France's unchallenged political, economic, and military domination of its former sub-Saharan African colonies is rooted in a currency, the CFA franc. Created in 1948 to help France control the destiny of its colonies, fourteen countries--Benin, Burkina-Faso, Ivory Coast, Mali, Niger, Senegal, Togo, Cameroon, Central African Republic, Congo, Gabon, Equatorial Guinea, Bissau Guinea, and Chad--maintained the franc zone even after they gained independence decades ago.
In exchange for France guaranteeing the CFA franc's convertibility, these countries agreed to deposit 65% of their foreign exchange reserves in a special account within the French Treasury and granted to France a veto over the franc zone's monetary policy whenever this special account was overdrawn. These decisions have had devastating consequences for forty years.
The bulk of the CFA franc money supply comes from trade between France and its African allies. As a result, the franc zone's basic features have always been scarce money and high interest rates. On the other hand, in line with IMF and World Bank structural adjustment programs, strict budget discipline has kept inflation low--as if further belt tightening in the name of price stability was the right policy priority in desperately poor countries hit by decades of depressed demand.
The result has been a lethal combination of currency convertibility, skyrocketing interest rates, low inflation, and free capital movement, which merely fuels speculation and capital flight. Speculators transfer huge amounts of money from France to high-interest-bearing local deposit accounts, collect their tax-free gains every three months, and take the no-risk plunge again.