Proposals for a monetary association of the West African states(CEAO, ECOWAS)

Abstract

The present monetary system makes it impossible for any monetary policy to work in the countries of the CEAO. The Central Bank is not empowered to lend its support to the Treasury except within very narrow limits, and does not really administer the foreign reserves of the countries concerned since it places them almost entirely with the French Treasury. If, in addition, as is the case, the commercial hanks are foreign owned and are authorized to transfer funds in and out of the country without being subject to any control, the national authorities are bereft of all means of using the basic instruments of monetary policy. In any event, we have already seen that, because of the disparity in the interest rates applied in Africa and in Europe, foreign companies were induced to borrow from the banks in Africa in order to invest in Europe. The purpose of this monetary union is to avoid a water light partitioning of the States and to facilitate their commercial and financial relations.