West African Economic and Monetary Union: Staff Report on Common Policies for Member Countries—Press Release; Staff Report; and Statement by the Executive Director for the Waemu
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International Monetary Fund. African Dept.
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Publication Date:
02 Mar 2022
eISBN:
9798400203244
ISBN:
9798400203244
Language:
English
Keywords:
headline inflation; fostering financial market development; GDP growth simulation; net SDR position; WAEMU region; Government debt management; market segmentation
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1. Although the impact of the pandemic seems to be less severe than in the rest of sub-Saharan Africa (SSA), the WAEMU has been hard hit by the Omicron variant. The region has, so far, suffered four waves of the Covid virus. During the most recent one, the number of new cases per million soared to 21 as of January 10, 2022 (compared to 32 in SSA)—well above the average of 3 recorded since the beginning of the pandemic. Despite the increase in cases, countries had not introduced new significant restrictions on mobility at the time of drafting this report. As of January 10, the fatality rate for WAEMU countries was estimated at 1.6 percent of identified cases, compared to 2.0 percent for SSA.

Abstract

1. Although the impact of the pandemic seems to be less severe than in the rest of sub-Saharan Africa (SSA), the WAEMU has been hard hit by the Omicron variant. The region has, so far, suffered four waves of the Covid virus. During the most recent one, the number of new cases per million soared to 21 as of January 10, 2022 (compared to 32 in SSA)—well above the average of 3 recorded since the beginning of the pandemic. Despite the increase in cases, countries had not introduced new significant restrictions on mobility at the time of drafting this report. As of January 10, the fatality rate for WAEMU countries was estimated at 1.6 percent of identified cases, compared to 2.0 percent for SSA.

Recent Developments

A. Health and Security Situation

1. Although the impact of the pandemic seems to be less severe than in the rest of sub-Saharan Africa (SSA), the WAEMU has been hard hit by the Omicron variant. The region has, so far, suffered four waves of the Covid virus. During the most recent one, the number of new cases per million soared to 21 as of January 10, 2022 (compared to 32 in SSA)—well above the average of 3 recorded since the beginning of the pandemic. Despite the increase in cases, countries had not introduced new significant restrictions on mobility at the time of drafting this report. As of January 10, the fatality rate for WAEMU countries was estimated at 1.6 percent of identified cases, compared to 2.0 percent for SSA.

uA001fig01

New Covid Cases Per Million

(7-day moving average)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: Our World In Data and IMF staff calculations.
uA001fig02

People Fully Vaccinated

(percent of population)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: Our World In Data and IMF staff calculations.

2. Countries are making progress, but the pace of the vaccination campaign remains slow and uneven. Overall, the number of fully vaccinated people in the WAEMU is still very low (below 10 percent in most countries as of the first week of January), partly because of supply constraints, albeit vaccine hesitancy also plays a role. National authorities are pursuing efforts to secure sufficient supply of shots from AVAT, COVAX, and bilateral partners. But given the current pace of vaccination, a significant inoculation rate is unlikely to be reached at the regional level before the second half of 2022.1

3. The pandemic has aggravated the situation of countries already plagued by rising security risks. The security situation has deteriorated in the Sahel region since 2012, with Burkina Faso, Mali and Niger being particularly impacted. In 2021, close to 2,500 security incidents (including battles, violence against civilians, and riots) were reported in these three countries, according to ACLED—an increase of about 15 percent relative to 2020. The number of fatalities is at historically high levels. Moreover, security incidents have spilled over to other countries in the region, notably to border areas in Benin and Cote d’lvoire, raising alarm among policymakers and prompting a discussion about strengthening the response to these threats, including through additional information sharing and military spending.

uA001fig03

Fatalities Linked to Security Incidents

(number of fatalities)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Note: Security incidents include battles, rots, explosions, and violence against civilians.Sources: ACLED; and IMF staff calculations.

B. Economic Developments

4. Despite these headwinds, the economic recovery, which started in the third quarter of 2020, has firmed up in 2021. GDP growth in 2020 is estimated at 2 percent, significantly above the projection made at the time of the last regional consultation (0.3 percent), mainly due to higher-than-expected domestic demand. Monthly indicators of activity point to a robust recovery in 2021, especially in commerce and services (Figure 1). The economic rebound appears to be broad-based across countries. At the regional level, GDP growth is expected to bounce back to 5.7 percent in 2021, driven by an acceleration of private domestic demand.2

Figure 1.
Figure 1.

WAEMU: Recent Economic Developments

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Sources: BCEAO, World Economic Outlook and IMF staff calculations.

5. Supply disruptions and the strong economic activity have accentuated inflationary pressures. Headline inflation at the regional level has exceeded the ceiling of the BCEAO target range (1 -3 percent) since April, and average inflation for 2021 is expected to be slightly above 3 percent. Higher prices of locally grown and imported food staples have been the main driver of rising inflation, which was nonetheless contained by administered prices. Core inflation, excluding energy and certain food items, has also increased from 1.6 percent in April to 3.6 percent in November, in part due to the higher cost of imported food items (Figure 1).

C. Macroeconomic Policy

6. The fiscal stance was relaxed significantly in 2020 in response to the crisis and remained supportive in 2021. The overall deficit reached 5.7 percent of GDP in 2020, a relaxation of close to 3.5 percent of GDP relative to 2019 (Table 1). The additional financing needs were covered primarily externally, including through donor support, but issuances on the regional market also increased (Figure 2). For 2021, the regional fiscal deficit is estimated at 5.9 percent of GDP, with financing needs being most notably covered by further issuances in the regional market as well as Eurobond issuances, in addition to the SDR allocation.3 As a result of the relaxation of the fiscal stance, debt levels are estimated to reach 56 percent of GDP in 2021 and debt service burden indicators have deteriorated further (Table 6). Many of the Covid-related support measures were withdrawn during 2021.

Table 1.

WAEMU: Selected Economic and Social Indicators, 2018–26 1

article image
Sources: IMF, African Department database; World Economic Outlook; World Bank World Development Indicators; IMF staff estimates and projections.

All projections presented in this staff report were prepared in the first half of December 2021 and do not incorporate any further developments.

Shows data from the IMF Country Report No. 21/49, published on January 21, 2021 (Board document number SM/21/5).

The acceleration in GDP growth in 2023 is due to the start of production of large hydrocarbon projects in Niger and Senegal.

Excluding intraregional trade.

Projections for 2021 include the 2021 SDR allocation which is equivalent to US$2,327 million, or 0.6 months of imports and 9.6 percent of the BCEAOs sight liabilities.

Table 2.

WAEMU: Selected National Accounts and Inflation Statistics, 2018–26

article image
Sources: IMF, African Department database; and staff estimates.

Shows data from the IMF Country Report No. 21/49, published on January 21, 2021 (Board document number SM/21/5).

Higher growth rates in 2023 and 2024 in Niger and Senegal reflect coming on stream of hyrdrocarbon production.

Investment in Niger includes the change in inventories.

Table 3.

Sub-Saharan Africa: Cross-Group Comparison, 2018–26

article image
Sources: IMF, African Department database; and staff estimates.

Central African Economic and Monetary Community (CEMAC).

Including Nigeria and South Africa.

Table 4.

WAEMU: Selected Fiscal Indicators, 2018–26

article image
Sources: IMF, African Department database; and staff estimates.

In Mali operations linked to the Etablissements Publics Nationaux are included in total expenditures but classified as neither capital nor current. In Burkina Faso and Niger, discrepancies between total expenditures and the sum of capital and current expenditures reflect net lending.

Table 5.

WAEMU: Balance of Payment, 2018–26

article image
Source: IMF, African Department database.

Including intraregional trade.

While it did not affect NFA, the 2021 SDR allocation increased NIR by the equivalent of 1,3 percent of regional GDP.

Table 6.

WAEMU: Government Public Debt and Debt Service, 2018–26

article image
Source: IMF, African Department database.
Figure 2.
Figure 2.

WAEMU: Recent Monetary and Financial Sector Developments

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Sources: BCEAO; Agence UMOA-Titres; and IMF staff calculations.

7. Monetary and financial conditions have continued to be accommodative in 2021. The policy rate has remained at 2 percent since June 2020, and the BCEAO has followed the fixed rate full allotment (FRFA) policy of satisfying all banks’ demand for liquidity at the policy rate, against adequate collateral. Overall, regional financing conditions have further eased over 2021. The average interbank rate has decreased and is now close to the policy rate. On the regional market, sovereign yields have declined, and the average maturity rose as several countries issued 7 and 10-year bonds (Figure 2). Furthermore, the structural liquidity of banks has improved markedly since the last quarter of 2020, mainly due to stronger export receipts and the diffusion in the economy of the fiscal stimulus.

8. The BCEAO’s external reserves have risen to comfortable levels due to strong capital inflows. Nominal reserves in dollar increased by 9 percent between end-2020 and end-November 2021 to reach USD 23.7 billion. Over the same period, the import cover increased from 5.5 months of importations to 5.8 months. This upward trend reflects a rebound in repatriation of export proceeds, the SDR allocation (USD 2.3 billion), and portfolio inflows linked to Eurobond issuances (USD 4.7 billion) by Benin, Cote d’lvoire, Senegal and the BOAD. While both exports and imports recovered over the first half of 2021, the increase in imports has outpaced that of exports.4

uA001fig04

WAEMU: Gross International Reserves

(months of next year’s imports)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Sources: BCEAQ; IMF staff calculations.
uA001fig05

WAEMU: Exports and Imports of Goods

(year-on-year growth rate)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: BCEAO; IMF staff calculations.

9. The WAEMU banking system remained resilient during the crisis. The average bank capital adequacy ratio increased from 11.5 percent at end-2019 to 11.8 percent at end-2020, on the back of a call by the Banking Commission to limit the distribution of 2020 dividends, and reached 12.0 percent at end-June 2021. In line with the economic recovery, credit to the private sector showed robust growth (about 7 percent y-o-y monthly average) between January and October 2021—the latest data available (Figure 1). Banks’ gross non-performing loans (NPL) decreased from 11.4 percent of total loans at end-2019 to 11.0 percent at end-2020 before returning to 11.3 percent in June 2021. The decline in NPLs in 2020 partly reflected the regulatory forbearance scheme for loan repayment deferral set up in response to the crisis.5 In addition, the sector of microfinance institutions (MFIs), which is small,6 saw a sharp deterioration in NPLs from 6.5 percent at-end 2019 to 12.6 percent in June 2020, before receding back to 9.0 percent in June 2021 (Annex I).7

uA001fig06

WAEMU: Bank Capital Adequacy Ratio

(percent)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: BCEAO.

