government on December 25, 1945, which established a special currency for the then Colonies Françaises d’Afrique. This currency is fully convertible into French francs at a fixed rate—since 1950, 1 CFA franc = 2 old French francs or 0.02 new French franc.3 The treaty of May 12, 1962, which established the UMOA, provided for a change in the name of the monetary unit to “franc de la Communauté Financière Africaine,” thus maintaining the initials “CFA”; these initials are also used, without change in their significance, for the currency issued by the BCEAEC. The monetary unit of the Malagasy Republic was renamed “franc malgache” in 1963; it has the same characteristics as the CFA franc.

Owing to the importance of the common monetary and financial arrangements for the economies of the CFA franc countries, this paper starts out with a description of the fundamental features of the CFA franc system, the monetary and budgetary developments and the wage and price situation in the area, and then describes in detail the foreign trade and marketing situation and the balance of payments position.

I. Fundamental Features of CFA Franc System

The fundamental features of the CFA franc system are the guarantee of the parity and convertibility of the CFA franc into French francs by the French Treasury and the prudent policies pursued by the central banks, the Executive Boards of which include directors appointed by the member countries and by France. Convertibility is achieved through the mechanism of an Operations Account maintained by the central banks with the French Treasury. The central banks keep their foreign exchange reserves on deposit in the Operations Account and have unlimited overdraft facilities. Thus far, none of the central banks has incurred a debit balance on its Operations Account with the French Treasury. In fact, all three central banks have maintained substantial credit balances, which have increased significantly since 1962, when the Operations Accounts were set up.

Other factors contributing to the maintenance of a satisfactory reserve position in all three areas include the inflow of substantial foreign aid and the satisfactory performance of exports related partly to the preferential markets in France and other EEC countries. In 1961–66 financial aid granted by France amounted to the equivalent of about $1,200 million, representing about two thirds of total aid received by the CFA countries. These factors, combined with the relatively liberal system of trade and exchange controls, have ensured adequate supplies of imported goods, which have helped to maintain the stability of prices and wages. The average rate of price increase for the last six years has been moderate in all three areas. There have been some upward adjustments of wages, but these have been no larger than the increases in the cost of living associated with the higher prices of imported goods and the increase of import duties.

Official foreign reserves are pooled with the common central banks. This pooling enables member countries in balance of payments difficulties to use the common pool of reserves so as to avoid abrupt changes in monetary and fiscal policies and limit the use of exchange restrictions. In the BCEAO and BCEAEC areas a few countries have been substantial net contributors to the foreign reserves pool, others have shown approximately balanced external payments, and some have incurred persistent deficits in their balance of payments. Related to the pooling of reserves in a monetary union is the relatively uniform application of credit policy in all member countries.

In fiscal matters, the decision of the Governments to limit the amount of borrowing from the central bank to 10 per cent (BCEAEC) or to 15 per cent (BCEAO)4 of the previous year’s fiscal revenue and the duration to 240 days (or to the end of the year) has prevented the emergence of strong inflationary pressures from the public sector, which could endanger the maintenance of the CFA franc system (see below). All CFA countries have been faced with heavy expenditures associated with independence (security, foreign affairs, and social welfare) and have incurred large development expenditures. Government revenues, although generally increasing, have lagged behind expenditures in most countries. It should be noted that these deficits have been covered at least in part by foreign grants and loans.

The preferential trade arrangements between France and the CFA countries were maintained after these countries became independent and until the financial arrangements of the association with the EEC became effective. One of the goals of the association of the CFA countries with the EEC is to encourage the expansion of trade by the establishment of a free trade area without any discrimination among members. Under the Yaoundé Convention of Association of African States with the EEC, which became effective on June 1, 1964, all EEC members received equal tariff treatment in the CFA countries, and imports from the EEC countries became exempt from customs duties (not from fiscal duties) in countries where such duties were applied. Moreover, quantitative restrictions on imports from France and its EEC partners and customs duties levied by the EEC countries on imports from the CFA countries are gradually being removed, while a common external tariff applicable to imports from third countries is being established.

The Convention provided for a gradual elimination of French support prices for commodities imported from the CFA countries. Therefore, French price support for groundnut products, the last category of commodities that enjoyed such support from France, was terminated at the end of 1967. In order to facilitate the abolition of these French price supports, the Yaoundé Convention provided for financial aid to agricultural production and diversification in associated countries for the duration of the Convention, i.e., until May 31, 1969. The EEC aid to agricultural production consisted of programs for increases in productivity and for price subsidies for certain crops, mainly groundnuts and cotton. The price subsidies are scheduled to decline progressively until they are eliminated by mid-1969. Starting in 1967, the EEC’s price support to agricultural exports of the CFA countries has been extended by a new stabilization scheme applicable to exports of oil and oilseeds, which aims at alleviating the effects of major declines in world prices on export receipts of associated countries.

The exchange and trade control systems of the CFA franc countries are similar to those existing in France.5 Foreign exchange operations with countries of the French franc area are permitted freely. With effect from July 1967, exchange controls were eliminated on operations with countries outside the French franc area, but some specific controls remained on certain capital transactions.6 Imports from the French franc area are free from licensing, while most imports from non-franc area countries require licenses and are regulated according to an annual import program. This program provided for specific quotas for certain imports from EEC countries other than France to be maintained until June 30, 1968 and for a global quota applicable to restricted imports from all other countries. Certain imports are fully liberalized, while a few are prohibited for protective reasons.

II. Money and Banking

Changes in institutional arrangements7

Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO)

On May 12, 1962 a treaty establishing the West African Monetary Union (Union Monétaire Ouest Africaine—UMOA) and providing for a common currency and a common central bank was signed by Dahomey, Ivory Coast, Mali, Mauritania, Niger, Senegal, and Upper Volta. The old BCEAO was dissolved on October 31, 1962 and replaced by a new central bank of the same name but with enlarged responsibilities and an intergovernmental organization. On the same date, the above-mentioned countries concluded with France a cooperation agreement by which France guaranteed the convertibility of the CFA franc, issued by the BCEAO, into French francs, and the members of the UMOA undertook to keep their external reserves in an Operations Account opened by the new BCEAO at the French Treasury, with which a special relationship was established. The treaty establishing the UMOA and the agreement for cooperation are two separate documents with no necessary link to each other; the treaty providing for a monetary union and a common central bank could continue in force even if the agreement for cooperation were to be abrogated.

Mali did not ratify the treaty or the agreement; on the other hand, Togo (which had participated in the negotiations only as an observer) formally signed both documents on November 27, 1963 and subsequently ratified them. The capital of the BCEAO is set at CFAF 2,800 million distributed evenly among the seven members of the UMOA.

The over-all management of the new BCEAO is entrusted to a Board of Directors in which each member country appoints two directors, from whom one is elected President, and France, under the provisions of the cooperation agreement, appoints seven. The decisions of the Board as a rule are taken by a simple majority, but certain important decisions must be adopted by a two-thirds majority. Amendment of the statutes requires the unanimous decision of the Board.

In each member country, a five-member national Monetary Committee, appointed by the government and including the two national directors, implements the general credit and rediscount policy decisions taken by the Board of Directors. The day-to-day management of the BCEAO is entrusted to a Director General, appointed for an indefinite term by the Board of Directors. The Director General attends, either personally or through a delegate, all meetings of the Board and the national Monetary Committees. He represents the BCEAO in all its relations external to the Bank.

The BCEAO, with temporary headquarters in Paris, maintains an agency in the capital of each member country and has established sub-agencies in some other places within the territory of the UMOA. All personnel of the Bank are appointed and removed from office by the Director General, although appointments of agency managers require the prior approval of the government of the country in which the agency is established.

The BCEAO has the sole right to issue currency in each member country. The identification of notes by a letter following the serial number enables the BCEAO to keep separate accounts for each country’s currency in circulation. Coins, which account for approximately 4 per cent of total currency in circulation, are not identified by country. Statistics, based on issuance of each country’s notes and withdrawal of notes of other countries, have revealed that the intercountry movement of notes is fairly large, particularly between Mauritania and Senegal, between Dahomey and Togo, and among Ivory Coast, Niger, and Upper Volta.

With the exception of small working balances held with foreign correspondents, the external reserves of the UMOA are held by the BCEAO in French francs in a single account at the French Treasury. The procedural aspects of the centralization of the BCEAO’s reserves in the Operations Account are regulated by a convention between the BCEAO and the French Treasury. An amendment to this convention dated June 2, 1967 made it possible for the BCEAO to invest part of its exchange reserves in certain types of negotiable bonds, maturing within two years, issued by international organizations of which all BCEAO countries are members. Subsequently, the BCEAO has invested a small part of its foreign reserves in short-term bonds issued by the International Bank for Reconstruction and Development (IBRD). Transfers between member countries and France are unrestricted. However, the BCEAO’s statutes and the agreement for cooperation provide for specific action in the event of a dangerous decline or depletion of the BCEAO’s external assets. The statutes require that the Chairman must call a special meeting of the Board to consider appropriate action, including a rise in the rediscount rate and a reduction of the rediscount ceilings, when the exchange reserves of the BCEAO fall below 20 per cent of the BCEAO’s sight liabilities (or appear to be about to fall below this level). If the external reserves fall below 10 per cent of sight liabilities, the Board must meet immediately to reduce rediscount ceilings by the percentages fixed by the Board for each country and to consider raising the discount rate.

On the other hand, the BCEAO’s Operations Account Agreement with France requires that, should the assets in the Operations Account be depleted, the Bank shall request the public and/or private institutions in the member countries to sell to it the liquid foreign exchange assets that they hold. These purchases may be limited to public institutions or banks and to particular countries. Moreover, should the Operations Account be in overdraft for more than 60 days, the agreement for cooperation provides for an automatic 1 per cent increase in the rediscount rate and a compulsory reduction of the BCEAO’s rediscount ceilings by either 20 per cent or 10 per cent, depending on the reserve position of each country.8 When these circumstances arise, the Board of Directors must be convened immediately to take appropriate measures and/or grant certain exemptions or derogations, all of which have to be decided upon by a three-fourths majority of the Board.

Any change of the parity of the monetary unit requires the approval of all member countries and France. The French Treasury pays interest to the BCEAO on balances in the Operations Account at a rate at least equal to the rediscount rate of the Bank of France, but never less than 2.5 per cent; in 1966–67 the effective rate was 4.5 per cent, and in 1967–68 it was 5.3 per cent. Conversely, the BCEAO pays interest to France on any overdraft balance at a rate which increases from 1 per cent per annum for amounts up to F 5 million to 2 per cent per annum for amounts between F 5 million and F 10 million. For balances above this amount, the rate is the same as the rediscount rate of the Bank of France, but never less than 2.5 per cent per annum. Interest paid by the BCEAO on negative balances is deducted from the royalties or dividends to be paid to the member countries according to the negative external reserve position of each country. If the imputed share of the BCEAO’s foreign reserves for any member country becomes negative, the country pays a charge on its debit balance at a rate equal to the average rate of interest on the BCEAO’s foreign investments or borrowings. The reason for this provision is to maintain equity among member countries; as the BCEAO’s profits are distributed equally among member countries, the net use by a member of the common pool of reserves reduces earnings on foreign exchange holdings and, consequently, the profits available for distribution.

In addition to the discount of customs duty bills, the BCEAO extends credit to the governments of the member countries either directly by advances or indirectly through rediscounts, purchases, or advances against treasury bills held by banks. According to the original provisions of the statutes, the duration of direct advances to a government during any calendar year could not exceed a total of 240 days, whether consecutive or not. However, since June 4, 1966, following an amendment of the statutes, the Board may, by a two-thirds majority, extend the advance until the first working day of the new calendar year. In December 1968 the statutes of the BCEAO were further modified so as to allow the Central Bank, by special decision of the Executive Board based on a study of the monetary situation, to increase its direct advances to member governments from the previous 10 per cent to 15 per cent of the actual fiscal receipts of the previous budget year. The statutes provide that the limit on such advances shall be reduced automatically by the amount of treasury bills held by the BCEAO and by the amount of government borrowing from commercial banks and other credit institutions that have rediscount facilities with the BCEAO.

The present 3 ½ per cent discount rate of the BCEAO has been in force since October 15, 1956. It applies to all countries and to all credits extended to the member governments as well as to credits to the banking system within the rediscount ceilings, with the exception of export credits, which enjoy a preferential rate of 3 per cent.

In accordance with the principles outlined in the treaty establishing the UMOA, the Board of the BCEAO recommended model banking legislation for member countries. However, as the responsibility for bank supervision in each member country rests with the national authorities, each country has adapted the model legislation to suit local conditions. In general, banks and financial institutions are required to have a minimum amount of share capital and to respect liquidity and solvency ratios. The liquidity ratio for banks, which relates liquid assets (cash and negotiable assets) to short-time liabilities, was set at 70 per cent for the accounting year 1965/66, to be increased by 1 per cent every year until 1970/71 when it will remain at 75 per cent. Solvency ratios, which relate capital (including reserves, grants, and retained profits) to total credit extended, are 8 per cent for commercial banks, 12 per cent for development banks, and 10 per cent for other financial institutions. In most member countries there is a National Credit Council, with functions that are by and large advisory, and a Banking and Financial Institutions Committee, which supervises the banks. The manager of the Bank’s agency in each country is a member of the Council and the Committee.

Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC)

The establishment in 1955 of the Institut d’Emission de l’Afrique Equatoriale Française et du Cameroun (Institut d’Emission) provided the area consisting of Cameroon, the Central African Republic, Chad, Congo (Brazzaville), and Gabon with its first common monetary institution. In 1959, the name “Institut d’Emission” was changed to “Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun” (BCEAEC), and the statutes drawn up in 1955 were modified. The 1960 cooperation agreement between France and the five equatorial countries has changed the legal status of the Central Bank from a national to a multinational institution. Since then, important modifications have been introduced in its statutes, particularly those relating to the creation of specialized committees and the establishment of a head office in each member country as well as the setting of the rules governing direct advances to the Governments.

The BCEAEC’s capital, originally provided by France, has remained unchanged at CFAF 250 million. The Central Bank pays an annual fee to each member government calculated on the basis of the amount of currency in circulation. According to the statutes, any net profits (after transfers to reserves) are to be distributed among the five member countries. Thus far, the Board of Directors of the BCEAEC has consistently decided to transfer all the net profits to reserves in order to finance important construction programs.

In 1959 the Board of Directors had established three special committees for its members in order to deal with the current operations of the Central Bank in Cameroon, Gabon, and the other three countries. At present, there are six committees presided over by the Chairman of the Board of Directors: one for each of the member countries and a joint committee, the Equatorial Africa Committee, to discuss matters of common interest for the Central African Republic, Chad, and Congo (Brazzaville).9

The Bank has a head office in the capital of each member country and a central administrative office in Paris. The BCEAEC does not enjoy the same immunities and privileges as the BCEAO. It is subject in each member country to all taxes that are not related to the special fees calculated on the basis of the currency in circulation, which are the counterpart of the Bank’s credit operations and its foreign exchange holdings. The fees are payable even when there are no profits. However, taxes on industrial and commercial profits paid by the Bank to each country are deducted from the fees.

The BCEAEC has the exclusive right to issue notes and coins for the five member countries. Since 1961 separate notes have been issued for Cameroon, and since 1967 for the Central African Republic. With regard to coins, the 50-franc and 100-franc coins recently put into circulation in Cameroon have a special design. However, all notes and coins issued by the Bank continue to be legal tender throughout the five countries.

The foreign exchange holdings of member countries are held as credit balances of the BCEAEC in the Operations Account. There is no statutory obligation for the Bank to take specific measures in the event of a decline in its external assets. Any corrective action is left to the discretion of the Board of Directors. Provisions for a change in the parity of the CFA franc and for the payment of interest on balances in the Operations Account are similar to those of the BCEAO.

Each country has enacted its own banking legislation and established a National Credit Council consisting of representatives of the government, the BCEAEC, the development banks, the commercial banks, and users of credit. The functions of the general secretariat of each National Credit Council are performed by the Central Bank. The National Credit Councils advise their respective governments in matters of credit policy and suggest appropriate regulations and measures in this field. A Banking Control Commission made up of members of the National Credit Council supervises the operation of banks in each country.

The principal banking regulations include provisions for prior authorization for opening of a bank or a branch, for minimum capital subscription, and for a liquidity ratio, which is fixed in each country by the National Credit Council.

Institut d’Emission Malgache (IEM)

The Banque de Madagascar et des Comores (BMC), which previously served as the bank of issue, continues to keep the accounts of the Malagasy Treasury on behalf of the IEM and continues to be responsible for the operations connected with the stocking and movement of currency over the country. However, beginning on January 1, 1968, the IEM took over from the BMC the handling of the Malagasy Treasury accounts in Tananarive.

The IEM has a capital of FMG 500 million, of which one half has been subscribed by France in accordance with a special cooperation agreement, and the other half by the Malagasy Republic.

On July 13, 1962 a National Credit Council was created, and by a law of December 11, 1964 a Banking Control Commission was established. While the Council primarily advises the Minister of Finance on the orientation of credit policy, especially with regard to financing the development plan, the Banking Control Commission regulates the banking activities in the Malagasy Republic. The National Credit Council is presided over by the Vice-President of the Republic and includes the highest ranking officials of ministries dealing with economic and financial matters, as well as of commercial banks and other private interests; the President of the IEM is the Vice-President of the Council. The Council also makes recommendations on measures designed to foster and safeguard bank deposits and on commissions charged by commercial banks. The Banking Control Commission, which is presided over by the President of the IEM, advises the Minister of Finance on the creation and closure of banks and branch offices and exercises control over banking activities through its authority to establish reserve requirements and liquidity ratios for commercial banks. It also has the responsibility of assuring the observance of banking regulations and may impose penalties for violations.

Credit developments

Growth and seasonality of credit

Credit to the private sector has expanded rapidly in both the BCEAO and BCEAEC areas during the period 1960–64. Since then, the rate of expansion in both areas has declined considerably. The average annual increase in credit to the private sector appears to have been some 8 per cent in the BCEAO area during 1960–66 and some 11 per cent in the BCEAEC area during 1961–66. However, Ivory Coast and Senegal account for more than 80 per cent of credit to the private sector in the BCEAO. Similarly, Cameroon accounts for some 40–50 per cent of credit outstanding in the BCEAEC area. Hence, the growth of credit in both areas is determined largely by developments in these three countries. Commercial and development banks are the most important source of credit to the private sector. Except in Cameroon, the Treasuries in the BCEAO and BCEAEC areas extend some short-term credit to the private sector in the form of customs duty bills for the payment of indirect taxes, mainly import taxes. Furthermore, the French Caisse Centrale de Coopération Economique (CCCE) extends long-term credit to the private sector, both direct and through the local banking system.

In most countries in the BCEAO and BCEAEC areas, credit to the private sector shows a distinct seasonal pattern that coincides with the financing of the main agricultural crops. Credit to the private sector starts to expand in the latter part of the calendar year, attains its peak in February-April of the following year, and then begins to fall gradually until it reaches the trough in August-October. However, since agricultural seasons differ from one country to another, these peaks and troughs partially offset each other, with the result that the amplitude of seasonal variations in each of the areas as a whole is smaller than that in some of the member countries.

The amplitude of seasonal variations in total credit to the private sector in the BCEAO and BCEAEC areas, as measured by the percentage change from the low to the high quarters, is much larger in the BCEAO area (29 per cent) than in the BCEAEC area (10 per cent). (See Table 1.) This difference is due to the fact that agricultural crops are of minor importance in some of the BCEAEC countries, particularly Gabon and Congo (Brazzaville). Furthermore, seasonal variations in credit in the BCEAO area are dominated by those in the private sector in Ivory Coast and Senegal, which account for some 80 per cent of total credit in the whole area. The peaks and troughs in these two countries occur at about the same time. In the BCEAEC area, Chad has the highest seasonal variation. The high seasonality in Senegal and Chad can be explained by the fact that groundnuts and related products represent some 77 per cent of Senegal’s exports, while cotton represents some 60 per cent of Chad’s exports. The seasonal pattern of credit expansion in the Malagasy Republic reflects the financing of agricultural crops, which for the most part are harvested during the second half of the year.

Table 1.

CFA Countries and Malagasy Republic: Credit to the Private Sector, 1961–66

article image
Sources: International Monetary Fund, International Financial Statistics; Banque Centrale des Etats de l’Afrique de l’Ouest, Notes d’Information et Statistiques and Annual Reports.

Estimates according to U.S. Department of Commerce, Bureau of the Census, The X-II Variant of the Census Method II Seasonal Adjustment Program (1965).

Based on September data in the BCEAO area and on December data in the BCEAEC area and the Malagasy Republic after elimination of random factors.

In the BCEAO area these data are for 1962–64 and in the Malagasy Republic, for 1963–66.

In the BCEAO area these data are for 1960–66 and in the Malagasy Republic, for 1963–66.

Data on commercial bank credit to the private sector in the Malagasy Republic are available only since the end of 1962. During 1963 and 1964 credit expanded at an annual average rate of 11 per cent, but in 1965 it declined considerably because of a fall in agricultural production. With the recovery of economic activity in 1966, credit expansion resumed its earlier growth rate of 12 per cent.

Credit policy

The principal instrument of credit policy in the BCEAO and BCEAEC areas is rediscount ceilings, the use of which has been facilitated by the fact that commercial and development banks rely on central bank rediscounts to finance their credit operations. In both the BCEAO and BCEAEC areas, commercial and development banks’ borrowings from the Central Bank declined over the period 1960–66 in relation to total credit granted by these banks to the private sector; furthermore, they declined in absolute terms during the last two years of that period.

The principal instrument of credit policy of the IEM is also rediscount policy, which is implemented through quantitative and qualitative controls. Changes in the basic rediscount rate have not been used as a means to restrict or to expand domestic credit, and the rate has been kept unchanged for a number of years. The effectiveness of the rediscount mechanism is enhanced by the fact that commercial banks rely heavily on borrowing from the IEM rather than on their own resources of domestic or foreign origin to finance their credit operations. Commercial banks are not subject to reserve requirements. However, the IEM has successfully used its suasive power on commercial banks and companies whenever it found that commercial banks tended to rely excessively on central bank credit or companies on commercial bank credit, rather than on their own funds. The IEM has no statutory limits to its credit operations and has thus far provided the financing for about 50 per cent of the total credit to the economy.

