Washington, DC : On February 11, the Executive Board of the International Monetary Fund (IMF) concluded the regional consultation[1]with the West African Economic and Monetary Union (WAEMU) on February 11, 2022.
The WAEMU has so far demonstrated strong resilience to the Covid crisis. Nonetheless, the region has been hard hit by the Omicron variant and security risks continue to increase in some countries. Despite these headwinds, the economic rebound that started in the second half of 2020 firmed up in 2021, while fiscal and monetary policies remained supportive. External reserves have risen to comfortable levels and the financial system appears to be broadly sound. Inflation has exceeded the 3 percent ceiling of the BCEAO’s target band since April 2021, mainly on account of higher domestic and imported food prices.
Growth is expected to further accelerate to about 6 percent in 2022, primarily driven by a rebound in net exports and inflation is projected to return to the BCEAO’s target band by the end of the year. A gradual fiscal consolidation is expected to start this year and bring the aggregate fiscal deficit to 3 percent of GDP by 2024. There are however significant downside risks to the outlook, particularly given slow and uneven progress with vaccination, the possibility of further deterioration of security risks and political uncertainty, and the likely tightening of global financial conditions.
Executive Board Assessment[2]
Executive Directors welcomed the region’s strong resilience to the COVID crisis and that the recovery has firmed up in 2021. Directors noted important downside risks to the outlook, particularly from the evolution of the pandemic, a tightening in global financial conditions, deterioration in security conditions, and political instability. They underscored that efforts to ensure macroeconomic sustainability, while limiting scarring and supporting the recovery are crucial.
Directors agreed that a return to the aggregate fiscal deficit ceiling of 3 percent of GDP by 2024 is essential to maintain an adequate level of external reserves, limit the risk of regional financial market pressures, and ensure debt sustainability. The credibility of the medium-term adjustment path would be enhanced by re-establishing the WAEMU’s Convergence Pact. Directors emphasized that the fiscal adjustment should promote an inclusive recovery. They recommended implementing revenue-enhancing measures, protecting priority social and infrastructure expenditure, and prioritizing vaccine rollout. Directors highlighted the importance of using the SDR allocation in a way that preserves fiscal sustainability and external stability.
Directors concurred that the accommodative monetary policy stance remains appropriate. They urged the BCEAO to stand ready to tighten monetary policy if the external position weakens or persistent inflationary pressures emerge. Directors welcomed the BCEAO’s continuing efforts to modernize its policy and governance frameworks. They noted that reserves are adequate.
Directors welcomed the progress on finalizing the bank resolution framework and encouraged its full operationalization. They stressed the need to reduce the high reliance of some banks on BCEAO refinancing and to address structural fragilities in the microfinance institutions sector. Directors concurred that enhancing the depth and liquidity of the sovereign security market remained a priority.
Directors agreed that countering the possible scarring effects of the crisis would require strong actions at the regional and national levels to boost productivity growth and stimulate private investment. They noted that regional-level priorities were to foster trade integration, enhance regional competitiveness, and accelerate the implementation of regional infrastructure projects.
The views expressed by Executive Directors today will form part of the Article IV consultations with individual member-countries that take place until the next Board discussion of WAEMU common policies.
[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 f 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.