Outlook and Risks

10. Growth is projected to return to potential by 2022. Growth is expected to further accelerate to 6.1 percent in 2022 despite planned fiscal consolidation of over 1 percentage point of regional GDP. The acceleration is primarily driven by a rebound in net exports. Inflation is projected to return to the BCEAO’s target band by end-2022. Over the medium term, GDP growth would stabilize around 6 percent, after a temporary rise over 2023–24 due to the hydrocarbon projects coming on stream in Niger and Senegal. Nonetheless, staff estimates that the pandemic could reduce growth prospects in the absence of proactive measures to prevent scarring effects (Selected Issues Paper SIP #1).

uA001fig07

WAEMU: Contribution to GDP Growth

(percentage points)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: IMF staff calculations.

11. Fiscal policy will gradually adjust towards a 3 percent deficit by 2024. Medium-term projections reflect a consolidation of around 1 percent of GDP per year until the deficit ceiling is reached by 2024. In staff’s assessment, the adjustment path embedded in current projections is challenging but feasible within the proposed timeframe. It will require considerable efforts, especially from countries with initially higher deficits (Table 4). The adjustment is tilted towards expenditure containment relative to revenue mobilization. In the near term, a large part of the retrenchment on the expenditure side will be concentrated on current spending, with most remaining Covid-related support measures to firms and households being discontinued in 2022.8 On the revenue side, domestic revenue mobilization efforts should be significant9 The largest increases are expected in countries with hydrocarbon projects (Niger, Senegal), as well as in Burkina Faso, where tax policy and revenue administration reforms are envisaged by the authorities.10

uA001fig08

WAEMU: Fiscal Adjustment between 2021 and 2024

(percentage points of GDP)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: IMF staff calculations.

12. After deteriorating in the short term, the region’s current account is forecast to narrow. The current account deficit is projected to widen to 5.9 percent of GDP in 2021–22, as the effect of higher prices of commodities exported by WAEMU countries would be more than offset by a rising import bill, reflecting the ongoing economic recovery and higher international oil prices. Subsequently, the current account would narrow by around 1½ percent of GDP on the back of declining import ratios, given gradual fiscal consolidation and the completion of import-intensive hydrocarbon projects in Niger and Senegal. The reserve coverage is projected to gradually stabilize at 5 months of imports by the end of the forecast horizon, reflecting the uncertain environment for future Eurobond issuances and the fast growth of nominal imports.11

13. Uncertainty surrounding the baseline outlook is high, with risks tilted to the downside in the near term. The main risks pertain to the evolution of the pandemic (Annex II). Slow and uneven progress with vaccination could lead to more rapid spread of new variants potentially resistant to vaccines and higher risks of breakthrough infections. Moreover, an abrupt tightening of global financial conditions could negatively affect growth prospects, especially if inflationary pressures lead to a faster-than-expected normalization of monetary policy in advanced economies. Adverse developments in terms of trade, in particular higher oil prices, are another important risk factor for the outlook, including on the inflation front. At the regional level, further deterioration of security risks, political uncertainties, and delays in hydrocarbon projects could also hurt economic prospects. Slower fiscal adjustment could undermine the credibility of the convergence path and have adverse consequences on FX reserves. Box 1 outlines a downside scenario with a slower recovery.

Alternative Scenario with a More Gradual Recovery

Baseline projections reflect expectations of a V-shaped rebound in economic activity in the WAEMU—a scenario supported by recent conjunctural indicators. However, there are substantial downside risks, which could lead to a slower and weaker recovery. This Box presents a downward scenario, which mimics the shape of past recoveries in the region. Given that the recovery in 2022–23 is mostly driven by external demand, a negative scenario could, for instance, materialize as a result of a global shock affecting trade (e.g. sharp oil price increase or trade disruptions due to new pandemic developments) or domestic delays in the gas and oil projects of Niger and Senegal.

The analysis is conducted in two steps. First, the GDP growth path is simulated with a Growth-at-Risk (GaR) model tailored to low-income countries and developed in the context of the current Financial Sector Assessment Program (FSAP).1 The model estimates the distributional density of historical recovery patterns, and builds the scenario using, more specifically, the last two episodes of 1992 and 2011. Then, in a second step, the analysis quantifies the effect of lower economic growth on fiscal deficits and reserves. To evaluate the impact on the deficit ratio, a revenue to GDP elasticity of 1 is assumed, while nominal spending is kept unchanged relative to the baseline. Regarding reserves, the box replicates the analysis employed in the 2020 Staff Report on Common Policies of Member States, which estimated an econometric relationship between fiscal deficits and reserves.

uA001fig09

WAEMU: GDP Growth

(percent)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: IMF staff calculations.

Simulations show that the growth rate would be, on average, about 1 percentage points lower than under the baseline over the period 2021–26 (Box Figure). In this scenario, the fiscal deficit ratio would increase to about 4 percent of GDP by the end of the forecast horizon, compared to 3 percent of GDP under the baseline. The reserve coverage would decline by about half a month of imports by 2026 compared to the baseline (4.5 months versus 5.0 months).

In terms of policy response, letting automatic stabilizers operate under the downside scenario would make it much more difficult for fiscal deficits to converge back to 3 percent of GDP by 2024. Therefore, staff would recommend offsetting any cyclical revenue shortfall through better expenditure prioritization. On the monetary policy front, maintaining an accommodative monetary stance for longer would seem warranted under this scenario.

1 GDP growth simulations were prepared by Romain Lafarguette and Zhuohui Chen under the guidance of Romain Veyrune (all MCM).

Authorities’ Views

14. The regional authorities broadly agreed with IMF staff on the economic outlook and risks. Projections were broadly aligned, although the BCEAO and WAEMU Commission forecast more favorable medium-term growth (about half a percentage point higher than projected by staff over 2022–25), assuming full recovery of sectors affected by the crisis and a strong effect of public infrastructure projects on the economy. On the fiscal side, the authorities expect, like staff, that member states will converge to the 3 percent of GDP deficit target by 2024. Regarding the regional balance of payments, the BCEAO foresees higher capital inflows than staff, reflecting more favorable assumptions concerning foreign direct investments (FDIs) ahead of the planned realization of hydrocarbon projects in Senegal and Niger. This, together with a projected substantial reduction in the current account deficit from 2023 (linked to higher oil exports), implies a stronger reserve coverage, which would stabilize around 6 months of imports by 2023 (compared to close to 5 months in staff projections).

Policy Discussions

A. Recalibrating the Medium-Term Fiscal Strategy After the Crisis

15. Staff supports the authorities’ decision to converge towards the regional fiscal deficit of 3 percent of GDP by 2024. In June 2021, the head of states of the ECOWAS (15 members, including all WAEMU countries) committed to converging towards the fiscal deficit anchor over the years 2024–26.12 This is one year later than recommended in last year’s report, but staff assesses the more gradual adjustment path, incorporated in baseline projections, to be compatible with external viability and fiscal sustainability.13 The WAEMU’s foreign exchange position is, in fact, stronger than expected at the time of last year’s consultation and the regional financial market has shown some resilience in absorbing increased sovereign issuances.

uA001fig10

WAEMU: Overall Fiscal Balance (Commit. Basis) and Components

(percent of GDP)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: IMF staff calculations.

16. The credibility of the medium-term fiscal trajectory would be strengthened by reestablishing the WAEMU Convergence Pact which was suspended in 2020. Although a convergence plan has been adopted at the ECOWAS level, the WAEMU set of fiscal rules has not yet been reinstated. The WAEMU Commission is expected to make a proposal to the Council of Ministers in the first semester of 2022. Staff has conducted a detailed analysis of the calibration of fiscal targets (summarized in SIP #2), which shows that it would be preferable to maintain the debt and deficit ceilings at their previous levels of, respectively, 70 and 3 percent of GDP. The 70 percent debt ceiling appears to strike the right balance between growth and fiscal prudence considerations. Model-based simulations also show that raising the deficit ceiling from 3 to 4 percent of GDP could undermine domestic and external stability, except in very specific circumstances—namely with unconstrained access to external financing and significant progress in fiscal transparency. Both conditions may prove difficult to satisfy in the near term.

17. The credibility of the fiscal trajectory hinges also on the swift implementation of PFM reforms. As discussed in previous year’s reports, PFM directives enacted at the regional level are in line with international best practices. However, their implementation at the national level is very uneven. One area of concern is the persistent discrepancy between the fiscal deficit (as measured in fiscal accounts “above the line”14) and the increase in government debt—typically called “stock-flow adjustments” (SFAs). SFAs have historically averaged 1 percent of GDP a year in the WAEMU and are estimated to be even larger in 2020 (see SIP#2). To some extent, the large size of SFAs signals PFM weaknesses, such as off-budget expenditure and materialization of contingent liabilities.

18. Beyond the credibility and relevance of medium-term fiscal targets, it is also essential that the composition of fiscal adjustment fosters an inclusive economic recovery. Countries should shift from broad fiscal support to more targeted policies. Emphasis should be placed on revenue-enhancing measures to create needed fiscal space and strengthen the capacity to service debt15 On the spending side, priority social expenditure and infrastructure investment should be protected.16 Staff also encourages the authorities to accelerate vaccination rollout, including by stepping up information campaigns to overcome misinformation, addressing shortcomings in the logistics of vaccine distribution, and providing more incentives for citizens to get vaccinated. The 2021 SDR allocation will support the medium-term fiscal strategy (Box 2).

19. Regarding country relationships with the IMF, the WAEMU is still in a transition period. Most IMF supported programs in the region expired in 2020. As of early January 2022, only Mali, Niger and Senegal have financing arrangements. Guinea-Bissau has an ongoing staff-monitored program (with prospects for a financing arrangement in 2022), while all other countries are at different stages of program discussion or negotiation.

