IMF Executive Board Concludes Regional Consultation with West African Economic and Monetary Union
IMF News, March 18, 2019
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- Published: March 18, 2019
Background: recent performance and vulnerabilities
- Real GDP growth exceeded 6 percent for the 7th consecutive year in 2018, fueled by strong domestic demand.
- Aggregate fiscal deficit was reduced by ½ percentage point of GDP in 2018.
- External current account deficit estimated to have increased to 6.8 percent in 2018 from 6.6 percent of GDP in 2017.
- Public debt and servicing costs increased in 2018, partly because of below‑the‑line budgetary operations:
- Total debt rose to 52.5 percent of GDP in 2018 from 50.1 percent in 2017.
- Total debt service increased to 33 percent of government revenue in 2018 from 26.4 percent in 2017.
- Liquidity pressures in the regional financial system were temporarily eased in 2018:
- BCEAO significantly reduced its refinancing volume to banks between early 2017 and end‑2018.
- Liquidity improved following sizeable Eurobond issuances, which also reduced sovereigns’ demands on the regional debt market.
- Banking sector reforms implemented in 2018 included:
- Move to Basel II/III prudential standards (with a 5 year‑phasing period).
- New bank accounting rules.
- Banking supervision based on a risk‑sensitive consolidation approach to groups.
- Steps to operationalize the new resolution framework of the Banking Commission.
Medium‑term outlook and risks
- Growth projection and conditions:
- Growth is projected to stay above 6 percent, conditional on fiscal consolidation to meet the regional fiscal deficit convergence criterion of 3 percent of GDP and elimination of below‑the‑line budgetary operations from this year onwards, and implementation of structural reforms.
- Downside risks identified:
- Potential slippages in fiscal consolidation.
- Slow progress in implementing structural reforms and improving inclusiveness.
- Larger imports or lower capital inflows relative to projections.
- Persistent security concerns.
- Weaker‑than‑expected global recovery and tighter international financial conditions.
Executive Board assessment and policy recommendations
- General assessment:
- Executive Directors agreed with the thrust of the staff appraisal, welcoming continued strong growth and progress on banking sector reforms.
- Directors noted downside risks from rising public debt and higher external current account deficit.
- Fiscal policy priorities:
- Growth‑friendly fiscal consolidation is critical to reduce public debt distress risks and preserve external stability.
- Urged member‑countries to adhere to the regional fiscal deficit convergence criterion of 3 percent of GDP.
- Emphasized adjustment should focus on domestic revenue mobilization by curbing tax exemptions and enforcing regional tax policy directives to create space for development spending.
- Urged more effective control of below‑the‑line budget operations and encouraged a review of the regional surveillance framework to better contain risks to debt sustainability.
- Monetary and financial sector recommendations:
- Current monetary policy is broadly appropriate; BCEAO should stand ready to tighten if external reserves deteriorate.
- Encourage BCEAO to address cautiously the banking sector’s structural liquidity deficit.
- Advise authorities to develop more active and liquid secondary debt and interbank markets to deepen WAEMU financial markets and enhance monetary policy transmission.
- Banking sector and supervision:
- Welcome smooth introduction of Basel II/III prudential regulations and new accounting standards in 2018.
- Highlighted need to increase banks’ capital, reduce concentration risks and non‑performing loans.
- Encouraged prompt resolution of ailing banks, operationalization of the new resolution framework, improved supervision of banking groups, and identification of criteria for defining systemic institutions.
- Financial inclusion and oversight:
- Called for further efforts to improve financial inclusion with adequate supervision of financial innovations to avoid new stability risks.
- Stressed close monitoring of microfinance institutions and strengthening AML/CFT risk‑based supervision.
- Structural and regional reforms:
- Emphasized intensifying structural reforms and regional initiatives to improve competitiveness and inclusiveness, including continued efforts to promote cross‑border infrastructure projects and ease customs procedures.
- Encouraged sustaining progress in improving the quality, coverage, and timeliness of regional data.
Key statistics (selected indicators, 2015–2023 as presented)
- GDP at constant prices:
- 2015: 6.3
- 2016: 6.4
- 2017: 6.6
- 2018: 6.5
- 2019: 7.4
- 2020: 6.8
- GDP per capita at constant prices:
- 2015: 3.4
- 2016: 3.5
- 2017: 3.7
- 2018: 3.6
- 2019: 4.5
- 2020: 4.0
- Consumer prices (average):
- 2015: 1.0
- 2016: 0.3
- 2017: 1.4
- 2018: 1.6
- 2019: 1.9
- Terms of trade (selected years):
- 2015: 8.4
- 2016: 11.9
- 2017: -0.8
- 2018: -1.7
- Gross national savings:
- 2015: 17.3
- 2016: 16.2
- 2017: 16.7
- 2018: 16.5
- 2019: 17.9
- 2020: 18.3
- 2021: 19.2
- 2022: 20.8
- 2023: 22.1
- Gross domestic investment:
- 2015: 23.2
- 2016: 21.8
- 2017: 23.4
- 2018: 24.2
- 2019: 25.1
- 2020: 25.8
- 2021: 27.1
- Public investment (of which):
- 2015: 7.7
- 2016: 8.2
- 2017: 8.7
- 2018: 8.8
- 2019: 8.9
- 2020: 9.0
- Government total revenue, excl. grants:
- 2015: 17.6
- 2016: 18.1
- 2017: 18.2
- 2018: 18.6
- 2019: 19.0
- 2020: 19.6
- 2021: 19.8
- Government expenditure (selected years):
- 2015: 23.9
- 2016: 24.1
- 2017: 24.6
- 2018: 23.8
- 2019: 24.0
- 2020: 24.3
- Overall fiscal balance, incl. grants (commitment basis):
- 2015: -4.0
- 2016: -4.4
- 2017: -4.3
- 2018: -3.1
- 2019: -2.8
- 2020: -2.7
- 2021: -2.6
- Current account, excl. grants:
- 2015: -7.3
- 2016: -7.2
- 2017: -8.5
- 2018: -8.9
- 2019: -8.3
- 2020: -8.7
- 2021: -8.4
- 2022: -6.6
- 2023: -5.9
- External public debt:
- 2015: 27.5
- 2016: 28.4
- 2017: 29.6
- 2018: 33.8
- 2019: 33.9
- 2020: 32.5
- 2021: 30.5
- 2022: 29.7
- Total public debt:
- 2015: 43.3
- 2016: 46.8
- 2017: 50.1
- 2018: 52.5
- 2019: 51.3
- 2020: 50.2
- 2021: 49.4
- 2022: 47.7
- 2023: 46.5
- Nominal GDP (billions of CFA francs):
- 2015: 56,299
- 2016: 59,901
- 2017: 64,208
- 2018: 69,351
- 2019: 75,119
- 2020: 81,588
- 2021: 88,306
- 2022: 96,755
- 2023: 105,257
- Nominal GDP per capita (US dollars):
- 2015: 1,013
- 2016: 1,045
- 2017: 1,112
- 2018: 1,227
- 2019: 1,258
- 2020: 1,343
- 2021: 1,421
- 2022: 1,525
- 2023: 1,619
- Gross international reserves (millions of US dollars):
- 2015: 12,725
- 2016: 11,015
- 2017: 12,367
- 2018: 15,419
- 2019: 16,514
- 2020: 17,361
- 2021: 19,068
- 2022: 20,999
- 2023: 23,576
IMF Press Release No. 19/81, March 18, 2019.