Credit ceilings

The Executive Board of the BCEAO fixes a global rediscount ceiling for short-term credit for each member country semiannually on the basis of a projection of the needs of the country and the available resources of the banking system submitted by the national Monetary Committee and the BCEAO’s local agency. After reserving part of the global ceiling for the rediscount of customs duty bills by the Treasury, the Monetary Committee establishes individual ceilings for each bank. The ceilings are subject to an absolute maximum of 50 per cent of a bank’s expected short-term credit operations.10 However, beginning in September 1968, rediscounts of credit for certain crops could exceed this limit but could not be more than 80 per cent of such credit. The rediscount ceilings are established separately for short-term and medium-term credits. In addition to rediscount ceilings for each deposit bank, the national Monetary Committee establishes, within the framework of the over-all credit ceiling for the member country, individual credit limits for each enterprise on the basis of its financial position.

It seems that the stiffening of rediscount conditions, together with moral suasion by the BCEAO, has resulted over the years in an improvement of the financial structure of enterprises operating in BCEAO countries, which, though no detailed data are available, appears to have been accompanied by some inflow of foreign capital. Enterprises that were unable or unwilling to reorganize their finances to satisfy the new conditions have turned to other sources of credit, including head offices abroad, or, in some instances, have borrowed at increased rates from the local banks. The effect of these tightened credit conditions on business activity appears to have been limited.

The credit facilities provided by the BCEAEC to commercial banks to help them to finance short-term credit are expressed in the form of either permanent or seasonal ceilings. In addition, the BCEAEC, in the same way as the BCEAO, provides credit facilities to commercial banks to finance medium-term credits. With respect to short-term credits, the rediscount ceilings are not established for each country but for each commercial bank and, within each bank, for each individual borrower. For each commercial bank, the ceiling is determined in the light of the bank’s own resources and actual use of credit in the preceding years. For each borrower, the ceiling is determined according to his financial position and creditworthiness, as well as according to the potential economic benefits of this credit and its monetary impact. Credit ceilings for financing agricultural crops, such as cocoa, coffee, and cotton, vary seasonally; these seasonal ceilings are fixed annually in accordance with the expected size of each crop. The ceiling for the rediscount of medium-term paper is determined for the five countries together, and not for each country separately; the ceiling is fixed after taking into account both private investment possibilities and the foreign exchange holdings of the BCEAEC. This rediscount ceiling was raised from CFAF 4 billion to CFAF 5 billion on March 16, 1966. At the same time, the BCEAEC has decided to finance certain investments outside this ceiling (hors plafond) either because of their importance or because of their benefits for the whole monetary union. Accordingly, the central bank credit to the oil refinery in Port Gentil, a joint venture of the five equatorial countries, has been granted outside the ceiling. Medium-term rediscounts represent a small portion of total central bank credit and concern mainly the financing of new productive investments. With regard to public works contracts, which are not considered as medium-term credit, the Central Bank stands ready to provide credit of up to 80 per cent of the nominal value of the contracts, provided that the loans are against collateral, relate to public works financed through the government budget, and will be settled within 6 months.

Central bank credit to commercial banks shows seasonal variations similar in timing to, but larger in amplitude than, those of the commercial banks’ credit to the private sector, indicating the important role of the Central Bank in financing agricultural crops. Besides financing seasonal operations, the Bank provides short-term credit; such lending has increased at an annual compound rate of some 6 per cent for the five countries over the period 1961–66.

The Central Bank has had some success in coping with capital movements from the BCEAEC countries. When the situation has warranted it, the Bank has lowered credit ceilings accorded to commercial banks and companies and has restricted the credit extended to them to short-term advances (prises en pension) against securities on which a higher rate is applied, and in some cases has adjusted the rediscount rate applied to certain operations.

Prior to May 1, 1966, the BCEAEC was not entitled to extend credit direct to the Government of Cameroon and other Equatorial African Governments, but it could discount customs duty bills held by the Treasuries, rediscount for commercial banks treasury bills having a maturity of 6 months or less, and grant advances to banks against government bonds. Beginning on that date, the Central Bank was authorized to grant direct advances to member governments for a period of up to 240 days within the calendar year. Since November 1967, under special circumstances and with the specific authorization of the Board of Directors of the BCEAEC, this period can be extended up to the first working day of the following calendar year. The total credit to each member government through direct advances and treasury paper operations normally cannot exceed the maximum of either 10 per cent of average private sector deposits at local banks during the preceding 12 months or 10 per cent of the government’s actual fiscal receipts during the preceding budgetary year.

As a rule, the credit operations of the IEM are with banks and credit institutions. The short-term credit operations of the IEM may be in the form of (1) rediscounts and prises en pension of commercial paper and (2) short-term advances against private or government paper. Virtually all rediscount operations of the IEM are subject to global ceilings, which are established annually. Within the global ceilings, separate rediscount ceilings are established for each commercial bank and, within each bank, for eligible companies on the basis of their financial structure and position.

In addition to these ceilings, the IEM establishes for each bank separate ceilings and rediscount conditions for six categories of eligible short-term paper: (1) domestic commercial bills, (2) foreign trade bills, (3) crop-financing bills (préfinancement), (4) bills secured by goods, (5) bills secured by government contracts, and (6) bills secured by local products. Only domestic commercial bills having less than 80 days until maturity and having a total life of no more than 4 months may be rediscounted. In general, the IEM, in rediscounting, gives larger amounts for crop-financing bills and bills secured by local products than for the financing of imports, especially nonessential goods and items for which local substitutes are available.

As in the BCEAO and the BCEAEC, all direct and indirect IEM credit to the Government is subject to ceilings, with the exception of rediscounts of customs duty bills held by the Treasury, which are short-term obligations of the private sector on account of customs duties.

Commercial and development banks

There are 12 commercial banks operating in the BCEAO area, 14 banks in the BCEAEC area, and 4 in the Malagasy Republic; 2 operate in both the BCEAO and BCEAEC areas, and 1 operates in all three areas. Individually or collectively, European and, to a smaller extent, U.S. interests hold the majority of shares in most of these banks, though national governments hold majority interests in the capital of a few local commercial banks. The commercial banks in all three areas engage almost exclusively in short-term credit operations, mainly to finance foreign trade. Medium-term and long-term credit is of little significance and is usually extended only if the debtor complies with the central bank’s requirements for rediscounting.

In addition to the commercial banks, development banks have been established in almost all CFA countries in the years following the attainment of independence. The national government is usually the main shareholder in the capital of the development banks; the shareholders may include the CCCE, the central bank, and foreign banking institutions. Though the activities of the development banks in all the areas have grown steadily in recent years, the distribution of their credits has been rather uneven.

In the course of 1964 and 1965, commercial banking in the BCEAO area was developed further by the enactment of new banking legislation in all member countries, replacing regulations carried over from pre-independence days, which had consisted of legislation similar to that in France and an intrabank agreement regulating interest rates. The new legislation is practically uniform throughout the UMOA and is based on guidelines set up by the BCEAO. In addition to a number of formal provisions regarding the banking profession, the new legislation fixes solvency ratios to be maintained by the banks and sets limitations on mixed banking. The banks are also required to maintain a minimum liquidity ratio, i.e., the ratio between cash and negotiable assets (including rediscountable credit) and short-term liabilities, which was fixed at 70 per cent for the first year after enactment of the respective laws and is to increase thereafter by 1 percentage point a year for five years (i.e., until it reaches 75 per cent), at which level it would be maintained.

Moreover, the legislation established a new schedule of interest rates to be charged by the banks on credit for various purposes. In contrast with previous provisions under the intrabank agreement, the new interest rates are related primarily to the nature of the project being financed, instead of to the creditworthiness of the borrowing enterprise. The new rates are generally lowest for projects of primary importance to the country’s economic development.

The new banking legislation has had the effect of further limiting the use of nonrediscountable credit. On the one hand, the increased interest rates on nonrediscountable credit have limited the expansion of demand while, on the other hand, the supply has been reduced by the required liquidity ratios, which favor the extension of rediscountable credit.

The development of commercial banking in the BCEAO and BCEAEC areas and the Malagasy Republic during 1960–66 is indicated in Table 2. In both areas commercial banks have been able to expand credit to finance agricultural crops and to meet other credit demands. In order to finance their operations, commercial banks succeeded in attracting demand deposits, in mobilizing savings, and in borrowing abroad. Consequently, the foreign liabilities of these banks in the BCEAO area more than doubled, while in the BCEAEC area they increased even more rapidly.

Table 2.

CFA Countries and Malagasy Republic: Monetary Indicators, 1962–66

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Source: International Monetary Fund, International Financial Statistics.

1965 figures for Chad, Congo (Brazzaville), and Gabon; 1965/66 figures for Cameroon.

September.

Including time deposits of state-owned agencies kept with the Caisse Autonome d’Amortissement, which in other countries are kept with the treasury.

Unweighted average.

Over the period 1962–66 deposit money increased in both areas at a faster rate than currency in circulation. Table 2 also provides some indication of the degree of monetization in the BCEAO and BCEAEC member countries and the Malagasy Republic. The liquidity ratios vary considerably among the different countries. It should be noted, however, that the calculation of gross domestic product (GDP) in developing countries is subject to a wide margin of error for many reasons, including the difficulties of estimating the subsistence sector. In addition, data on currency in circulation for any particular country are unreliable in both areas, because currency moves freely among different countries in the same area.

There are 4 commercial banks operating in the Malagasy Republic with a total of 34 offices in 17 different localities. They are owned mainly by French private banks, but in two instances the Malagasy Government has subscribed to 12.5 per cent and 35 per cent, respectively, of their capital.

The principal credit operations of these banks consist of short-term financing of crops and discounts of commercial paper relating to exports and imports. Some medium-term credit is provided, mainly for financing purchases of capital equipment and local construction activities. In the last few years, mainly as a result of a growing need to finance stocks of unsold export commodities, banks have increased credit in the form of advances against collateral and of overdraft facilities. In 1966, however, the proportion of these types of credit showed a slight decline.

Although commercial banks have continued to finance a large proportion of their credit to the private sector through borrowing from the IEM, this proportion has declined considerably, going from more than 60 per cent at the end of 1964 to a little more than 40 per cent at the end of 1966. This development has been due partly to the competition among banks, which prompted them to intensify their efforts, including the opening of new branches, to mobilize additional domestic resources.

Monetary developments

In the period 1962–64 money supply increased somewhat more rapidly in the BCEAEC area (13 per cent) than in the BCEAO area (9 per cent). (See Table 3.) The main reason for the increase in both areas was an expansion in credit to the private sector. In the BCEAO area credit to the private sector expanded by some CFAF 24 billion (18 per cent per annum), and in the BCEAEC area by CFAF 14 billion (15 per cent per annum). The Governments of Ivory Coast, Senegal, and Togo in the BCEAO, and of Cameroon and Chad in the BCEAEC, succeeded in accumulating sizable (net) deposits during the period under review. Furthermore, in some member countries there was a deterioration in the net foreign position, owing to a rapid increase in imports.

Table 3.

CFA Countries and Malagasy Republic: Changes in Money Supply by Major Determinants, 1962–661

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Source: International Monetary Fund, International Financial Statistics.

End of September data. Expansionary factor (+), contractionary factor (—).

Average of annual percentage increases.

Between 1964 and 1966 the rate of expansion of money supply in the BCEAO area was about the same as in the BCEAEC area. The increase in foreign assets and, to some extent, in credit to both the government and private sectors was the main reason behind the increase in money supply in the BCEAO area. In the BCEAEC area the expansion in money supply was due mainly to credit expansion to the private sector and to a reduction in government deposits.

The major determinant of the movements in money supply in the Malagasy Republic was credit to the private sector, which increased by an annual average rate of 11 per cent during 1962–64, declined by 5 per cent in 1965 owing to the poor agricultural crop, and with the general economic recovery in 1966, increased by about 12 per cent. The other principal factor affecting money supply over the period 1962–66 was the decline in the net foreign assets position of the banking system, owing partly to larger trade deficits.

III. Government Finance

The public sector in the countries using the CFA franc consists of the Central Government, local authorities, and public and semipublic enterprises. Not all public sector expenditures are included in the budgets, however, because important outlays financed by the Fonds d’Aide et de Coopération (FAC) or the European Development Fund (EDF) are effected outside the budget. The countries using the CFA franc have many common features, comprising (1) administrative and budgetary procedures based on French practice; (2) similar tax structures in which indirect taxes, particularly taxes on foreign trade, are relatively important; (3) a treasury system that also performs banking functions for the public sector and, occasionally, for the private sector; and (4) close financial ties with France, enabling African treasuries under certain circumstances to obtain financing from the French Treasury.

The fiscal year coincides with the calendar year in all CFA countries (including the Malagasy Republic) except Senegal and Cameroon, where it begins on July 1 and ends on June 30, and Niger, where it starts on October 1 and ends on September 30.

The public financial position in many CFA countries has been under great pressure since 1960. Although revenues have increased rapidly, the rate of increase of total expenditures of the ordinary and capital budgets has been higher than that of revenue. The increase in ordinary budget expenditures has been necessitated by new services relating to representation abroad, defense expenditure, postal services, and telecommunications. These expenditures, which had been borne previously by France and/or the Federations of West and Equatorial Africa, were larger than the contributions made by these countries to federal budgets, prior to independence. Expenditure has also increased from expanding the administrative machinery, from paying higher wages and salaries, and from the need to subsidize new public and semipublic enterprises. Capital budget expenditures have also increased, following the adoption of development plans since 1960. On the basis of 1961 = 100 (see Table 4), the index of current budgetary outlays in 1966 was 141 in the BCEAO area and 181 in the BCEAEC area, or compound annual increases of 7.1 per cent and 12.6 per cent, respectively. In the Malagasy Republic the index in 1966 had increased by only 29 per cent above the 1961 level—an average annual rate of 5.2 per cent. During the same period, the index of revenue rose to 139 in the BCEAO area, 199 in the BCEAEC area, and 148 for the Malagasy Republic, giving average annual increases of 6.8 per cent, 14.8 per cent, and 9.6 per cent, respectively.

Table 4.

CFA Countries and Malagasy Republic: Fiscal Performance, 1961–66

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1961–65; Banque Centrale des Etats de l’Afrique de l’Ouest, Rapport d’Activité, 1965; United Nations, Statistical Yearbook, 1965; Institut National de la Statistique et des Etudes Economiques, Données Statistiques, April-June 1966; Budgets and Comptes Définitifs of the BCEAEC countries; “Loi de Réglement,” in Journal Officiel de la République Malgache, and Budget Général de l’Etat, both issued annually.

Including the Solidarity Fund in the BCEAEC area.

Excluding Congo (Brazzaville).

For Mauritania, 1966.

For Central African Republic, 1961 data and for Cameroon, 1962/63 data.

The over-all budgetary deficits in many CFA countries were financed mostly by foreign loans and grants and in some countries by the use of treasury reserve funds and other savings of the public sector. Between 1961 and 1966 the over-all budgetary deficit in the BCEAO and BCEAEC areas increased (Table 5), while in the Malagasy Republic it was slightly smaller in 1966 than in 1961 (Table 6). In the BCEAO area, the largest deficits were registered in Dahomey, Senegal, and Upper Volta, while in the BCEAEC area they were sizable in Gabon, the Central African Republic, and Cameroon.

Table 5.

BCEAO and BCEAEC Areas: Central Government Revenue, Expenditure, and Financing, 1961–661

(In millions of CFA francs)

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1961–65; Banque Centrale des Etats de l’Afrique de l’Ouest, Rapport d’Activité, 1965; Institut National de la Statistique et des Etudes Economiques, Données Statistiques, April-June 1966; Budgets and Comptes Définitifs of the BCEAEC countries.

For Senegal estimates for 1961 were derived from 18 months’ data covering January 1, 1961 to June 30, 1962. For Niger, budget data covering 9 months of 1962 were converted to a 12-month basis. Since 1961, in Senegal, and 1962, in Niger, fiscal year (e.g., 1962/63, 1963/64) data are shown under 1963, 1964, etc.

In Cameroon the budgets of the two Federated States are included.

Receipts from government properties and services.

Servicing of public debt in Ivory Coast is excluded because it is handled by the Caisse Autonome d’Amortissement.

Net of transfers and subsidies from local budgets, public agencies, etc., to the central government budget.

Capital expenditures in Senegal are estimated and not actual.

Table 6.

Malagasy Republic: Central Government Revenue, Expenditure, and Financing, 1961–67

{In millions of Malagasy francs)

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Sources: “Loi de Réglement,” in Journal Officiel de la République Malgache, and Budget Général de l’Etat, both issued annually.

It is difficult to draw general conclusions applicable to all these countries, owing to differences in revenue and government expenditure policies. The tax burden, judged either by the ratio of tax revenue to GDP or by per capita tax receipts, differs considerably from one country to another, in part owing to differences in the size of the monetized sector and the relative importance of foreign trade. Within the BCEAO area, the ratio of tax revenue to GDP is highest in Senegal and lowest in Niger and Upper Volta. In the BCEAEC area it is highest in Congo (Brazzaville) and Gabon, and lowest in the Central African Republic and Cameroon. In 1965, the per capita tax revenue was about the same in both the BCEAO area (CFAF 4,903) and the BCEAEC area (CFAF 4,754) and was markedly lower in the Malagasy Republic (CFAF 3,619). (See Table 4.)

Revenue structure11

Tax receipts constitute the most important source of government revenue in the CFA countries, accounting for 90 per cent to 95 per cent of total revenue (Tables 5 and 6). In both the BCEAO and BCEAEC areas, tax revenue includes direct taxes, indirect taxes (including export and import duties), and registration and stamp duties. Nontax revenue, accounting for 5 per cent to 10 per cent of government receipts, is derived from government property and charges for services rendered by the government.

Indirect taxes

Indirect taxes consist mainly of (1) import taxes, composed of (a) fiscal duties and other fees levied on all imports regardless of their origin, (b) customs duties applicable to imports from countries outside the franc area and, since December 1964, from outside the EEC, and (c) standard turnover taxes on imports levied on the c.i.f. value of imports, plus all import taxes, including the standard turnover taxes themselves;12 (2) export taxes, including (a) fiscal duties and other fees and (b) standard turnover taxes on exports levied on the f.o.b. value of exports, plus all export taxes, including the standard turnover taxes themselves; (3) turnover taxes on domestic production; and (4) specific excise taxes generally levied by the customs administration on alcoholic beverages, tobacco, cigarettes, petroleum products, etc.

Indirect taxes in most CFA countries yield about three to four times the revenue collected from direct taxes, partly because of the importance of foreign trade, which can be taxed relatively easily, and the administrative difficulties of assessing and collecting direct taxes in economies characterized by a small monetized sector, low per capita income, and the lack of adequate fiscal administrative machinery.

Inland countries, which depend wholly or partially on ports in neighboring countries for imports, have a system of sharing duties and taxes on imports. Thus, there is an arrangement between Senegal and Mauritania, whereby 91.38 per cent of the proceeds from such taxes go to the former and 8.62 per cent to the latter. In the BCEAEC area a Solidarity Fund was established for this purpose following the establishment of the Union Douanière et Economique de l’Afrique Centrale (UDEAC). For 1967, Congo (Brazzaville) and Cameroon contributed CFAF 500 million each, Chad and the Central African Republic contributed CFAF 300 million each, and Gabon contributed CFAF 200 million (previously CFAF 500 million). The proceeds were distributed between Chad (65 per cent) and the Central African Republic (35 per cent).

Another special feature of the UDEAC in the fiscal field is the adoption of a so-called single tax (taxe unique), which is a production tax levied on the value of manufactured products of factories whose markets include the territory of two or more states of the Union; this tax replaces all import duties and other indirect taxes on all materials used in manufacturing and on the manufactured product. Proceeds from the taxe unique are allocated to member countries in proportion to their consumption of the manufactured product. Producers report the destination of their sales to the customs service, which collects the tax. The same obligation applies to wholesalers when they resell the merchandise abroad. Transfers of the tax receipts to the national treasuries are made monthly. During the transitional period, which expires on June 1, 1972, the rates of the taxe unique may vary from one member country to another, depending upon the country’s stage of development.

The West African Customs Union was replaced by the Customs Union of the West African States (Union Douanière des Etats de l’Afrique de l’Ouest—UDEAO) beginning on December 15, 1966. Unlike UDEAC, the UDEAO is still in an early stage of implementation. The common external tariff is limited to the customs duty. However, the UDEAO provides for a preferential tax treatment for goods originating in one member country and exported to another.

Direct taxes

The relatively small contribution of direct taxes to total revenue can be ascribed to the low per capita income in most CFA countries, which leaves hardly any taxable income after allowance for personal exemptions. The subsistence sector, for which effective tax administration has not yet been developed except for the poll taxes, is usually very large, and it is almost impossible to collect direct taxes from this sector. Under these circumstances, the development of the income tax as a significant source of revenue cannot be expected to take place in the near future.

Direct taxes consist mainly of (1) taxes on wages and salaries; (2) schedular taxes on industrial, commercial, and noncommercial profits; (3) general income taxes on a progressive scale; (4) poll taxes of various forms, the rates of which vary from one region to another and the revenue of which is usually shared by the central and local governments; and (5) property and miscellaneous taxes, e.g., head taxes on livestock, real estate taxes, and business fees.

Receipts from direct taxes in the BCEAO area rose from 15.3 per cent of total tax revenue in 1961 to 17.8 per cent in 1966.13 However, the main revenue source in the BCEAO countries remains import and export taxes, the share of which increased between 1961 and 1966 when they accounted for more than half of tax receipts; in fact, 30 per cent of total tax receipts came from import taxes.