The SDR Allocation and its Use in the WAEMU

Out of the August 2021 general SDR allocation, about US$2.3 billion (SDR 1.6 billion or 1.3 percent of regional GDP) was transferred to the BCEAO, acting as fiscal agent of WAEMU member countries. The CFAF-equivalent of the SDR allocation was on-lent to all member countries by the BCEAO on August 23, through MOUs under the following terms: 20-year maturity (with possibility of rollover) at a fixed interest rate of 0.05 percent. By comparison, the 2009 allocation (1.2 percent of rebased GDP) was on-lent at 3 percent for a period of 10 years. The amounts range from 0.8 percent of GDP (Burkina Faso) to 2.4 percent of GDP (Guinea-Bissau and Togo) (Box Table 1). To put these amounts into perspective, total gross borrowing needs at the regional level average about 10 percent of GDP per year (over 2021–23).

Staff encourages member states to use the allocation in a way that preserves fiscal sustainability and external stability, and does not delay needed policy adjustment. Larger and/or more protracted fiscal deficits financed by on-lent resources could erode external buffers and undermine the credibility of the regional convergence path. Nonetheless, these risks appear contained at this stage.

Box Table 1.

2021 SDR Allocations

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Sources: FIN and BCEAO. Notes: The exchange rate used in all on-lending convention was SDR1 = CFAF794.042. In order to convert SDR to US$, exchange rate was used as of August 23, 2021 (SDR1=US$1.419).

Based on information available at the time of drafting this report, the intended use of the SDR allocation by country authorities could be summarized as follows:

  • Above-the line use. Benin has used the allocation to finance the 2021 budget deficit, including security spending and health and social measures to mitigate the impact of the pandemic. Niger plans to spend half of the allocation during 2021 to finance measures meant to improve the food security of vulnerable populations (e.g., food transfers), support security expenditures and finance road infrastructure, but this is unlikely to change the fiscal deficit trajectory because of containment of other spending; discussions are still being held regarding the use of the rest of the allocation in 2022. Overall, at the region level, the above-the-line use of the allocation in 2021 is estimated at less than half a percent of GDP.

  • Below-the line use. In Burkina Faso and Cote d’lvoire, the authorities communicated that they would use the SDR allocation during 2021 as a substitute for more expensive domestic financing, while the Togolese authorities decided to keep the SDRs in a special account at the BCEAO for future use as substitute for domestic financing. The Malian authorities intend to use about one third of the on-lent amount during 2021 in case privatization receipts (recorded below the line) do not materialize, and the remaining in 2022 to replace domestic debt issuances.

  • Mixed use. Guinea-Bissau plans to use the entire allocation in 2021 to finance Covid-related expenditures and to meet anticipated debt service payments to BOAD in 2021–22 (both interest and principal payments). In Senegal, more than half of the allocation will be used in 2021 to finance Covid-related expenses and clear unmet obligations, while the rest is planned to be used for targeted financial transactions and as substitute for other financing during 2021–22.

Authorities’ Views

20. Regional authorities acknowledged the importance of re-establishing the Convergence Pact in 2022. They welcomed IMF staff’s analysis on the calibration of fiscal rules and concurred that compliance with the 3 percent of GDP deficit anchor would help maintain an adequate level of external reserves, prevent pressures on the regional public security market, and preserve debt sustainability. However, they indicated that the discussion among policymakers on medium-term fiscal targets was still ongoing. They also noted that the revised Convergence Pact would encompass institutional reforms such as the introduction of more precise escape clauses.

21. The authorities also highlighted a number of steps being taken to enhance PFM. They noted that, as of July 2021, two thirds of the eight regional PFM directives had been implemented, with the six directives adopted in 2009 being already fully transposed at the national level. Moreover, five member states have already transitioned towards program-based budgeting, of which two in 2020–21. The authorities also highlighted several practical difficulties in advancing the PFM reform agenda, including limitations of national budgetary and accounting systems, challenges in implementing accrual accounting, and limited access to budgetary information by the general public. They also noted that six member states were able to produce general government financial statistics, albeit not yet on a consolidated basis.

B. Monetary Policy: Balancing Support for the Recovery, Price Stability, and External Buffers

22. The BCEAO has responded very effectively to the crisis, preventing the emergence of financial stress and contagion to the banking sector. In 2020–21, the central bank took important steps to mitigate the impact of the pandemic on economic activity, including by cutting the policy rate by 50 basis points in June 2020 and launching new 6-months and 12-months refinancing windows for government securities at the minimum bid rate (2 percent). Since March 2020, refinancing operations have been conducted through FRFA tenders—whereby banks’ demand for liquidity is fully satisfied at a fixed rate, against adequate collateral. So far, the regional financial market has been able to accommodate the increased demand for sovereign funding without tightening of financial conditions and crowding-out of private sector credit. In addition, the 2020 and 2021 WAEMU’s external positions are assessed as broadly consistent with fundamentals and desirable policy settings (Annex III).

23. The BCEAO should stand ready to tighten monetary policy if the external position weakens or inflation forecasts exceed durably the ceiling of the target band. In light of the severity of the shock and risks to the recovery, maintaining an accommodative stance has been appropriate. The fast rise in prices during the pandemic, with headline inflation exceeding the upper limit of the central bank’s target band since April 2021, may call for a monetary policy response if inflation pressures persist and forecasts do not return within the target band at a 24-month horizon (Annex IV). Various monetary policy rules estimated by staff would support a moderate rate hike if the economic recovery continues and inflationary pressures prove to be persistent (Annex V).

24. Staff encourages the BCEAO to pursue the modernization of its policy and governance frameworks. The BCEAO has conducted wide-ranging reforms since 2010, including by introducing changes in decision-making bodies, redefining policy objectives, and broadening the set of its operational tools. The reform momentum has not abated in recent years, which were marked by the new monetary arrangement with France announced at end-2019. The latest IMF safeguards assessment from 2018 deemed that the central bank’s control, accounting, reporting, and auditing systems were adequate to ensure the integrity of operations. Going forward, the authorities could continue their modernization efforts by contemplating the structural reforms described in Box 3.

25. Future use of SDRs could entail costs for the central bank, which may not be fully offset by the low fixed rate at which the 2021 SDR allocation is on-lent to member states. As of end-December 2021, the net SDR position of the eight WAEMU countries (defined as holdings minus cumulative allocations) recorded a surplus of SDR 1.9 billion (equivalent to 1.5 percent of regional GDP), reflecting SDR receipts in the context of IMF-supported programs and prudent reserve management by the central bank. However, future uses of SDR—possibly related to program repurchases or fiscal deficits causing pressures on international reserves—may push holdings below allocations, and lead the BCEAO to pay the SDR rate on the difference. Staff encourages the BCEAO to assess the implications of such scenario on its capital, given the low fixed rate at which the 2021 SDR allocation was on-lent to member states, leaving exchange rate and interest rate risks with the central bank.

Reforms of Central Bank Operations and Monetary Arrangements

Tender procedure. Staff encourages the BCEAO to examine the opportunity of maintaining the FRFA procedure after macroeconomic conditions normalize. By guaranteeing adequate supply of liquidity, the FRFA implementation has reduced the uncertainty around banks’ access to refinancing, eliminating the risk of overbidding and lowering the liquidity premium. The FRFA has also enhanced the ability of the policy rate to steer financial conditions by eliminating the discrepancy between minimum bid rate and average rate across bids. All these factors have contributed to enhancing monetary policy transmission.

Collateral framework The BCEAO has expanded the pool of collateral eligible for its refinancing operations in 2020, by accepting bank loans to prequalified private companies.1 The BCEAO applies a uniform 10 percent haircut to all assets used as collateral, regardless of the underlying risk and their public or private nature. Staff encourages the central bank to assess whether the 10 percent haircut would be sufficient to protect the central bank’s balance sheet in case of severe stress scenarios. Staff also advises the BCEAO to explore various ways of achieving greater differentiation in the framework, such as introducing different haircut rates (possibly grouped in broad buckets), using haircut premiums for specific risk categories, and moving towards applying haircuts to the market value of collateralized assets more broadly in the medium term.

Emergency liquidity assistance (ELA). While the BCEAO has, in the past, provided ad hoc liquidity assistance to banks facing temporary liquidity problems, staff advises the BCEAO to formalize this type of interventions by establishing a proper ELA framework, as exists in most other jurisdictions including in Africa. Such formalization would have a number of benefits, including (1) better preparation for potential emergency liquidity needs in the context of the normalization of monetary policies globally, (2) more explicit rules for lender-of-last-resort operations (including close supervision, conditionality and cost), which create predictability and limit moral hazard behavior, and (3) better safeguards for the central bank (due to the existence of a solvency requirement, risk control measures on assets used as collateral, and possible government guarantees).

Transparency and independence. As noted by the 2018 safeguards assessment, the institutional setting of the central bank supports sound governance. To further strengthen the perception of independence, staff advises national authorities to appoint independent experts like academics (rather than civil servants) in the monetary policy committee, as four member states already do. Since governance reforms are a continuous process in which central banks periodically re-examine their existing arrangements and adapt to the changing expectations of market participants, staff also encourages the BCEAO to review the transparency framework established in 2010. This review could rely on the new IMF’s Central Bank Transparency Code (CBT), which allows central banks and their stakeholders to map their transparency practices into international best practices, with a view to enhancing policy effectiveness.

ECO reform. The latest developments in the reform of the monetary arrangements are summarized in Annex VI. Going forward, it will be important to continue to communicate with private investors and development partners about the next steps of the currency reform and its articulation with the ECOWAS roadmap, with a view to ensuring that the transition to a new arrangement is gradual and predictable.

1 The BCEAO accepts either the loans to companies rated A (lowest credit risk) or B (relatively higher credit risk), provided that B issuances benefit from government guarantees.

