Financial Arrangements of Countries Using the CFA Franc

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

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

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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.


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.


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.


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


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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.



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.


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.


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 AssociatesStatistical 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.


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.