Senegal - Money

Throughout the 1980s and early 1990s, Senegal suffered extreme economic difficulties characterized by sustained recession and under-utilized capacity (which means that the working age population was not used to its full potential). One of the symptoms of the troubled Senegalese economy was a chronic balance of payments deficit. The WB and the IMF, therefore, contested that Senegal should devalue its currency, which would lower the price of its exports and make its products more attractive to the international markets. Devaluation would make the Senegalese economy more competitive and help to rectify the balance of payments problem.

On the eve of the devaluation in January 1994, the Senegalese currency, the Communauté Financiére Africaine franc (CFAF), was valued at 50 CFA francs to 1 French franc. Devaluation converted this figure to 100 CFA francs to 1 French franc. Since 1 January 1999, the CFAF has been fixed to the euro (the currency of the EU countries) at a rate of 655.957 CFA francs per euro, a rate which reflects the devaluation of 1994. This connection causes the value of the CFA franc to adjust to the value of the euro in international foreign exchange markets. In January 2000 the CFA franc-dollar exchange was 647.25 CFA francs to 1 U.S. dollar.

Exchange rates: Senegal
Communauté Financiére Africaine francs per US$1
Jan 2001	699.21
2000	711.98
1999	615.70
1998	589.95
1997	583.67
1996	511.55
Note: From January 1, 1999, the CFA Fr is pegged to the euro at a rate of 655.957 CFA Fr per euro.
SOURCE: CIA World Factbook 2001 [ONLINE].

Although WB contends that devaluation stimulated growth in the export-oriented sectors of the Senegalese economy, and in the economy as a whole, it has also brought negative results. Devaluing the exchange rate increases the amount of currency needed to pay for imports. For the urban poor, who are dependent upon imported food, the cost of food has escalated. Since the urban poor are already malnourished, devaluation has been detrimental to the nation's well-being. Moreover, Senegal continues to run a balance of payments deficit, despite its more competitive position in the international market.