In many countries of the BCEAO area, new taxes have been introduced, existing taxes have been increased, and the tax base has been broadened as part of a drive to improve government receipts. Per capita tax revenue increased from CFAF 4,049 in 1961 to CFAF 5,003 in 1964 (Table 4). Since then, although important gains were made in per capita tax revenue in Dahomey, Mauritania, and Niger, tax revenue in the BCEAO area as a whole barely kept pace with increases in population, owing to a decline in per capita tax revenue in Ivory Coast from CFAF 11,402 in 1964 to CFAF 10,330 in 1966. Nevertheless, Ivory Coast still had the highest per capita tax revenue in 1966, followed by Senegal (CFAF 9,087), while Niger (CFAF 2,196) and Upper Volta (CFAF 1,601) had the lowest.

Total central government revenue in the BCEAO countries increased from CFAF 78.3 billion in 1961 to an estimated CFAF 109 billion in 1966, an increase of 6.8 per cent per annum. Ivory Coast and Senegal accounted for 55 per cent of this increase of CFAF 30.7 billion, mainly because of their relative size; there were other countries, such as Mauritania, where the rate of growth of revenue (almost doubling between 1961 and 1966) was much more rapid than the average for the area as a whole, but because of their small size they had only a small influence on the global figures.

In the countries of the BCEAEC area, the share of each category of revenue has been more or less stable, with indirect taxes consistently accounting for about two thirds of total government revenue. In these countries, export tax revenue in relation to the value of total exports declined from about 9.1 per cent in 1961 to 7 per cent in 1963 and then rose to 8.1 per cent by 1965 (Table 4). Import taxes rose from 19.3 per cent of imports in 1961 to 25.6 per cent in 1965. As the ratio of import taxes to total imports is about three times that of export taxes to total exports, a fall in imports is especially detrimental for government revenues in these countries.

To finance their growing expenditures, governments in the BCEAEC countries progressively increased taxation and endeavored to improve the tax administration during the period 1961–66. In view of difficulties in assessing and collecting direct taxes, the governments have concentrated on indirect taxes. Certain direct taxes have also been increased, but the revenue effect has been very small, owing mainly to exemptions granted to companies under the investment code.

As a result of these measures and with the growth of the economies, total central government revenue in the BCEAEC area increased from CFAF 34.5 billion in 1961 to an estimated CFAF 68.8 billion in 1966, an increase of 14.8 per cent per annum. (See Table 5.) Of this increase of CFAF 34.3 billion, Cameroon, Congo (Brazzaville), and Gabon accounted for 69 per cent. Although the absolute share of the Central African Republic and Chad was small, these countries achieved a rapid increase in government revenue. With the increase in government revenue at a rate more rapid than that of population growth, the per capita tax revenue rose from CFAF 2,924 in 1961 to CFAF 4,754 in 1965. Although progress was registered in all countries, the area average for per capita tax revenue for 1966 was derived from figures that were as low as CFAF 2,758 in Chad and as high as CFAF 22,927 in Gabon.

Revenue from all categories of taxation in the Malagasy Republic increased between 1961 and 1967, but the rate of increase was more rapid for direct taxes than for other sources of revenue. Consequently, proceeds from direct taxes, which increased from 12.3 per cent of total government revenue in 1961 to 17.9 per cent in 1965, were expected to increase to 21.5 per cent in 1967. This trend has resulted partly from the growing monetization of the economy and partly from the determined efforts of the Government to raise more revenue from direct taxes through a reinforcement of assessment and collection methods and through increases in tax rates. For example, in 1966 income tax rates increased, while at the same time certain deductions were abolished; in addition, the tax rate on commercial profits of companies was increased from 28 per cent to 31 per cent.

By and large, indirect taxes on foreign trade have remained unchanged; hence, the ratio of import tax proceeds to the value of total imports in the Malagasy Republic has remained stable at about 26 per cent, while the ratio of export tax proceeds to the value of total exports has varied only slightly—between 9 per cent and 10 per cent. However, there have been increases in other indirect taxes, such as taxes on vehicles in 1966.

All these measures led to an increase in total central government revenue from FMG 18.8 billion in 1961 to an estimated FMG 27.9 billion in 1966, an increase of 9.7 per cent per annum. As this was more rapid than the rate of growth of the economy, the ratio of tax revenue to GDP increased from an estimated 12.6 per cent in 1962 to 14.6 per cent in 1966; per capita tax revenue rose from FMG 2,754 in 1961 to FMG 3,756 in 1966.

Structure of government expenditure

The structure of central government expenditure in the BCEAO and BCEAEC areas and in the Malagasy Republic is given in Tables 5 and 6. Current expenditure in the BCEAO area accounts for 80 per cent to 85 per cent of total budgetary outlay, while in the BCEAEC area it is usually slightly higher, amounting on average to 80 per cent to 90 per cent. In the Malagasy Republic it was as high as 92 per cent in 1961, but in recent years it has declined to between 85 per cent and 90 per cent of total outlays.

During the period 1961–66, expenditure on wages and salaries constituted the most important item, amounting to between 47 per cent and 51 per cent in the two areas and to about 45 per cent in the Malagasy Republic. Part of the increase in expenditure on personnel in all CFA countries originated in higher wages, but the main impetus has been the larger number of personnel needed to serve in the newly created Ministries of Foreign Affairs, Social Affairs, Security, and Defense. In addition, there have been demands for more education, health, and welfare services.

Next in importance is expenditure for material and maintenance, which accounts on average for between 26 per cent and 33 per cent of current budgetary outlay in the BCEAO and BCEAEC areas. Most of the expenditures for material and maintenance represent purchases of imported goods, and the increase of these expenditures was partly responsible for the increase in imports.

Only a relatively small part of public investment is executed through the central government budget; the bulk is financed directly by foreign sources. In most countries disbursements by the main sources of foreign aid, France and the EEC, are made through the French CCCE. Over the period 1961–66, about two fifths of total public investment in the BCEAO area was financed through investment budgets, while in the BCEAEC and the Malagasy Republic this ratio was less than one fourth.

In the BCEAO countries, total central government expenditures, including investments, rose from CFAF 83.1 billion in 1961 to an estimated CFAF 126.9 billion in 1966, an average compound rate of about 10 per cent per annum.

As the average rise of current expenditures of 6.8 per cent per annum during the period 1961 to 1966 was less than the rate of increase in investment expenditures, the importance of current expenditures in total government outlays declined from 85.2 per cent in 1961 to 79.5 per cent in 1966. This decline in the share of current expenditures reflects efforts to allocate more for investment, with a view to promoting economic development especially in Ivory Coast, Senegal, and Niger.

Capital expenditures in the BCEAO countries increased from CFAF 12.3 billion in 1961 to CFAF 26.0 billion in 1966, an average of 15 per cent per annum. The main investing countries have been Ivory Coast and Senegal where public investment increased rapidly, especially during 1961–64. In Dahomey there was no capital budget until 1966, and in the remaining countries, except Mauritania, public investment did not increase much.

In the BCEAEC countries, central government expenditures (including capital expenditures) rose from some CFAF 38 billion in 1961 to roughly CFAF 75 billion in 1966, an average annual rate of increase of 14 per cent. The rate of increase, however, slowed down from an annual average of 19 per cent during 1961–63 to 11 per cent during 1963–66. As in the BCEAO area, greater attention is being paid to development expenditures, and consequently current expenditures declined from 95 per cent of total government outlays in 1961 to 88 per cent in 1966.

Capital expenditures in the BCEAEC countries increased from CFAF 1.9 billion in 1961 (excluding Cameroon) 14 to CFAF 8.6 billion in 1966 (including Cameroon), when they represented 11.5 per cent of total expenditures. The main increase occurred between 1962 and 1963, in part because of the creation of a separate development budget in Cameroon but mainly because of increases in capital expenditures in Gabon (134 per cent) and in Chad (300 per cent).

In the Malagasy Republic, central government expenditures, including investments, rose from FMG 20.4 billion in 1961 to FMG 28.9 billion in 1966, an average annual rate of increase of about 8.3 per cent. The rate of increase, however, was highest in 1963 (16 per cent), owing mainly to a rapid expansion of investment expenditures from FMG 1.7 billion in 1962 to FMG 3.1 billion in that year. Investment expenditures increased in other years but at a slower pace; over the period 1961 to 1966 investment expenditures increased by three times, to reach FMG 4.9 billion at the end of the period (Table 6).

Budgetary deficit and its financing

In a discussion of budgetary deficits in the CFA countries, certain factors have to be borne in mind. First, unlike the situation in many other less developed countries, the treasury in many CFA countries has claims on the central bank (compte de placement du Trésor) that represent treasury reserves; the central bank in turn invests the funds abroad or locally, as in Senegal and Togo. Part of these treasury reserves have been used to finance budgetary deficits. Although the use of such treasury funds is equivalent to the running down of cash balances, which has a general expansionary effect on the money supply, there is usually no foreign exchange problem because the central bank has the foreign exchange counterpart of the treasury reserves. Second, in both the BCEAO and BCEAEC areas, the government has been allowed to borrow only temporarily and for limited amounts from the central bank, and hence there has been no prolonged deficit financing. Finally, up to a certain extent, treasury deficits have been financed by foreign aid, thus offsetting the effect of the deficit on the balance of payments.

However, the growing importance of the government sector vis-à-vis other sectors and in relation to the growth of the economy has had some indirect influence on the balance of payments. For example, the expansion of the government sector has accelerated the pace at which the economies are being monetized. Consequently, the demand for imports of consumer and capital goods, especially in the BCEAEC countries, has expanded more rapidly than the growth of the economy. On the other hand, some of the expansion in imports provides greater opportunity to the governments to raise revenues through taxes on imports. This interdependence among government revenues, expenditures, and foreign trade underscores the importance of export and import taxes in certain countries.

As far as nontrade movements in the balance of payments are concerned, the increase in foreign aid between 1960 and 1962, and again between 1963 and 1964, paralleled the expansion in public expenditures during these years.

In the presentation of budget data in Table 5, foreign aid grants and loans are considered as financing items, not as revenue. Since the end of World War II, many of the CFA countries have continued to depend on foreign financial assistance for the equipment budget, and until recently for the current budget. If such foreign assistance were to be treated as revenue, as is done for the Malagasy Republic in Table 6, the deficits would be smaller accordingly.

As shown in Table 5, the size of the total central government deficit in the BCEAO countries in early years, except in 1962, declined from CFAF 4.7 billion in 1961 to CFAF 2 billion in 1963 and 1964. In 1962, as military, diplomatic, and general services were taken over and extended following independence, and as tax receipts rose moderately, the deficit reached a record CFAF 16 billion. In 1965, as domestic government revenue did not cover total public expenditures in all the BCEAO countries, the consolidated deficit rose substantially (by CFAF 13 billion). When related to the money supply, the deficit increased from 2 per cent in 1964 to 15 per cent in 1965. In 1966, the deficit was estimated to increase to CFAF 17.8 billion (18.6 per cent of the money supply), but as in previous years most of it was expected to be financed by foreign loans and subsidies.

In addition to foreign loans and subsidies, including use of the “entente” Solidarity Fund and earmarked resources from the former French West African Federation, the deficits were financed by use of reserve funds, domestic borrowing, and temporary advances from the BCEAO.

The total deficit of central government budgets in the BCEAEC countries has increased rapidly in recent years, more than doubling from CFAF 3.5 billion in 1961 to CFAF 8.4 billion in 1965 (Table 5). The total budget deficit in 1965 amounted to about 20 per cent of the money supply in September 1965 for the BCEAEC area. The deficit was expected to be about 12 per cent in September 1966. These relatively large deficits did not exert undue pressure on the balance of payments or on domestic prices in 1965 because a large share of the deficit was financed by foreign loans and budget grants. In 1966, the amount of foreign assistance available for budgetary support declined substantially. Domestic financing has been obtained mainly from non-inflationary sources, such as deposits in the postal savings system and of local governments with the treasury and use of reserve funds in foreign exchange representing surpluses from earlier years. Except for temporary advances, the governments have not resorted to financing their deficits by borrowing from the central bank or from the commercial banks.

In the Malagasy Republic the results of the over-all central government budget have fluctuated between a deficit of FMG 1.5 billion (in 1961) and a surplus of FMG 1.5 billion (in 1964), depending on the size of agricultural output and exports and the amount of revenues collected. As in the BCEAO and BCEAEC areas, the deficit has been financed mainly from foreign sources, including grants from France, which amounted to more than three fifths of the deficit in 1966. Domestic borrowing has not been important, but in some years the Treasury has used its cash balances to finance the deficit.

The public debt

Only fragmentary information is available on the size of total public debt, which comprises debts of the Central Government, public and semipublic enterprises, and, in some instances, local authorities. In the majority of the CFA countries, there have been only limited amounts of internal borrowing, and governments have been cautious, on the whole. In some countries, e.g., Gabon, the need to borrow domestically has not been pressing, even for financing the investment budget and other important extrabudgetary outlays, because of increases in revenue and because of the generally large inflow of official foreign aid. Furthermore, the scope for nonbank domestic borrowing is not extensive, in view of the low level of money incomes and small savings.

Prior to independence, public internal debt in the CFA countries consisted essentially of deposits of public or semipublic enterprises kept with the treasury, which used them for budgetary purposes. Since 1960, many of the CFA countries have issued treasury bills. The development of a market for this instrument has been limited by the fact that rediscounts of these bills form part of global central bank credit, and prospective buyers have generally been reluctant to purchase bills in excess of the rediscountable quota. Consequently, on the one hand, the development of an internal market for short-term negotiable government instruments has been slow, and, on the other hand, the investment abroad of liquid savings, especially by the banking system, has been encouraged. National lotteries have been started in some countries, e.g., Congo (Brazzaville), Dahomey, Niger, Senegal, and Upper Volta, with the help of foreign experts, but the results are still uncertain.

Since 1960, attempts have been made to mobilize internal resources to finance economic development through the issue of long-term instruments. In the BCEAO area, Ivory Coast, Niger, and Senegal have floated long-term (up to 20 years) development bonds. These loans were used by public authorities either to finance directly agricultural and industrial projects, e.g., in Senegal, or to increase the resources of development banks, as in Niger.

In the BCEAEC area, two-year bonds were issued in Congo (Brazzaville) and Gabon. In the Malagasy Republic, the internal debt consists mainly of a loan floated in 1966, which was subscribed mainly by a group of insurance companies, the savings bank, and a commercial bank.

Until 1960, up to 90 per cent of the external debt of the CFA countries was owed to France. A major portion consisted of a consolidation of loans granted by the Fonds d’Investissement pour le Développement Economique et Social soon after World War II and to a smaller extent by the CCCE. After independence, debts were contracted with Germany (mainly Kreditanstalt), e.g., by Gabon and Ivory Coast; with the U.S. Agency for International Development (AID), e.g., by Cameroon and Senegal; and with other European countries. There has also been increasing use of suppliers’ and contractors’ credits. The Compagnie Française d’Assurance pour le Commerce Extérieur has guaranteed export credits to a number of CFA countries, but data are not available on a country-by-country basis. Some of these investments have not been accompanied by the expected increase in output.

The amortization of the internal and external public debt as recorded in the budgets of the CFA countries is shown in Table 7. In absolute amounts, it increased in the BCEAO area as a whole by more than CFAF 2.7 billion between 1961 and 1966. Of this increase, Senegal was responsible for more than 50 per cent. In the BCEAEC countries it increased by about CFAF 1.4 billion—about half the increase in the BCEAO area. The bulk of this increase is due to Congo (Brazzaville) and Gabon, which showed increased outlays on amortization of more than sixfold and fivefold, respectively.

Table 7.

CFA Countries and Malagasy Republic: Amortization of Public Debt, 1961–66

(In millions of CFA francs)

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Sources: Government budgets.

Estimates.

IV. Prices and Wages

The level and evolution of prices and wages in the CFA countries is important not only for the usual reasons of assessing their impact on the balance of payments but also because there is relative freedom of movement of labor and capital within and between the three central banking areas. Of special significance in these countries is the fact that internal price levels are influenced by the degree of price support that exporters have enjoyed in past years in French markets. These preferences are now in the process of being eliminated (see below).

Wages and prices differ not only among the BCEAO and BCEAEC areas and the Malagasy Republic but also among countries within each banking area. A prime factor responsible for these discrepancies has been the varying cost of transport for both exports and imports. The same imported commodity, for example, sells at a much higher price in the inland countries, such as Chad, the Central African Republic, and Niger, than in the coastal countries, such as Ivory Coast, Gabon, and Dahomey. Furthermore, since the preferential marketing arrangements are applied equally to all countries, the producer prices of export commodities in the inland countries tend to be less than those in the coastal countries because of the relatively high transport costs. Consequently, the money incomes generated by export crops are lower in the inland countries, and wages in other sectors, except for highly qualified workers and those in government services, also tend to be lower in those countries. The level of wages also varies among these countries with the availability of natural resources, which in general are more abundant and easily exploitable in the coastal countries than in the inland countries. Thus, output and the standard of living in some of the coastal countries, such as Gabon and Ivory Coast, have increased much more rapidly than in other countries, and consequently incomes and wages have risen more rapidly there. Another factor accounting for growing differences in prices and wages is the introduction of new customs duties in certain countries in the BCEAO area. For example, the cost of living has increased more rapidly in Dahomey than in neighboring countries, such as Ivory Coast and Togo, because of higher duties. In the BCEAEC area, the establishment of a customs union has prevented ad hoc and competitive increases in customs duties.

Price increases in practically all the CFA countries have stemmed from higher costs of production and of imports rather than from excessive credit expansion to the private sector or deficit financing by governments. Nevertheless, the question still remains of the financial and other adjustments required for the success of the programs for eliminating support prices of export commodities and for diversification and higher productivity.

Prices

Price data for the BCEAO and BCEAEC countries are limited mainly to developments in major cities. For the former group of countries, consumer price indices are available for both African and European families in all countries except Togo. There are no wholesale indices in these countries. In the BCEAEC countries there are wholesale and African consumer price indices in some countries, and European consumer price indices for all five countries. In the Malagasy Republic consumer price indices are available for both Europeans and the Malagasy nationals, but the latter index begins only in January 1964.

The consumer price indices for both the BCEAO and BCEAEC areas and for the Malagasy Republic have limited significance for economic analysis, not only because of the limited coverage but also because they include items for which the prices are more or less affected by government price controls. The governments of most of these countries fix prices of basic consumer goods directly, or, in some instances, regulate profit margins for wholesalers and retailers. Prices of less essential products are frequently subject to registration and government approval. In some countries, notably in Mauritania, subsidies are applied to reduce prices of certain foodstuffs.

BCEAO area

African consumer price indices in the BCEAO area as a whole appear to have changed little between 1961 and 1963. Between 1963 and 1966, the available indices rose by 10 per cent on the average, about 3 per cent per annum (see Table 8). For European consumers, retail prices rose more or less every year, with the largest increases occurring in Mauritania, especially in 1963. Available data suggest an average increase of 19 per cent between 1961 and 1966 for the BCEAO area, with about half the increase taking place between 1963 and 1966; in other words, the yearly increases were about 3 per cent to 4 per cent. The somewhat larger price increases in the European indices in all countries reflect the rising cost of imported items, which have relatively large weights. Foodstuffs and clothing, in particular, have been responsible for the major share of these price increases.

Table 8.

CFA Countries and Malagasy Republic: Annual Averages of African and European Consumer Price Indices, 1961–661

(1963=100)

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Sources: Cameroon—Service de la Statistique Générale et de la Mécanographie, Bulletin Mensuel and Note Trimestrielle sur la Situation Economique. Central African Republic—Service de la Statistique et de la Conjoncture, Bulletin Mensuel de Statistique; French Institut National de la Statistique et des Etudes Economiques, Résumé des Statistiques d’Outre-Mer, Bulletins Accélérés. Chad—Bulletin Mensuel de Statistique. Congo (Brazzaville)—Cabinet du Premier Ministre, Bulletin Mensuel Rapide des Statistiques. Dahomey—H.C. Durand in Etude de l’évolution des prix de detail et éléments déune politique des prix. Gabon—Service National de la Statistique, Dix Ans d’Economie Gabonaise and Bulletin Mensuel de Statistique. Ivory Coast—Bulletin Mensuel de Statistique, 1961–65. Malagasy Republic—Institut National de la Statistique et de la Recherche Economique and Ministère des Finances et du Commerce, Bulletin Mensuel de Statistique and Situation Economique au 1er janvier 1967. Mauritania—Bulletin Statistique et Economique, 1964; Chambre de Commerce de Mauritanie, Bulletin No. 124, March 15, 1965. Niger—Commissariat Général au Plan, Service de la Statistique, Bulletin de Statistique, Nos. 20, 24, and 25. Senegal—Ministère du Plan et du Développement, Service de la Statistique, Bulletin Statistique et Economique Mensuel; Situation Economique du Sénégal, 1963. Upper Volta—Ministère de l’Economie Nationale, Direction de la Statistique et des Etudes Economiques, Bulletin Mensuel de Statistique.

The figures are converted from series with original base years as follows. African indices: Dahomey, Feb. 1957 = 100; Ivory Coast, Feb. 1960=100; Niger, July 1, 1963 to June 30, 1963 = 100; Upper Volta, 1958 = 100; Central African Republic, 1960=100; Gabon, 1962=100; Cameroon, March 1965 = 100. European indices: Dahomey, Feb. 1957=100; Ivory Coast, 1960=100; Mauritania, Jan. 1961 = 100; Niger, 1960=100 except for 1965 and 1966 when Nov. 15-Dec. 15, 1964=100; Senegal, July 1945 = 100; Upper Volta, 1961 = 100; Cameroon, March 1961 = 100; Central African Republic, 1956=100; Chad, 1958 = 100; Gabon, 1958 = 100; Congo (Brazzaville), January 1964=100; Gabon, 1959 = 100. For the African index for the Malagasy Republic, January 1964=100. In Gabon until 1963 the European index was computed by recording monthly retail prices of 100 items; beginning with 1964 the index was broadened to 135 items. In Congo (Brazzaville) the European index was computed by recording monthly retail prices of 102 items until 1964; since January 1965 the index has been broadened to 139 items. The weight of food is between 50 per cent and 65 per cent in the African indices and between 50 per cent and 58 per cent in the European indices.

