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January currency review

Plans by eight French-speaking West African nations to launch a new common currency, the 'eco', sometime in 2020, have come up against major objections from their English-speaking neighbours.

Francophone/Anglophone divisions have long been an issue in West Africa (Cameroon has recently shown just how divisive they can be), and there is fierce rivalry for regional dominance between French-speaking Cote d'Ivoire and English-speaking Nigeria. However, the fact that Francophone Guinea is siding with the Anglophone five regarding the eco suggests the issue is more complex than a simple language barrier.

Benin, Burkina Faso, Cote d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo had hoped that their plans to scrap the West African CFA franc, which they all use as their currency, and replace it with the eco, would be reasonably uncontroversial. After all, it would involve little change on the face of it, with the new currency being adopted by the same countries as used the old, while still being pegged to the euro and backed by the Banque de France.

The trouble is that the ambition to create a common currency in West Africa goes back decades, having first been suggested in 2000 by the same five Anglophone nations (Gambia, Ghana, Liberia, Nigeria and Sierra Leone), plus Guinea, who are now so put out by the French-speakers' plans. Furthermore, the new project is considerably less ambitious than the one agreed to only a few months ago by the broader ECOWAS group, which includes both the French and English-speaking nations currently at odds with each other. On top of all that, the newcomers have even stolen the name of the proposed currency, 'eco', which the forerunners had hoped to use for the bigger project. 'Sacré bleu!' as the French might say.

Ghana had initially backed the new eco plans, but has since backtracked, joining the rest of the Anglophone group in issuing a statement on 16 January that the latest move "is not in accordance with the [ECOWAS] decisions" of July 2019 and publicly criticising the planned usage of the eco name. However, by setting themselves against the Francophone plans, the English speakers risk scuppering not just those but their own ambitions as well.

There's no reason why the new eco, if the French speakers can achieve it, couldn't act as a forerunner of the Anglophone ambitions. Indeed, it might be a safer way of starting the project off. There has already been support from the countries which currently use the Central African CFA franc (Cameroon, Central African Republic, Chad, Congo Republic, Equatorial Guinea and Gabon - all French speaking), who hope to join, and the bigger the collective economy involved, the more stable the eco is likely to be. If the English-speaking countries, especially the huge Nigeria, were to become members too, viability would be greatly enhanced. The Anglophone countries aren't keen on the eco being pegged to the euro, preferring a floating exchange rate, but that reform could come later. None of this will be easy, but the danger is that if the Anglophone group refuses to back the Francophone efforts and goes its own way, the language barrier which already separates West Africa to a significant degree could be joined by a much more divisive currency barrier.

Countries experiencing largest currency losses in January
Currency code Movement v EUR
30 Dec - 3 Feb 2019 (%)
Chile CLP -6 3.0
South Africa (Lesotho, Namibia, Swaziland) ZAR -5 4.0 (4.6, 2.6, 2.0)
Sudan SDG -8 57.7
Ukraine UAH -6 4.1
Venezuela VES -40 39113.8
Zambia ZMW -8 11.7

The Venezuelan bolivar was once again the world's weakest currency this month. However, reports suggest the bolivar is not only almost entirely worthless now, but also increasingly hard to find. Dollarisation is spreading through society, creating a mini-economic boom in Caracas among those who have had access to or savings in hard currencies through the crisis. For those not so lucky, however, life appears to be ever more difficult.

Also losing significant value in January was the Sudanese pound, continuing a long downward trend. However, a glimmer of hope was provided when the government announced in January that it would be relaunching gold exports, in the hope of reducing shortages of dollars and stabilising the local currency and inflation.

In Lebanon, where official and unofficial exchange rates had been rapidly diverging since a political crisis erupted in October, a deal has been struck between the central bank and independent licensed money changers to cap the dollar exchange rate at USD 1 / LBP 2000 (the unofficial rate had gone as high as LBP 2600 in early January). So far, it seems to be holding and may also have stifled the black market. If so, the move should help to stabilise inflation, which has risen sharply in the last few months.

There probably aren't many expats working in Syria at the moment, but the country's economy is now beginning to re-open to external trade, so it may be useful to note that the value of the Syrian pound has halved in the last 12 months on parallel markets (the official rate remains pegged to the dollar). The economy is still in something of a crisis and inflation is reportedly soaring again.

Only two currencies gained more than 2% in January against the euro, which had a much stronger month than it has been used to lately:

Countries experiencing largest currency gains in January
Currency code Movement v EUR
30 Dec - 3 Feb 2019 (%)
Ghana GHS +4 7.9
Myanmar MMK +3 8.3

Finally, here is this month's selected currency movements table:

Selected currency movements (v EUR)
Country Currency code % movement to 3 February 2020 v EUR since: Latest official annual inflation (%)
(1 month)
(3 months)
(6 months)
(12 months)
Argentina ARS 0 0 -27 -36 53.8
Australia AUD -3 -2 -3 -4 1.8
Brazil BRL -4 -5 -12 -12 3.3
Canada CAD 0 0 0 +3 2.2
Chile CLP -6 -6 -14 -17 3
China CNY +2 +2 0 +1 4.5
Egypt EGP +2 +3 +5 +14 7.1
India INR 0 0 -3 +3 7.4
Indonesia IDR +2 +3 +3 +5 2.7
Japan JPY +2 0 +1 +4 0.8
Kenya KES +1 +4 +4 +4 5.8
Korea Republic KRW -2 -1 0 -3 0.7
Mexico MXN +1 +3 +2 +5 2.8
Nigeria NGN +1 +1 +1 +4 12.6
Norway NOK -3 0 -5 -5 1.4
Philippines PHP 0 0 +1 +6 2.5
Poland PLN -1 -1 -1 0 3.4
Russia RUB -1 +1 0 +6 3
Singapore SGD 0 +1 +1 +2 0.8
South Africa ZAR -5 +2 -4 -8 4
Sweden SEK -5 +2 -4 -8 2
Switzerland CHF -2 +1 -1 -3 1.8
Turkey TRY 0 -4 -5 -11 11.8
United Kingdom GBP +2 +2 +6 +4 1.3
United States of America USD +1 +1 +1 +4 2.3
Venezuela VES -40 -69 -89 -95 39113.8
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