Authorities’ Views

26. The BCEAO broadly concurred with IMF staff’s assessment of the monetary policy stance. At the time of the consultation discussions, the BCEAO viewed the increase in inflation as a temporary phenomenon which would not call for immediate policy tightening. The BCEAO expected inflation to return below 3 percent within the next 24 months. They argued that inflation remained concentrated on food products and they did not detect signs of transmission to other categories, partly because of administered prices. In addition, various indicators of underlying pressures (inflation expectations, wage growth) did not signal second-round effects. Regarding the external assessment, the BCEAO agreed that the current level of reserves was adequate, and the exchange rate was in line with fundamentals.

27. The authorities welcomed the discussion on the reform of the central bank’s governance and policy frameworks. Regarding the collateral framework, they agreed on the principle of protecting the central bank’s balance sheet but expressed reservations about the benefits of differentiating haircut rates, which could conflict with the principle of solidarity in the union and discourage the development of markets for longer-term securities as well as their efforts to develop the use of bank loans to private companies as collateral. On the FRFA tender procedure, the authorities agreed on its benefits, but felt that deeper analysis was still needed given possible implications in terms of liquidity control. The authorities were interested in exploring the possibility of formalizing the ELA framework and will pursue the discussion in the context of the FSAP mission. They also took note of the possible balance sheet implications related to the use of the SDR allocation, but deemed that this scenario had a low probability and the central bank had mechanisms in place to manage currency and interest risks.

C. Fostering Financial Stability and Inclusion

28. The banking sector has been resilient during the crisis, partly because of the proactive measures taken by the Banking Commission and the BCEAO. In response to the pandemic, the transition path to Basel ll/lll has been postponed by one year, with the convergence to a regulatory capital adequacy ratio of 11.5 percent now expected in 2023. The BCEAO has also set up a regulatory forbearance scheme for banks and MFIs to defer repayments of distressed customers, without reclassifying these claims as NPLs. The scheme was terminated in December 2020. On the AML/CFT front, physical onsite inspections have resumed in October 2020 after being suspended in March, but virtual off-site monitoring continued to take place during the whole period. At end-October, 48 onsite inspections had taken place in 2021 compared to 27 in 2020 and 36 in 2019. And the proportion of thematic inspections focused on AML/CFT has increased to about 20 percent in 2021 from 5 percent in 2019.17 The IMF is conducting a FSAP at the regional level, which started in 2021 and will be completed at the end of the first quarter of 2022 (see CD strategy in Annex VII). The FSAP will assess the financial sector’s main risks and vulnerabilities, review the institutional framework (including bank supervision and regulation and AML/CFT oversight), examine crisis management and bank resolution mechanisms, and offer options to further develop financial markets.

29. Significant progress has been made in operationalizing the bank resolution framework. As of October 2021, 25 of the 28 systemic banks had presented preventive restructuring plans (PRP) to the General Secretariat of the Banking Commission, five of which were formally approved by the Supervisory Board. The supervisor will subsequently prepare resolution plans for the institutions whose PRPs are approved. The adoption of these resolution plans, expected for all systemic institutions in 2022, is a crucial step in operationalizing the banking resolution framework. But this exercise does not mark the end of the reform process. In order to make the resolution mechanism fully effective, this step must be supplemented by some technical, procedural, regulatory or legislative measures.18

30. The high reliance of some commercial banks on BCEAO refinancing is a source of vulnerability in the financial system. Some banks hold large portfolios of government securities that are refinanced at the central bank.19 This trade, which offers elevated risk-adjusted returns, is attractive compared with private credit20 Nevertheless, it increases maturity and interest rate mismatches and may reduce incentives for banks to implement adequate liquidity risk management and control. The existing quantitative limits on access to refinancing21 do contain banks’ leverage but they present shortcomings: (1) they lack gradualism and flexibility, since banks’ demand for refinancing becomes suddenly constrained once the ceilings are breached; (2) their credibility can be called into question if a systemic bank at the limit encounters liquidity stress, such as deposit flight or loss of access to the interbank market; and (3) they do not mandate corrective actions and do not provide support to banks in designing their deleveraging strategy. Staff advises the regional authorities to consider requesting “funding plans” from banks excessively reliant on refinancing. These plans, which would be assessed and monitored by the supervisor, have been implemented with success in other jurisdictions, including in Africa, to encourage banks to resort to other forms of financing (such as the interbank market) and set explicit targets for the diversification of their resources. These plans could initially complement—rather than substitute for—existing quantitative limits in order to curb access to BCEAO refinancing.

31. The diagnostic missions of MFIs, currently conducted by the BCEAO, will be essential to better understand the causes of the sector’s fragilities and propose effective solutions. Although the MFI sector has been hit hard by the pandemic, its fundamental weaknesses have structural causes, such as poor governance and risk management, exposure to informal and rural sectors where asymmetry of information is elevated, and a lack of adequate information and reporting systems. The fragility of the sector, which poses important risks for financial inclusion and poverty, calls for better monitoring, further actions to strengthen capacity, and restructuring of distressed institutions. In this regard, staff welcomes the BCEAO’s diagnostic project, carried out with the support of the AFD in 2020–21, to identify the MFIs in difficulty and conduct review missions. Regarding other dimensions of financial inclusion, staff advises regional institutions to pursue their efforts (jointly with national authorities) to improve digital and financial literacy, develop technological infrastructure, mitigate financial risks related to mobile money (fraud, cyberattacks), and improve customer service.

32. Fostering financial market development remains a priority to support the growth outlook and ensure that the medium-term fiscal plans do not create financial stress. A systematic analysis of the segments of the regional market is presented in SIP#3 using a new tool developed by the IMF’s Monetary and Capital Markets department. The depth and liquidity of the secondary sovereign security market could be increased by (1) improving transparency and price formation through the development of an electronic platform for auctioned securities; (2) increasing the incentives for sovereign security dealers (SVT) to animate the primary and secondary markets; (3) developing benchmark maturities through reopening sovereign security issues and better planning issuances in the context of each member’s medium-term debt strategy; and (4) advancing towards greater fungibility between syndicated and auctioned securities with a view to gradually eliminating market segmentation.

Authorities’ Views

33. The authorities are committed to further strengthening the resilience of the financial sector. They noted that the financial system appeared globally sound. They also indicated their intention to finalize the resolution plans for all banks of systemic importance by 2022 and committed to work diligently on remaining procedures and legal measures to ensure that the bank resolution framework becomes fully operational. The authorities agreed that excessive bank’s reliance on refinancing could be a source of vulnerability in the financial system, especially to the risk of higher interest rates. Nevertheless, they expressed concerns about the administrative burden that could be associated with supervising funding plans and saw existing quantitative limits for access to refinancing as being broadly effective. Regarding MFIs, the authorities emphasized their vital role for financial inclusion. They noted that action plans were in place to further modernize information systems and foster access of MFIs to regional payment systems. They stressed that the diagnostic missions being undertaken would be essential to tailoring policy responses to address the vulnerabilities of the sector.

34. The authorities broadly shared IMF staff’s diagnostic and recommendations to further develop the regional financial market. They highlighted several initiatives to address constraints to the development of the market, including a review of the regulatory framework for non-bank financial market intermediaries and a project to improve incentives for government-security dealers (SVTs) to act as true market makers. Regarding the need to develop benchmark securities, the authorities noted that some issuances were already being reopened, but agreed that further progress in this area would require greater tolerance on the issuers’ side for bond price changes22 as well as cashflow management improvements (since volumes would increase and principal repayments would become lumpier).

D. Mitigating the Risk of Scarring Effects on Medium-Term Growth

35. The pandemic is likely to have persistent effects on the economies of the region. The size and duration of the recovery will depend on the persistence of the economic damage, or “scarring”, in the medium term. Staff analysis suggests that the pandemic could reduce GDP growth by up to 1 percentage point over the medium term in the absence of corrective measures (SIP #1). This is primarily due to the more subdued outlook for investment, the negative effect of school closures on human capital accumulation, and productivity losses associated with the possible increase in informality.

36. The risk of scarring calls for accelerating reforms, both at the national and regional levels, to address key growth bottlenecks. Although these bottlenecks vary across countries, there are common impediments, including limited access to electricity, lack of bank financing for private ventures, and the large size of the informal sector. Discussions during the regional consultation focused mostly on regional reforms but there is also an extensive policy agenda at the national level, covered by individual countries’ Article IV reports, including improving governance, accelerating economic diversification, facilitating access to finance, and strengthening the educational system as well as professional and vocational training programs.

uA001fig11

WAEMU: Firms Identifying Issue as Major Constraint

(percent of firms)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: World Bank Enterprise Surveys.Note: Latest available surveys used for each country.

37. Deeper trade integration is key to foster economic resilience and boost productivity post-Covid. Greater integration contributes to the diffusion of knowledge and ideas, reduces costs for businesses, and allows firms to reap economies of scale by expanding the size of the regional market. Trade is by law free of customs’ duties within the WAEMU and the broader ECOWAS community. Nevertheless, trade among member states remains relatively limited, in part due to various non-tariff barriers, including the lack of common documentation for customs procedures and ad-hoc levies charged for road transit. The simplification and harmonization of procedures are priority areas to foster regional integration. More broadly, there is also scope for better integrating the WAEMU with other sub-regions within Africa as well as the global economy. In that context, the African Continental Free Trade Area (AfCFTA) could play a significant catalyst role to coordinate integration efforts at the regional level.23 The effective establishment of this framework is likely to boost trade and competition, enhance prospects for FDI, and facilitate the development of regional supply chains.

38. Regional infrastructure projects could also be an engine of medium-term growth. Better coordination and faster implementation of investments and pooled resources could enhance digital infrastructure and foster the construction of regional transportation and energy networks that would promote movements of goods and persons. Nevertheless, there are important bottlenecks to the implementation of regional investment projects, resulting in weak execution rates. Impediments to the execution of these projects include weaknesses in budget programming, lack of financing, cumbersome administrative procedures (in particular for public procurement), as well as capacity constraints to monitor project implementation.

39. Regional initiatives to improve the business climate would also mitigate the scarring effects of the pandemic. At the regional level, establishing a “level playing field” by enhancing the competition framework is particularly important to foster cross-border investment and boost productivity growth. In particular, the revision of the legal framework to enhance the division of responsibilities and cooperation between the WAEMU Commission and national competition authorities could improve the capacity to monitor and sanction anti-competitive practices within the region.