African indices are based on general retail prices in urban and rural areas for Dahomey; on the consumption pattern of an African family of 4 to 5 persons living in Abidjan, Ivory Coast; of an unskilled worker’s family in Niamey, Niger; of an unskilled worker living in Ouagadougou, Upper Volta; and of African families consisting of 2 to 5 persons with an average income ranging from CFAF 15,000-40,000 a month in the BCEAEC area (CFAF 25,000 in Gabon).

Average of first ten months.

1964=100. The index includes only 42 articles.

January.

May.

Percentage change from 1962 to 1966.

The European indices are based in general on the consumption pattern of an average European family (with incomes of more than CFAF 100,000 a month in the BCEAEC area) in an urban area (mostly the capital city except for Cameroon (Doula and Yaoundé).

Data refer to selected months, mainly May. For 1965 it is January.

Percentage change 1961–65.

Data for 1961–64 refer to December and data for 1965–66, to June.

July data rather than annual averages.

The price rises in African markets in most BCEAO countries in past years are believed to be largely the result of increases in indirect taxation, the burden of which is relatively heavy for most of these countries. It is believed that excess demand has generally not been a factor in price movements for these countries, owing to the relatively small budgetary deficits, which, in any event, have usually been financed without recourse to borrowing from the banking system, and to the moderate expansion in money supply throughout the entire BCEAO area.

BCEAEC area

Available data indicate that retail prices, especially for European families, have risen substantially more in the BCEAEC area than in the BCEAO area in recent years. African consumer price indices in the capitals of Gabon and the Central African Republic have increased by roughly 3 per cent and 7 per cent per annum, respectively, in recent years, although for Gabon the rate of increase fell somewhat in 1965–66 (see Table 8). The 1966 African consumer price index for Gabon was roughly 9 per cent above the 1963 annual average and 17 per cent above the 1962 average. The largest increases in the indices for Gabon and the Central African Republic have occurred for clothing and housing.

In comparison with the BCEAO countries, the European consumer indices in all five BCEAEC countries registered larger gains than did the available African consumer indices in this area. From 1963 to 1966, European prices in the Central African Republic, Chad, and Gabon rose by about 20 per cent—roughly 6–7 per cent annually; the increase was somewhat smaller in Congo (Brazzaville) and Cameroon. Large price rises for clothing, household services, and foodstuffs were primarily responsible for the increases in the European consumer price indices.

In general, price increases throughout the BCEAEC area reflect increased income and consumption tax rates, higher prices for imported goods as well as higher freight rates, and, to some extent, wage and salary increases. The latter factor has particularly influenced prices of foodstuffs consumed by Africans, the supply of which is dependent on the weather. Higher prices for imported goods are reflected in the European indices, where they have a relatively large weight.

Data for Gabon, the Central African Republic, and Congo (Brazzaville) suggest that increases in wholesale prices have about matched those of retail prices, having increased in all three countries by roughly 17 per cent between 1963 and 1966. Wholesale prices, like retail prices, have increased continuously in recent years; they rose by roughly 50 per cent during the period 1958–66.

Malagasy Republic

The price index for European families living in Tananarive increased slowly between 1961 and 1963, but in 1964 it rose by 5 per cent. The rate of increase slowed down in 1965 and 1966 (2.8 per cent), as higher prices for clothing, food, and services were partly offset by a slight decrease in prices for fuel and electricity (Table 8).

The retail price index for Malagasy families in Tananarive rose by 4 per cent in 1965 and by 3 per cent in 1966, mostly as a result of substantial increases in food prices (10.2 per cent over the two-year period) and in the cost of domestic services (10.0 per cent over the same period).

There is no wholesale price index, but prices of the most important products in Tananarive indicate that, while there had been substantial increases in wholesale prices of imported products (with the exception of cotton prints) between 1961 and 1964, wholesale prices in general were stable over the period December 1964–December 1966, with a large rise for soap; slight increases for cement, printing paper, and metal works; and a reduction in prices of textiles.

Wages

Comparable data on wages and salaries are not available, other than for minimum wages guaranteed by the Governments of the BCEAO and BCEAEC countries and of the Malagasy Republic. These minimum wages are guaranteed for both nonagricultural and agricultural employees and are known as the guaranteed minimum hourly wage (salaire minimum interprofessionnel garanti—s.m.i.g.) and the guaranteed minimum agricultural wage (salaire minimum agricole garanti—s.m.a.g.), respectively. They apply primarily to private sector wages, but government workers are paid wages based on a scale that is essentially linked to s.m.i.g. rates. The s.m.i.g. and s.m.a.g. rates differ according to salary zones (generally urban and rural).

Normally, the individual governments set s.m.i.g. and s.m.a.g. rates after consulting with special national wage committees, composed generally of representatives of employers, wage earners, and government ministries. Factors taken into account by the Governments in determining minimum wages include the general wages policy of the individual governments, the working relations between employees and employers, and the so-called minimum vital, which is the minimum cost of living based on budget surveys of low-income employees.

In practice, actual money wages for industrial workers, and occasionally for agricultural workers, are determined in most countries of the BCEAO and BCEAEC areas by collective bargaining agreements (conventions collectives) negotiated by committees of employees and employers presided over by representatives of the respective governments. The agreements specify wage rates for categories of unskilled and skilled workers and are generally patterned after the s.m.a.g. and s.m.i.g. rates. For employees not covered by collective agreements, wage rates are sometimes fixed by government decree or else based on the minimum guaranteed rates. Generally in all these countries actual wages are above the minimum guaranteed rates, and as changes in the latter usually induce changes in the former, the Governments of all the countries, and especially those of the BCEAO area, have tried to avoid minimum wage increases after independence.

In all countries family allowances are added to basic salaries. Not all countries have an organized social security system, but there is in all countries a system of accident insurance paid for by the employer. In some countries, notably the Central African Republic and Gabon, social benefits include maternity care and pensions. These benefits are financed by obligatory contributions from employees; employers participate only in the cost of retirement insurance through a levy on their earnings. In some countries, such as Chad, medical assistance is provided without charge by a system of socialized medicine. In the Central African Republic, medical services are supplied directly by employers for their own work force.

BCEAO area

Guaranteed minimum wages for each of the seven countries of the BCEAO area are shown in Table 9 for the period 1957–66. These minimum wages are the highest in Senegal; for industrial employees working in urban areas the rate has been CFAF 44 an hour since 1961, and for agricultural workers of the lowest wage zone, CFAF 33.50 an hour.15 Minimum wages for nonagricultural workers are next highest in Ivory Coast. Minimum wages for agricultural workers in the lowest wage zone, however, have remained below CFAF 20 an hour in Ivory Coast; this is the lowest level on the list, except for Togo, in which minimum wages have generally been the lowest.

Table 9.

CFA Countries and Malagasy Republic: Minimum Hourly Wage Rates in Nonagricultural and Agricultural Occupations in the Highest and the Lowest Wage Zones at the End of Each Year, 1957–67

(In CFA francs)

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Sources: EEC Commission, Rapport sur la Situation Sociale dans les Pays d’Outre-Mer Associés à la Communauté Economique Européenne, 1960; EEC, Office Statistique des Communautés Européennes, Overseas Associates—Statistical Bulletin, 1965, Nos. 2–5; Banque Centrale des Etats de l’Afrique de l’Ouest, Rapport d’Activité, issued annually; National statistical bulletins of the countries in the table; Togo, Ministère des Finances, de l’Economie et du Plan, Service de la Statistique Générale, Inventaire Economique du Togo, 1964; Upper Volta, Ministère du Développement et du Tourisme, Rapport Economique: Données Géographiques et Humaines pour 1959 à: 1964, p. 45; International Labor Office, African Labour Survey, 1958; Le Moniteur Africain du Commerce et de l’Industrie, November 30, 1963 and January 30, 1965; Marchés Tropicaux et Méditerranéens, February 29, 1964 and August 6, 1966; Gabon, Bulletin Mensuel de Statistique, August 1963, pp. 24–25

I refers to Zone I (highest wage zone: principal urban areas); L refers to the lowest rural wage zone.

Salaire minimum interprofessionnel garanti (s.m.i.g.) applies to nonagricultural workers and salaire minimum agricole garanti (s.m.a.g.) applies to workers in the agricultural sector.

With effect from April 1, 1968 only one wage zone would continue to exist and on July 1, 1968 the s.m.i.g. (and s.m.a.g.) were to be increased by 10 per cent; however, workers in the interior (Zone II) who benefited from the unification of their zone with Zone I would benefit from the increase in 10 per cent of the s.m.i.g. (and s.m.a.g.) only on September 1, 1968.

In Niger wage zones were abolished after October 1, 1956.

On June 13, 1968, at the end of a tripartite conference between government, employees, and trade unions, the President of Senegal announced that with effect from July 1, 1968 the s.m.i.g. (and s.m.a.g.) would be increased by 15 per cent (to CFAF 50.60 and CFAF 43.95) and the two existing wage zones would be unified into one.

Since August 1, 1966, there has been only one wage zone in Gabon; the increase from 35 to 37.5 reflects the first step, with effect from February 1, 1966.

In comparison with the large increases that occurred between 1953 and 1960, only minor wage adjustments were made in most BCEAO countries between 1961 and 1966. In 1968 and 1969 there were increases in minimum wages in Dahomey, Ivory Coast, Mauritania, and Senegal.

BCEAEC area

Guaranteed minimum wages over the period 1955–65 for the countries of the BCEAEC area are shown in Table 9. In general terms, these countries may be divided into high-wage countries—Gabon, Congo (Brazzaville), and Cameroon—and low-wage countries—the Central African Republic and Chad. The maximum wage differential extends from CFAF 40 an hour for s.m.i.g. rates in urban areas of Gabon to CFAF 11 an hour for s.m.a.g. rates in rural areas of the Central African Republic.

The majority of the countries in the BCEAEC area, unlike those in the BCEAO area, have had rather large increases in minimum wage rates since independence. The largest increases (46 per cent and 68 per cent) took place in Chad—the country with the lowest s.m.i.g. wage level in 1964.

A comparison of the absolute levels of minimum wages in the BCEAO area with those in the BCEAEC area indicates that the unweighted average of the nonagricultural minimum hourly rate is almost 10 per cent higher than the comparable average of CFAF 32.14 an hour in the BCEAEC area.

The lowest rate, and in fact the real minimum wage rate, is the rate operative for agricultural workers in the lowest wage zone of the Central African Republic (CFAF 11 an hour). This rate is about 50 per cent below the lowest rate in the BCEAO area, namely, the one operative in the rural, inland, and nonplateau areas of Togo. The unweighted average of the nonagricultural minimum wage rates in the lowest zones of the BCEAO countries is CFAF 26.14 an hour, against CFAF 22.54 an hour in the BCEAEC area.

Malagasy Republic

The s.m.i.g. applies to private sector and unskilled government workers and is established for five salary zones by the Government of the Malagasy Republic in consultation with the National Work Council.

The minimum hourly rates are the highest for nonagricultural workers in the urban areas of Tananarive, Tamatave, and Diégo-Suarez and were raised to FMG 29 on December 1, 1963. Minimum hourly rates for agricultural workers are FMG 3–5 lower than for non-agricultural workers in the urban areas noted above. The difference in minimum hourly wage rates between salary zones amounts to a maximum of FMG 9–10 an hour.

The increase in the s.m.i.g. rate on December 1, 1963 was part of the broader wage legislation of November 20, 1963 that was designed to reestablish, for certain skills, the wage margins that had been eroded in past years by wage legislation favoring lower-skilled workers. To this end, the Government established a wage rate index graduated according to skill category on the basis of the s.m.i.g. rate in each salary zone. The legislation of November 1963 was also aimed at diminishing interzone salary differentials in s.m.i.g. rates by reducing the number of salary zones from 10 to 5 and by providing for the gradual equalization of s.m.i.g. rates among the remaining urban and rural salary zones.

On the basis of the s.m.i.g. rate =100, a scale of wage rate indices is applied to skilled workers, according to their degree of skill. In order to re-establish wage margins for skills, the indices were raised in three steps: by 10 per cent on December 1, 1963, by 9 per cent on January 1, 1965, and by 11 per cent on January 1, 1966. Rates have remained unchanged since, and no further increase is contemplated at present.

V. Foreign Trade

Foreign trade is particularly important in relation to GDP of the CFA countries: exports are equal to about 22 per cent of GDP and Imports, to about 25 per cent. Together with foreign official aid, exports are the main source of foreign exchange for the balance of payments of these countries, which generally show a deficit on invisibles and, in some cases, encounter difficulties in attracting foreign private capital. Imports, on the other hand, play a key role in the economic growth of the CFA countries; they constitute practically the only source of capital goods and, in some instances, substantial proportions of essential consumer goods.

The balance of trade of the CFA countries has shown a persistent deficit over the period 1960–66, exports covering about 88 per cent of imports for the group as a whole (see Table 10). However, the level of the deficit was markedly lower from 1964–66, as exports increased more rapidly than imports. In 1966, the trade account was almost in balance.

Table 10.

CFA Countries and Malagasy Republic: Balance of Foreign Trade, 1960–66

(In billions of CFA francs)

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; authors’ estimates.

The terms of trade deteriorated somewhat over the period 1960–66, as import prices rose substantially, but it is difficult to judge the exact amount in view of the lack of systematic data. Export prices for the main cash crops have shown diverging movements, with coffee and palm oil prices evolving favorably, while groundnut and groundnut oil prices remained fairly stable and cocoa and cotton prices fell substantially. For a number of agricultural exports, however, the effects of world price fluctuations have been alleviated through marketing arrangements with France and price subsidies from the EEC.

Exports

Over-all developments, 1960–66

Despite increased exports of mineral products, the exports of the CFA countries continue to consist largely of tropical agricultural and forestry products. Total exports from the CFA countries show an upward trend, resulting not only from the exploitation of mineral resources but also from increases in agricultural production brought about by an increase in the area under cultivation and by improvements in productivity. However, the value of exports has fluctuated substantially, depending on the size of crops and changes in world prices of the major agricultural products.

As shown in Table 11, the recorded value of total exports from the CFA countries increased steadily from 1960 to 1964, growing by about two thirds, from CFAF 142 billion to CFAF 235 billion—an average annual rate of 13 per cent. In 1965, the value of total exports leveled off at CFAF 234 billion, as a drop in coffee and cocoa receipts offset further gains in other exports, mainly minerals. In 1966, exports rose to a record CFAF 263 billion, mainly as a result of favorable crops, including coffee, groundnuts, and cocoa.

Table 11.

CFA Countries and Malagasy Republic: Commodity Composition of Exports, 1960–661

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; authors’ estimates.

Including Mali for the first six months of 1960 and excluding West Cameroon for the entire period covered.

Marketing arrangements

Internal price stabilization. The world market prices of most of the agricultural products exported by CFA countries fluctuate considerably, and stabilization funds are employed to smooth out the returns to producers. In 1954, the system of stabilization funds (Caisses de Stabilisation des Prix) was reorganized in all countries and was extended to cover most agricultural exports. These funds seldom engage in marketing operations themselves; instead they announce producer prices and their c.i.f. equivalent (taking into account various costs, including profit margins for intermediaries and exporters) and give exporters—either private firms or public marketing agencies—a subsidy when actual export prices are lower than the c.i.f. equivalent of producer prices, or exact a levy when the reverse is true. The financial resources of the stabilization funds are normally derived from surpluses achieved in periods of high export prices; they also include levies imposed on exports and a share of the government’s duties on exports.

French support system. When the CFA countries became independent in 1960, France continued to guarantee them a minimum revenue from their main agricultural exports within the framework of the existing marketing organization.16 The protection given to the CFA countries’ agricultural exports on the French market was important to these countries. Products accorded such treatment accounted for approximately two thirds of total exports of the CFA countries and included coffee, groundnuts and groundnut oil, bananas, palm oil, sugar, and cotton production. Table 12 shows estimates of the total financial advantage derived by the CFA countries during 1960–66 from their exports to the French market at prices higher than those in world markets.17 This advantage was at a peak of some CFAF 20 billion a year in 1961 and 1962; it declined markedly in the following years, to some CFAF 6–7 billion in 1965 and 1966, as a result of the gradual removal of French support as prescribed in the Yaoundé Convention. About 82 per cent of the total estimated financial advantage during 1960–66 (CFAF 89 billion) was derived from exports of three groups of commodities, namely, groundnut products (35 per cent), coffee (34 per cent), and bananas (13 per cent). Moreover, the total financial advantage was concentrated among four countries: Senegal (29 per cent), Ivory Coast (25 per cent), the Malagasy Republic (15 per cent), and Cameroon (11 per cent).

Table 12.

CFA Countries and Malagasy Republic: Estimated Financial Advantage Derived from French Price Support, 1960–661

(In billions of CFA francs)

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Sources: Authors’ estimates on the basis of Tables 15, 18, 24, 26, and 27; Food and Agriculture Organization, Monthly Bulletin of Agricultural Economics and Statistics; France, Ministère des Finances et des Affaires Economiques, Statistiques du Commerce Extérieur de la France; data provided by the French authorities.

Excluding French price support to minor export commodities, such as pepper, gum, and coconuts.

Subsidies to cotton producers and exporters financed by France through stabilization funds.

The financial advantage from banana exports to France does not derive from direct price support but from protection through quantitative restrictions.

Upper Volta, Gabon, and Mauritania have benefited to a lesser extent from French price support; it has not been possible to compute their financial advantage.

Arrangements under the Yaoundé Convention. The basic principles for the association with the EEC of the former colonies and overseas territories of member states were contained in the Treaty of Rome, signed in 1957. A Convention of Application annexed to the Treaty established the conditions and procedure of the association for the period 1958–64. On July 20, 1963, a new Convention of Association was signed in Yaoundé, Cameroon, by EEC member states and 18 African and Malagasy states (including all the CFA countries), which in the meantime had acceded to full independence. This Convention18 entered into force on June 1, 1964 and covered a five-year period that expired on May 31, 1969. A new arrangement is reported to have been agreed upon at the end of June.

In the matter of trade relations, the Yaoundé Convention aimed at the full implementation of the target set by the Treaty of Rome, that is, the establishment of a free trade area without any discrimination between members, with a common tariff vis-à-vis third countries. Consequently, the preferential treatment granted by France to the exports of some of the associated countries, whether in the form of tariff or quantitative restriction preferences or guaranteed export prices, was to be eliminated. As a counterpart, the exports of African associated countries to all EEC countries would benefit from the protection of the common external tariff vis-à-vis third countries, to be gradually implemented until fully effective on July 1, 1968. The only exception to the tariff protection in favor of associated countries concerns commodities subject to the EEC’s own marketing arrangements (for example, rice, sugar, and oils and fats), as explained below in the section on Trade Restrictions (pp. 368–74). In order to ease the transition to a free trade system between EEC members and associated countries, the Yaoundé Convention provided for financial aid to agricultural production and to agricultural diversification in associated countries.

Aid to agricultural production included two categories of subsidies: price subsidies and subsidies for “structural improvements.” Price subsidies—i.e., allocations per unit equal to the difference between the world price and a “target cost price” (see p. 340)—were to replace the French price support of certain commodities, but they were expected to decrease progressively until their elimination by mid-1969. Subsidies for structural improvements were for such items as agricultural equipment, fertilizers, fungicides, draft animals, and advisory personnel. They were expected to help to improve agricultural productivity so that commodities previously enjoying price support could be marketed at world prices by the end of the Convention period. To replace the financing from the Fonds National de Régularisation des Cours des Produits d’Outre-Mer (FNRCPOM),19 the Convention provided (in Articles 17 and 20) for the possibility of direct advances by the EEC to stabilization funds when export prices have fallen below prices specified in the loan agreements. Such advances were to be financed from the EEC’s cash reserves.

After July 1967 the EEC’s financial support to associated countries was extended: a price stabilization scheme applicable to the Community, to run until the expiration of the Yaoundé Convention, was established for exports of oils and oilseeds.20 This scheme was aimed at alleviating the effects of major declines in world prices on oil and oilseed export receipts of associated countries. Whenever the world price of one of the products concerned fell below the corresponding “reference” price set by the EEC, the Community was to compensate the exporting countries by a subsidy equivalent to 80 per cent of the difference between the reference price and the world price, multiplied by the quantity imported by the EEC countries. Subsidies to be disbursed by the EEC were subject to a global ceiling of $13 million, which was allocated in four biannual installments. The price stabilization scheme for oils and oilseeds was separate from the price support system included in the EEC’s programs of aid to groundnut and palm oil production, which are described in detail below. However, it might happen that stabilization subsidies 21 overlap the price subsidies in the programs of aid to production.22 In that case, the stabilization subsidies must be reduced by 80 per cent of the overlapping amount.

Annex 3 to the Yaoundé Convention established a timetable for the gradual elimination of French tariff and quantitative restriction preferences in favor of imports from CFA countries (see section on Trade Restrictions, pp. 369–74). Implementation of this program has been as follows:

(a) Coconuts, pepper, palm oil, and gum arabic were traded at world prices starting with the 1963/64 crop season, as provided for by the Convention.

(b) Rice and sugar were to be traded at world market prices as soon as the EEC’s own marketing arrangements for these commodities became effective. These marketing arrangements came into force in September 1964 for rice and entailed the imposition of a special levy on all rice imports into the Community. However, by special derogation, rice imports from associated countries have been granted a reduction in this levy. France discontinued support prices on sugar from the franc area countries beginning with the 1965/66 crop year, while the EEC’s marketing arrangements were enforced after December 1967.

(c) Oils and oilseeds were to be traded at world prices when the EEC’s marketing arrangements for these products became effective. This occurred on July 1, 1967, but French support to groundnut product imports from associated countries was continued until December 1, 1967. The former French support to oil and oilseed exports was partly replaced by the price stabilization scheme for such exports established in July 1967 by the EEC.

