BY NDUMBE BELL JOSEPH GASTON IN DOUALA
It raised some eyebrows when the announcement was made by BEAC,the issuing institution of the Economic and Monetary Community of Central African States (CEMAC), on November 7, 2022 for the issuance of new bank notes to be unveiled in December 16, 2022 also to mark the celebration of the fiftieth anniversary of the Brazzaville Accord, 20 years after the present banknotes were unveiled in 2003.
A cross-section must have understood the introduction of new banknotes to be a means of cleaning the surface from dilapidated or mutilated notes. Others were wishing that this BEAC announcement would mark the end of stringing the CFA to France for CEMAC to circulate an independent currency while another shade of the population would have thought that the objective was to increase the quantity of money in circulation in response to a shortage or to stamp out counterfeiting, other forms of falsification and of course, including money laundering.Some ofthese speculations were included in the mix.
Of course, it is BEAC’s responsibility to guarantee all the means of payment while ensuring that they are protected from possible risks. Obviously, like in many other economies including that of CEMAC, new banknote injection draws (sometimes) scepticism, positive reactions, criticism and a lot more ways to envisage the outcome or raison d’être.
It is with these in mind that the reasons for BEAC’s announcements has to be put in its rightful perspective. According to Nkafu Policy Institute in Cameroon, public opinion needs enlightenment for this call for change which is taking place in a global environment characterised by strong economic instability.
According to our source, one of the explanations to inject new banknotes (in a nutshell) is to make money readily available so that people can consume.
“Given the global situation, the injection of new bank notes has the particularity of increasing the propensity of economic agents to hold money and therefore consume”. This will accordingly stimulate production and therefore cause a rise in production that will later result to lower prices. It is said that this is one-way BEAC strategises to guarantee monetary stability, citing article I of its statutes.
Our source further enlightens that new bank notes does not necessarily mean increase of the quantity of money in circulation, so BEAC’s objective is to accelerate the speed of circulation of money while taking care of the withdrawal of the old series of banknotes so as to introduce the new in the same quantity. “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 on advantageous terms.”
Another very important reason for this banking injection is given to be the reinforcement of banknote security and compliance with international standards. One of the obligations of BEAC in compliance with Article 20 of Title II of the convention governing the Central African Monetary Union (UMAC), is to issue money to all the States of CEMAC and to ensure the security and durability of the banknotes, that is to reinforce the quality of the monetary signs or designs to have a longer lifespan in order to minimise the cost entailed by the Central bank.
The last announcement of the Central bank to introduce new bank notes coincided with increasing demands to put an end to the use of the CFA (Franc de la Cooperation Financière en Afrique). According to our sources, this will take at least a decade or so. It is explained that “Given that these banknotes are printed in France” and the existing cooperation agreement in force with CEMAC countries, this may take 20 more years according to the Brazza Accord.
Our source says BEAC has therefore fulfilled its’ objective of achieving stability but cautions that this measure by itself, is not enough to “contribute to enhancing the effectiveness of monetary policy” which, the institute says, “is based on principles such as the independence of the bank and the credibility of the decisions taken by the Monetary Policy Committee”.