Authorities’ Views

40. The authorities broadly concurred with IMF staff’s analysis and diagnosis of structural bottlenecks to growth. They highlighted a number of initiatives being implemented at the regional level to address these issues. These include the Regional Economic Program (Programme Economique Regional- PER), which comprises key regional infrastructure projects in priority areas such as transportation, electricity and the digital economy, as well as an infrastructure fund financed by the BOAD (which would be operational by 2022), in addition to specific programs on the energy sector and human capital development. The latest phase of the PER comprises 102 projects (43 of which are being implemented by the WAEMU commission and other regional institutions) amounting to about 7 percent of regional GDP. In addition, the WAEMU Commission and member states have put in place measures to foster the reduction of non-tariff barriers to trade within the union, including the elaboration of trade surveillance reports, the undertaking of review missions within the different trade corridors, and the implementation of a framework to identify and settle problems encountered by economic agents when undertaking cross-border trade activities (Mecanlsme d’Alerte sur les Obstacles au Commerce-MAOC).

Staff Appraisal

41. The WAEMU region has, so far, shown remarkable resilience in the face of the Covid shock. Member states entered the crisis in a relatively strong macroeconomic position, supported by robust regional institutional frameworks for fiscal, monetary, and financial policies. In addition, national and regional authorities have provided a forceful and appropriate response to the shock.

42. The region is experiencing a fast economic recovery, although uncertainty about the economic outlook remains elevated. Economic prospects are favorable in the near and medium-term, with growth likely to stabilize around 6 percent and the external current account deficit eventually narrowing. Nonetheless, uncertainty surrounding the baseline scenario is still high, with risks tilted to the downside. Economic prospects could be undermined by the rapid spread of new Covid variants in a context of low vaccination, an abrupt tightening of global financial conditions, further deterioration of the security situation, and delays in fiscal adjustment.

43. After two years of relaxation of fiscal deficits, there is a need to re-anchor the fiscal trajectory in a credible medium-term fiscal framework. Staff supports the authorities’ decision to converge towards the regional fiscal deficit anchor of 3 percent of GDP by 2024, which is necessary to preserve external and fiscal sustainability over the medium term. The credibility of the adjustment path would be enhanced by re-introducing the WAEMU Convergence Pact suspended in 2020. In staff’s view, the medium-term fiscal targets embedded in the pre-crisis fiscal framework (70 percent of GDP debt ceiling and 3 percent of GDP deficit ceiling) appear to strike the right balance between growth and fiscal prudence considerations.

44. It is also crucial to ensure that the composition of fiscal adjustment fosters an inclusive economic recovery. Countries should shift from broad fiscal support to more targeted policies. Emphasis should be placed on revenue-enhancing measures to create needed fiscal space for the provision of essential public goods and strengthen debt servicing capacity. On the spending side, health expenditures, in particular those linked to the vaccination rollout, other priority social expenditure, and infrastructure investment should be protected.

45. The monetary policy stance appears appropriate. In light of the severity of the shock and uncertainty regarding near-term economic prospects, maintaining an accommodative stance has been adequate. The BCEAO should stand ready to tighten monetary policy if the external position weakens or inflation forecasts exceed durably the ceiling of the target band. The 2020 and 2021 external positions are assessed as broadly consistent with fundamentals and desirable policy settings.

46. Staff supports the BCEAO’s continuous efforts to modernize its policy and governance frameworks. In response to the Covid crisis, the central bank has expanded the range and scale of its interventions. Some of these reforms could be maintained or developed further in the coming years. In particular, staff encourages the authorities to consider the possibility of extending the FRFA procedure after macroeconomic conditions normalize. Staff also recommends that the BCEAO explores various ways of achieving greater differentiation in the treatment of the expanded pool of collateral eligible for refinancing operations.

47. Although the financial sector has weathered well the crisis, financial stability and deepening should remain top priorities to foster growth and resilience. Commendable progress was achieved in 2021 to finalize the bank resolution framework, but some legislative, regulatory, and procedural measures are still needed to make it fully operational. The high reliance of some banks on BCEAO refinancing is a source of vulnerability that should be addressed, possibly by using the instrument of funding plans to encourage recourse to other forms of financing. Structural fragilities in the MFI sector should be tackled by enhancing monitoring, strengthening capacity, and restructuring distressed institutions. Finally, the depth and liquidity of the secondary sovereign security market could be increased by improving transparency and the price formation process, developing further benchmark maturities, and gradually eliminating market segmentation between syndicated and auctioned government securities.

48. Countering the possible scarring effects of the crisis will require bold actions at both the regional and national levels to boost productivity growth and stimulate private investment. At the regional level, the priorities are to foster trade integration, enhance the regional competition framework, and accelerate the implementation of regional infrastructure projects in the areas of transportation, electricity, and digitalization.

49. The discussions with the WAEMU authorities will be on the 12-month cycle in accordance with Decision No. 13656-(06/1), as amended.

Figure 3.
Figure 3.

WAEMU: Medium-Term Prospects

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Sources: BCEAO; World Economic Outlook; and IMF staff calculations.
Figure 4.
Figure 4.

WAEMU: Regional Macroeconomic Heterogeneity

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Sources: BCEAO; World Economic Outlook; and IMF staff calculations.
Table 7.

WAEMU: Monetary Survey, 2018–26

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Sources: BCEAO; and IMF staff calculations.
Table 8.

WAEMU: Financial Soundness Indicators, 2016–21

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Source: BCEAO.

First year of data reporting in accordance with Basel II/III prudential standards and the new banking chart of account.

Annex I. Impact of the Pandemic on Financial Inclusion1

This annex provides a preliminary analysis of the impact of the Covid pandemic on financial inclusion in the WAEMU during 2020. The focus is on three dimensions of financial inclusion, namely microfinance institutions (MFIs), e-money and banking sector. Overall, while MFIs have remained mired in persistent vulnerabilities, there are reasons to believe that progress made on e-money and digital transactions could outlast the pandemic and deepen as Covid recedes.

A. Financial Inclusion and the Pandemic

1. Boosting financial inclusion is a policy priority in the WAEMU, considering its role in economic development through supporting growth, reducing poverty and mitigating inequality. Greater availability of financial services unlocks business opportunities for individuals and firms, while allowing citizens to invest in education, cushion negative shocks, and save for old age. Moreover, small and young firms, which are subject to financing constraints, can contribute to job creation in more inclusive financial systems. Therefore, financial inclusion can help countries alleviate inequality and promote economic development2

2. This annex focuses on three key dimensions of financial inclusion. These three pillars—a common typology in the literature—are MFIs, e-money, and banks’ activities targeted towards enhancing access and quality of financial services (Box 1). In the WAEMU, the MFI sector is relatively small, with its end-2020 credit outstanding representing about 1.8 percent of GDP. By comparison, banks’ credit to the private sector stood at about 23 percent of GDP. The total value of e-money transactions (including digital payments) was about 44 percent of GDP during 2020.

Concepts

Financial inclusion. It is a multidimensional concept and can broadly be defined as the extent to which individuals and firms have access to, and effectively use, formal financial services at high quality and low costs. Banking sector, MFIs and e-money are three important aspects of inclusive finance.

MFI sector. It consists of financial institutions that provide financial services mainly to low-income households and small- or micro-sized enterprises, which are typically excluded from traditional banking services.

Mobile money and e-money. “Mobile money” can be defined as financial services offered by mobile network operators or other financial institutions which partner with network operators, generally without the requirement of having a bank account. Hence, the pre-requisite is often to have a mobile phone subscription. “E-money” is a broader concept that also covers other digital financial services (DFS) such as services provided by banks or other traditional financial institutions that can be done using mobile phone, internet, or other electronic devices (e.g. deposits, bill payments, or online transfers).

3. The Covid pandemic may have created both challenges and opportunities for financial inclusion. The ambiguous effect of the pandemic is apparent when analyzing the potential channels of transmission:

  • Lockdowns, travel restrictions and social distancing measures have disrupted economies in Africa, while the slow pace of vaccine rollout has imposed further strains on the economies. Financial institutions are facing a deterioration of credit quality, with customers having difficulties to repay their debt. The MFI sector has been particularly impacted, since it engages with lower income groups and small-sized firms, groups that have been disproportionately hit by the pandemic. Moreover, MFI operations have been affected by social distancing measures that disrupted collection of repayments, face-to-face meetings with clients, and flow of work.

  • The Covid shock may also have created opportunities for financial inclusion, particularly in the area of e-money. Virus containment measures have promoted contactless transactions and compelled many people to adopt DFS for the first time. In addition, central banks in many countries, including the BCEAO, have launched new measures to boost the use of DFS (such as reducing transaction fees), and governments have introduced mobile cash transfers (such as the Novissi program in Togo) to reach out the vulnerable populations.

B. Evolution of Financial Inclusion Pre-Pandemic

Microfinance Institutions

4. The MFI sector went through extensive restructuring in the years preceding the pandemic. Based on data from the BCEAO, the nominal stock of loans provided by MFIs increased by about 60 percent, from 934 to 1,483CFAF billion, between the end of 2015 and the end of 2019. As share of GDP, the loan ratio increased from 1.4 to 1.7 percent over the same period (Figure 1).3 This increase in credit happened in the context of a restructuring of the sector (which started in the second half of the 2000s) prompted by measures to close nonviable MFIs and tighten conditions to grant new licenses. In the meantime, the number of MFIs declined from 679 at end-2015 to 508 by end-2019. The total number of MFI clients was broadly stable at around 14–15 million over the period.

Figure 1.
Figure 1.

Financial Inclusion Indicators in the WAEMU

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Sources: BCEAO, World Bank, IMF World Economic Outlook, IMF staff estimates. Data from the BCEAO regarding MFIs, E-Money and banking sector are obtained from monthly bulletins, quarterly reports on MFIs, annual reports on financial inclusion and information provided by the authorities in the context of the consultation. Data for internet use not yet available after 2017.

