International Monetary Fund. External Relations Dept.
PINs are IMF Executive Board assessments of members’ economic prospects and policies issued—with the consent of the member—following Article IV consultations, with background on the members’ economies.
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.
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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.
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 BCEAO conducts monetary policy in the WAEMU at the regional level. Its basic near-term objectives are (1) to maintain the fixed exchange rate relationship between the CFA franc and the French franc—which means that the trend rate of inflation in the area is fundamentally determined by French inflation (Box 2); and (2) to achieve a target level of foreign assets for the BCEAO. The fixed exchange rate system implies that the independence of regional monetary policy is constrained: money growth within the region is endogenously determined, and an appropriate differential must be maintained between market interest rates in the WAEMU and in France (Figure 3). Moreover, there is no scope for national monetary policies in the member countries of the WAEMU. For this reason, IMF-supported programs in these countries currently do not include targets for either base money or the central banksď net domestic assets because these variables cannot be meaningfully defined at the national level. Even if they could be defined, they would be beyond the control of the national authorities. Of course, fiscal policy—including public debt management—remains within the purview of individual countries in the WAEMU, and IMF-supported programs typically include targets for the fiscal deficit, external borrowing by the government, and net domestic bank credit to the government. Cumulative borrowing by national governments from the BCEAO is itself constrained to no more than 20 percent of their fiscal revenue in the previous year.
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.