Statement by Mr. Assimaidou and Mr. Diallo on WAEMU Executive Board Meeting

This West African Economic and Monetary Union (WAEMU) IMF staff report focuses on common policies for member countries. The region continued to experience a strong upswing in 2013, and the immediate outlook is for further vigorous growth and moderate inflation. Delays in implementing reforms, at both the national and regional levels, are the principal medium-term risk. It highlights that with continued strong growth projected for the region, countries are encouraged to seek opportunities to strengthen fiscal sustainability while maintaining public investment efforts.


This West African Economic and Monetary Union (WAEMU) IMF staff report focuses on common policies for member countries. The region continued to experience a strong upswing in 2013, and the immediate outlook is for further vigorous growth and moderate inflation. Delays in implementing reforms, at both the national and regional levels, are the principal medium-term risk. It highlights that with continued strong growth projected for the region, countries are encouraged to seek opportunities to strengthen fiscal sustainability while maintaining public investment efforts.

The WAEMU authorities thank staff for the candid and productive dialogue during their visit to the Union’s institutions. Twenty years after its establishment, the WAEMU is at an important juncture as a regional economic community and my authorities appreciate the Fund’s contribution to their ongoing work aimed at revamping the regional surveillance framework as well as implementing the key structural reforms which will help member states initiate their economic transformation. They broadly share the thrust of the staff report as a fair reflection of the views exchanged during the mission.

After experiencing the adverse impact of the political and security situation in the region, economic activity in 2013 sustained the pace of its 2012 rebound and WAEMU countries are committed to take advantage of this new momentum to entrench growth over the medium term. The reform package designed accordingly is on track, in the fiscal area, the financial sector, and other important structural reforms for the development of the private sector and trade.

Recent Developments, Growth and Fiscal Policy Coordination

The Union’s authorities concur with staff on the recent positive developments in the region and to the projected favorable outlook as well. Growth recorded a strong 5.5 percent in 2013 owing to an improved socio-political environment, buoyant public investment, a good harvest and oil production. Regional inflation was subdued at 1.6 percent as a result of lower food prices. The situation of public finances reflects the big shift towards investment mostly in infrastructure. The authorities are taking steps to further improve the composition of spending in that direction. Efforts have also been made on the revenue side, with countries stepping up the mobilization of taxes and grants to support their investment agenda. As a result, the area-wide fiscal deficit is contained at about 3 percent of GDP.

Overall, the authorities consider the recent developments in the public finances and the current account as encouraging signs of the success of the structural changes underway. The public spending profile is trending towards investment as opposed to the high current expenditures of the past. Consequently, imports are being dominated by capital goods. Although these developments entail some adverse effect on the fiscal and current account deficits in the short run, my authorities believe that they are temporary and the related investments should pave the way for a better stance in the medium term.

For the period ahead, the WAEMU has embarked on a thorough review of the regional surveillance framework, which should contribute to improve fiscal policy coordination and strengthen member countries’ public finances. The overarching goal of the authorities in reforming the surveillance framework is to set new fiscal rules that support their development agenda while ensuring fiscal sustainability over the long term. To this end, the WAEMU Commission has initiated the review of the convergence criteria with an emphasis on the debt criterion. Drawing on the experience of weak compliance with the regional fiscal rules, the authorities have taken steps to ensure that the review process and the design of new rules are participatory and inclusive. Moreover, they have made arrangements to garner inputs and views from partners and external experts on the current surveillance framework and the changes that may be warranted. In particular, a study on the debt criterion was commissioned and the report by external experts is being discussed with partners including IMF staff, officials from member countries and experts of the WAEMU institutions.

Preliminary discussions have exposed divergent views between staff and the authorities, especially on the debt criterion, which warrant stressing the authorities’ views. Staff recommended the lowering of the ceiling on the debt- to-GDP ratio, arguing that the current level of 70 percent of GDP is no more constraining and too high from a debt vulnerability perspective. Without prejudging the outcome of their ongoing review, my authorities consider that the external debt criterion should not be viewed only from a debt vulnerability perspective. The goal of policymakers, among others, is to grow the economy at strong and sustainable rates so as to create jobs, improve the standard of living of the population and generate enough revenue to honor public liabilities. At a time when African leaders and all their partners concur that Sub-Saharan Africa should seize the moment, my authorities strongly believe that, while maintaining macroeconomic stability, countries should not be over-constrained and unduly deprived of sources of financing for their structural transformation agenda. Rather, due account should be taken of the development imperatives in any debt assessment.

The WAEMU authorities are fully committed to preserve the improvement of macroeconomic management and the hard-won benefits of the HIPC and MDRI initiatives. Most countries in the region now have in place national debt management strategies and institutions with civil societies more aware of debt issues and the challenges they face. The combination of these factors resulted in the area-wide average debt- to-GDP ratio dropping from 125 percent in 2000 to less than 40 percent currently; with some countries’ ratio standing at less than 20 percent. Such a favorable stance provides room for maneuver and should entail some flexibility in setting a ceiling on the debt-to-GDP ratio. Moreover, to ensure ownership and compliance, this ratio should be realistic and reflect countries’ need to scale up public investment while maintaining long-term fiscal and debt sustainability.