(d) For coffee, a progressive reduction in support prices was initially provided, beginning with the 1963/64 crop season. However, favorable developments in world prices brought them up to the level of the support prices.

(e) Cotton from the CFA countries continues to be traded at world prices, and the subsidies to producers and exporters formerly paid by France have been replaced by decreasing price subsidies from the EEC (see pp.351–56).

(f) Annex 3 to the Yaoundé Convention does not provide for a schedule for the removal of the preferential treatment granted to bananas (see pp. 356–58), nor are bananas covered by the program of aid to agricultural production.

In Protocol No. 5 to the Yaoundé Convention, the EEC’s commitments on aid to agricultural production and diversification were set in global terms for each receiving country (see pp. 379–85). For aid to agricultural production, five-year programs were agreed between the EEC and each receiving country. These programs allocated the aid by yearly installments (tranches), by commodity, and by category of aid (that is, price subsidies and subsidies for structural improvements). Programs were also agreed upon bilaterally for aid to agricultural diversification, but these programs were separate from the five-year programs of aid to production. Yearly price subsidy allocations included in the five-year programs were computed on the basis of estimated exports and price subsidies per unit calculated as the difference between the estimated world price and the target cost price (prix d’objectif) in the year concerned. Target cost prices are theoretical optimum cost prices (f.o.b. or c.i.f.) including various cost elements, such as the producer price; various handling, processing, and storage costs; a normal rate of remuneration to the commercial intermediaries and the exporter; taxes and levies on exports; insurance; transportation; and other costs abroad. Whereas estimated world prices shown in the five-year programs were assumed to remain constant, target cost prices were scheduled to decline progressively as a result of improvements in productivity and savings on various cost components. In the fifth and last year of the programs (1968/69), the target cost price was shown as equal to the world price. Consequently, subsidies per unit declined every year, finally disappearing in the last year (for example, see Tables 19 and 23). The yearly tranches of aid to agricultural production, based on the five-year programs, were liable to undergo such modifications as necessary to take account of actual developments in production, world prices, cost elements, the rhythm of aid utilization in previous tranches, etc.

The EEC agreed with the CFA countries upon an over-all amount of CFAF 7.9 billion for price support over the period 1964/65–1968/69 covering seven products, the most important of which were groundnuts (61 per cent of total commitments) and cotton (25 per cent). (See Table 13.) Eight CFA countries benefited from price support, the main recipients being Senegal (47 per cent of the total commitment for groundnuts), the Malagasy Republic (13 per cent of the total commitment for coffee, rice, and pepper), and Chad (13 per cent of the total commitment for cotton). In the first two annual tranches approved by the EEC (for 1964/65 and 1965/66), price subsidies to the CFA countries totaled CFAF 6.6 billion, more than 80 per cent of total price subsidies in the five-year programs. However, by the end of 1966, disbursements on price subsidies totaled only CFAF 3.9 billion (see Table 35). Disbursements did not take place in the expected amounts, either by commodity or by country, because of delays in presenting country programs and final accounts to the EEC and unexpected developments in the variables on which the amount of price support depended (i.e., the size of marketed crops, actual export prices, and cost prices). Of total disbursements, 65 per cent was with respect to groundnut products from Senegal; the rest was for cotton from Chad and the Central African Republic and, to a small extent, for rice from the Malagasy Republic and coconuts from Dahomey.

Table 13.

CFA Countries and Malagasy Republic: EEC Aid to Production by Commodity, Five-Year Programs, and First Two Annual Tranches1

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Sources: EEC Commission, Fonds Européen de Développement—Situations Trimestrielles and Partnership in Africa—The Yaoundé Convention; Afrique Service; Bulletin de l’Afrique Noire.

As approved by the EEC on December 31, 1966.

Concerning groundnut products, which account for about one half of total EEC aid to production, the implementation of the five-year programs yielded moderately encouraging results regarding improvements in productivity. Concerning cotton—the second most important beneficiary of EEC aid to production—substantial progress was achieved in cost reduction, sometimes even more than had been scheduled. However, after 1965, world cotton prices dropped far below the estimated world prices set in the five-year programs. As a result, financing problems arose for stabilization funds in some countries. A detailed review of export developments and marketing problems for the major agricultural exports from CFA countries in the period 1960–66 follows.

Recent developments in major agricultural exports

Coffee. Coffee produced in the CFA countries is mostly of the robusta type. Although it is the most important export product of the CFA countries, accounting for approximately 20 per cent of the area’s total exports in 1966, it represents a minor fraction of total world coffee production. Output varies considerably from year to year but has risen substantially in the 1960’s. Coffee exports from the CFA countries account for about half the world’s consumption of robusta coffee, estimated at 720,000 tons in 1966. In contrast to fluctuating production, the volume of recorded exports rose almost steadily and by 40 per cent from 1960 to 1966 (see Table 14); their value increased by 71 per cent, owing to the improvement in export prices.

Table 14.

CFA Countries and Malagasy Republic: Coffee Exports, 1960–66

(In thousands of metric tons)

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1964–66; Commodity Research Bureau, Inc., Commodity Year Book, 1967 (New York).

Estimated.

Union Douaniére et Economique de l’Afrique Centrale.

Ivory Coast is the major coffee producer among the CFA countries, accounting on average for about 60 per cent of the total crop and of the total value of coffee exports from the CFA area. Two other important coffee producers are the Malagasy Republic and Cameroon.

Until 1963/64, France gave preferential treatment to imports of coffee from the CFA countries, consisting of freedom from customs duties and guaranteed minimum prices (which, until 1959, applied to all such imports but were later restricted to bilaterally agreed quotas). Imports into France from non-franc area countries not only were subject to sizable customs duties but also were restricted by import quotas. As a result of these preferences, France was the largest purchaser of CFA coffee, taking from 60 per cent to 75 per cent of total exports in the earlier years; after the preferential treatment was discontinued, France remained the largest purchaser but accounted for less than half the total exports (Table 14). As coffee prices in the French market were well above world market prices, the CFA countries enjoyed substantial financial benefit from this arrangement. Table 15 shows an attempt to estimate the size of this benefit.

Table 15.

CFA Countries and Malagasy Republic: Coffee Export Prices and Estimated Financial Advantage Derived from French Price Support, 1960–66

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1964 and 1965; Société Commerciale Anversoise et Société Belge d’Extrême-Orient Réunies, Revue des Principaux Marchés Tropicaux (Antwerp); data supplied by the French authorities.

The French price support was terminated after the 1962/63 crop year; from 1964, world market prices were applied in France with adjustments for quality and transportation costs.

Robusta Congo N2B, c.i.f., Antwerp.

Price advantage per unit (line A-1—line A-2) multiplied by quantity of exports to France (see Table 14).

In June 1964, by virtue of the Yaoundé Convention, the EEC countries eliminated their customs tariffs on coffee imports from associated countries. At the same time, they applied the full common external tariff (CET) to coffee imports from third countries (9.6 per cent ad valorem). The Convention also provided that, from 1963/64, marketing of coffee should be at prices that progressively approached world prices, reaching that level no later than the 1967/68 season. Producing countries were to be compensated for the decrease in French support by aid from the EEC in the form of price subsidies and grants for improvement of productivity. Actually, the world price of robusta coffee started rising in 1963 (see Table 15), and, consequently, the French support price system was discontinued from 1964/65, ahead of the termination date (1967/68) specified in the Yaoundé Convention. The EEC’s five-year program of aid to production was also reviewed to take into account favorable developments in world prices. In certain countries, such as Cameroon, EEC funds for coffee price subsidies were devoted to improvements in the productivity of coffee cultivation. In Ivory Coast all EEC funds for aid to coffee production were shifted to the program of aid to diversification, to be used mainly in the development of palm oil production. The Malagasy Republic, however, requested price subsidies from the EEC in the amount of CFAF 1.5 billion, of which only about CFAF 7 million had been disbursed by September 1966. As a result of the termination of the French support system, and also of growing demand in other parts of the world, the share of France in the CFA countries’ coffee exports has decreased substantially (from 63 per cent in 1960 to 42 per cent in 1966).

All CFA coffee producing countries are members of the International Coffee Organization (ICO); they are part of the Organisation Africaine et Malgache du Café (Oamcaf), which has a global quota within the ICO. CFA coffee producers are also part of the Inter African Coffee Organization, which consists of African countries accounting for about 80 per cent of the world’s production of robusta coffee.

As world prices tended to decline in the course of the 1964/65 coffee year, the international bodies concerned intervened several times. The ICO reduced fixed quotas by 4 per cent and established a system of automatic adjustment based on prices that later led to a further 4.5 per cent quota reduction. The Inter African Coffee Organization also took restrictive action to limit sales. As a consequence, CFA producers accumulated excess stocks in spite of the relatively small size of the crop. Unsold stocks in Ivory Coast rose by 30,000 tons, to 120,000 tons at the end of the 1964/65 crop year, and in Cameroon stocks rose by one third, to 16,000 tons. Producer prices were maintained at previous levels in Ivory Coast, resulting in a substantial decline in the profits of the stabilization funds (see Table 16).

Table 16.

Ivory Coast and Cameroon: Coffee Prices and Stabilization Fund Results, 1963/64–1965/66

(In CFA francs per kilogram)

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Sources: International Monetary Fund, International Financial Statistics; Journal Officiel (Abidjan); Journal Officiel (Yaoundé).

Estimates.

Average for October-December 1965.

Reduced quotas were maintained by the ICO for the 1965/66 coffee year. However, in view of favorable developments in prices, special quota increases were granted to countries in a particularly difficult situation (among which were the Oamcaf countries), subject to suspension in case of a fall in prices. Owing to a bumper crop, excess stock problems arose again in CFA countries. Stocks in Cameroon reached 21,000 tons at the end of the 1965/66 crop year, and the stabilization fund sustained a loss. Ivory Coast succeeded in keeping its stocks down by additional sales on markets outside the ICO. The financial situation of the stabilization funds began to ease later in the crop year, as world prices started to recover.

For the 1966/67 crop the ICO left unchanged the basic quotas but provided for two kinds of additional quotas: special export authorizations were distributed to all countries pro rata to basic quotas, and export waivers were granted to members with particularly difficult overproduction and stocking problems. For the Oamcaf, the addition of special export authorizations (6,000 tons) and export waivers (25,000 tons) to the basic quota (242,000 tons) brought total export authorizations for the 1966/67 coffee year up to 273,000 tons. This was still substantially less than the area’s normal production capacity, but the crop in the CFA countries in 1966/67 was poor and, consequently, few marketing problems were encountered.

Groundnuts and groundnut oil. Groundnut products are the third most important export of the CFA countries, after coffee and timber. Aggregate production of unshelled nuts in the CFA area fluctuated around one million tons in the early 1960’s, representing 6–8 per cent of world production. In 1965/66 output expanded markedly, to more than 1.3 million tons, owing to favorable weather conditions and to production aids partly financed by the EEC. In 1966/67, however, a poor crop in Senegal resulted in a reduction in over-all output to previous levels.

The value of groundnut product exports from the CFA countries remained relatively stable in 1960–65, dropping to CFAF 22 billion and rising to CFAF 27 billion, but it rose to CFAF 33 billion in 1966 when it accounted for about 12 per cent of total export receipts of CFA countries. Exports of shelled nuts, after fluctuating for several years, fell to 326,000 tons in 1965; they rose to an estimated 460,000 tons in 1966, corresponding to the exceptional 1966/67 crop. In 1966, these exports represented close to one third of world imports (see Table 17). Exports of groundnut oil, on the contrary, have risen steadily in recent years, following development of the groundnut crushing industry. They amounted to 157,000 tons in 1966, about one third of world imports.

Table 17.

CFA Countries and Malagasy Republic: Exports of Groundnuts and Groundnut Oil, 1960–66

(In thousands of metric tons)

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; France, Ministère des Finances et des Affaires Economiques, Statistiques du Commerce Extérieur de la France; International Seed Testing Association, Oil World Semi-Annual, November 1967; data provided by the French authorities.

Based on exporting countries’ records.

Estimated.

Based on French records. Discrepancies between customs records in exporting and importing countries account for the fact that, for certain years, exports to France shown here exceed the figure of aggregate exports.

Senegal is by far the largest producer of groundnuts in the CFA area; on average it accounts for more than three fourths of total unshelled nut production as well as for 70 per cent of total shelled nut exports and 96 per cent of total oil exports. Second to Senegal is Niger with averages of 15 per cent of total production and 23 per cent of total shelled nut exports. Niger’s exports of groundnut oil, which have increased recently, are still small compared with those of Senegal.

France continued to support groundnut product exports by the CFA countries after their independence by guaranteeing to purchase amounts that are fixed at the beginning of each crop year.23 The French support system also included full exemption of customs duty on nut and oil imports from the CFA countries, while imports from non-franc area countries were subject to sizable duties. As a result of such preferences, most of the CFA exports of groundnuts and groundnut oil were sent to France (see Table 17). In Table 18 an attempt is made to estimate the direct financial advantage derived by the CFA countries from nut and oil exports to France at support prices in the period 1960–66.

Table 18.

CFA Countries and Malagasy Republic: Groundnuts and Groundnut Oil Export Prices and Estimated Financial Advantage Derived from French Price Support, 1960–66

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Sources: Food and Agriculture Organization, Monthly Bulletin of Agricultural Economics and Statistics; data supplied by the French authorities.

Nigerian groundnuts, shelled.

Price advantage per unit (line A-1—line A-2) multiplied by total exports to France (see Table 17).

Nigerian groundnut oil.

The Yaoundé Convention provided that French support of groundnut products would be discontinued and that these products would be marketed at world prices from the 1964/65 crop year onward. As explained above, the ensuing loss in export receipts was expected to be met partly by EEC price subsidies as provided for in the bilaterally agreed five-year programs of EEC aid to production. In Senegal and Niger, these programs provided for a total cost price reduction of 12 per cent to result from reductions in taxation, savings on various internal costs, and—in Senegal—a reduction in the producer price (see Table 19). In addition to price subsidies, groundnut product exports of CFA countries to EEC countries were to benefit from the removal of quantitative restrictions, from a gradual reduction of customs tariffs, and from the adoption of the CET.

Table 19.

Senegal and Niger: Groundnuts, Export Price Structure, and EEC Subsidies on Exports to France, 1964/65–1968/69

(In CFA francs per kilogram of shelled nuts)

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Sources: Banque Centrale des Etats de l’Afrique de l’Ouest, Notes d’Information et Statistiques; Afrique Service; Bulletin de l’Afrique Noire.

Target cost prices in 1968/69 are expected to correspond to the world price in that year. Niger and Senegal have not retained the same hypothesis concerning the level of world prices by the end of their respective programs.

Increased by CFAF 0.25 over original estimates, in view of rising shipping costs.

Proposed by Senegal to the EEC in view of lower yields in shelled nuts and rising shipping costs.

Revised in view of increased transportation and storage costs.

In fact, the French preferences were not removed before the 1967/68 crop year because of delays in the application of the EEC’s internal arrangements for oils and fats. In the meantime, world prices for groundnut products rose considerably, reducing substantially the direct financial advantage derived from the continuation of the French support price. Under the EEC’s five-year programs of aid to production, EEC price subsidies were also paid on exports to EEC countries, including exports under French preferential quotas whenever the French support price proved to be lower than the corresponding target cost price set in the EEC program (see Table 19). At the end of September 1966, price subsidies approved by the EEC for groundnuts totaled CFAF 3.5 billion, of which CFAF 2.7 billion was for Senegal, CFAF 0.4 billion for Niger, and CFAF 0.3 billion for Cameroon. The 1967/68 groundnut crop was marketed entirely at world prices, and losses were totally or partially covered by EEC subsidies under both the programs of aid to production and the scheme of price stabilization for oil and oilseed exports (see pp. 337–41).

From July 7, 1967 the customs duties on imports of oil and fat from associated countries into the EEC were totally removed, while the full CET was applied to competing imports from third countries. The CET is 10 per cent on groundnut oil and nil on groundnuts (see Table 30).

Cocoa. Exports of cocoa account for about 9 per cent of the total export receipts of the CFA countries. Cocoa production of the CFA countries, about 19 per cent of the world total, rose to about 200,000 tons in 1962/63, where it remained except for bumper crops of 250,000–260,000 tons in 1964/65 and 1966/67. The volume of cocoa exports from CFA countries rose from 135,000 tons in 1960 to an estimated 231,000 tons in 1966 (18 per cent of world imports). (See Table 20.) The value of exports, however, rose less markedly as world prices declined. The two major cocoa exporters in the CFA area are Ivory Coast and Cameroon, accounting for 54 per cent and 37 per cent, respectively, of the total volume of the CFA countries’ cocoa exports in 1966.

Table 20.

CFA Countries and Malagasy Republic: Cocoa Exports and Average Import Prices in the United Kingdom and France, 1960–66

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; Secrétaire du Comité Monétaire de la Zone Franc, La Zone Franc, 1964–66; Commodity Research Bureau, Inc., Commodity Year Book, 1966 (New York); International Monetary Fund, International Financial Statistics.

Estimated.

Ghanaian, good fermented, c.i.f., U.K. port.

Ivory Coast and Cameroonian, good fermented, c.i.f., Le Havre.

Unlike coffee and groundnuts, cocoa from the CFA countries has not received price preferences in the French market. The French market absorbed a relatively small and decreasing share of the CFA countries’ cocoa (36 per cent in 1960 and 23 per cent in 1966—see Table 20). On the other hand, exports to the United States and to other EEC countries grew rapidly. Although there was no price guarantee for CFA cocoa in France, prior to 1964 the FNRCPOM fixed an intervention price and made loans to stabilization funds in the CFA countries so as to cushion the effects of sharp fluctuations in world prices and to assure producers a minimum price in their respective countries.

Since cocoa was already being marketed at world prices, the Yaoundé Convention did not provide for any aid to cocoa production, whether in the form of price subsidies or of grants to help to improve productivity. On the other hand, CFA countries’ cocoa benefited immediately from a complete removal of internal EEC tariffs and from the establishment of a CET of 5.4 per cent (see Table 30). In addition, CFA cocoa producers could take advantage of the Convention’s provision regarding advances to stabilization funds, as happened in Cameroon for the 1965/66 crop year.

Since 1964 Ivory Coast, Cameroon, and Togo have been members of the Cocoa Producers Alliance, which comprises the main cocoa producing countries accounting for more than 80 per cent of world production. The aim of the Alliance is to coordinate export policies in order to alleviate price fluctuations and to maintain the level of export receipts.

The world cocoa market is characterized by an extreme instability of prices. After a period of high prices in the 1950’s, world prices declined sharply early in the 1960’s, reaching a low in 1961 and 1962 when they were about half the level of 1958. Minimum producer prices in the CFA countries were reduced accordingly. In Ivory Coast, for instance, the producer price was reduced in 1961/62 from CFAF 90 to CFAF 70 per kilogram, where it remained for the next three crop years. After rising somewhat in 1962/63 and 1963/64, world prices declined again during the 1964/65 crop year. The Cocoa Producers Alliance decided to enforce restrictive measures, including suspension of cocoa shipments, but prices continued to drop and reached an all-time low by mid-1965. At this level, export prices were considerably below cost prices in the CFA countries, resulting in substantial losses for the stabilization funds. However, such losses were limited in Ivory Coast, as most of the exceptionally large crop had been sold before the acceleration of the price decline (see Table 21). A partial recovery of world prices during 1965/ 66, combined with sizable reductions in producer prices, limited losses incurred by the stabilization funds. On a credit line of CFAF 1.5 billion obtained from the EEC by the Cameroon Cocoa Stabilization Fund, actual drawings totaled only CFAF 226 million, owing to the improvement in export prices. During 1966/67 world prices continued their recovery, and consequently producer prices were again increased.

Table 21.

Ivory Coast and Cameroon: Cocoa Prices and Stabilization Fund Results, 1963/64–1965/66

(In CFA francs per kilogram)

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Sources: International Monetary Fund, International Financial Statistics; Journal Officiel (Abidjan); Journal Officiel (Yaoundé).

Estimates.

Average, October-December 1965.

Average quotation for Ivory Coast and Cameroonian cocoa, good fermented, c.i.f., Le Havre, October-December 1965.

Cotton. Cotton accounts for about 3 per cent of the total value of exports from the CFA countries. Cotton production in the CFA area increased substantially in the 1960’s, totaling an estimated 107,000 tons of ginned cotton in 1966/67 (1 per cent of the world’s total output), compared with 56,000 tons in 1960/61. This upward trend resulted from an increase in the area under cotton cultivation and improvements in the yield, generally the result of programs sponsored by French specialized institutions and, in recent years, programs financed by EEC aid. Exports of ginned cotton followed developments in production, rising from 54,000 tons in 1961 to about 70,000 tons in recent years (see Table 22). The main cotton producer is Chad, accounting for roughly one half of total production and exports of the area. Cameroon and the Central African Republic are the next largest producers in the area. Most exports go to France; although the share decreased sharply in 1963–65, it rebounded to 78 per cent in 1966. An increasing share of exports has been taken by the United Kingdom, Belgium, Yugoslavia, and Morocco.

Table 22.

CFA Countries and Malagasy Republic: Cotton Exports and Export Prices, 1960–66

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1964–66; France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; Office de Statistique des Communautés Européennes, Statistiques du Commerce Extérieur des Associés d’Outre-Mer; Food and Agriculture Organization, Trade Yearbook, 1966 and Monthly Bulletin of Agricultural Economics and Statistics.

1960/61 production figure.

Estimated

Data refer to crop years 1959/60, 1960/61, 1961/62, etc.

The relatively high cost of ginned cotton in the CFA countries (excluding Cameroon) results mainly from processing and transportation costs and export taxes. Producer prices have generally been low compared with those paid in other African cotton producing countries. They are fixed by the authorities at levels ensuring a minimum remuneration to the farmer; any substantial reduction would, in most instances, discourage production.

