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International Monetary Fund

This Selected Issues paper analyzes the competitive threats to the tourism sector in the Eastern Caribbean Currency Union (ECCU). The paper concludes that the ECCU countries have lost competitiveness globally and vis-à-vis newly emergent Caribbean tourist destinations as a result of both price and nonprice factors. The short-term measures implemented by the countries seem to have been insufficient to prevent further declines in 2002. The paper also describes strengthening fiscal discipline through fiscal benchmarks.

G. E. Gondwe

This paper examines how Africa can reposition itself to take full advantage of globalization—while minimizing the risks in the process—to accelerate economic growth and reduce poverty. The paper highlights that Africa’s share of world trade has dwindled, foreign direct investment in most countries has remained at low levels, and the income gap relative to advanced countries has widened. The paper looks at why Africa has missed out so far on the benefits of globalization, and indicates what steps Africa now needs to take to boost economic growth.

Evangelos A. Calamitsis

This paper examines how Africa can reposition itself to take full advantage of globalization—while minimizing the risks in the process—to accelerate economic growth and reduce poverty. The paper highlights that Africa’s share of world trade has dwindled, foreign direct investment in most countries has remained at low levels, and the income gap relative to advanced countries has widened. The paper looks at why Africa has missed out so far on the benefits of globalization, and indicates what steps Africa now needs to take to boost economic growth.

Rattan J. Bhatia

Abstract

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.

Rattan J. Bhatia

Abstract

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

Rattan J. Bhatia

Abstract

The BCEAO area is open to trade and payments, which sets obvious limits on how far it can have an independent monetary policy because the balance of payments outcome is almost exogenously determined by production and prices of exports. This is evident from the factors affecting the money supply.

International Monetary Fund
The staff report on discussions with regional institutions of the West African Economic and Monetary Union is presented. The region faced a number of challenges in 2011, with the intensification of the political crisis in Côte d’Ivoire and a large increase in global food and fuel prices. A materialization of downside risks could require a monetary policy relaxation for the union and differentiated fiscal responses across member countries. The drought in the Sahel may also require a more active fiscal policy in the affected countries.
International Monetary Fund. External Relations Dept.

The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy. www.imf.org/external/pubs/ft/survey/so/home.aspx

Rattan J. Bhatia

Abstract

As observed earlier, between 1963 and 1974 the deposits of commercial banks increased faster than their demand for rediscountable credit. This, coupled with the BCEAO’s readiness to provide liberal rediscount facilities, enabled the banks to expand their own lending resources, especially for nonrediscountable credit. But between 1965 and 1974 commercial banks in the Union held more rediscounted credit than the liquidity ratio prescribed—on average about 5 percent of total deposits, compared with an average cash ratio of about 4 percent. One reason that not all the increase in deposits was lent as rediscountable credit may have been insufficient demand; alternatively, some banks may have felt that rediscount ceilings would have a restrictive impact on their operations.8

Rattan J. Bhatia

Abstract

As noted in the Section IV, until recently the BCEAO continued to rely mainly on its rediscount policy to influence monetary developments and, to some extent, on the mechanism of prior authorization to determine the sectoral allocation of credit. Nevertheless, under the new statutes and the rules of intervention, the BCEAO has acquired a wide range of instruments, so that it now can adopt discretionary policy for individual member countries.