International Monetary Fund. Independent Evaluation Office
Technical assistance is one of the key services provided by the IMF to member countries—particularly lower income countries. It covers a wide set of activities, from technical assistance to support IMF policy advice to longer-term assistance to support countries’ institutional development. This evaluation report examines the relevance and effectiveness of IMF technical assistance, and derives recommendations for both IMF management and the Executive Board.
THE PURPOSE OF THIS PAPER is to examine the changes in money supply during the period 1962–68 in the seven African countries (Dahomey, Ivory Coast, Mauritania, Niger, Senegal, Togo, and Upper Volta) that have a common central bank, the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), with a view to determining the relative importance of the various factors causing such changes. For this purpose, the causal factors are divided into “behavioral” and “nonbehavioral.” The former are identified as (1) the ratio (c) of currency to money and (2) the ratio (r) of cash reserves held by the commercial banks to demand deposits. The nonbehavioral factors considered are (1) changes in net foreign assets (Δ F), (2) changes in credit to the government (Δ DG), and (3) policy-induced changes in monetary liabilities (Δ Lp) of the Central Bank. If Δ F and Δ DG are considered autonomous (i.e., outside the control of the Central Bank), then changes in Lp may be properly ascribed to policies of the Central Bank. The relative influence of changes in Lp on money supply (M), compared with that of behavioral and other nonbehavioral factors, should provide an indication of the relative influence of monetary policy on money supply in each of the member countries of the BCEAO as well as in the currency area as a whole.
This paper discusses the project financed by the World Bank for controlling the flow of the Chao Phya River in Thailand. Chao Phya is the lifestream of the Thai people. However, this river, and its principal tributaries are, in their natural state, capricious rivers. In the early 1950s, the World Bank began assisting the Thai government in a series of projects designed to break this ancient tyranny of the rivers’ violent changes. The paper describes how the river is being tamed for irrigation and navigation, and how they are providing electric power and other benefits.
On April 20, 2000, in Accra, Ghana, the leaders of six West African countries1 declared their intention to proceed to monetary union among the non-CFA2 franc countries of the region by January 2003, as a first step toward a wider monetary union including all the ECOWAS3 countries in 2004. The six countries committed themselves to reducing central bank financing of budget deficits to 10 percent of the previous year’s government revenue; reducing budget deficits to 4 percent of GDP by 2003; creating a Convergence Council to help coordinate macroeconomic policies; and setting up a common central bank. Their declaration states that, “Member States recognize the need for strong political commitment and undertake to pursue all such national policies as would facilitate the regional monetary integration process.”
In January 1994, seven sub-Saharan African countries—Benin, Burkina Faso, Côte dď lvoire, Mali. Niger, Senegal, and Togo—signed a treaty establishing the West African Economic and Monetary Union (WAEMU). These countries, with the addition of Guinea-Bissau in 1997, form part of the CFA franc zone along with a second group of six African countries that participate in a similar monetary arrangement, the Central African Economic and Monetary Community (CAEMC). The CAEMC countries are Cameroon, the Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon. Within eaeh subzone, monetary arrangements are managed by a separate central bank: the Central Bank of West African States (BCEAO) for the WAEMU and the Bank of Central African States (BEAC) for the CAEMC. The two subzones share a common currency, the CFA franc, which stands for the Communauté financiere africaine in the BCEAO area and for the Coopération financiere en Afrique in the BEAC area.
Until 1984, the West African Monetary Union (WAMU) consisted of six West African countries—Benin, Burkina Faso, Ivory Coast, Niger, Senegal, and Togo. (Mali withdrew from the Union in 1961 and rejoined in 1984; it is therefore excluded from this analysis, which deals with a period when it was not a member.) For nearly two decades these countries have had a freely circulating common currency issued by the Central Bank of West African States, the Banque: Centrale des Etats de l’Afrique de l’Ouest (BCEAO), which was formally established in 1962. The BCEAO implements the same monetary policy for the entire WAMU area, and its statutes cannot be unilaterally altered by a member government, although they can be amended by unanimous agreement. The currency, the CFA franc, is pegged to the French franc at an exchange rate of CFAF 50 = F 1 that has remained unchanged since 1948. France, which is represented on the Bank’s Board of Directors, ensures unlimited convertibility of the CFA franc into French francs through an operations account at the French Treasury, which holds the foreign exchange reserves of all the member countries and which handles the BCEAO’s foreign exchange transactions.
International Monetary Fund. Independent Evaluation Office
This evaluation examines the technical assistance (TA) provided by the IMF to its member countries. The evaluation is based on desk reviews of a broad sample of countries, analyses of cross-country data on TA, six in-depth country case studies, reviews of past evaluations, and interviews with IMF staff and other stakeholders. The objective of the IMF TA is to contribute to the development of the productive resources of member countries by enhancing the effectiveness of economic policy and financial management.
During the second half of the 1980s and in the early 1990s, a prolonged deterioration of the terms of trade, a steep increase in labor costs, and the nominal appreciation of the French franc against the U.S. dollar resulted in a considerable real effective appreciation of the CFA franc (Figure 1 and Figure 2 and Appendix II).3 These developments led to a serious decline in the competitive position of the CFA franc zone and a substantial weakening of the economic situation in the region. For the WAEMU as a whole during 1990–93, real GDP growth per capita was negative, and savings and investment ratios were very low (see Table 1 and Appendix IV, Tables 4–13). The deterioration in the terms of trade, together with the slow growth of export volume, resulted in a widening of the external current account deficit to an average of 11 percent of GDP in 1990–93. The shrinking of the tax base caused by the decline in real income as well as the financial difficulties of most corporate taxpayers were reflected in a drop in the ratio of government revenue to GDP, a deterioration in the overall fiscal balance, and severe constraints on government investment. Consequently, there was a significant accumulation of both domestic and external payments arrears, a large increase in the public debt, and a decline in the net foreign assets of the BCEAO.
The “politico-economic” framework within which the BCEAO operated changed between the time it look on the broader functions of a common central bank in 1962, and the revision of its statutes in 1974. At the time of its transformation in 1962, almost all the countries belonging to the WAMU were economically and financially dependent upon France. About 60 percent of their exports went to France, a large share under preferential agreements: France also represented an important source of official capital, and provided almost two thirds of the union’s imports.1
Recent plans for monetary union come as a response to a political commitment by ECOWAS heads of state, who met on December 9–10, 1999, in Lomé, Togo, to accelerate the pace of regional integration.7 In particular, the Accra Declaration on a Second Monetary Zone, signed on April 20, 2000, by six non-WAEMU West African countries, expressed their intention to establish a second common currency in the region by 2003 and to work toward a single currency for ECOWAS by 2004. National ministers of finance, trade and commerce, foreign affairs, and integration, together with national central bank governors, sit on an ECOWAS Convergence Council, empowered to oversee implementation of the process. A Technical Committee is tasked with working out the structure and regulatory framework for a regional central bank, and other preparatory activities. The Council recently approved the Technical Committee’s recommendation to establish the West African Monetary Institute in early 2001 to serve as a transitional institution to a future, common central bank.