Impact of Devaluation on the Cameroonian Economy

The 2008 global economic crisis exposed the interdependence of nations and the critical role of currency value. All societies must develop a medium of exchange. The USDP's approach to combating poverty depends on the creation of a national currency in Cameroon.

The Negative Role of Devaluation and Dependence on the CFA: Devaluation, a deliberate reduction in the value of a currency relative to the one it is pegged to, is often driven by market pressures and political decisions. It has a significant impact on citizens' quality of life. The Cameroonian people need a government that explains the reasons for any devaluation and the measures taken to minimize its negative impacts. Cameroon has experienced past devaluations influenced by the IMF.

The global crisis was caused by policies encouraging asset bubbles and refusing to restructure bad debts. European economies, including France, were dragged down partly due to their common currency and financial ties with the United States. Cameroon is affected because its currency is linked to the French franc (Euro). The local government must explain its specific role. Cameroonians need to know whether France, a major trading partner, benefits from the devaluation of the FCFA to buy Cameroonian products more cheaply.

The value of a currency depends on its productivity and its value in global reserves. Exchange rates are fixed or floating. The USDP will openly discuss a local currency not tied to the French franc.

Circumstances and Effects of Devaluation: A government devalues when the fixed exchange rate becomes unsustainable (insufficient foreign exchange reserves). Devaluation makes the national currency cheaper, which can: Make exports cheaper for foreigners; Make imports more expensive for nationals, discouraging imports; Help reduce the current account deficit; Be used to stimulate demand and combat unemployment (an alternative to unpopular fiscal policies).

Risks: Worsening inflation (may require an increase in interest rates, slowing growth); Negative psychological effects (a sign of economic weakness, loss of investor confidence); Successive devaluations by trading partners ('beggar thy neighbor'), creating instability.

Devaluation and Employment in Cameroon: Devaluation can reduce unemployment in industrialized countries. In Cameroon, there is insufficient industrial infrastructure for this effect to occur. The government must justify whether the devaluation aimed to create jobs and prove its past impact.

Example I: Impact on FCFA vs. Dollar Purchasing Power: After devaluation, the FCFA buys fewer dollars.

Example II: Impact on the Cost of Imported Goods: More FCFA is needed to buy cars, school supplies, medicines, clothing, and imported equipment.

Example III: Impact on Subsistence Farmers: Farmers must produce/sell much more (coffee, cocoa) to cover basic needs, the prices of which (in FCFA) have increased.

Example IV: Impact on Civil Servants: Without adjustment, their fixed salary loses value and no longer covers needs (rent, education, health).

USDP Program to Effectively Manage Devaluation: Before taking power, the USDP will develop a master plan including: Defining and agreeing on clear devaluation terms with France (since the current FCFA is linked to the Euro/French franc) including: Provisions for funds to develop and build a profitable industrialized manufacturing base in Cameroon; Immediately approved projects for the reconstruction and rehabilitation of the nation in key infrastructure areas.