E-money

5. E-money displayed robust improvements over the period, becoming crucial for financial inclusion in the WAEMU. BCEAO data shows a widespread increase in the use of e-money over the period 2015–19. The number of accounts (as a share of adult population) increased more than twofold, from 29 to 66 percent. During the same period, more and more businesses started accepting e-money payments. The number of person-to-person transfers and total volume of payments also increased fourfold and sixfold, respectively (Figure 1).

6. Improvements in cellular phone subscriptions, internet use and access to electricity over the past decade have helped unlock the potential for e-money in the region. According to the World Bank’s World Development Indicators, cellular phone subscriptions reached 100 (per 100 people) in 2019, doubling from 52 in 2010. Internet use, as a share of total population, also jumped from 3 to 21 percent over 2010–17, and access to electricity increased from 34 to 44 percent of population during 2010–19 (Figure 1).

Banking Sector

7. Indicators of financial inclusion in the banking sector point to steady improvements before the pandemic. The number of bank accounts increased from 13 to 15 percent of adult population during 2015–19. Service points—defined as any type of physical place where clients can receive banking services—also showed modest progress. Although being an imperfect measure of inclusion, credit to the private sector grew by about 40 percent, from a nominal value of 14,400 at end-2015 to 21,000 CFAF billion at end-2019. In proportion of GDP, credit to the private sector increased from 21 to 23 percent during the same period (Figure 1).

C. Financial Inclusion During the Crisis

Microfinance Institutions

8. The pandemic does not seem to have durably impacted the loan provision by MFIs. The Covid shock led to an initial decline in the nominal stock of loans in the second quarter of 2020, but the effect was short-lived. Loans showed a rebound during the second half of 2020, with an average quarterly growth rate of about 10 percent (y-o-y), as the economies started to reopen. During the first half of 2021, consistent with the economic recovery in the region, credit from MFIs rebounded significantly with an average quarterly growth of 19 percent y-o-y, although some of it reflected the base effect of slowdown in the second quarter of 2020 (Figure 1). The number of MFI clients has increased by about 1.5 million people since the beginning of 2020, reaching 16 million at the end of the first quarter of 2021.

9. However, the quality of MFIs portfolio has deteriorated significantly during the crisis. The aggregate NPL ratio increased from 6.5 percent at the end of 2019 to a peak of 12.6 percent in the second quarter of 2020. This large increase was due to several factors, including (1) the low adoption by MFIs of the forbearance measures provided by the BCEAO during the pandemic (Box 2); (2) weaknesses of the MFIs’ information systems that did not allow forborne loans to be classified as performing, even when the forbearance measures were implemented; and (3) large exposure of MFIs to the agriculture sector, which was hardly hit by the crisis. Afterwards, with the economic recovery and the removal of the lockdown and social distancing measures, repayments resumed and the MFIs’ NPL ratio declined to 9.0 percent in the second quarter of 2021 (Figure 1). This is still 2.5 percentage points higher than in the last quarter of 2019, reflecting the structural fragilities of the sector (poor governance and risk management, inadequate staffing, weak legal structures etc), which were further aggravated by the pandemic.

Authorities’ Actions to Foster Inclusion During the Pandemic

The BCEAO has taken some actions to protect financial inclusion, as the pandemic hit the region. In order to incentivize the use of e-money, the BCEAO reduced fees and commissions in various types of e-money transactions and relaxed the conditions for opening e-money accounts during 2020.

In addition, the BCEAO launched a framework in 2020 encouraging banks and MFI to postpone the debt repayments of customers that were affected by the pandemic (but evaluated as solvent), without reclassifying those claims as non-performing. The loan forbearance framework provided a breathing space to firms and households hit by the economic downturn and supported the goal of an inclusive financial system. Furthermore, in order to facilitate MFI access to bank financing, bank loans granted to eligible MFIs became eligible, as collateral, for a special refinancing window of the BCEAO (thereby creating additional incentives for banks to lend to MFIs).

E-money

10. The pandemic has boosted the use of e-money across the WAEMU, reinforcing the gains accumulated before the pandemic. The number of e-money accounts (as a share of adult population) increased from 66 at end-2019 to 76 percent at the end of 2020. The number of businesses accepting e-payments increased almost fourfold during the pandemic, reaching almost 413,000 by the end of 2020 compared to end-2019. Person to person transactions also improved markedly, from 190 to almost 300 percent of adult population by end-2020, while the number of payments increased from 111 to 160 percent of adult population between 2019 and 2020 (Figure 1).

11. It is unclear whether all the gains achieved in 2020 in e-money use will be preserved in the post-pandemic environment. Virus containment measures and the BCEAO policy response contributed to the positive developments in the use of e-money. Some of these effects may be transitory and reversed, as economies go back to normal. That said, three main factors could make the gains more durable. First, as mentioned above, the pandemic counted many first-time users, and some of them will continue to use e-money beyond the Covid period. Second, the increase in digitalization and internet use during the pandemic could lead to permanent gains in e-money use.4 Third, the BCEAO is likely to continue incentivizing e-money transactions beyond the pandemic.

Banking Sector

12. The Covid shock has led to a sizable increase in the banked population, while other indicators of financial inclusion in the banking sector have not been much affected. Individuals with a bank account (as a share of adult population) increased from 15 percent at the end of 2019 to 16.5 at the end of 2020. Although the pandemic led to a small decline in the nominal stock of bank loans to the private sector during the first quarter of 2020, the effect was transitory. Loans resumed their increase afterwards, at a pace similar to the pre-pandemic level (with an average 5.6 percent quarterly growth y-o-y), reflecting the removal of the lockdown and social distancing measures and the ongoing economic recovery. Service points for the banking sector remained stable in 2020 (Figure 1).

Overall Use of Financial Services

13. Aggregate indicators of financial inclusion confirm the steady improvement in the use of financial services during the Covid crisis. The BCEAO produces several indicators of financial inclusion that combine the three dimensions discussed above (e-money, MFIs and banks). For instance, the share of adult population using at least one sort of financial services reached 64 percent at the end of 2020 from 60 percent at end-2019 (Figure 2). This shows a continuation of the steady improvement observed during the pre-pandemic period (the share of adult population that uses financial services stood at 42 percent by end-2015). Other aggregate indicators of financial inclusion display the same trend.

Figure 2.
Figure 2.

Indicator of Overall Use of Financial Services in the WAEMU

Percent of adult population

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: BCEAO’s annual report on financial inclusion. The indicator is corrected for individuals with multiple accounts, thereby representing citizens as share of adult population.

Annex II. Risk Assessment Matrix1

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Annex III. External Sector Assessment1

Overall Assessment: The 2020 and 202 1 WAEMU’s external positions are assessed as broadly as broadly consistent with fundamentals and desirable policy settings. The current account deficit, which is estimated to have narrowed in 2020, is projected to expand in 2021 reflecting an increase in imports caused by the economic recovery and higher oil prices. The level of reserves is within the range suggested by reserve adequacy metrics using 2020 and preliminary 2021 data. The exchange rate is found to be broadly in line with fundamentals.

Potential Policy Responses: In 2021, accommodative monetary and fiscal policies have been appropriate to support the economic recovery given considerable uncertainties surrounding the macroeconomic outlook. Over the medium term, fiscal consolidation towards 3 percent of GDP and implementation of structural reforms—including at the regional level—will be key to supporting the external position.

A. Net International Position

1. 2019 position. The WAEMU’s net international position (NIIP) deteriorated to – 44.4 percent of GDP at end-December 2019 (the date of the most recent observation), against -42.8 percent at end December 2018. This trend was largely driven by an increase in external debt, which passed from to 28.0 percent of GDP in 2018 to 30.2 percent in 2019.

2. Outlook. The improvement in the CA (current account) deficit in 2020 is expected to support the NIIP, while the expected weakening in the CA position in 2021 might contribute to a worsening of the NIIP ratio. Looking ahead, the projected improvement in the CA position from 2023 should contribute to stabilizing the NIIP ratio in the medium-term. Over 40 percent of the WAEMU external liabilities is constituted by foreign direct investments (FDI), while portfolio investments (which are more volatile than FDI) constitute a relatively small proportion of external liabilities; in this regard, risks to external sustainability arising from the negative NIIP appear contained.

B. Current Account

3. Background. The WAEMU external CA deficit (including grants) is estimated to have narrowed to 4.5 percent of GDP in 2020 from 4.9 percent in 2019, as some import compression in the context of the pandemic and an increase in official transfers more than offset the export contraction resulting from the decline in external demand.2 In 2021, the CA deficit is projected to widen to 5.9 percent of GDP as the result of a rebound in imports, related to the ongoing economic recovery as well as higher international oil prices. Over the medium term, the CA deficit would progressively improve to reach 4.6 percent of GDP in 2026 (a level broadly similar to the 2016–20 average), reflecting the effect of fiscal consolidation as well as the expected import decline associated with the completion of planned hydrocarbon projects in Niger and Senegal.

4. Assessment. When applied to 2020 data, the Fund’s EBA-Lite CA model estimates a CA norm of -5.24 against a cyclically-adjusted CA balance of -5.10 percent of GDP, resulting in small positive gap of 0.14 percent of GDP (Text Table). This result includes adjusters for the impact of the pandemic on oil trade balances and tourism (-0.09 percent on average in WAEMU countries) as well as natural disasters and conflicts (0.42 percent on average).3 Using preliminary data for 2021, the model estimates a CA gap of -0.62 percent of GDP, wider than the one estimated using 2020 data but still within the threshold assessed to be in line with economic fundamentals according to the EBA-Lite methodology (-1 percent of GDP).4 The difference between the 2020 and 2021 assessments reflects the expected widening of the CA deficit in 2021.

WAEMU: Model Estimates for 2020

(in percent of GDP)

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C. Real Exchange Rate

5. Background. The CFA Franc (CFAF), in real effective terms, depreciated by about 14.3 percent between the peak of 2009 and 2019, reflecting both the nominal depreciation of the Euro vis-a-vis the US dollar and relatively low inflation in WAEMU countries compared to trading partners. Starting in 2020, the depreciating trend was halted. In 2020, the real effective exchange rate (REER) appreciated by about 3.9 percent compared to 2019 levels; this was largely the result of relative appreciation of the Euro against the USD, while the inflation differential with trading partners was stable over the same period. In 2021, the REER further appreciated by about 1.9 percent over January-October, compared to the average value over the same period in 2020, reflecting the nominal exchange rate appreciation.

uA001fig12

WAEMU: Effective Exchange Rate, 2000–2021

(Indices, 2000=100)

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: IFS.

