By Dr. Jean Cédric Kouam (Download pdf version)
Why Did BEAC Decide to Introduce a New Series of Bank Notes 20 Years After Those of 2003?
Traditionally, the Bank of Central African States (BEAC), the issuing institution of the six countries of the Central African Economic and Monetary Community (CEMAC), which is comprised of six countries (Cameroon, Central African Republic, Chad, Congo Republic, Equatorial Guinea and Gabon and), renews its range of banknotes every ten (10) years. The latest banknotes, announced in 2002, were introduced in 2003 to mark the thirtieth anniversary of the Brazzaville Agreements. On November 7, 2022, BEAC’s monetary authorities announced the introduction of new banknotes. These new banknotes are expected to be unveiled during the celebration of the fiftieth anniversary of the Brazzaville Agreements from November 20 to 22, 2022 in Ndjamena (Chad); and put into circulation from December 16, 2022. Undoubtedly, the injection of a new range of banknotes and coins in the CEMAC zone has several facets and can be interpreted in different ways. The purpose of this article is to inform public opinion about the main reasons for this change, which is taking place in a global context marked by high economic vulnerability.
Increasing the propensity of economic agents to hold money and therefore to consume
First of all, considering the current global situation marked by strong inflationary pressures at both national and international levels, the injection of new banknotes has the particularity that it will increase the propensity of economic agents to hold money and therefore to consume. The increase in consumption will naturally stimulate production and this increase in production could translate in a decrease in prices, at least at the national level. It is therefore a strategy for the BEAC to guarantee monetary stability in accordance with Article 1 of its Statutes.
It should be noted that the injection of new banknotes does not necessarily mean that the central bank will increase the quantity of money in circulation, but rather its clear desire to accelerate the speed of circulation of money. In fact, the central bank will take care of the withdrawal of the old series of banknotes from circulation in order to introduce the new series of banknotes announced in the same quantities. In the event that the central bank decides to increase the quantity of money in circulation, it is obliged to lower its key rate (which is practically unlikely given the current economic context marked by a general rise in prices), in order to give commercial banks the means to refinance themselves on favorable terms. This is unlikely to happen in the current economic context of rising prices,)
Strengthening the Security of Banknotes and their Compliance with International Standards
Secondly, in accordance with Article 20 of Title II of the Convention governing the Central African Monetary Union (UMAC), the BEAC has the exclusive right to issue banknotes and coins that are legal in the territory of each member state of the Union. This privilege comes with a certain number of obligations, including ensuring the security and durability of the notes. The BEAC is therefore obliged to guarantee these means of payment against possible risks of falsification and counterfeiting; but also to reinforce the quality of the monetary signs put into circulation. It should be noted that the processing of very worn signs has a cost for the central bank, hence the need to put into circulation notes and coins that would have a longer life span. It should also be recalled that the BEAC is also concerned about the aesthetics of the currency it issues, and strives to meet the new international standards.
A clear willingness by BEAC to rule on the virulent demands to end the use of the CFA franc.
Finally, it should be noted that the decision to inject new banknotes into CEMAC countries comes in a context marked by strong demands to end the use of the CFA franc (Franc de la Coopération Financière en Afrique). Given that these banknotes are printed in France and considering the monetary and financial cooperation agreements signed between France and the CEMAC countries, the introduction of a new series of banknotes undoubtedly reflects the commitment of the member states to perpetuate these cooperation agreements, which means that the CFA Franc has several more years of life ahead of it. It may be necessary to wait until the next decade (when a new series of banknotes will be introduced) to see it disappear.
BEAC’s decision to introduce a new series of monetary signs 20 years after those of 2003 reflects its willingness to fulfill its missions and achieve its objectives, particularly that of monetary stability. However, such a decision will not necessarily contribute to strengthening the effectiveness of monetary policy, which is based on principles such as the independence of the bank and the credibility of decisions taken by the Monetary Policy Committee.