devaluation on the domestic prices of imported goods, as well as the impaa of the ensuing liberalization of prices. Variations in inflation rates from country to country, based on the openness of the individual country and the rate at which it liberalized its prices, had been provided for. It was, however, expected that the consolidation of regional integration would
stamp out these variations.
2.5. External debt relief offers a glimmer of hone
69. In view of the hard currency appreciation against the CFA franc, the change in par value was expected to increase the debt burden. It was, however, announced that the franc area's African countries' debt would receive special treatment as part of fresh negotiations, on debt conditions, with international creditors. It was expected that the negotiations would lead to restructuring, the immediate effect of which would be the reduction of debt servicing.
70. Figures concerning debt that corresponds to Official Development Assistance (ODA) of the franc area's African countries for 1992 are given in the tables below:
Table I: PDA debt (medium-income countries)
(in billions of dollars) Countries
Cameroon Congo
Cote d'lvoire Gabon
TOTAL
Sum 5.4 3.8 10.6 3.0 22.8
France's share 31.0
41.2 42.7 53.5
Source: s Tmpicaux- 21 January 1994.
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Table II: PDA debt (least developed countries)
(in millions of dollars)
Source: Marches Tropicaux- 2rjanuary 1994,
71. France, the major creditor, decided to cancel the total debt owed by the least developed countries and reduce by 50% that of medium- income countries. Such a measure has a far-reaching financial effect. It is a fact that debt servicing features in the various States' budgetary expenditures. Once canceled, the ODA debt no longer figures in public accounts. Consequently, a burden is lifted. This indicates that debt relief can help improve States1 budgetary balances.
3. Rough assessment of the January 1994 devaluation in African member countries of the franc area
72. It would be delusive to claim to definitively assess the impact of the devaluation of the CFA franc against the French franc. It is nevertheless possible to evaluate the initial effects of this measure on the economies concerned. Such an evaluation must not disregard the measure's initial goals. The goals concern the management of inflation, growth of productivity, increase in financial resources, signing of external debt relief agreements, etc.
3.1. a relatively low inflation level
73. Immediately following the devaluation,there was a widespread increase in prices owing to the rise, in local currencies, of imported goods on one hand, and of the inputs used in the manufacture of local products, on the other hand. The re-introduction of price controls in most countries of the area did nothing but slightly delay the phenomenon as well as prolong and intensity it: controls heralded shortages of certain basic products (sugar, flour, etc.), as a result of either hoarding or diminished production.
74 Today, evidence shows that the upward trend in salaries is under control, and although
some price increases are discernible, they are mostly attributable to States' budget policies
(creation of a series of taxes with a view to increasing state receipts). For 1994, the inflationrate for the entire area was approximately 33%, or 2 points above the projected level.'3
3.2. Improvement "f *he rea* GT>P grawth rate
75 Compared to the 1990-1993 period during which the real GDP dropped by an annual average of 1%, the real GDP for 1994 rose by 1.5%. This result, which is clearly higher than the targeted 1.1%, represents a reversal of the previous period's pattern. However, it is hardly a reflection of the individual situation of the area's countries. Thus, for instance, within the rnmmnnautg Ernnomioue et Mon&aire de rAfrJQue Centrale (CEMAC), such countries as
Cameroon, Congo and Gabon recorded negative growth rates. We hasten to stress that reversal of the real GDP growth pattern is attributable, above all, to positive results posted by countries
of the West African Economic and Monetary Union (UEMOA). The GDP growth rate in thelatter group of countries rose from -1.3% in 1993 to 3.1% in 1994. The pattern reversal
affecting the entire area was astonishing. Growth in quantity could hardly have been expectedwithin such a short time-frame. Indeed, one of the characteristics of African countries of the franc area is that they specialize in the production of raw materials, a substantial increase of
which requires a period of four to five years. It is possible, then, that the increase in export volumes is the result of the produce of marginal orchards (which were low-yielding owing to their age or inaccessibility), unharvested prior to the devaluation. The increase in exports along with the decrease in imports, definitely played a role in the growth of the real GDP beyond the projected value.163.3. Increase *P financial resources
76 As a result of the devaluation, African countries of the franc area enjoyed a tremendous upsurge in the prices of their export products. Between 1993 and 1994, these prices increased twofold in local currencies. This situation, coupled with the repatriation of capital, contributed to an increase of about 1.9 billion dollars in external reserves at the BCEAO and the BEAC, in 1994. Actually, it would be difficult to ignore the scope of this phenomenon in the area. The difficulty of establishing accurate evaluation notwithstanding, it is clear that the sums that had been expatriated were considerable. Take a country like Cameroon, figures concerning the
13 J.A.P. CLEMENT: "Bilan apres la devaluation du franc CFA\ Finances et Ddveloppement. June, p. 24.
16 Cf. Annexe II.
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smuggling of bank notes out of the country were, for certain years, a cause for concern: 128 billion CFA francs in 1988, 109 billion CFA franc in 1989.17 These figures are not very different from the country's investment budgets for those same years. It is hoped, therefore, that the repatriation of capital will, in the medium-term help further the revival of investment and the reduction of unemployment.
3-4. Signing of external debt relief agreement?
77. A major disadvantage of a devaluation is that it intensifies the debt burden of the country that is subjected to it. Already heavily indebted prior to the change in the par value of their currency, African countries of the franc area were no exception to this rule. In 1992, their total outstanding debt amounting to 46,671.4 million dollars, represented 95% of the GDP of these countries as a whole, while the arrears (in interests and principal) alone represented 51.5% of
the GDP."
78. The devaluation was followed by negotiations between African countries of the area and foreign commercial banks and other private creditors, with a view to rescheduling these countries' debt and establishing conditions that are consistent with their capacity for external payments. To-date, nearly all these countries have signed or are about to sign substantial debt relief agreements with the Paris Club. The bilateral debt of some of the countries (low-income ones) was canceled, in particular by France. Average-income countries, which were for a while exempted from debt relief measures, recently benefitted from the conversion, into investment projects, of their debt to France.
79. Although they only serve to temporarily delay problems related to debt servicing, the debt relief measures applied to the franc area's African countries, nevertheless enable the latter to re allocate resources to profitable investment projects. It is, however, regrettable that so-far only France has made noteworthy efforts along these lines. It is hoped that other creditors will effectively implement similar measures.