IMF Executive Board Concludes Regional Consultation with West African Economic and Monetary Union

  • After almost a decade of strong growth, the WAEMU region is facing a triple crisis impacting health, the economy, and security.
  • For 2021, growth is projected at 5.4 percent, mostly driven by a rebound in private consumption and private investment, reflecting the relaxation of lockdown constraints and the return of foreign direct investment, but the economic outlook remains uncertain.
  • A gradual fiscal consolidation is expected to start this year and bring back the regional fiscal deficit toward the 3 percent of GDP regional ceiling by 2023.
  • Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the regional consultation [1] with the West African Economic and Monetary Union on February 8, 2021.

    After almost a decade of strong growth, the West African Economic and Monetary Union (WAEMU) region is facing severe challenges from a triple crisis impacting health, the economy and security. In part, because of drastic measures taken early on, the Covid-19 virus seems to have spread at a slower pace and with a lower fatality rate in WAEMU countries than on average in Sub-Saharan Africa. Economic activity decelerated sharply in March-June 2020, particularly in the commerce, construction, transportation and hospitality sectors. But a rebound was observed in the third quarter. Both fiscal and monetary policies were relaxed significantly in 2020 to contain the pandemic and support the economy.

    For 2021, growth is projected at 5.4 percent, mostly driven by a rebound in private consumption and private investment, reflecting the relaxation of lockdown constraints and the return of foreign direct investment. A gradual fiscal consolidation is expected to start this year and bring the aggregate fiscal deficit to 3 percent of GDP by 2023. There are however significant downside risks to the outlook, and new virus outbreaks or security shocks could derail the recovery and create additional fiscal pressures.

    Executive Board Assessment [2]

    Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director, made the following statement:

    Executive Directors agreed with the thrust of the staff appraisal. They noted the triple crises facing the region (health, economic, and security) and commended the authorities for measures taken early on to contain the spread of the COVID-19 virus, as well as for the monetary and fiscal measures to support the region’s economies. Looking ahead, in view of the high uncertainty and constrained fiscal space, being prepared to respond to a deterioration in the economic outlook and further propagation of the virus will be important.

    Directors concurred that a gradual return of the region to the aggregate fiscal deficit ceiling of 3 percent of GDP by 2023 would support internal and external stability. Converging toward the fiscal deficit anchor is essential to maintain an adequate level of external reserves, limit the risk of pressures on the regional financial market, and ensure debt sustainability. A number of Directors saw merit in granting some flexibility to countries facing security risks. Directors cautioned that consolidation should not harm inclusive growth by protecting priority social and infrastructure spending and shifting to targeted policies. Enhancing revenue mobilization, public financial management, and fiscal transparency will also be crucial. Against this background, Directors noted that the upcoming reform of the regional fiscal governance framework would provide an opportunity to anchor the consolidation path.

    Directors welcomed the measures taken by the BCEAO in response to the pandemic, which have prevented a tightening of financial conditions. Monetary policy could be relaxed further if the economic outlook deteriorates, provided that an adequate buffer of foreign exchange reserves is maintained.

    Directors agreed that the loan forbearance framework set up in March 2020 has provided relief to solvent firms and households impacted by the crisis, but stressed that banks should not relax the monitoring of customers in difficulty. Capital shortfalls in the banking system that could emerge from the crisis would call for targeted and proactive actions from the supervisor. Making the bank resolution framework fully operational in 2021, as planned by the authorities, would be essential to ensure that nonviable banks can be promptly intervened and resolved. Directors urged close monitoring of the microfinance sector and strengthening AML/CFT supervision.

    Directors supported the authorities’ intention to push ahead with structural reforms and regional infrastructure investment to enhance competitiveness. They also highlighted the need to continue to support the development of regional financial markets.

    Table 1. WAEMU: Selected Economic and Social Indicators, 2017-2025

    Social Indicators

    GDP

    Poverty (2015 or latest available)

    Nominal GDP (2019, millions of US Dollars)

    151,154

    Headcount ratio at $1.90 a day (2011 PPP)

    46.3

    GDP per capita (2019, US Dollars)

    1,190

    Undernourishment (percent of population)

    15.9

    Populations characteristics

    Inequality (2015 or latest available)

    Total (2019, millions)

    127

    Income share held by highest 10 percent of population

    32.1

    Urban Population (2018, percent of total)

    40.3

    Income share held by lowest 20 percent of population

    6.1

    Life expectancy at birth (2017, years)

    60.9

    Gini index

    40.8

    Economic Indicators

    2017

    2018

    2019

    2020

    2021

    2022

    2023

    2024

    2025

    SM/19/44 1

    Est.

    SM/19/44 1

    Proj.

