CFP franc

CFP franc. The CFP franc is the currency used in the three French overseas collectivities of French Polynesia, New Caledonia, and Wallis and Futuna. Its creation was a direct consequence of the economic disruptions following the Second World War, designed to provide monetary stability distinct from the fluctuating French franc. Managed by the Institut d'émission d'outre-mer, the currency is pegged to the euro, ensuring its value is aligned with the economic policies of the European Union.

History

The currency was established by a decree signed by Charles de Gaulle on 26 December 1945, concurrently with the creation of the West African CFA franc. This post-war monetary reform aimed to stabilize the economies of French territories in the Pacific Ocean after the instability caused by the Battle of France and the subsequent Japanese occupation of French Indochina. Initially, the acronym "CFP" stood for *Colonies Françaises du Pacifique*, but this was later changed to *Communauté Financière du Pacifique* following the constitutional reforms of the French Fifth Republic. The currency's evolution mirrors the political changes of these territories, from colonies to overseas territories and finally to their current status as special collectivities, a transition formalized by the Nouméa Accord for New Caledonia.

Issuance and management

The sole institution authorized to issue banknotes and coins is the Institut d'émission d'outre-mer (IEOM), headquartered in Paris. The IEOM operates under the oversight of the French Ministry of the Economy, Finance and Industrial and Digital Sovereignty and maintains close operational ties with the Banque de France. Coin production is carried out by the Monnaie de Paris, while banknotes are printed by the security printing works of the Banque de France. Monetary policy is fundamentally linked to the euro through a fixed exchange rate guarantee provided by the French Treasury, which holds the currency's foreign exchange reserves. This arrangement is formalized through an agreement with the European Central Bank.

Coins and banknotes

Coins are minted in denominations of 1, 2, 5, 10, 20, 50, and 100 francs, featuring distinct national designs for French Polynesia, New Caledonia, and Wallis and Futuna, often depicting local cultural symbols, flora, and fauna. Banknotes, which are uniform across all territories, come in values of 500, 1000, 5000, and 10,000 francs. These notes prominently feature iconic landscapes and historical figures from the Pacific territories, such as scenes from Bora Bora or the Loyalty Islands. The security features are comparable to those used on the euro, incorporating holographic strips and watermarks to prevent counterfeiting.

Exchange rates and value

The currency has a fixed parity with the euro, set at 1 euro = 119.331742 CFP francs, a rate established on 1 January 1999 with the launch of the European Monetary Union. Prior to this, it was pegged to the French franc at various rates. This fixed exchange rate regime, backed by the French Treasury, provides significant stability against currencies like the United States dollar, the Australian dollar, and the New Zealand dollar, which are major trading partners' currencies. The value is reviewed periodically in consultation with the European Central Bank and the finance ministries of the member territories.

Usage and circulation

The currency is legal tender in French Polynesia, New Caledonia, and Wallis and Futuna, where it circulates alongside the euro, which is also accepted in many tourist areas and government transactions. Its use is central to the economies of these islands, supporting key industries like tourism in Tahiti, nickel mining in New Caledonia, and agriculture. While the Australian dollar and New Zealand dollar are influential in regional trade, the fixed link to the euro facilitates commerce with Metropolitan France and other members of the European Union. Discussions about monetary sovereignty occasionally arise, particularly in New Caledonia in the context of the Nouméa Accord and votes on independence.

Category:Currencies of France Category:Currencies of Oceania