Table 1. WAEMU: Selected Economic and Social Indicators, 2018–261 | |||||||||||||||||||
Social Indicators | |||||||||||||||||||
GDP | Poverty (2015 or latest available) | ||||||||||||||||||
Nominal GDP (2020, millions of US Dollars) | 159,277 | Headcount ratio at $1.90 a day (2011 PPP) | 47.1 | ||||||||||||||||
GDP per capita (2020, US Dollars) | 1,218 | Undernourishment (percent of population) | 12.5 | ||||||||||||||||
Populations characteristics | Inequality (2015 or latest available) | ||||||||||||||||||
Total (2020, millions) | 131 | Income share held by highest 10 percent of population | 32.1 | ||||||||||||||||
Urban Population (2020, percent of total) | 40.8 | Income share held by lowest 20 percent of population | 6.1 | ||||||||||||||||
Life expectancy at birth (2019, years) | 61.3 | Gini index | 40.8 | ||||||||||||||||
Economic Indicators | |||||||||||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | |||||||||||
SM/21/5 2 | Est. | SM/21/5 2 | Proj. | Projected | |||||||||||||||
(Annual percentage change) | |||||||||||||||||||
National income and prices | |||||||||||||||||||
GDP at constant prices 3 | 6.5 | 5.8 | 0.3 | 2.0 | 5.4 | 5.7 | 6.1 | 7.0 | 7.2 | 6.1 | 5.8 | ||||||||
GDP per capita at constant prices | 3.4 | 2.8 | -2.5 | -1.0 | 2.5 | 2.8 | 3.1 | 3.9 | 4.1 | 3.1 | 2.8 | ||||||||
Consumer prices (average) | 1.0 | -0.1 | 1.7 | 2.3 | 1.6 | 3.3 | 2.5 | 1.9 | 1.9 | 1.9 | 1.9 | ||||||||
Terms of trade | -1.9 | -3.2 | 18.4 | 19.4 | 2.3 | -3.1 | -1.7 | -2.6 | -2.2 | -0.5 | -0.6 | ||||||||
Nominal effective exchange rate | 4.1 | -0.5 | … | 3.7 | … | … | … | … | … | … | … | ||||||||
Real effective exchange rate | 2.2 | -3.7 | … | 3.7 | … | … | … | … | … | … | … | ||||||||
(Percent of GDP) | |||||||||||||||||||
National accounts | |||||||||||||||||||
Gross national savings | 18.6 | 19.4 | 18.6 | 20.1 | 19.4 | 19.5 | 20.1 | 20.7 | 21.0 | 21.4 | 21.5 | ||||||||
Gross domestic investment | 24.4 | 24.2 | 24.0 | 24.6 | 25.1 | 25.4 | 25.9 | 26.0 | 25.5 | 25.8 | 26.0 | ||||||||
Of which: public investment | 6.4 | 6.1 | 7.1 | 7.1 | 7.1 | 7.5 | 7.8 | 7.4 | 6.9 | 7.0 | 7.1 | ||||||||
(Annual changes in percent of beginning-of-period broad money) | |||||||||||||||||||
Money and credit | |||||||||||||||||||
Net foreign assets | 4.6 | 6.6 | 0.3 | 0.7 | -0.5 | 2.5 | -0.1 | 0.7 | 1.8 | 1.3 | 1.0 | ||||||||
Net domestic assets | 7.9 | 3.7 | 10.1 | 15.9 | 7.4 | 5.5 | 8.0 | 8.0 | 7.2 | 6.7 | 6.7 | ||||||||
Broad money | 12.5 | 10.3 | 10.4 | 16.5 | 6.9 | 8.0 | 8.0 | 8.7 | 9.0 | 8.0 | 7.7 | ||||||||
Credit to the economy | 5.9 | 4.2 | 5.6 | 4.1 | 3.3 | 2.6 | 2.5 | 3.8 | 4.6 | 3.9 | 3.8 | ||||||||
(Percent of GDP, unless otherwise indicated) | |||||||||||||||||||
Government financial operations | |||||||||||||||||||
Government total revenue, excl. grants | 14.6 | 15.6 | 14.7 | 15.2 | 15.5 | 15.3 | 15.9 | 16.3 | 16.5 | 16.9 | 17.2 | ||||||||
Government expenditure | 19.7 | 19.8 | 23.1 | 22.9 | 22.3 | 22.9 | 22.4 | 21.6 | 21.0 | 21.2 | 21.4 | ||||||||