Prior to the application of the Yaoundé Convention, cotton exports by the CFA countries to France did not enjoy any special preference in the form of either price support or tariff and quota protection. However, the regional or local stabilization funds received loans and subsidies from the French-operated Fonds de Soutien des Textiles des Territoires d’Outre-Mer (FSTTOM).24

The Yaoundé Convention provided for the establishment of five-year programs of aid to the production of cotton, including price subsidies and grants for productivity improvement. As a result, EEC price subsidies replaced FSTTOM deficiency payments beginning in the 1964/65 crop year (1963/64 in certain countries). The target cost prices were scheduled to decrease, following improvements in ginning yields and savings in other costs, such as transportation. Little or no reduction of producer prices or taxation was expected. In Chad, the price support program agreed with the EEC provided for a total cost price reduction of 8 per cent on the initial target price; no reduction in the producer price or in taxation was scheduled (see Table 23). Among the main CFA cotton producing countries only Cameroon did not receive price subsidies in its program of aid to production, production costs being lower in this country because cotton is generally grown on irrigated land.

Table 23.

Chad and Niger: Cotton, Export Price Structure, and EEC Subsidies, 1963/64–1968/69

(In CFA francs per kilogram of ginned cotton)

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Sources: General Agreement on Tariffs and Trade, Committee on Trade and Development, International Trade in Cotton and the Economy of Chad; Banque Centrale des Etats de l’Afrique de l’Ouest, Notes d’Information et Statistiques; Afrique Service; Bulletin de l’Afrique Noire.

As initially proposed by the Chadian authorities to the EEC.

Revisions adopted by the EEC in the course of the five-year program’s execution.

Proposed to the EEC by the countries.

As set in the adopted EEC five-year program of aid to production in Niger.

The Yaoundé Convention also required the gradual removal of tariffs on cotton imports by EEC countries from associated as well as third countries. To expedite this reduction, customs duties levied on cotton imports by EEC countries were completely suspended.

Recent developments in world cotton prices were characterized by a sudden drop in 1965, following price reductions in the United States (see Table 22). In the CFA countries, beginning with the 1965/66 crop year, cotton export prices fell to levels far below the export prices specified in the EEC price support programs and used to determine the amount of price support aid made available in the corresponding crop years (see Table 23). Consequently, in spite of strong efforts to reduce cost prices, even beyond the program’s targets, EEC price subsidies proved insufficient to cover the deficits incurred, and local stabilization funds had extensive recourse to their own reserves, to government funds, or to reimbursable advances from the EEC. By September 1966 subsidies approved by the EEC for cotton price support totaled CFAF 1.5 billion, CFAF 720 million of which was in favor of Chad and CFAF 530 million, in favor of the Central African Republic.

Bananas. Bananas account for about 2 per cent of the total export receipts of CFA countries. Banana exports of the CFA countries expanded rapidly in the 1960’s, totaling 230,000 tons in 1966, compared with 110,000 tons in 1960 (see Table 24). The main producers are Ivory Coast and Cameroon, accounting on average for 55 per cent and 39 per cent, respectively, of banana exports by CFA countries. The expansion in Ivory Coast’s banana production resulted from the introduction of higher-yielding varieties and improved cultivation techniques. Banana production in East Cameroon was depressed in the early 1960’s, owing to political unrest, but recovered to normal levels during 1963. Production in West Cameroon tended to fall off as a result of diseases, storm damage, and the transfer of acreage to rubber growing.

Table 24.

CFA Countries and Malagasy Republic: Banana Exports, Export Prices, and Estimated Financial Advantage Derived from French Preferential Treatment, 1960–66

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1964 and 1965; Food and Agriculture Organization, Monthly Bulletin of Agricultural Economics and Statistics; data provided by the French authorities.

Estimated.

Based on French customs records. Discrepancies between customs records in exporting and importing countries account for the fact that, for 1961, exports to France shown here slightly exceed the figure on aggregate exports.

Ecuador, c.i.f., Hamburg.

Price advantage per unit (line B-l — line B-2) multiplied by total exports to France.

Bananas were the only tropical commodity for which the Yaoundé Convention did not provide for the removal of existing preferences. Consequently, there was no requirement that preferential treatment on the French market be terminated for imports from Ivory Coast, East Cameroon, and the Malagasy Republic. In France, banana imports are regulated through quotas set by the Comité Interprofessionnel Bananier, representing importers and interested administrative agencies. Three kinds of import quotas are set annually. (1) A global quota is guaranteed to franc area producers, and it, in turn, is shared in the proportion of two thirds to one third between French overseas departments (mainly Martinique and Guadeloupe) and African members of the franc area (in practice, the CFA countries). (2) Quotas are opened in favor of other banana producing, EEC associated countries; they were progressively enlarged to correspond to 20 per cent of the production of these countries by 1969. (3) Individual quotas are also opened in favor of the countries outside the franc area and EEC associated states. Banana imports into France from the CFA countries are free of customs duty, whereas imports from other EEC or associated countries had been subject to a 5 per cent duty until July 1, 1968, when they were exempted from all taxes, and imports from third countries were subject to a 20 per cent duty. The financial advantage derived by CFA banana producers from the French support system is substantial; an attempt to estimate this advantage in the years 1960–66 is shown in Table 24. Until October 1963 bananas from West Cameroon enjoyed the Commonwealth tariff preference and, consequently, were exported almost entirely to the United Kingdom.

In recent years CFA banana producers have had to find outlets outside sheltered markets for a growing proportion of their products. French demand has not kept pace with the rapidly expanding supply, and the loss of Commonwealth tariff preferences has obliged West Cameroon to turn to continental European markets. CFA producers have found themselves in a difficult competitive position in those markets where preferential systems favor other African producers and South American bananas are supplied at substantially lower cost. In Italy, banana imports are subject to an over-all quota, set at 300,000 tons in 1966. All imports under this quota are subject to a specific “consumption” tax (Lit 90 per kilogram in 1967) with an exception in favor of Somali bananas, which benefit from a reduced tax (Lit 60 per kilogram in 1967) to the extent of 100,000 tons—covering practically all of Somalia’s exportable production. Banana imports into Italy are also subject to a 20 per cent customs duty (i.e., the full extent of the CET), except those from the EEC and associated countries, which are free of customs duty. In the countries of the Benelux, bananas from the associated countries paid, by the end of 1966, an import duty of 3.7 per cent ad valorem (against an 18 per cent duty on imports from third countries). However, bananas imported from the Democratic Republic of Congo, Rwanda, and Burundi into Belgium were free of customs duty, and banana imports from the Netherlands Antilles and Surinam received a similar treatment in the Netherlands. In Germany, banana imports from associated countries are free of customs duty. The 12 per cent external tariff (to be brought ultimately to 20 per cent) on imports from third countries (e.g., South American countries) is not applied, since, by virtue of the Treaty of Rome, Germany is allowed to import free of duty from third countries a quota that covers practically its entire consumption (583,000 tons in 1966 and 614,000 tons in 1967). The existence of an ad valorem fiscal duty (of 2.5 per cent) tends to increase the absolute spread in prices between bananas of the associated countries and South American bananas, as the unit value of the former is higher.

As a result of marketing difficulties experienced in 1964 and 1965, part of Ivory Coast’s banana crop was destroyed, and a program designed to stabilize the country’s production at the 1965/66 level was being implemented. Measures taken by Ivory Coast and Cameroon to improve the competitiveness of their banana products on foreign markets included efforts at quality control and selection, as well as improved packaging.

Palm products. Palm products account for about 2 per cent of the total export receipts of the CFA countries. On the whole, production and export of palm products have stagnated in the 1960’s, as palms are harvested largely from natural groves, the area and yield of which do not increase. Palm kernel exports generally declined over the period 1960–66, with an especially large drop in 1965, owing to the commencement of the production of palm kernel oil in Dahomey. In 1966 they totaled only about 53,000 tons, compared with 119,000 tons in 1960 (see Table 25). After stagnating between 14,000 tons and 18,000 tons, exports of palm oil and palm kernel oil have risen substantially beginning in 1965, amounting to an estimated 26,000 tons in 1966. Dahomey is the main exporter of palm products among the CFA countries; the value of its palm product exports accounts for about 35 per cent of the total from the CFA area. Ivory Coast exports of palm products are still relatively unimportant, but they will rise considerably when a major program of palm plantations begins to yield results. This program is being financed mainly by the EEC under a scheme of aid to diversification.

Table 25.

CFA Countries and Malagasy Republic: Exports of Palm Products by Country of Origin, 1960–66

(In thousands of metric tons)

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; International Seed Testing Association, Oil World Semi-Annual, November 1967; Banque Centrale des Etats de l’Afrique de l’Ouest, Notes d’Information et Statistiques.

Estimated.

Palm kernels from the CFA countries have always been exported at world market prices, while palm oil exports enjoyed French support until 1962/63. This support took the form of quantitative restrictions on imports from outside the franc area and guaranteed prices that were higher than world prices. Table 26 shows the estimated advantage from price supports derived by CFA countries from their exports of palm oil to the French market in the years 1960–63. Beginning with the 1963/64 crop, by virtue of the Yaoundé Convention, the French support price for palm oil was discontinued, and palm oil produced in CFA countries has been marketed at world prices. However, world prices have developed favorably in recent years, so that palm oil export receipts of the CFA countries have risen since 1964. As for other oils and fats, customs duties on palm product imports from associated countries into the EEC have been totally removed since July 1, 1967, while the full CET (9.0 per cent on palm oil and palm kernel oil and nil on palm kernels) was fully applied to competing imports from third countries.

Table 26.

CFA Countries and Malagasy Republic: Palm Oil Export Prices and Estimated Financial Advantage Derived from French Price Support, 1960–66

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Sources: Food and Agriculture Organization, Monthly Bulletin of Agricultural Economics and Statistics; data provided by the French authorities.

The French price support was terminated after the 1962/63 crop year; from 1964, world market prices were applied in France with variances owing to quality and transportation costs.

Nigerian, c.i.f., European ports.

Price advantage per unit (line A-l – line A-2) multiplied by exports to France (line B).

EEC imports of palm oil are not subject to the special levies earmarked for the EEC Compensation Fund (Fonds Européen d’Orientation et de Garantie Agricole—FEOGA). In addition, CFA countries’ exports of palm products to the Common Market benefit from the new EEC price stabilization scheme for oil and oilseed exports established on July 1, 1967 (see pp. 337–41).

Sugar. Sugar exporting countries in the CFA area are the Malagasy Republic and Congo (Brazzaville); their production of sugar totaled some 145,000 tons in 1966/67, equivalent to about 6 per cent of the estimated total production in the franc area. Until 1964/65 these two countries received preferential treatment from France for their sugar exports, including quotas at support prices that were higher than the world market prices. The resulting financial advantage is estimated in Table 27. In 1964/65 the support price was set at CFAF 40 per kilogram (f.o.b.) for quotas of 70,000 tons for the Malagasy Republic and 14,500 tons for Congo (Brazzaville). Beginning in 1965/66, France discontinued its support prices for Malagasy and Congolese sugar, conforming to the provisions of the Yaoundé Convention.

Table 27.

CFA Countries and Malagasy Republic: Sugar Export Prices and Estimated Advantage Derived from French Support, 1960–66

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Source: Data provided by the French authorities.

The French price support was terminated after the 1965/66 crop year.

Price advantage per unit (line A-1 – line A-2) multiplied by exports to France (line B).

To compensate for the loss of French support for the 1965/66 crop, the Malagasy Republic signed bilateral agreements with Senegal, Mauritania, Ivory Coast, and Upper Volta, ensuring a market for 43,000 tons of sugar at the support price of CFAF 35 to CFAF 40 per kilogram. In June 1966, countries of the Common Organization of African and Malagasy States (Organisation Commune Africaine et Malgache—OCAM) reached a multilateral agreement organizing the marketing of sugar in their area. According to this agreement, importing countries are to buy Malagasy and Congolese sugar at support prices within specified quotas. An equalization fund was established to compensate importers for losses incurred when domestic sales of Malagasy and Congolese sugar are at prices that are insufficient to cover import costs. The equalization fund was to be financed by a tax on imports of sugar by OCAM countries from non-OCAM countries. For the 1966/67 crop year the support price was set at CFAF 36.7 per kilogram (f.o.b.), implying a substantial reduction from the former French guaranteed support prices. In that year, exports by the Malagasy Republic under the OCAM agreement totaled 30,000 tons.

Under the EEC internal marketing arrangements for sugar, which entered into force in July 1967, customs duties were replaced by “compensatory” levies imposed on all sugar imports from non-EEC countries. Special derogations from this regime in favor of imports from associated countries were granted by the EEC (see pp. 370–73).

Other products. Other minor agricultural exports from the CFA countries include such products as vanilla, rice, coconuts, maize, pepper, and gum arabic. Several of these products enjoyed on the French market preferential treatment that is being discontinued as a result of association with the EEC. The Yaoundé Convention, however, provided for price support and/or aid to productivity for rice and pepper in the Malagasy Republic, and for coconut products in Dahomey and Togo.

Imports

Over-all developments, 1960–66

The cash income of individuals in most CFA countries comes mainly from the marketing of export crops. As a result, the level of imports of consumer goods is closely related to developments in agricultural exports, except where domestic price stabilization schemes introduce a differential between export receipts and individuals’ cash income. The relationship between other categories of imports and export receipts is less direct; moreover, other factors enter into account, such as, for capital goods imports, the amount of foreign aid available and the attractiveness of investment in the country, both of which vary according to political and economic circumstances.

As shown in Table 28, from 1960 to 1964 the recorded value of aggregate imports into the CFA countries increased at an average annual rate of 10 per cent, from CFAF 176 million to CFAF 255 million. The growth was particularly rapid in 1961, immediately following independence, and again in 1964 when consumption expenditures rose, mainly as a result of bumper coffee crops in some countries. In 1965 total imports leveled off at about CFAF 257 million, a drop in imports of consumption goods offsetting further increases in other categories; the decrease in expenditures for consumption goods was related to that year’s drop in coffee and cocoa export receipts. In 1966 the over-all rise in import expenditure resumed, following a general increase in export receipts.

Table 28.

CFA Countries and Malagasy Republic: Commodity Composition of Imports, 1960–661

(Amounts in billions of CFA francs)

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; authors’ estimates.

Including Mali for the first six months of 1960, and excluding West Cameroon for the entire period covered.

Import structure

Imports of consumer goods, the value of which rose by about 40 per cent, contributed the main part (44 per cent) of the over-all increase in import expenditures over the five years 1960–66. Expenditures on imports of capital goods, rising by three fourths, accounted for one third of the over-all increase, while imports of intermediate goods (e.g., energy and raw materials) rose by one half, accounting for the remainder of the increase.

The resulting changes in the composition of aggregate imports into the CFA countries over the period 1960–66 were small: there was some decline in the percentage share of consumer goods and some increase in the percentage share of raw materials and semiprocessed and capital goods. In 1966 consumption goods, including foodstuffs, accounted for about one half of total imports. Food imports, one fifth of the total, consisted mainly of such staples as rice, cereals, sugar, and dairy products. Major items among other consumer goods were textiles and leather articles. Capital goods, which accounted for about one fourth of total imports in 1966, include such items as motor vehicles and certain household appliances. The remaining fourth was shared between energy (6 per cent) and raw materials and semiprocessed goods (17 per cent together).

In spite of the basic similarity of the economies in most of the CFA countries, the structure of their imports varied considerably from one country to another owing to differences in such elements as consumption habits, government spending policies, and the stage and nature of economic development. In some countries, such as Senegal and Dahomey, the share of consumer goods imports was especially large (60 per cent), reflecting the influence of European consumption patterns owing to historical factors. In countries such as Mauritania and Niger the Governments’ austerity policies contributed to the relatively low level of imports of consumer goods. The share of capital goods imports did not vary significantly in recent years in Senegal and Ivory Coast, while it rose substantially in Niger, Mauritania, Gabon, and Cameroon—partly because the latter group was less developed than the former group and needed relatively more capital goods. The nature of a country’s development also bore on the structure of its imports: countries where capital-intensive activities, i.e., industry and mining, were being developed showed a large proportion of equipment imports. A striking example was Mauritania, where equipment imports on account of the iron ore mining industry accounted for 90 per cent of total imports in the period 1963–65.

Import prices

There is no index of import prices for any of the CFA countries. However, consumer price indices and wholesale prices of certain construction materials indicate that import prices have risen substantially since 1960, owing to increased import levies, rising prices in the countries of origin, and higher transportation costs. In landlocked countries, such as Niger and Chad, transportation costs account for up to 50 per cent of the import cost.

Direction of trade

Over-all developments, 1960–66

Table 29 shows the trade of the CFA countries in 1960 and 1966 by areas of origin and destination.25 Over the period 1960–66, the overall trade deficit declined from CFAF 35 billion to CFAF 6.5 billion, owing to improvements in the balances of the BCEAO and BCEAEC areas. The Malagasy Republic’s adverse trade balance not only deteriorated slightly but also was larger than the over-all 1966 deficit; the BCEAO area showed a surplus, and the trade balance of the BCEAEC area was close to equilibrium.

Table 29.

CFA Countries and Malagasy Republic: Direction of Trade, 1960–661

(Amounts in billions of CFA francs)

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Donnies Statistiques; authors’ estimates.

Including Mali for the first six months of 1960. Excluding West Cameroon.

Total export and import data shown here do not reconcile with data shown in Tables 11 and 28; for certain countries, different sources had to be used to analyze the composition and direction of trade.

The trade deficit of the CFA countries as a whole with the franc area increased over the period 1960–66, amounting in the latter year to CFAF 40 billion. There were surpluses on trade with EEC countries other than France and with the rest of the world. The balance of trade with the EEC as a whole (including France) improved during 1960–66, with a deficit declining by one third, to CFAF 16 billion.

Distribution of trade by CFA monetary areas

Over the period 1960–66, the share of the BCEAO area in total exports of the CFA countries increased from 54 per cent to 58 per cent, and the share in total imports increased from 52 per cent to 55 per cent. The BCEAO area’s trade balance changed from a deficit of CFAF 15 billion to a surplus of CFAF 5 billion in 1966. The percentage of imports covered by exports rose from 84 to 104.

Ivory Coast’s trade plays a key role in the over-all balance of trade of the BCEAO area, not only because of its absolute amount (47 per cent of total trade in 1966) but also because of its large and persistent surplus. If Ivory Coast’s trade is excluded, the balance of trade of the BCEAO area showed deficits averaging CFAF 21 billion during 1960–66, with an import coverage increasing from 70 per cent to 93 per cent.

Over the same period, the shares of the BCEAEC area’s exports and imports remained stable, each representing about one third of the total. However, the area’s balance of trade improved: whereas export proceeds in 1960 covered only 82 per cent of import expenditures, the trade deficit had almost disappeared in 1966 with export receipts covering 98 per cent of import outlays. The value of exports rose by four fifths from 1960 to 1966, while that of imports increased by about one half.

Two countries play a determining role in the over-all balance of trade of the BCEAEC area. Cameroon’s trade, accounting for some 42 per cent of the 1966 total, was close to equilibrium or showed a surplus in every year except 1965. Gabon’s trade, although accounting for a smaller share of the total, was in substantial surplus; this surplus rose from CFAF 4.0 billion in 1960 to CFAF 8.5 billion in 1966, owing mainly to expanding mineral exports. If Gabon’s trade is excluded, the balance of trade of the BCEAEC area shows a deficit averaging CFAF 11 billion during 1960–66.

Over 1960–66, the share of the Malagasy Republic in the total trade of the CFA countries declined from 13 per cent to 9 per cent for exports and from 16 per cent to 13 per cent for imports. Its trade deficit increased by 10 per cent, as import outlays rose more than export proceeds; in 1966, the export coverage of import expenditures was 71 per cent.

Distribution of trade by external areas

Trade with France and the franc area. Although the share of France in both total imports and exports of the CFA area declined from 1960 to 1966, that country remained the main trading partner of the area, accounting for about half its total trade.

From 1960 to 1966, France’s share in total exports from the CFA countries declined from 60 per cent to 43 per cent. The principal factors bringing about this decrease were the rapidly developing mineral exports of the CFA countries (the market for which was mainly outside France), the gradual reduction—in accordance with the Treaty of Rome—of the advantages granted by France to imports from the CFA countries in the form of tariff and quantitative preferences, and price guarantees.

The share of France in the total imports of the CFA countries decreased from 65 per cent to 56 per cent owing to various factors, including the liberalization of imports from other EEC countries and a substantial decrease in the number of French nationals (mainly civil servants and military personnel) residing in the CFA countries. The fact that France’s share in the CFA countries’ imports decreased considerably less than its share in these countries’ exports is explained by the persistence of a restrictive system favoring French imports (see pp. 368–74), by the fact that a large part of import trade is in the hands of French firms or their subsidiaries in Africa, and by the magnitude of French financial aid, which in general goes to finance imports of French equipment.

From 1960 to 1966, the trade deficit with France increased considerably, as imports from that country rose more than exports to it. In 1966 receipts from exports to France covered only 75 per cent of expenditures on imports from that country. The share of other franc area countries in the total trade of the CFA countries was minor and did not change significantly (7–8 per cent for both imports and exports).

Trade with EEC countries. EEC countries as a whole (including France) account for more than two thirds of the value of the total trade of the CFA countries. However, during 1960–66, their share decreased in regard to both exports and imports of the CFA countries. The trade deficit with the EEC area declined over the period, with receipts from exports covering 91 per cent of expenditures on imports in 1966. A 46 per cent rise in import value was due partly to the gradual liberalization of import restrictions toward EEC countries and to large multilateral and bilateral aid programs that helped to finance equipment imports from the EEC countries. Exports to the EEC rose by about 63 per cent, owing mainly to larger sales of minerals and wood to EEC countries. At the end of 1965, the gradual establishment of the preferential system under the Yaoundé Convention had not yet succeeded in stimulating agricultural exports of the CFA countries to the Common Market. From 1963—i.e., the calendar year preceding the application of the Convention—to 1965, receipts from the main agricultural exports to the EEC declined by 4 per cent, while the value of the same exports to non-EEC countries rose by one third. However, it appears that the situation of agricultural exports to the EEC improved during 1966, when aggregate exports of the CFA area to the Common Market rose by 12 per cent.

