Should the straitjacket of the CFA franc be broken to finally transform the Senegalese economy? The keys to a successful transition

Source: French to English Tester Published on: 2026-05-01

Source: The Conversation – in French– By Souleymane Gueye, Professor of Economics and Statistics, City College of San Francisco

The debate on the CFA franc, a common currency used by several countries in West Africa and Central Africa guaranteed by the French Treasury, has been raging among economists since the 1960s, but it has never concerned most Senegalese. Over the past decade, the media, as well as social networks, have showna growing interestfor the use of the CFA franc.

These concerns of the population regarding economic issues related to the CFA franc should be welcomed and taken into account by policymakers. They are explained notably by the differing interpretations about the role of the CFA franc’s fixed peg to the euro in the structural external imbalances of the Senegalese economy, as well as by debates about its contribution to the inability to create employment and reduce poverty in Senegal. This fuels the discussion about the future of this currency.

More than half a century after independence, the central question remains: can Senegal undergo its economic and social transformation without having the necessary monetary sovereignty, while continuing to operate within the framework of the CFA franc?

For part of the population, questioning this system is seen as an unnecessary risk. For others, refusing to discuss itdemonstrates obvious political and intellectual resignation.

Consequently, it is imperative to ask the essential question: can a sovereign state lead its economic development without fully controlling the main macroeconomic instruments, foremost among which are monetary policy and exchange rate policy?

Senegal belongs today tothe West African Economic and Monetary Union (UEMOA), where monetary policy is passively conducted by theCentral Bank of West African States (BCEAO).

To havestudied the implications of a possible exit of Senegal from the CFA zone, I believe that the CFA franc, pegged to the euro and guaranteed by France within a fixed exchange rate regime, ensures stability and credibility. That said, it clearly limits Senegal’s ability to structurally transform its economy.

Two opposing views

Two opposing views:

•The supporters of the CFAhighlight a collective monetary sovereignty and an appreciable macroeconomic stability, which enhance investor confidence and stabilize inflation.

•The criticsestimate that the current regime constitutes a structural constraint.

The absence of exchange rate flexibility and the limited autonomy of monetary policy hinder the mobilization of the instruments necessary for industrialization and job creation.

Faced with these challenges, the monetary issue becomes central to any ambitious development strategy. Within the framework of theSenegal Transformation Program towards 2050, currency must no longer be considered solely as an instrument of stability, but rather as an essential lever for the systemic transformation of the Senegalese economy.

Why consider a national currency?

The CFA franc offers advantages: low inflation and exchange rate stability. However, these gains come with constraints that could limit the structural transformation of the Senegalese economy. Furthermore, the project to create the Eco, the common regional currency of the countries of theEconomic Community of West African States(ECOWAS, 12 countries), remains uncertain.

The meeting of Heads of State in Monrovia in February 2026 once againconfirmed the accumulated delays, notably due to convergence criteria largely inspired by the experience of the European Union, but difficult to apply to West African economies that are still very heterogeneous and weakly integrated.

Inthe West African Economic and Monetary Union (UEMOA), intra-regional trade remains relatively low — at the level of13% of trades— and the regional budgetary stabilization mechanisms remain very limited.

In this context, a national currency deserves to be considered for three main reasons:

1. Correct the exchange rate asymmetry and restore macroeconomic instruments

With an outward-looking economy, specialized in primary products (peanuts, oil, gold, fish, etc.) and highly dependent on food and energy imports, Senegal remains vulnerable to external shocks.

The pegging of the CFA franc to the euro can create asymmetry: an overvalued currency penalizes exports and favors imports. This results in structural external deficits (-10.5% of GDP) and a very low import coverage rate by exports (55%). It harms economic activity while maintaining the non-competitiveness of the agricultural and industrial sectors.

A well-managed national currency would allow the exchange rate to be adjusted based on economic fundamentals, notably the new oil, gas, and agro-industrial resources, to correct structural imbalances and thereby enhance the country’s economic adaptability and resilience to external shocks.

2. Adapt monetary policy to national priorities

The BCEAO’s monetary policy primarily favors price stability and the external anchoring of the currency, excluding any possibility of effectively supporting employment, industrialization, or agro-industrial processing.
A national monetary sovereignty would allow coordinating monetary policy and development strategy.

The exchange rate could become a lever of competitiveness for key sectors, and monetary policy could directly support major national projects that are labor-intensive.

