In its recent analysis of the price competitiveness of the Cemac , the Bank of Central African States (Beac) reveals that the F CFA, the currency used in the sub-region, lost value in the first quarter of 2022.
The report says between the fourth quarter of 2021 and the first quarter of 2022, the FCFA depreciated against the US dollar (-2.2%), the Chinese yuan (-1.7%), the British pound (-1.0%) and the euro (-0.4%), Beac said.
But, according to experts, the depreciation of the FCFA against the euro should not affect operations in exchange offices between these two currencies which have a fixed parity. “It is in nominal terms that users trade, not in real terms,” said a former Beac executive,reports the onlie media Investir au Cameroun.
For the central bank, this loss of value of the FCFA is good news for the price competitiveness (i.e. the ability to produce goods and services at prices lower than those of competitors for an equivalent quality) of CEMAC countries.
In the first quarter, the price competitiveness gains of the Cemac economies, recorded in the fourth quarter of 2021, declined in the first quarter of 2022, due to lower position gains on the export and import front.
However, the depreciation of the nominal effective exchange rate, reinforced by a lower inflation rate in the sub-region than in its partners, especially its competitors, has contributed to improving the price competitiveness of the CEMAC economies. In other words, the loss of value of the FCFA against the US dollar, the Chinese yuan, the British pound and the euro has helped improve the ability of CEMAC countries to produce goods and services at prices lower than those of competitors for an equivalent quality.
According to the central bank, the trends observed in the first quarter should continue in the second quarter. “The CFA franc is expected to depreciate over the period against the currencies of major partners and suppliers, due to the decline of the euro (the anchor currency) against major currencies, especially against the US dollar. This should reflect the widening short-term interest rate differential between the euro area and the United States, driven by higher inflation in the United States and the different path of US monetary policy,” explains the Beac.