From 1960–66, the share of EEC countries other than France in the CFA countries’ trade increased in regard to both exports and imports. Several factors accounted for this development, including the granting of EEC aid to finance imports, the extension to all EEC countries of reciprocal trade preferences that were formerly granted by the CFA countries only to franc area countries, and the expansion of mineral exports largely to European countries other than France.

Trade with other countries. Taken as a whole, countries outside the franc and EEC areas increased their share in both imports and exports of the CFA countries over the period 1960–66. The marketing of mineral products in the United States and non-EEC European countries contributed largely to the increase of exports. As these grew faster than imports, the balance of trade with such countries evolved favorably from 1960–66, with a deficit in 1960 being replaced by a surplus in 1965.

Trade restrictions

General system
Imports

Quantitative restrictions. Normally, all imports from franc area countries are free from any restrictions and administrative formalities. Imports from non-franc area countries are subject to quota except for EEC imports, which were completely liberalized by June 1, 1968; for details, see International Monetary Fund, Twentieth Annual Report on Exchange Restrictions (Washington, 1969).

Tariff system.26 Import levies in the BCEAO countries and the Malagasy Republic can be classified in general into the following main categories: (1) an ad valorem customs duty consisting of a minimum tariff—the rates, which are applied to countries outside the franc area and the EEC, vary widely, with lower rates on essentials and equipment goods—and a general tariff, which is a multiple of the minimum tariff; (2) a fiscal duty, either specific or ad valorem, which ranges usually from nil to 25 per cent; and (3) a variety of import surtaxes, including generally a statistical tax (1–2 per cent ad valorem), a standard tax (generally 20 per cent of the c.i.f. value less other taxes), and a turnover tax (12–25 per cent of the c.i.f. value plus other taxes). In the BCEAEC countries, all of which are members of the UDEAC, all import levies other than the customs duty, the fiscal duty, and import turnover tax are replaced by an additional tax (taxe complémentaire), the rate of which varies according to the budgetary requirements in each member country.

The import levies in the CFA countries vary markedly with the origin of imported goods, for a number of reasons: (1) Imports from other franc area countries and EEC countries, as noted above, are not subject to customs duty. (2) With the exception of Togo and the Malagasy Republic, all CFA countries are members of a customs union, either the UDEAO or the UDEAC. These unions involve the granting of substantial tax concessions by each member country on goods originating within their respective areas. In the UDEAO, such products are exempt from customs duties and are subject to a fiscal duty equal to 50 per cent of the most favorable rate applied to similar imports of external origin. In the UDEAC, goods produced within the Union are free of all import duties and other indirect taxes on materials used in manufacturing and on the processed product, and are subject instead to the single tax (taxe unique) at the producer’s level, the proceeds of which are allocated to member countries in proportion to their consumption of the product in question. (3) The minimum customs duty tariff is accorded to countries that have signed a most-favored-nation treaty, including most Western European countries and the United States.

Exports

With a few exceptions, exports to countries in the franc area are free of licensing. Exports to other countries, although not generally subject to quantitative restrictions, require licenses in order to prevent certain re-exports and to ensure adequate supply for domestic needs. In some instances, all exports to certain countries (e.g., Rhodesia) are prohibited.

Export taxes vary considerably from one CFA country to another, since they are not influenced by the factors that brought about similarity of import duties, i.e., membership in the franc area and regional customs unions and association with EEC. They constitute an important factor in the cost price of exports, and, consequently, programs for improving the competitiveness of agricultural exports provide for their reduction in several countries.

Relations with EEC countries

As mentioned before (see p. 337), the principles of the association between the EEC countries and their former colonies and overseas territories were laid down by the Treaty of Rome, which aimed to establish ultimately a free trade area between the EEC and each associated country, adapted to the requirements of less industrialized developing economies. All customs duties and quantitative restrictions were to be eliminated progressively between member and associated countries. However, associated countries retained the right to maintain or to establish certain restrictions in order to protect their economic development, in case of balance of payments difficulties, or for budgetary reasons; the EEC could also decide on its tariff policy. Finally, whereas member countries were bound to apply a CET toward third countries, the associated countries retained freedom of action vis-à-vis third countries. The provisions of the Yaoundé Convention pertaining to trade liberalization between member and associated countries and their state of implementation are reviewed below.

Elimination of internal tariffs

Imports into EEC countries. In principle, customs tariffs on imports from associated countries into EEC countries were reduced progressively at the same pace as tariffs among EEC members themselves. The original timetable for such reductions, established by the Treaty of Rome, was accelerated and all remaining tariffs were completely removed on July 1, 1968–18 months earlier than the date originally set for the termination of the transition period of the Common Market.

The above scheme did not apply uniformly to all imports from associated countries; in certain instances, the internal tariff reduction was accelerated; in others, it was slowed down. In that respect, the following categories of imports into EEC countries should be distinguished:

(1) For nine major tropical products on the special list of Annex II to the Yaoundé Convention (pineapples, coconuts, coffee, pepper, tea, vanilla, nutmeg, cloves, and coca), internal tariffs were completely eliminated with the entry into force of the Yaoundé Convention in June 1964. Moreover, for these products, EEC countries immediately applied the full CET, which for other commodities is being implemented only gradually (see p. 374).

(2) For other products listed in Annex II (i.e., agricultural products other than the nine mentioned above) and which were not subject to EEC internal market regulations, tariffs were reduced at a slower pace. Table 30 shows the customs duties levied by EEC countries on selected imports from CFA countries on December 15, 1967, compared with duties levied on similar imports from third countries.

Table 30.

Customs Duties Levied by EEC Countries on Imports of Selected Commodities Produced in the CFA Countries and the Malagasy Republic, December 15, 1967

(In per cent of import value)

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Source: Customs tariffs.

Products on the special list of Annex II to the Yaoundé Convention. This list includes nine agricultural products for which internal tariffs have been removed and the common external tariff applied immediately at the entry into force of the Convention.

Agricultural products mentioned in Annex II of the Yaoundé Convention and not included in the special list referred to in footnote 1.

Imports from the franc area are admitted free of duty in France and those from the Democratic Republic of Congo, Rwanda, Burundi, Netherlands Antilles, and Surinam have similar advantages in Benelux.

The Federal Republic of Germany is allowed to import free of duty a certain quota from third countries.

Without alcohol and sugar, packages of more than one kilogram.

Industrial products not included in Annex II of the Yaoundé Convention.

(3) In principle, imports into the EEC of commodities subject to internal market regulations may not be given preferential treatment, whatever their origin, and become subject to the “compensatory” levies accruing to the FEOGA.27 However, by virtue of Article 11 of the Yaoundé Convention, which provided that the Community will take into consideration the interests of associated countries in matters pertaining to imports competing with European products, some degree of relief from these levies may be granted to imports from associated countries.

Five groups of agricultural commodities usually imported from the CFA countries have come under EEC market regulations: (1) rice and various rice products, (2) manioc flour and ground manioc, (3) processed fruit with sugar added (chiefly pineapple juice and preserves, in the CFA countries), (4) oils and fats, and (5) sugar. On rice and manioc imports into the EEC, compensatory levies have replaced any other protective taxation; the burden of such levies, however, has been reduced on imports from associated countries to levels lower than those on imports from third countries. On imports of pineapple juice and preserves from associated countries, customs duties were reduced to a maximum 15 per cent of the basic duty since November 1, 1967 and were eliminated at the end of the transition period of the Yaoundé Convention (that is, mid-1968). In addition, imports from associated countries were exempt from the compensatory levy on the sugar added to pineapple juice and preserves from third countries. Oil and fat imports into the EEC (except olives and olive oil) are not subject to compensatory levies; moreover, imports from associated countries are free from customs duties (since July 7, 1967), while the full CET is applied on imports from third countries. The EEC market regulation on sugar entered into force in July 1967, providing for a levy system that replaces customs duties. Concerning imports from associated countries, a special regulation was issued providing that a premium be granted by the EEC to associated countries on sugar refined within the Community, and that a levy-free quota would be allowed for imports of Surinam sugar into the Netherlands. EEC market regulations are also contemplated with regard to tobacco and products of the fishing industry.

Imports into associated countries. Protocol No. 1 to the Yaoundé Convention provided for the progressive reduction (in steps of 15 per cent) of customs tariffs imposed by associated countries on imports from EEC member countries. However, the Convention also provided that equal treatment be granted to imports from all member countries. Since France enjoyed full exemption from customs duty in all the CFA countries by virtue of its membership in the franc area, other EEC members were accorded similar treatment, and customs tariffs on imports from these countries were completely removed, beginning in 1964. One exception was Togo, which was allowed by the Yaoundé Convention to maintain for three years the open-door policy introduced by a former international agreement.

As an exception to the general principle of tariff reciprocity between member and associated states, the latter have the right to maintain or to establish customs duties and similar taxes not only for budgetary reasons but also to protect their industries and to facilitate their economic development. In fact, this provision was not used, as associated countries preferred to avail themselves of a similar provision permitting quantitative restrictions.

Elimination of quantitative restrictions

Imports into EEC countries. Imports from associated countries into EEC countries benefited from the elimination of quotas among member states pursuant to the Treaty of Rome. Such restrictions were eliminated with few exceptions, mainly for banana imports into France and Italy (see pp. 356–58).

Imports into associated countries. The Yaoundé Convention provided that associated countries abolish quantitative restrictions against imports from EEC member states no later than four years after the Convention became effective, that is, no later than mid-1968. A protocol to the Convention set up a schedule for step-by-step enlargement of quotas. However, the protocol also provided that whenever actual imports have been smaller than scheduled quotas for two consecutive years, they must be removed immediately. As a result, associated countries had fully liberalized most imports from EEC countries by the end of 1967. Following the open-door policy mentioned above, Togo’s imports from EEC countries have been free of quantitative restrictions since the inception of the association.

As with tariff elimination, the Convention included an exception clause by which the associated countries might maintain or impose quantitative restrictions to safeguard their economic development and industrialization, in case of balance of payments difficulties, and, for agricultural products, as required by the provisions of regional marketing organizations. The associated countries availed themselves of the exception clause on several occasions.

Trade with third countries

Imports of EEC countries from third countries. Pursuant to the Treaty of Rome, customs duties applied by EEC countries on imports from third countries were adjusted to a CET established, in principle, at the average of the duties applied on January 1, 1957. Adjustments to the CET were made in three steps, of which the second step took place at the end of 1965 and the third in mid-1968. As already mentioned, for nine specified agricultural products imported free of duty from the associated countries, the CET was applied immediately by EEC countries. However, as a concession to third countries, the EEC agreed to lower the CET for a number of important tropical products (cocoa beans, raw coffee, tea, pepper, vanilla, cloves, nutmeg, fresh pineapples, coconuts, and rough wood). Table 30 shows, for selected commodities produced by the CFA countries, the CET and the customs duties actually levied by EEC countries on imports from third countries on December 15, 1967.

Imports of associated countries from third countries. The CET was applied only by the member states of the EEC; the associated countries retained freedom of action with respect to tariffs vis-à-vis third countries. In addition, the Yaoundé Convention stipulated that the associated countries had the right to conclude customs unions and free trade areas among themselves as well as with third countries, provided that they were compatible with the general principles laid down. The only reservation was that in no case might EEC member states be treated less favorably than third countries.

VI. Balance of Payments

Structure and recent developments

No official over-all balance of payments data are available for the CFA countries, except Ivory Coast. Detailed data are published only on transactions with countries outside the franc area, which until July 1, 1967 were subject to exchange control and which represent a minor part of the CFA countries’ foreign transactions. Transactions within the franc area have always been free of control. Therefore, the only information available on these transactions consists of customs records on trade, estimates of French aid, and global data relating to nontrade payments made through the central banks. Such payments are classified only into payments originating from governments or assimilated bodies and payments originating from private entities. Tables 31, 32, and 33 show an attempt to construct over-all balances of payments for the CFA countries as a whole and for the BCEAO and BCEAEC monetary areas for the years 1960–66. Sizable margins of errors and omissions result from the incompleteness of the data and from the fact that some cover transactions and others cover payments.

Table 31.

CFA Countries and Malagasy Republic: Estimated Balance of Payments, 1960–661

(In billions of CFA francs)

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1960–66; International Monetary Fund, International Financial Statistics; Banque Centrale des Etats de l’Afrique de l’Ouest, Rapports d’Activité) Table 34.

Positive figures indicate credit; negative figures indicate debit.

Customs data taken from the reports of the Monetary Committee of the franc area, La Zone Franc. They differ somewhat from customs data shown in Tables 10, 11, and 28, which were taken from other sources—Institut National de la Statistique et des Etudes Economiques, Données Statistiques, and national statistical bulletins—and also were adjusted in certain instances.

Includes pensions paid by the French Government to the nationals of CFA countries who were formerly employed in the French armed forces or colonial administration. Such pensions should normally be included in private transactions with the franc area.

Includes loans by the CCCE to semipublic enterprises.

Table 32.

BCEAO Area: Estimated Balance of Payments, 1960–661

(In billions of CFA francs)

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1960–66; International Monetary Fund, International Financial Statistics; Banque Centrale des Etats de l’Afrique de l’Ouest, Rapports d’Activité; Table 34.

Positive figures indicate credit; negative figures indicate debit.

Customs data taken from the reports of the Monetary Committee of the franc area, La Zone Franc, 1960–66. They differ somewhat from customs data shown in Table 28, which were taken from other sources—Institut National de la Statistique et des Etudes Economiques, Données Statistiques, and national statistical bulletins—and also were adjusted in certain instances.

Includes pensions paid by the French Government to the nationals of CFA countries who were formerly employed in the French armed forces or colonial administration. Such pensions should normally be included in private transactions with the franc area.

Includes loans by the CCCE to semipublic enterprises.

Table 33.

BCEAEC Area: Estimated Balance of Payments, 1960–661

(In billions of CFA francs)

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1960–65; International Monetary Fund, International Financial Statistics; Table 34.

Positive figures indicate credit; negative figures indicate debit.

Customs data taken from the reports of the Monetary Committee of the franc area. They differ somewhat from customs data shown in Table 28, which were taken from other sources—Institut National de la Statistique et des Etudes Economiques, Données Statistiques, and national statistical bulletins—and also were adjusted in certain instances.

Includes pensions paid by the French Government to the nationals of CFA countries who were formerly employed in the French armed forces or colonial administration. Such pensions should normally be included in private transactions with the franc area.

Includes loans by the CCCE to semipublic enterprises.

The balance of payments of CFA countries as a whole

In the period 1961–66, the over-all balance of payments of the CFA countries has been characterized as follows. (1) The balance of trade showed persistent deficits, which tended to decrease as exports rose faster than imports. (2) There was a substantial and growing net inflow of official transfer payments, which rose by one half from 1961 to 1965 but declined somewhat in 1966; the official transfer payments consistently exceeded the deficit on trade by a large amount. (3) The balance on other recorded items—including services, private transfer payments, and nonmonetary capital—evolved from small surpluses to rapidly increasing deficits. (4) Except for 1966, sizable debit balances on errors and omissions probably indicate a steady outflow of unrecorded private nonmonetary capital.

Over the six-year period 1961–66 the over-all balance of payments of the CFA countries showed a deficit in two years (1961 and 1963), a large surplus in one year (1962), and a smaller surplus in the last three years (1964, 1965, and 1966). Over the period, aggregate net foreign assets of the monetary system—including the central banks of the three monetary areas and the deposit money banks—rose by about one third (CFAF 16.1 billion), reaching CFAF 63.1 billion at the end of 1966.

The balance of payments of the CFA countries with the franc area and with other areas

Payments of the CFA countries with non-franc area countries tend to show a persistent surplus, while those with the franc area show a deficit. The balance of recorded payments of the CFA countries with the franc area (see Table 31, item, Balance on A+B+C, With franc area) shows increasing deficits since 1963, reaching CFAF 45 billion in 1966. Allowing for errors and omissions, it may be presumed that largely unrecorded private transactions with the franc area would have the effect of increasing the indicated deficits except in 1966.

Trade with the franc area shows a large and persistent deficit, which has been more than offset by official transfer payments representing mainly French official grants. On other official transactions with the franc area (e.g., government expenditures and pensions and loans), the balance was positive until 1965 when a deficit appeared, as net official lending by French aid agencies and French government expenditures in CFA countries declined. Recorded private payments with the franc area showed a large and persistent deficit, owing partly to substantial deficits on account of services and private transfer payments with France. The balance on private nonmonetary capital movements with the franc area appears to be a variable element. In several countries, lack of investment opportunities and the growing role of public and semipublic organizations may have deterred the inflow of new private capital and induced the withdrawal of some private capital. The importance of these factors would vary among the CFA countries. For example, there has been a substantial net inflow of private capital into certain countries, such as Ivory Coast, Mauritania, and Gabon.

The surplus with non-franc area countries grew steadily from CFAF 15 billion to CFAF 56 billion over the period 1961–65. This resulted primarily from improvements in the trade balance, owing mainly to rising mineral exports to non-franc area countries and increasing foreign official grants, primarily on account of EEC aid. However, the deficit on services with non-franc area countries increased steadily, whereas the balance on nonmonetary capital movements showed a persistent but variable surplus. In 1966, the over-all surplus with non-franc area countries declined to CFAF 46 billion, owing mainly to a reversal of the net flow of nonmonetary capital.

Balance of payments by monetary areas

The balances of payments of the BCEAO and BCEAEC areas are generally characterized by a substantial deficit on trade (except for the BCEAEC area in recent years and the BCEAO area in 1966), a large surplus on official transfer payments, and, generally, a deficit on the remaining balance (see Tables 32 and 33). The two areas have consistently shown over-all surpluses with countries outside the franc area and, in general, deficits with the franc area.

After showing either deficits or negligible surpluses in the early 1960’s, the over-all balance of payments of the BCEAO area improved in 1965 and 1966, with surpluses of CFAF 1.7 billion and CFAF 8.4 billion, respectively. These improvements resulted from considerable progress toward a favorable trade balance (the usual deficit disappeared in 1966), from moderate increases in foreign aid disbursements, and from a reversal in the direction of unrecorded flows that presumably consisted largely of private nonmonetary capital. However, the balance on recorded private nontrade transactions, including mainly services, deteriorated considerably over the period.

The BCEAEC area’s reserves, after increasing in 1962 owing to favorable developments in trade, aid, and capital movements, fell in 1963 and recovered only slowly in 1964 and 1965 following improvements in trade and foreign aid. In 1966 a deficit reappeared, resulting mainly from a slowdown in foreign aid disbursements and the deterioration of the balance on services and nonmonetary capital.

Official transfer payments

Disbursements under foreign official grants received by the CFA countries in the period 1961–66 are presented in Table 34. This assistance totaled CFAF 410 billion over the period, of which more than two thirds came from France and about one fifth from the EEC. Other sources of aid included the United States, the United Nations, Germany, and, to a lesser extent, the United Kingdom, Israel, and mainland China.

Table 34.

CFA Countries and Malagasy Republic: Disbursements of Foreign Official Grants, 1960–66

(In billions of CFA francs)

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Sources: France, Institut National de la Statistique et des Etudes Economiques, Données Statistiques; Organization for Economic Cooperation and Development, Geographical Distribution of Financial Flows to Less Developed Countries; U.S. Agency for International Development, Operations Missions Reports; France, Ministère de la Coopération, Cinq ans de Fonds d’Aide et de Coopération; EEC Commission, Fonds Européen de Développement—Situations Trimestrielles; data provided by the French authorities; authors’ estimates.

Fonds d’Aide et de Coopération.

Estimates.

Receiving countries’ contributions toward the cost of FAC technical assistants.

Includes FAC contributions to common regional organizations and to French agencies operating in the BCEAO and BCEAEC countries and in the Malagasy Republic.

Agency for International Development.

Food deliveries.

Mainly Germany, and to a lesser extent, the United Kingdom, Israel, mainland China, Canada, Sweden, Switzerland, and Italy.

European Economic Community.

European Development Fund.

Aid from France

French grants-in-aid to the CFA countries, channeled primarily through the FAC administered by the Secrétariat d’Etat aux Affaires Etrangères Chargé de la Coopération, fluctuated between CFAF 46 billion and CFAF 51 billion a year during 1961–66. Such aid included investment grants, budget contributions, technical assistance, grants for scholarships and training programs, technical and cultural cooperation, and various services rendered by French research, development, and technical agencies. Soft loans were also extended under the FAC and by the French CCCE to the public and private sectors. The BCEAO area received almost half of this aid, while the BCEAEC area received about one third.

Investment grants under the FAC averaged about CFAF 14 billion a year (about one third of the total) and financed a variety of projects ranging from transportation infrastructure to geological surveys.

French budget contributions represent nonreimbursable subsidies to ordinary and capital budgets. The figures in Table 34 also include a certain amount of short-term advances from the French Treasury to ordinary budgets, which it was not possible to exclude. French contributions to the budgets of the CFA countries averaged CFAF 8 billion a year over the period 1961–65. In recent years these subsidies have been declining, and they are being gradually shifted from the ordinary budget to the capital budget. Subsidies to the capital budget are granted according to procedures and criteria that are more flexible than for FAC investment grants. The main beneficiaries of French subsidies have been the Central African Republic, Chad, Dahomey, Gabon, the Malagasy Republic, Niger, Senegal, Togo, and Upper Volta.

Technical assistance is an important aspect of French aid to the CFA countries. Over the period 1961–66 the cost of FAC-financed technical assistants averaged almost CFAF 20 billion a year, or nearly half the average of the total disbursements of French grants. In 1966 there were about 9,400 FAC technical assistants stationed in the CFA countries, 5,200 of which were involved in education. Moreover, specialists are provided by various French technical and scientific agencies, which sometimes receive, in turn, FAC subsidies. The beneficiary governments contribute to the cost of FAC technical assistants at rates which vary from CFAF 20,000 to CFAF 65,000 a month for each assistant, according to the country. A global estimate of such contributions (reverse grants) is shown in Table 34.