Overall fiscal balance, excl. grants | -5.0 | -4.1 | -8.4 | -7.6 | -6.9 | -7.6 | -6.5 | -5.4 | -4.4 | -4.3 | -4.2 | ||||||||
Overall fiscal balance, incl. grants | -3.3 | -2.3 | -5.9 | -5.7 | -4.9 | -5.9 | -4.7 | -3.8 | -3.0 | -3.0 | -3.0 | ||||||||
External sector | |||||||||||||||||||
Exports of goods and services 4 | 19.2 | 19.6 | 17.0 | 18.7 | 18.1 | 18.9 | 19.9 | 19.7 | 20.3 | 20.2 | 19.8 | ||||||||
Imports of goods and services 4 | 25.5 | 25.4 | 23.4 | 24.2 | 24.3 | 25.8 | 26.6 | 25.7 | 25.4 | 25.0 | 24.8 | ||||||||
Current account, excl. grants | -6.7 | -6.1 | -6.9 | -5.9 | -6.8 | -6.8 | -6.8 | -6.3 | -5.4 | -5.3 | -5.3 | ||||||||
Current account, incl. grants | -5.6 | -4.9 | -5.4 | -4.5 | -5.7 | -5.9 | -5.9 | -5.3 | -4.5 | -4.5 | -4.6 | ||||||||
External public debt | 28.0 | 30.2 | 32.9 | 33.6 | 33.3 | 36.4 | 35.1 | 33.5 | 31.8 | 30.3 | 29.4 | ||||||||
Total public debt | 43.4 | 45.5 | 48.5 | 52.1 | 49.6 | 55.6 | 55.5 | 54.5 | 52.7 | 51.5 | 50.8 | ||||||||
Broad money | 33.0 | 34.3 | 37.1 | 38.6 | 37.1 | 38.6 | … | … | … | … | … | ||||||||
Memorandum items: | |||||||||||||||||||
Nominal GDP (billions of CFA francs) | 83,301 | 88,519 | 90,231 | 91,545 | 96,476 | 98,891 | 106,762 | 116,024 | 126,456 | 136,513 | 147,001 | ||||||||
Nominal GDP per capita (US dollars) | 1,217 | 1,190 | 1,198 | 1,218 | 1,322 | 1,332 | 1,394 | 1,494 | 1,600 | 1,692 | 1,784 | ||||||||
CFA franc per US dollars, average | 555 | 585.9 | … | 574.8 | … | … | … | … | … | … | … | ||||||||
Gross international reserves 5 | |||||||||||||||||||
In months of next year’s imports (of goods and services) | 4.6 | 5.6 | 5.5 | 5.5 | 5.0 | 5.8 | 5.5 | 5.3 | 5.3 | 5.2 | 5.0 | ||||||||
In percent of this year’s GDP | 10.3 | 11.7 | … | 12.8 | … | 13.9 | 12.9 | 12.2 | 11.9 | 11.5 | 11.0 | ||||||||
In percent of the BCEAO’s sight liabilities | 79.6 | 81.4 | … | 77.3 | … | 86.4 | 89.4 | 84.2 | 81.9 | 79.2 | 76.1 | ||||||||
In millions of US dollars | 14,853 | 17,547 | 19,275 | 21,764 | 19,497 | 24,228 | 24,898 | 25,827 | 27,626 | 29,035 | 30,043 | ||||||||
Sources: IMF, African Department database; World Economic Outlook; World Bank World Development Indicators; IMF staff estimates and projections. | |||||||||||||||||||
1 All projections presented in this staff report were prepared in the first half of December 2021 and do not incorporate any further developments. | |||||||||||||||||||
2 Shows data from the IMF Country Report No. 21/49, published on January 21, 2021 (Board document number SM/21/5). | |||||||||||||||||||
3 The acceleration in GDP growth in 2023 is due to the start of production of large hydrocarbon projects in Niger and Senegal. | |||||||||||||||||||
4 Excluding intraregional trade. | |||||||||||||||||||
5 Projections for 2021 include the 2021 SDR allocation which is equivalent to US$2,327 million, or 0.6 months of imports and 9.6 percent of the BCEAO’s sight liabilities. | |||||||||||||||||||