3. Prevent a prolonged structural dependency

Senegal remains trapped in a system it does not fully control. The reform of the CFA franc (or the creation of the Eco) meant to replace the CFA franc since 2020 is struggling to materialize. Given the delays and twists in the negotiations from 1980 to the present day, it would be a historic exception to see drastic reforms emerge from the discussions planned at the sub-regional and regional levels on the monetary issue.

In an unstable international environment and a certain geopolitical realignment in the coming years, mastery of currency is imposed as a strategic lever to counter prolonged economic dependence. Consequently, Senegal must take the lead as thedeclaredSenegalese Prime Minister Ousmane Sonko: “The CFA franc does not fit with our vision. Either the currency will be changed with our UEMOA partners, or we will take our responsibilities, and we will prepare to issue our own national currency.”

Steps and conditions for a controlled exit

An exit from the CFA requires gradual planning and supervision by robust institutions. The credibility of the future currency depends on the trust of households, businesses, and international partners.

For a successful transition, certain prerequisites are necessary:

Consolidate the macroeconomic framework: budgetary discipline, credible monetary policy, and a solid financial framework.
Stabilize external debt: reduce vulnerability to currency fluctuations.
Strengthen foreign exchange reserves: stimulate exports and increase local added value (agriculture, fishing, mining).
Diversify the economy: develop new industrial sectors and improve productivity.
Broaden the tax base: mobilize more domestic resources and reduce dependence on external borrowing.

Construction of credible monetary institutions:

• Independent central bank: clear mandate (price stability, financial stability, support for economic activity).

• Transparent management of reserves: diversification into gold and currencies (dollars, euros, yuans).

• Flexible exchange rate regime: administered floating or indexed to a basket of currencies reflecting the weight of our trading partners, in order to limit volatility.

• Securing the financial system: deposit guarantee, strengthened banking supervision, coherent communication.

Economic impacts: risks and opportunities

Every monetary transition inevitably involves an adjustment phase. In the case of an exit from the CFA franc, several short-term risks must be clearly identified and anticipated in order to avoid any macroeconomic instability.

A. Short-term Risks:

• Monetary instability and capital flight: anticipation of a depreciation, increased demand for foreign currencies, imported inflation.

• Increase in the cost of external debt: depreciation of the currency and pressure on public finances.

• Commercial adjustments: conversion costs, exchange rate risks, temporary adaptations of regional chains.

• Impact on the diaspora and the informal economy: temporary disruptions in remittances and price formation.

B. Medium- and long-term opportunities:

Beyond transition risks, a reform of the monetary system can also open significant economic opportunities if accompanied by strong institutions and a coherent development strategy.

• Strengthen competitiveness and industrialization: adjustment of the exchange rate, substitution for imports, development of local sectors.

• Increased countercyclical financing capacity: bank refinancing, support for investment and structural projects.

• Better control of financial flows: control of unproductive outflows and mobilization of national savings.

Monetary sovereignty and development financing

The national currency could reduce dependence on external debt and mobilize local savings to finance the country’s economic development. The central bank could direct credit towards strategic sectors (agriculture, industry, agro-processing) and coordinate industrial, budgetary, and trade policies. Thus, the currency would become an active instrument of economic transformation, and not just a pillar of stability.

Ultimately, the currency is a strategic instrument, not a miracle solution. The CFA franc guarantees stability and credibility but limits the crucial strategic flexibility for a country in transition like Senegal.

I recommend preparing a national currency with rigor, discipline, and strong institutions in order to:

• Finance development endogenously;

• Support the productive sector;

• Reduce dependence on external debt;

• Strengthen the adjustment capacity in response to international shocks by adapting monetary policy.

The question is not symbolic: it is about aligning macroeconomic instruments with Senegal’s ambitions for structural transformation. For a country aspiring to emergence, the currency must become a strategic tool serving endogenous and sustainable development, as the new authorities had foreseen: “there is no sovereignty without monetary sovereignty” in their economic development program.

Unfortunately, the monetary issue is almost absent from the new Vision 2050, despite the campaign promises and the detailed analysis of the necessary steps — similar to those mentioned in this text — to achieve a national currency.

It is imperative to move from intention to execution with rigor, determination, and a keen sense of responsibility towards the population and the country’s future – systemic transformation of the economy

Souleymane Gueye does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

–ref. Should we break the shackles of the CFA franc to finally transform the Senegalese economy? The keys to a successful transition –https://theconversation.com/should-we-break-the-constraint-of-the-cfa-franc-to-finally-transform-the-senegalese-economy-the-keys-to-a-successful-transition-278899