The preparatory work on the other convergence criteria is proceeding well. The authorities will draw on their past experience and on relevant international best practices to design the new framework. In this regard, they appreciate the discussion with staff on a number of measures and instruments such as the transposition of regional rules into national laws and fiscal frameworks or the setting of independent national fiscal councils. While some of these instruments may appear helpful in principle, the institutional development stage of the WAEMU countries may not yet offer the suitable environment for their implementation and effectiveness. The final step of the current review process will be the formulation of a specific reform proposal to be submitted to the Council of Ministers for decision.

Financial Sector Development and Monetary Policy

The WAEMU authorities have taken good note of staff’s assessment that “various analyses suggest that the real effective exchange rate remains broadly in line with regional fundamentals”. Monetary policy in the recent period has supported member countries’ efforts to boost economic activity, especially after the post-crisis slowdown in some countries. This easing has contributed to the strong credit growth, albeit with a limited effect on bank lending rates.

The overall regional financial sector is sound and the authorities are addressing difficulties where needed, with no or limited impact on public finances. The banking commission has been strengthened, better staffed and equipped to closely monitor developments in the sector. Furthermore, the set of financial sector reforms mainly initiated by the central bank (BCEAO) should help address most of the vulnerabilities, including the high concentration of lending, which not only increases risks for banks but also impedes broad-based growth and economic diversification. Reforms have proceeded well and the authorities are stepping up efforts to accelerate those that encountered delays. The objective is to develop a deep and well-functioning financial sector, which provides the appropriate channels for the conduct of monetary policy, and which better supports the economic activity, including by availing credit to all sectors in need.

Regarding the interbank and public debt markets, the electronic infrastructure is in its final stage of implementation and should be functional before mid-2014. The creation of credit bureaus is underway, with companies to be selected in 2014. The regional agency set to assist countries in better coordinating the issuance of sovereign debt has been created; its senior management team is recruited and it is being further staffed. As regards supervision and crisis prevention, the banking commission has liaised with the authorities of parent banks of regional subsidiaries to better coordinate supervisory efforts in the face of fast developing regional banking groups. The authorities are also taking steps to implement Basel II/III regulation in the coming years. The creation of a financial stability fund aimed at addressing sovereign risks is also being finalized; the governance architecture is completed and the resources should be made available in the period ahead.

Structural Reforms for Economic Transformation

Besides the fiscal area and the financial sector, other structural reforms are underway or are to be initiated to support member countries’ efforts to sustain growth over the long-term and to speed up economic transformation. The first policy area is related to an array of regional initiatives aimed at boosting the development of the private sector, which should be the main driver of inclusive growth. The WAEMU Commission is taking steps to harmonize across countries the reforms for improving the business environment, including the World Bank “Doing Business” related reforms.

The Union’s common industrial policy includes an emphasis on the development of SMEs. Efforts are underway to design a single set of characteristics for classifying SMEs within the region, with the view to facilitate the implementation of policies in this sub-sector. Likewise, a single market is being established to allow SMEs to sub-contract with bigger companies in public procurements across countries. Major steps have also been made in delivering regional infrastructure projects and in finding lasting regional solutions to the energy issue, all aimed at creating a conducive environment to growth. The implementation of the second phase of the Regional Economic Program (PER) should bolster these efforts.

The facilitation of regional trade is also a top priority of the Union which has designed a program that includes lifting nontariff barriers to the movement of people, goods and services within the WAEMU, and addressing issues such as illicit road blocks and payments of bribes. The recent agreement for a common external tariff (CET) for the whole Economic Community of West African States (ECOWAS) is also a good step to further enhance trade.

My authorities consider it an important achievement that work carried out for years have now been translated into an accord, with a CET to merge the WAEMU and ECOWAS markets. As for the risks associated with this development, the authorities view the agreement as a work in progress and they are committed to working expeditiously to address the current difficulties and improve the framework as the single market gains ground. Along these negotiations, the ECOWAS authorities are also working with the European Union on the terms of the Economic Partnership Agreement (EPA). The discussions now focus on a proposal by the ECOWAS to allow for a 75 percent free access for European goods to its market against initial proposals of 70 percent (ECOWAS) and 80 percent (EU).

The authorities also intend to promote the dissemination of best practices among countries by making regional rules of the positive experiences and achievements of a given member country. In the same vein, they have initiated a set of institutional reforms for a better functioning of WAEMU institutions, especially the Commission. These reforms are inspired by the Commission’s Strategic Plan 2011-20. A forward-looking report on the “WAEMU in 2020” drafted by a high level panel also serves as a basis for internal discussions on key challenges facing the regional economy as a whole.


The regional framework provided by the WAEMU has contributed to the progress achieved by member countries in conducting fiscal and monetary policies and on important structural reforms. Despite internal challenges and adverse exogenous shocks, the Union has made significant inroads towards creating a well-functioning single market, basis for economic development and prosperity within the region.

The 20th anniversary is a milestone for the WAEMU and the authorities have high expectations from the review they initiated to bring changes to their fiscal coordination instrument. Paired with the comprehensive reforms in a wide range of sectors, my authorities are hopeful that the region’s process of economic transformation will be well entrenched for sustainable and inclusive growth.