Aid from the EEC

Disbursements of EEC grants to the CFA countries started on a sizable scale in 1962, when they totaled CFAF 10.0 billion. They increased steadily to CFAF 19.4 billion in 1965, when they accounted for about one fourth of total grants-in-aid received by the CFA countries; disbursements in 1966 amounted to CFAF 18.3 billion. The BCEAO countries had received about half of the total EEC grants by the end of 1966, whereas the BCEAEC area had received 34 per cent and the Malagasy Republic, 15 per cent. EEC aid is being disbursed under the first and second EDF programs. Disbursements under these two programs are expected to continue at the present rate for another four to five years.

The first European Development Fund. The first EDF was established in 1958 by the Convention annexed to the Treaty of Rome, which embodied the principle of association with overseas territories and colonies. The five-year Convention provided for measures regarding the liberalization of trade (see pp. 368–74) and also earmarked a total of $581 million (equivalent to CFAF 144 billion) for development aid to economic and social projects in associated territories, to be administered by the EEC Commission under the financially autonomous EDF. The Convention provided for gradual disbursements of EEC development aid; the geographical allocation of aid was limited to four areas. Each area included the countries and territories having special relations with France, Italy, Belgium, or the Netherlands; the allocation per country or territory within each area was not specified. A total of $511 million, later changed to $506 million, was committed for the franc area, including mainly the CFA countries.

Following delays in project identification and public bidding procedures, disbursements under the first EDF did not start on a sizable scale until 1962 but they continued after the expiration of the Convention. A maximum was reached in 1964, with disbursements for the CFA countries totaling CFAF 16 billion. By the end of 1966, commitments on projects in the CFA countries amounted to $356 million, of which about $273 million had already been disbursed. About half of the disbursements under the first EDF had been in favor of the BCEAO countries, while the BCEAEC countries and the Malagasy Republic had received 35 per cent and 16 per cent, respectively, of total disbursements. Economic and social projects financed under the first EDF were mainly for transportation, education, and health.

The second European Development Fund. The Yaoundé Convention not only provided for measures pertaining to the liberalization of trade and capital movements (see pp. 337–41) but also included a $730 million program of financial and technical cooperation with associated countries. Of this amount, $666 million was to be administered under a second EDF, while the remaining $64 million was earmarked for development loans to be extended by the European Investment Bank (EIB) from its own resources (see p. 387). The second EDF covered the five-year period June 1, 1964 to May 30,1969.

In contrast to the first EDF, which provided for investment subsidies only, the second EDF included several forms of aid, as follows: (1) grants for economic and social investments as in the first EDF; (2) $46 million for soft “special-term” loans; (3) $230 million for aid to agricultural production and diversification, which was related to the progressive elimination of preferential treatment granted by certain EEC countries (see pp. 334–41); (4) technical cooperation indicating the financing of general studies, studies related to EEC-financed investment projects, and professional training programs; and (5) short-term advances to stabilization funds to alleviate the consequences of world price fluctuations. The funds for such advances, which were limited to a total of $50 million, were to be supplied from the EDF’s cash reserves.

By the end of 1966, commitments to the CFA countries under the second EDF totaled CFAF 51 billion (equivalent to $206 million). Disbursements started in 1965 and by the end of 1966 totaled about CFAF 10.3 billion, of which CFAF 0.7 billion represented grants for social and economic investments; CFAF 8.8 billion, aid to agricultural production and diversification; and CFAF 0.8 billion, technical assistance. The BCEAO countries had received about 70 per cent of the second EDF disbursements in favor of the CFA countries, while the BCEAEC area and the Malagasy Republic had received 26 per cent and 4 per cent, respectively.

Aid to agricultural production and diversification, in contrast to other forms of EEC aid, was allocated by country in the Yaoundé Convention. The Convention also provided for the establishment of five-year programs of aid to production, bilaterally agreed between the EEC and each recipient country. Commitments to the CFA countries under aid to production and diversification totaled CFAF 48 billion on December 31, 1966 (Table 35). Of this amount, about CFAF 21 billion was earmarked for programs of aid to production, including price subsidies (CFAF 8 billion) and subsidies for structural improvements (CFAF 13 billion); about CFAF 27 billion remained for diversification projects. Five countries received only aid to diversification (Ivory Coast, Congo (Brazzaville), Upper Volta, Mauritania, and Gabon); all others received both aid to production and aid to diversification.

Table 35.

CFA Countries and Malagasy Republic: EEC Aid to Production and Diversification-Commitments and Programs, and Disbursements on December 31, 1966

(In millions of CFA francs)

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Sources: EEC Commission, Fonds Européen de Développement—Situations Trimestrielles; Partnership in Africa—The Yaoundé Convention; Afrique Service; Bulletin de l’Afrique Noire.

As provided for by Protocol No. 5 of the Convention of Association Between the European Economic Community and the African and Malagasy States.

As provided in the five-year programs bilaterally agreed between the EEC and aid-receiving countries.

The main beneficiaries of aid to production were Senegal and the Malagasy Republic, accounting together for 65 per cent of total aid to production to the CFA countries. Table 13 shows that the main crops benefiting from EEC aid to production were groundnuts (50 per cent of total commitments) and coffee, cotton, and rice (15–16 per cent each). Other crops receiving EEC aid to production included palm oil, pepper, and coconuts. The main recipients of aid to diversification were Ivory Coast (CFAF 11.5 billion), Senegal (CFAF 3.3 billion), and the Malagasy Republic (CFAF 2.5 billion). Originally Ivory Coast was expected to receive a large amount of aid to coffee production, but such aid proved unnecessary in view of favorable developments in world coffee prices. Consequently, Ivory Coast’s allocation of EEC aid to agriculture was shifted to aid to diversification.

Procedures for the establishment and execution of the five-year programs of aid to production were described in Section V. Table 35 shows that, at the end of 1966, EDF disbursements under aid to production programs totaled CFAF 5.6 billion. Of this amount, price subsidies accounted for CFAF 3.9 billion, corresponding approximately to disbursements on the first two annual tranches and representing half of the total price subsidies provided for the whole five-year period. Payments of subsidies for structural improvement amounted to CFAF 1.8 billion, representing only 14 per cent of the total provision for the five years. Senegalese groundnuts accounted for 60 per cent of total disbursements of aid to production; the remainder was received mainly by Chad, Cameroon, and the Central African Republic for groundnuts, cotton, and coffee.

Aid to diversification was approved by the EEC on the basis of individual projects as they were submitted by receiving countries. By the end of 1966, the amount of diversification subsidies approved by the EEC totaled CFAF 11.2 billion—42 per cent of the five-year provision; however, disbursements totaled only CFAF 3.1 billion. The main diversification projects approved by the EEC by the end of 1966 pertained to palm plantations in Ivory Coast (CFAF 8.2 billion), palm plantations and animal husbandry in Congo (Brazzaville), banana production in Cameroon, cotton production in Senegal, hydraulic works in Mauritania, cotton manufacturing in Upper Volta, and agricultural cooperatives in Niger.

Other sources of aid

U.S. aid to the CFA countries is on a relatively small scale; it averaged CFAF 3.4 billion a year over the period 1960–66 (Table 34). It includes assistance from the AID—largely technical assistance and grants-in-kind—and surplus food deliveries under the Public Law 480 program. The cost of such deliveries (including transportation) averaged CFAF 1.2 billion a year over the period 1961–66.

Aid from various agencies of the United Nations averaged CFAF 2 billion a year, consisting primarily of technical assistance in project preparation and education. Bilateral assistance is also provided on a small scale by Germany, the United Kingdom, Canada, Sweden, Denmark, Switzerland, Italy, Japan, Israel, and mainland China.

Services, private transfer payments, and nonmonetary capital

Transactions with the franc area

Information published by the Monetary Committee of the franc area on nontrade transactions of the CFA countries with the franc area consists of global data on payments made through the three central banks of the monetary areas concerned. They are classified into official payments and private payments.

Official payments include all payments originating from government or assimilated agencies, such as the CCCE in France. These payments are made on account of various transactions, such as government expenditures on account of embassies and other agencies abroad, expenditures of the French armed forces abroad, pensions paid by the French Government to Africans retired from the former colonial administration or from the French armed forces, payments on account of foreign aid (excluding salaries to technical assistants, which are paid in France), and loans by the French Government or French public agencies. In Tables 31, 32, and 33, official transactions with the franc area have been adjusted by excluding French foreign aid (shown under official transfer payments) and net loan disbursements by the CCCE to private and mixed enterprises in the CFA countries.

The surplus on official payments with the franc area of CFAF 39.5 billion in 1961 has gradually disappeared, and in 1966 there was a deficit of CFAF 8.7 billion (Table 31). This change resulted essentially from a decline in local expenditures of the French Government and an increase in expenditures abroad by Governments of the CFA countries.

Data on private payments with the franc area, as given by the Monetary Committee, relate to various transactions of private origin, including services, and transfer payments as well as nonmonetary capital movements. In Tables 31, 32, and 33, private payments with the franc area have been adjusted by adding net loan disbursements by the CCCE to private and mixed enterprises in the CFA countries. The deficit on private payments with the franc area has averaged about CFAF 51 billion a year during the period 1961–66.

The information available on capital movements between the CFA countries and the franc area is far from complete. It includes only net disbursements on account of the CCCE and FAC loans and on bond issues floated by the Ivory Coast’s Caisse Autonome d’Amortissement and by the Republic of Gabon on the French market. The data indicate a decrease in net public lending from the franc area beginning in 1964.

Transactions with non-franc area countries

Detailed information published by the Monetary Committee of the franc area has made it possible to show under separate headings in Tables 31, 32, and 33 the balances on services, private transfer payments, and nonmonetary capital with countries outside the franc area.

Over the period 1960–66, nonmonetary capital movements with non-franc area countries concerned principally the EEC countries other than France (see Table 36). Total net investments by these countries increased during the period 1963–65, when they averaged CFAF 4 billion a year, going largely to Ivory Coast, Gabon, Mauritania, Congo (Brazzaville), Cameroon, and Togo. Net investments from the United States and Canada averaged CFAF 2 billion a year during 1960–65, with peaks in 1962 and 1965 resulting from investments in Congo (Brazzaville), Senegal, Togo, Ivory Coast, and the Central African Republic. Capital movements recorded under international institutions represent primarily investments by the IBRD; these were unusually large in 1961 (CFAF 6.3 billion, net) and 1962 (CFAF 7.9 billion, net), going mainly into mining and transportation infrastructure in Gabon, Mauritania, and Senegal. Loan disbursements by the EIB started in 1965 on a small scale but increased rapidly in the following years. At the end of 1966, loans committed by the EIB totaled CFAF 5.2 billion and concerned industries in four CFA countries, namely, Cameroon, Congo (Brazzaville), Senegal, and Ivory Coast. These loans were financed from the EIB’s own resources. The EIB also extends soft “special-term” loans financed from EEC funds; in 1967 such loans to Cameroon and Chad totaled CFAF 1.9 billion.

Table 36.

CFA Countries and Malagasy Republic: Nonmonetary Capital Movements (net) with Non-Franc Area Countries, 1960–66

(In billions of CFA francs)

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Sources: Secrétariat du Comité Monétaire de la Zone Franc, La Zone Franc, 1960–66.

Minor differences from data in Table 31 are due to rounding.

Accords financiers des pays dont la monnaie est le franc CFA

Résumé

Cet article décrit les accords financiers des pays utilisant le franc CFA et le franc Malgache, c’est-à-dire les 13 états africains indépendants qui ont conclu avec la France des accords monétaires prévoyant l’établissement d’un “Compte d’opérations”. Sept de ces pays sont membres d’une banque centrale commune, la Banque Centrale des Etats de l’Afrique de l’Ouest; cinq autres sont membres d’une autre banque centrale commune, la Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun; le dernier pays, la République Malgache, a sa propre banque centrale, l’Institut d’Emission Malgache.

Une caractéristique principale des accords conclus avec la France consiste en ce que les banques centrales détiennent leurs réserves de change sous la forme de dépôts en un “Compte d’opérations” ouvert auprès du Trésor français, sur lequel ces banques centrales ont un droit de tirage illimité. Jusqu’à présent, les trois banques centrales ont pu maintenir des soldes largement créditeurs à leurs “Comptes d’opérations”. Comme les réserves des pays membres d’une même banque centrale sont mises en commun, les surplus de paiements extérieurs de certains pays ont plus que compensé les déficits des autres. Les deux-tiers de l’aide extérieure consentie aux pays membres ont été fournis par la France (1.200 millions de dollars de 1961 à 1966) et leurs recettes d’exportation ont bénéficié d’un régime préférentiel sur le marché français et, plus récemment, sur celui d’autres pays de la CEE, en vertu de la Convention de Yaoundé.

L’aide extérieure et l’accroissement de leurs exportations ont permis aux pays utilisant le franc CFA de maintenir le niveau de leurs importations et les prix sont restés relativement stables dans les 3 zones d’émission au cours des dernières années. L’apparition de fortes pressions inflationnistes en provenance du secteur public a été évitée grâce à la décision des gouvernements de limiter la durée et le montant de leurs recours aux banques centrales.

L’article passe en revue, pour chaque zone d’émission, le système monétaire et bancaire, la structure des finances publiques, l’évolution des prix et des salaires, et les caractères principaux de l’aide, du commerce, et des paiements extérieurs. Il tente, de plus, d’évaluer les avantages financiers que les régimes préférentiels consentis par la France ont procurés à ces pays.

Ordenamiento financiero de los países que utilizan el franco CFA

Resumen

En este artículo se describe el ordenamiento financiero de los países que utilizan el franco CFA y el franco malgache—13 estados africanos independientes que tienen acuerdos monetarios con Francia incluyendo la llamada Cuenta de Operaciones. Siete de esos países son miembros de un banco central común, Banque Centrale des Etats de l’Afrique de l’Ouest; otros cinco son miembros de otro banco central común, Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun; y el país restante, República Malgache, tiene su propio banco central, Institut d’Emission Malgache.

Uno de los principales aspectos de los acuerdos con Francia es que los bancos centrales mantienen sus reservas de divisas en depósito en una Cuenta de Operaciones en el Tesoro francés, sobre la cual tienen también facilidades ilimitadas de sobregiro. Hasta la fecha, los tres bancos centrales han logrado mantener saldos sustanciales de crédito en la Cuenta; se combinan las reservas de los países miembros, de forma que los superávit de balanza de pagos de algunos países compensan con creces los déficit de los demás. Dos terceras partes de la ayuda exterior recibida por los países miembros la ha suministrado Francia (US$1.200 millones en 1961/66), y sus exportaciones se benefician de un ordenamiento prefe-rencial en el mercado francés y, más recientemente, en otros países de la CEE de acuerdo con la Convención de Yaoundé.

La ayuda exterior y la creciente exportación han permitido a los países del franco CFA mantener la importación, registrándose en los últimos años una relativa estabilidad de precios en las tres zonas. La aparición de fuertes presiones inflacionistas del sector público ha sido detenida por las decisiones de los gobiernos de limitar la cuantía y duración de los préstamos tomados del banco central.

El artículo examina, en la zona de cada uno de los tres bancos centrales, el sistema bancario y monetario, la estructura de la hacienda pública, el curso de los precios y salarios, y los aspectos principales de la ayuda, los intercambios, y los pagos. Además, se ha tratado de calcular el beneficio financiero que han recibido esos países mediante sus acuerdos preferenciales con Francia.

In statistical matter (except in the résumés and resúmenes) throughout this issue,

  • Dots (...) indicate that data are not available;

  • A dash (—) indicates that the figure is zero or less than half the final digit shown, or that the item does not exist;

  • A single dot (.) indicates decimals;

  • A comma (,) separates thousands and millions;

  • “Billion” means a thousand million;

  • A short dash (-) is used between years or months (e.g., 1955–58 or January-October) to indicate a total of the years or months inclusive of the beginning and ending years or months;

  • A stroke (/) is used between years (e.g., 1962/63) to indicate a fiscal year or a crop year;

Components of tables may not add to totals shown because of rounding.

A New Series of Books by the IMF

SURVEYS OF AFRICAN ECONOMIES

Volume 1: Cameroon, Central African Republic, Chad, Congo (Brazzaville), and Gabon

Available in English (pp. xxiv + 365) and French (pp. xxiv + 393)

Volume 2: Kenya, Tanzania, Uganda, and Somalia

Available in English (pp. xxiv + 448); French edition in preparation

Each volume surveys the monetary, fiscal, exchange control, and trading systems that are common to the groups of selected countries and presents detailed information for each country on natural resources, production, development planning and progress, budgets and taxation, money and banking, and foreign trade, aid, and payments. Maps, statistical tables, and an index are included in each volume.

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*

This paper was prepared by a study group in the African Department under the direction of U Tun Wai, Senior Advisor, who received his graduate training at Yale University. The economists in the African Department who made major contributions to the paper are Naguib M. Abu-zobaa, who is a graduate of Cairo University and American University; Pierre E. Berthe, who is a graduate of Brussels University and Columbia University; Adhemar Byl, who is a graduate of Michigan State University; Moncef Guen, who is a graduate of the Universities of Tunis and Paris; and Petrus J. Van de Ven, who is a graduate of the University of Amsterdam.

1

Mali was not included in this study; however, on December 19, 1967 Mali signed an agreement with France that established the convertibility of the Mali franc into French francs, with effect from the end of March 1968, through the mechanism of the Operations Account, thus assuring the return of Mali to the French franc area.

2

This paper generally describes developments from 1960 until 1967. For the earlier study, see “The CFA Franc System,” Staff Papers, Vol. X (1963), pp. 345–96.

3

Guinea used the CFA franc until March 1, 1960, when it established its own currency. There are other “CFA francs,” the name being used for the currencies issued in Réunion (a French overseas department) by the Institut d’Emission des Départements d’Outre-Mer, in the Comoros Islands by the Banque de Madagascar et des Comores, and in St. Pierre and Miquelon by the Caisse Centrale de Coopération Economique.

4

With effect from December 10, 1968.

5

For a complete country-by-country survey of exchange restrictions, see International Monetary Fund, Nineteenth Annual Report on Exchange Restrictions (Washington, 1968), which describes the system before the reintroduction of exchange controls toward the end of 1968.

6

Exchange control was re-established in France and in the Malagasy Republic and the African countries of the French franc area at the end of November 1968.

7

For a description of the original institutional arrangements, see “The CFA Franc System” (cited in footnote 2), pp. 380–84. See also Paul Marquis, “Importance et efficacité d’une politique d’émission en Afrique de l’Ouest” (mimeographed), presented at a seminar held by the African Institute of Economic Development and Planning of the United Nations, Dakar, Senegal, July 24–29, 1966.

8

However, the reduction of the rediscount ceilings does not apply to countries whose external reserves exceed 15 per cent of the currency in circulation.

9

At first, these three states had opted for a joint committee only.

10

Within this absolute maximum and within the global rediscount ceiling of each member country, the BCEAO may extend credit in excess of a bank’s ceiling for 30 days and at the special rate of 6 per cent or 8 per cent per annum, but such credits thus far have not actually been extended. On credit extended in the form of short-term advances against customs duty bills (prises en pension), a special rate of 6 per cent was fixed for the first time at the end of 1968.

11

For a more detailed discussion of sources of revenue, see A. Abdel-Rahman, “The Revenue Structure of the CFA Countries,” Staff Papers, Vol. XII (1965), pp. 73–118.

12

Because of its uniform tariff treatment of all imports regardless of their origin, Togo does not follow the above-mentioned distinction between fiscal and customs duties. Ivory Coast levies, in addition, a special import duty (droit special d’entrée). With effect from January 1, 1967, Dahomey consolidated its fiscal duty, the turnover tax, and other fees into a single levy.

13

As export taxes are essentially levied on agricultural products (groundnuts, cotton, coffee, cocoa, etc.), they can be viewed as taxes on incomes of the rural population; on this basis, the proportions of direct and indirect taxes would be different.

14

Cameroon shows capital expenditures separately only since 1963; but even with Cameroon included the figure would not have been much higher than CFAF 2.5 billion.

16

For a description of the French support system, see “The CFA Franc System” (cited in footnote 2), p. 357.

17

The advantage has been computed by the authors on the basis of the price differential and the quantities exported.

18

Named the Convention of Association Between the European Economic Community and the African and Malagasy States Associated with that Community; generally known as the Yaoundé Convention.

19

See “The CFA Franc System” (cited in footnote 2), p. 358.

20

Groundnuts, copra, palm kernels, groundnut oil, coconut oil, palm oil, and palm kernel oil.

21

Based on the difference between the actual export price and the reference price.

22

Based on the difference between the actual export price and the target cost price (for an explanation, see p. 340).

23

See “The CFA Franc System” (cited in footnote 2), p. 361.

24

See “The CFA Franc System” (cited in footnote 2), p. 367.

25

Total export and import data used here do not reconcile with those referred to in foregoing paragraphs; for certain countries, different sources had to be used to analyze the composition and the direction of trade.

26

See also “The CFA Franc System” (cited in footnote 2), pp. 389–91.

27

FEOGA’s resources, derived partly from compensatory levies on agricultural imports, are used to subsidize and to promote agricultural production in the EEC. In transitory stages, compensatory levies are applied on intra-Community as well as extra-Community exchanges, intra-Community levies being lower than the corresponding extra-Community levies in order to maintain a certain degree of preferential treatment within the Community. The intra-Community levies are being gradually reduced and eventually removed when common prices become effective throughout the Community.

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Cover IMF Staff Papers
IMF Staff papers: Volume 16 No. 2
Author:
International Monetary Fund. Research Dept.
Volume/Issue:
Volume 1969: Issue 002
Publisher:
International Monetary Fund
ISBN:
9781451947298
ISSN:
1020-7635
Pages:
218
DOI:
https://doi.org/10.5089/9781451947298.024