    Projected

    (Annual percentage change)

    National income and prices

    GDP at constant prices

    6.4

    6.5

    6.6

    5.9

    6.5

    0.3

    5.4

    6.6

    7.4

    6.5

    6.1

    GDP per capita at constant prices

    3.5

    3.5

    3.7

    3.0

    3.7

    -2.5

    2.5

    3.7

    4.4

    3.6

    3.2

    Consumer prices (average)

    0.8

    0.9

    1.6

    -0.1

    1.9

    1.7

    1.6

    1.9

    1.9

    1.9

    1.9

    Terms of trade

    -7.6

    -2.2

    2.5

    1.7

    -0.6

    18.4

    2.3

    -5.6

    -5.3

    -1.8

    -1.2

    Nominal effective exchange rate

    2.0

    4.1

    -0.5

    Real effective exchange rate

    -0.1

    2.0

    -3.9

    (Percent of GDP)

    National accounts

    Gross national savings

    18.0

    18.6

    14.9

    19.1

    15.2

    18.6

    19.4

    19.8

    21.3

    21.3

    21.4

    Gross domestic investment

    23.0

    24.3

    20.1

    23.7

    20.9

    24.0

    25.1

    24.9

    25.3

    25.1

    25.4

    Of which: public investment

    6.6

    6.4

    7.3

    6.3

    7.4

    7.1

    7.1

    6.8

    6.6

    6.6

    6.6

    (Annual changes in percent of beginning-of-period broad money)

    Money and credit 2

    Net foreign assets

    1.7

    4.5

    2.6

    6.6

    1.3

    0.3

    -0.5

    0.3

    2.0

    2.1

    0.9

    Net domestic assets

    6.8

    8.0

    7.6

    3.8

    9.7

    10.1

    7.4

    8.1

    7.2

    6.4

    7.1

    Broad money

    8.5

    12.5

    10.2

    10.3

    11.0

    10.4

    6.9

    8.4

    9.2

    8.5

    8.0

    Credit to the economy

    7.6

    5.9

    8.3

    4.2

    7.1

    5.6

    3.3

    3.3

    3.5

    3.0

    3.4

    (Percent of GDP, unless otherwise indicated)

    Government financial operations

    Government total revenue, excl. grants

    15.0

    14.6

    15.4

    15.6

    15.8

    14.7

    15.5

    15.8

    16.3

    16.5

    16.8

    Government expenditure

    20.3

    19.6

    19.8

    19.7

    19.9

    23.1

    22.3

    21.4

    21.0

    20.9

    21.1

    Overall fiscal balance, excl. grants

    -5.3

    -5.0

    -4.4

    -4.1

    -4.2

    -8.4

    -6.9

    -5.6

    -4.8

    -4.4

    -4.3

    Overall fiscal balance, incl. grants (commitment basis)

    -3.6

    -3.3

    -2.5

    -2.3

    -2.4

    -5.9

    -4.9

    -3.8

    -3.1

    -2.9

    -2.8

    External sector

    Exports of goods and services 3

    19.3

    19.0

    18.8

    19.1

    18.5

    17.0

    18.1

    18.7

    20.2

    20.3

    20.2

    Imports of goods and services 3

    25.1

    25.5

    26.4

    24.6

    26.5

    23.4

    24.3

    24.4

    24.7

    24.9

    25.1

    Current account, excl. grants

    -5.8

    -6.5

    -8.3

    -6.0

    -8.7

    -6.9

    -6.8

    -6.3

    -5.0

    -4.7

    -4.7

    Current account, incl. grants

    -4.7

    -5.4

    -6.3

    -4.8

    -6.8

    -5.4

    -5.7

    -5.2

    -4.0

    -3.9

    -4.0

    External public debt

    23.1

    27.7

    28.2

    30.2

    27.0

    32.9

    33.3

    32.7

    31.5

    30.5

    29.4

    Total public debt

    40.4

    43.0

    42.6

    44.8

    41.7

    48.5

    49.6

    49.5

    48.4

    47.6

    46.8

    Broad money

    23.9

    33.0

    27.7

    34.3

    28.1

    37.1

    37.1

    Memorandum items:

    Nominal GDP (billions of CFA francs)

    77,736

    83,391

    90,359.6

    88,561

    98,154.8

    90,231

    96,476

    104,539

    114,189

    123,865

    133,761

    Nominal GDP per capita (US dollars)

    1,118

    1,218

    1,279.4

    1,190

    1,365.5

    1,198

    1,322

    1,403

    1,494

    1,576

    1,652

    CFA franc per US dollars, average

    581

    555

    585.9

    Foreign exchange cover ratio 4

    73.5

    85.3

    88.4

    Gross international reserves

    In months of imports of goods and services 3

    4.1

    4.7

    4.4

    5.9

    4.3

    5.5

    5.0

    4.6

    4.5

    4.3

    3.9

    In millions of US dollars

    12,963

    14,858

    16,514.2

    17,547

    17,360.5

    19,275

    19,497

    19,801

    21,135

    22,276

    22,555

    In percent of broad money

    29.4

    31.1

    32.2

    34.1

    30.2

    31.9

    Sources: IMF, African Department database; World Economic Outlook; World Bank World Development Indicators; IMF staff estimates and projections.

    1 The GDP series of the 2019 regional consultation (SM/19/44) was adjusted to account for the National Accounts rebasing of Côte d’Ivoire, Niger and Togo, and facilitate the comparison of GDP ratios with current projections; the other components of GDP could not be recomputed in the new bases.

    2 Year on year change, end December.

    3 Excluding intraregional trade.

    4 Gross official reserves divided by short-term domestic liabilities (IMF definition).


    [1] Staff reports on the annual consultations with regional institutions of currency unions and the ensuing Board discussion are both considered an integral part of the Article IV consultations with individual member countries. Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

    [2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: https://www.IMF.org/external/np/sec/misc/qualifiers.htm .

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