The
French franc became the currency of Comoros after the islands became a French protectorate in 1886. In 1891, Sultan
Said Ali bin Said Omar of Grande Comore (
Ngazidja) issued coins denominated in centimes and francs which circulated alongside French currency. In 1912, the Comoros became a province of
Madagascar, which was also a
French possession. French banknotes and coins circulated in the colony. Apart from an emergency issue of small change notes in 1920, the French currency circulated alone until 1925. On 1 July 1925, the French government formed an agreement with the
Banque de Paris et des Pays-Bas to create the
Banque de Madagascar, headquartered in Paris, and granted it a
private monopoly to
issue currency for the colony of Madagascar. The
Malagasy franc (French:
franc malgache) was equivalent to the French franc and French coins continued to circulate as Madagascar had no coins of its own until 1943. When the Comoros became a separate French territory in 1945, the name of the issuing bank was changed to the
Banque de Madagascar et des Comores (still headquartered in Paris). A branch office opened in Comoros in 1953. While the banknotes were changed to reflect the new status of Comoros, the coins were not changed and bore only the name Madagascar. On 26 December 1945, the Madagascar-Comores
CFA franc was established and its value was fixed at 1.7
French francs. Old Madagascar coins and banknotes continued to circulate as this new currency. On 17 October 1948, the CFA franc was revalued to 2 French francs. In 1950, the French government took over majority ownership of the Banque de Madagascar et des Comores. On 1 January 1960, the French franc was redenominated, with 100 old francs becoming 1 new franc. (Décret n°59-1450 du 22 décembre 1959) The new exchange rate was 1 Madagascar-Comores CFA franc = 0.02 French francs (50 Madagascar-Comores CFA francs = 1 French franc). On 26 June 1960, Madagascar gained independence from France, and the
Institut d'Émission Malgache (headquartered in
Antananarivo) was created to issue currency only for Madagascar. Madagascar left the CFA zone effective 1 July 1973. On 23 November 1979, the government of Comoros signed the
Accord de coopération monétaire entre la République Française et la République fédérale islamique des Comores, a monetary cooperation agreement with France, making Comoros part of the franc zone (but not part of the
CFA franc zone). This agreement provided for the establishment of a system of
fixed parity between the
French franc and the Comorian franc and free
convertibility between the two
currencies, guaranteed by the Comorian
central bank's opening of an operations account (''compte d'operation'') at the French Treasury (
Trésor public) to handle all exchange transactions. Sixty-five percent of the
foreign exchange reserves of Comoros are held in
euros in this account. This account is similar to overnight deposits with the French Treasury: it may bear interest and may, in special circumstances, post a negative balance. However, to prevent this account from showing a lasting overdraft, a number of preventative measures have been set up. The stability of the Comorian franc is founded on tight monetary and credit discipline, underpinned by two specific safeguard measures: the central bank is required to maintain 20% foreign-exchange cover of its sight liabilities, and the government is not allowed to draw more than 20% of the previous year's budget receipts from their central bank funds. The
ministers of finance of the franc area (France, the CFA zone and Comoros) meet biannually. The agreement between France and the Comoros is essentially the same as the agreement France has with the CFA Zone. It is a continuation of a relationship of monetary cooperation between the two countries that has existed for more than a century. Until 1994, the Comorian franc was pegged to the
French franc at the rate of 50 Comorian francs to 1 French franc. This was changed on 12 January 1994, when the currency was
devalued in concert with the
CFA franc devaluation. however, the Comorian franc was devalued % to a new rate of 75 Comorian francs for 1 French franc, while the CFA franc's new rate was 100 CFA francs to 1 French franc. With the creation of the
euro in January 1999, the Comorian franc was
pegged, at its prevailing rate, to the new currency. The
exchange rate is now 491.96775 Comorian francs to 1 euro.
European Monetary Union In 1998 in anticipation of
European Monetary Union, the
Council of the European Union addressed the monetary agreements France has with the CFA Zone and Comoros and ruled that: • the agreements are unlikely to have any material effect on the
monetary and
exchange rate policy of the
Euro zone • in their present forms and states of implementation, the agreements are unlikely to present any obstacle to a smooth functioning of economic and monetary union • nothing in the agreements can be construed as implying an obligation for the
European Central Bank (ECB) or any national
central bank to support the convertibility of the CFA and Comorian francs • modifications to the existing agreements will not lead to any obligations for the European Central or any national central bank • the French Treasury will guarantee the free convertibility at a fixed parity between the
euro and the CFA and Comorian francs • the competent French authorities shall keep the
European Commission, the European Central Bank and the Economic and Financial Committee informed about the implementation of the agreements and inform the Committee prior to changes of the parity between the euro and the CFA and Comorian francs • any change to the nature or scope of the agreements would require Council approval on the basis of a Commission recommendation and ECB consultation ==Central Bank==