6. Assessment. When applied to 2020 data, the EBA-Lite Index Real Effective Exchange Rate (IREER) model finds a marginal misalignment of CFAF, estimating an undervaluation of approximately 2.1 percent with respect to values implied by economic fundamentals and equilibrium policies. This result is broadly consistent with the estimates obtained using the EBA-Lite CA model, which suggest an undervaluation of 0.23 for 2020 assuming an elasticity of the real exchange rate to the CA deficit of -0.18 (using IMF staff assumptions). When applied to preliminary data covering the period between January and October 2021, results from the IREER suggest the CFA franc is broadly aligned with economic fundamentals; the small difference between two assessments reflects the mild appreciation of the currency in the first three quarters of 2021.

D. Capital Flows

7. Background. In 2020, net capital inflows are estimated to have declined to 3.2 percent of GDP, from 5.6 percent in 2019, largely driven by a contraction in FDI in the context of the pandemic. Portfolio inflows, in turn, increased from 0.2 percent of GDP in 2019 to 0.6 percent in 2020, partly driven by a Eurobond issuance by Cote d’lvoire in the second half of the year. In 2021, the financial account is projected to recover to 5.1 percent of GDP, in line with the 2017–2019 average (5.2 percent), reflecting a projected rebound in FDI as well as a further increase in portfolio inflows, projected to reach 2.1 percent of GDP in 2021.5 Over the medium term, the financial account would decline and oscillate around 4 percent of GDP, reflecting a decrease in FDI inflows (as a share of GDP) after the completion of planned hydrocarbon projects and a decline in the portfolio investments ratio —the latter reflects prudent assumptions on new net Eurobond issuances over the period (given uncertain access of Eurobond issuers to international markets).

8. Assessment. Market perceptions of WAEMU countries are broadly favorable. This is illustrated by the fact that sovereign spreads for Eurobond issuers declined, on average, by over 100 basis points over January-September 2021 compared to the second half of 2020, and are currently below their average pre-pandemic levels. Nonetheless, the outlook for capital inflows remains subject to considerable uncertainties. Shifts in global risk appetite resulting from monetary policy normalization in advanced economies and concerns related to debt sustainability in some WAEMU economies might complicate access to international markets for Eurobond issuers. Over the medium term, policies to improve the competitiveness of the region and guarantee the soundness of the macroeconomic framework will be important to enhance the attractiveness of domestic economies and boost capital inflows.

E. Reserve Adequacy

9. Background. The WAEMU pooled reserves remained broadly stable in 2020, increasing mildly from CFAF 10,357 billion at end-2019 to about CFAF 11,731 billion at end-2020—equivalent to 5.5 months of 2021 imports6 or 77.3 percent of the BCEAO’s sight liabilities. In 2020, the reserve position was mostly supported by exceptional financial assistance received from the international community during the pandemic. In the same year, receipts related to export proceed surrender requirements declined given some deferrals of payments granted by exporters during the crisis. Between January and November 2021 (last month with available data), foreign reserves further increased to CFAF 13,630 billion, roughly equivalent to 5.8 of projected 2022 imports or 82.1 percent of the BCEAO’s sight liabilities, as a result of several factors including (1) Eurobond issuances of Benin, Cote d’lvoire, Senegal and the BOAD (2.6 percent of 2021 GDP or 1.1 months of 2022 imports), (2) a recovery in export repatriation proceeds, and (3) the August 2021 SDR allocation (about US$2.3 billion, equivalent to 1.3 percent of GDP or 0.6 months of 2022 imports). Reserves are projected to stand at 5.8 months of imports coverage by the end of 2021. In subsequent years, the reserve coverage ratio would decrease towards 5 months of imports, despite the decline in the CA ratio, reflecting the projected reduction in net capital inflows (in percent of GDP) as well as the expected growth in nominal imports (see above).

10. Assessment. The ARA CC approach based on 2020 data estimates an adequate level of reserves of 4.4 to 6.5 months of prospective import coverage for the WAEMU, with the lower end calibrated on fragile states and the higher end calibrated on non-resource rich countries. Based on this model, the level of reserves projected for end-2021 (5.8 months of imports) as well as the medium-term projection (5 months atend-2026) are assessed as being adequate. Growth-friendly fiscal consolidation and implementation of structural reforms will be key to maintaining reserves within the estimated optimal range.

F. Competitiveness

11. Trade performance. Over the past few years, the CA balance has marginally worsened, passing from about -4.5 percent of GDP on average between 2012 and 2015 to -4.8 percent between 2016 and 2019. Over the same period, the share of exports over GDP in the region has declined, from 25.4 percent on average in 2012–15 to 23.4 percent in 2016–19. The bulk of WAEMU exports is constituted by raw materials including gold, cotton, unrefined oil, and agricultural commodities, while manufacturing exports account for about 18 percent of total merchandise exports. Improving the trade performance of the region requires enhancing the competitiveness of the WAEMU’s export sector. While trends in exchange rates have been broadly favorable in recent years, various structural factors hinder the competitiveness of the region.

12. Price and non-price competitiveness. As noted above, the REER has depreciated in the past decade, suggesting that trends in price competitiveness for the WAEMU have been favorable during this period. Moreover, the EBA-Lite methodology suggests that the REER is currently consistent with economic fundamentals. Thus, space for further improvements in price competitiveness might be limited in the near term. At the same time, the WAEMU’s non-price competitiveness appears constrained by several structural factors. According to the 2020 World Bank governance indicators (WGI), for example, WAEMU countries fall behind key competitors in Africa and Asia in policy areas such as government effectiveness, control of corruption, regulatory quality, and rule of law. Survey-based indicators included in the 2019 World Economic Forum’s “Global Competitiveness Report” also suggest that member states exhibit relatively low scores on several dimensions such as dealing with insolvency regulations and paying taxes, as well infrastructure endowment—notably road quality and access to electricity. Consistent data from the World Bank’s Logistics Performance Index (LPI) suggests that the quality of trade connectivity in the region has not improved significantly between 2010 and 2018,7 given relative underperformance on several indicators including the ease to deal with customs procedures and the timeliness of shipments.

13. Intra-regional trade. Trade in local products is by law free of customs’ duties within the WAEMU and the broader ECOWAS community. Nevertheless, trade among WAEMU member states remains relatively limited. Between 2010 and 2017, exports to other WAEMU countries8 were broadly stable at about 15 percent of total exports, while the largest part of trade exchanges took place with countries outside the WAEMU. Two factors contribute to the low level of trade integration. First, as noted above, member states’ exports are dominated by non-transformed commodity and agricultural goods, whose production is not regionally integrated (the limited presence of regional supply-chains constrains trade integration). Second, various non-tariff barriers also constrain the development of intraregional exchanges. These include the lack of common documentation for customs procedures and ad hoc levies charged for road transit (WTO 2018).9

14. Several measures can contribute to alleviate existing structural constraints on competitiveness. Desirable policies at the national level include enhancing the provision of infrastructure, particularly electricity provision, as well as improving the business climate through measures aimed at improving governance (for example, with stronger anti-corruption agencies) and facilitating access to finance. In addition, given the concentration of the regional export sector on non-transformed commodities, policies to foster industrialization (for example, through carefully targeted fiscal incentives) could contribute to improving the trade performance of the region. At the regional level, useful policies would include targeted incentives and financing to promote cross-border infrastructure projects in the energy and transport sectors; efforts to harmonize customs’ procedures; and measures aimed at removing non-tariff trade barriers to trade.

Annex IV. Inflation Dynamics During the Pandemic1

This annex analyzes the recent increase in inflation in the region to identify its causes and assess its persistence. The three approaches presented beiow do not provide a dear and consistent message about the risk of second-round effects. Given the high uncertainty around the diagnostic, it wiii be essential to closely monitor developments in the coming months to determine whether inflation will return within the BCEAO’s target band without the need for policy tightening.

1. Headline inflation started increasing at the beginning of 2020 after recording negative rates throughout 2019. Inflation has exceeded the BCEAO central target of 2 percent since mid-2020, breached the ceiling of the 1–3 range in April 2021, and has remained above 3 percent in subsequent months. A fundamental question for monetary policy is whether the recent inflation spike is likely to continue in the future. This Annex relies on three approaches to throw light on this issue.

2. First approach: decomposition of headline inflation. Inflation is more likely to persist if price pressures broaden and are not limited to a few items of the consumption basket. In this regard, the rise in headline inflation during the crisis has been essentially driven by higher food prices, reflecting domestic supply problems and higher import costs. The contribution of food to inflation has increased from 0.20 percent before the crisis (December 2019-February 2020) to 3.0 percent on average over August-October 2021. Other components of the basket have had marginal effects on inflation dynamics.

uA001fig14

WAEMU: Decomposition of Inflation Increase during 2020–21

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Note:: “Pre-crisis” refers to the average Dec 2019-Feb 2020. “Current” refers to the average Aug-Oct2021.Sources: BCEAO; IMF staff estimates.

3. Second approach: analysis of core inflation. Another way to approach the question is to examine the evolution of inflation when volatile and transitory shocks are filtered out. The argument is that the inflation is bound to remain elevated, and the central bank is more likely to respond if the increase in volatile components is transmitted to more stable ones. Two measures of core inflation are used: (1) the authorities’ “core” indicator, published on the BCEAO website, which excludes food and energy prices from headline inflation; and (2) an alternative measure produced by IMF staff using a “trimmed mean” approach that filters out disturbances (the components at the high and low ends of the distribution are excluded from headline inflation in each period, and the remaining ones are aggregated). Both measures display an upward trend. Forecasts using ARIMA models indicate that the underlying indicator using the trimmed mean is likely to revert to the target by the end of 2022, while core inflation would decline at a slower pace, remaining above the target.

uA001fig15

WAEMU: Measures of Core Inflation

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Sources: BCEAO; IMF staff estimates.

