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The chapter briefly traces the evolution of the Franc CFA Zone- a monetary union, which is one of the world’s longest surviving currency arrangement. It examines the implication of the four main principles of the monetary arrangements with the advantages and costs. It looks at the membership in CEMAC especially on how the agreement has impacted the financial sector and consequently CEMAC’s economy. The CEMAC’s economy is oil dominated and oil price shocks influence the region’s economic performance. The impact is seen in region’s limited intraregional trade, weak financial development and low private sector financing. The chapter, therefore, assesses the financial sector of the zone, and analyses the role of financial sector on the growth of the private sector and economic expansion. The results of the estimated model show the importance of the financial sector to the private sector. The chapter concludes that the weak financial sector/system of the CFA franc zone has hindered the economic expansion because of the limited private sector financing. Hence, economic diversification and financial development is essential in the regional economic expansion. |