4. Third approach: direct estimation of inflation persistence. A coefficient of persistence of headline inflation is also computed through a rolling autoregressive model. This estimation shows that inflation typically displays low and positive persistence, but the coefficient has increased markedly since the beginning of 2021.

5. Overall assessment. The three approaches do not deliver a clear and uniform message about the risk of second-round effects. Although persistence seems to have increased in recent months, inflation remains mostly driven by food with few spillovers to other components, and core inflation is projected to decline slowly in 2022. Given the high uncertainty, it will be essential to closely monitor future monthly developments to assert whether the recent increase of inflation is temporary or reflects a more permanent trend.

uA001fig16

WAEMU: Inflation Persistence

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: IMF staff estimates

Annex V. Assessing the Monetary Policy Stance1

This annex analyzes the monetary policy stance in the WEAMU. The assessment helps to assert whether monetary policy and its orientation are consistent with the objectives of inflation and output stabilization pursued by the central bank. In the context of the WAEMU, the analysis needs also to take into account the fixed exchange rate setting and the need to maintain an adequate buffer of foreign exchange reserves. The results suggest that the monetary policy stance is broadly appropriate at the moment, with consideration of some tightening being warranted as conditions evolve.

Taylor and Orphanides Rules

1. The monetary policy stance is assessed through two rules applied to historical and projected data: (i) the augmented Taylor rule and (ii) a variant of the Orphanides rule. The augmented Taylor rule estimates a reaction function for the BCEAO using time series data. The Orphanides rule calibrates a reaction function in first differences with imposed parameters for output gap and inflation deviation. Exploring these two models permits evaluating the stance from different perspectives.

2. These two types of rules capture the monetary policy response in different ways. In both cases, past and projected values of macroeconomic variables are employed at a quarterly frequency. The dependent variable is the marginal policy rate, which is the effective driver of market rates and presents more volatility than the minimum bid rate.2 Nonetheless, there are three main differences: (1) the parameters of the augmented Taylor rule are estimated using OLS, while the values of the parameters of the Orphanides rule are imposed based on assumptions about central bank preferences; (2) the Taylor rule relies on the current value of the variables (since estimating a forward-looking rule was not possible due to data limitations), while the calibrated Orphanides rule uses forward-looking information (one year-ahead); and (3) the Taylor rule is specified in levels, while the Orphanides rule is formulated in first differences, which has the advantage of using estimates of potential growth instead of output gap.

3. The Taylor rule estimates how the BCEAO policy rate has responded in the past to domestic inflation rates, output gap, and net foreign assets (NFA) gap.3 Extending Taylor rules with additional terms is common practice in the literature, including in the WAEMU (see, for instance, Tenou (2002), BCEAO (2013), Shortland et al (2014), Diabate (2016)). First, we add a smoothing component for the interest rate in the form of the lagged interest rate.4 Second, the NFA gap is also included in the specification and estimated using the HP-filter (with NFA being measured as the average stock over the quarter). The level and evolution of FX reserves are indeed important variables considered by the BCEAO. Article 76 of the BCEAO statutes specifies a minimum threshold for its level of FX reserves, below which the monetary policy stance would need to be reassessed and remedial actions would have to be taken.5 Given these elements, it is assumed that the BCEAO is more likely to increase short-term interest rates when NFA deviate from long-term trend6 (BCEAO 2013).7 Therefore, the following equation is estimated using OLS with Newey-West standard errors on quarterly data where t denotes the quarter:

ratet=β0+β1ratet−1+β2output_gapt+β3inflation_deviationt+β4NFA_gapt+ut

4. Following Orphanides and Wieland (2013), we also calibrate a simple policy rule in first difference assuming two alternative sets of weights for the inflation gap and the business cycle. This rule assumes that the BCEAO changes the policy rate in response to deviations of (i) the forecast of inflation from the BCEAO’s inflation target, and (ii) the economic growth forecast from potential output growth one year ahead. The equation further assumes an inflation target of 2 percent (the mid-point of the range), and a potential output growth of 6 percent. Two assumptions are made for calibrating the weights. In the first case, we assume equal weights on inflation and growth, which is standard in the literature. In the second case, knowing that the BCEAO prioritizes inflation considerations in its legal framework, we place a weight of 0.75 on inflation and 0.25 on growth. The resulting formula is:

Rt=Rt−1+θ1(Eπt+4/t−1−π¯)+θ2(EΔyt+4/t−1−Δy¯)

where t represents the quarter, Rt is the interest rate in quarter t, θ represents the respective weights, Eπt+4/t-1 denotes the year-on-year inflation rate projected during quarter t-1 for quarter t+4 (relative to the same quarter one year before), π¯ is the central inflation target of 2 percent, EΔyt+4 is the year-on-year GDP growth projected during quarter t-1 for quarter t+4 (relative to the same quarter one year earlier), and Δy¯ is potential growth in real terms. As the rule is applied in a forward-looking way for every quarter of 2022, we use the most recent Fall projections from the World Economic Outlook (WEO) for 2023 for all the estimations. Therefore, in our case, t-1 always refers to the projections produced in 2021Q3.

Results

5. When applied to past data, the Taylor rule suggests that the monetary policy stance has been slightly accommodative during the pandemic. Despite the negative output gap and the relatively high level of reserves, the policy rate estimated by the Taylor rule is still above the observed marginal rate since the outbreak of the pandemics in 2020Q1. Considering the severity of the Covid shock, maintaining an accommodative stance was appropriate given that pressures on inflation were initially contained and reserve levels were comfortable. This said, the size of monetary policy accommodation may be overestimated by the Taylor rule, which does not capture the structural break associated with the shift to the FRFA tender procedure.8

6. Going forward, the three rules suggest the need for a moderate rate hike in the short term. The results from the Taylor rule and both versions of the Orphanides rule indicate that a moderate increase in the policy rate might be appropriate by the end of 2022.9This reflects current and prospective developments for inflation and economic activity. Nonetheless, a prudent approach is desirable, and staff assesses the monetary stance as being appropriate at the moment. A timely reassessment should be conducted once more information on macroeconomic developments, in particular inflation, becomes available.

uA001fig17

WAEMU: Policy Rate based on Taylor Rule

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: IMF staff estimates
uA001fig18

WAEMU: Policy Rate based on the Orphanides Rule

Citation: IMF Staff Country Reports 2022, 067; 10.5089/9798400203244.002.A001

Source: IMF staff estimates

Annex VI. Status Update on the Monetary Cooperation and Currency Reform1

1. Previous arrangements. As amended in 1973 and following the replacement of the French Franc by the Euro in 1999, the monetary cooperation Treaty between WAEMU member countries and France entailed:

  • A French Treasury’s convertibility guarantee of the WAEMU’s CFAF into Euro at a pegged rate of EUR 1 = 655.957 CFAF, through an unlimited overdraft facility.

  • The appointment by France of representatives acting as full members of the BCEAO’s Board, the Monetary Policy Committee and the WAEMU Banking Commission.

  • The obligation for the BCEAO to hold 50 percent of its international reserves into an “operation account” at the French Treasury. The BCEAO’s reserves deposited at the French Treasury were available on sight and renumerated at the marginal lending facility rate of the European Central Bank (ECB), subject to a floor of 0.75 percent. At end-2019, 62 percent of the BCEAO’s reserves were deposited at the French Treasury. International reserves not deposited at the French Treasury and managed by the BCEAO were invested in sovereign T-bills and bonds as well as in asset management structures at the BIS and the World Bank.

2. Reform of the monetary cooperation with France. In December 2019, WAEMU member countries and France signed a new Treaty of monetary cooperation, which was ratified by France in February 2021. While maintaining the unlimited convertibility guarantee and the peg of the CFAF to the Euro at its current parity, the new Treaty has made the following changes:

  • France is no longer represented in any of the WAEMU’s decision making bodies. However, to help prevent or manage a foreign exchange crisis, France may request to be temporarily represented by an observer on the Board of the BCEAO and the WAEMU Banking Commission.

  • As guarantor of the CFAF’s convertibility, France now monitors economic and financial developments in the WAEMU through regular data sharing by the BCEAO with the French Treasury as well as through periodic technical meetings between these parties.

  • In the event the BCEAO’s reserves are about to be exhausted, the BCEAO must inform the guarantor of its intention to call the convertibility guarantee with a five-day advance notice. The use of the overdraft facility implies an interest charge equal to the daily rate of the ECB’s marginal loans and at least 80 percent of foreign exchange inflows into the WAEMU must be used toward paying back this overdraft.

  • The BCEAO no longer has to deposit part of its reserves at the French Treasury and the “operation account” was therefore closed.

  • The BCEAO now manages all its reserves, through a portfolio allocation system aimed at satisfying liquidity requirements while minimizing the opportunity cost of holding these reserves.

3. Currency reform. In December 2019, the WAEMU authorities had also announced their intention to replace the WAEMU CFAF with a new currency called “ECO” as soon as possible. However, the ECO launch has been postponed because of the Covid crisis and the need to articulate this change in currency with the roadmap for the introduction by the ECOWAS of a currency with the same name issued by a common central bank under a flexible exchange rate regime. In June 2021, the ECOWAS authorities stated their intention to launch the ECO by 2027 for countries which will have met, from 2024 onwards, regional macroeconomic convergence criteria, including a fiscal deficit ceiling of 3 percent of GDP.

Annex VII. Capacity Development1

1. This annex takes stock of the Fund technical assistance (TA) recently provided at the regional level and updates the near-term capacity development (CD) strategy for regional institutions. Building on the broader evaluation of TA provision for the period 2017–20 contained in the Staff Report for the 2020 consultation on common policies of WAEMU member countries,2 this annex focuses on the TA provided since the beginning of 2020, mainly in the context of the Covid crisis. The annex then presents an updated CD strategy which incorporates the outcome of discussions with regional institutions in the context of the 2021 regional consultation.

2. This annex focuses on CD provided to five regional institutions. These institutions are the Central Bank (BCEAO), the WAEMU Commission, the General Secretariat of the Banking Commission (SGBCU), the Financial Market Regulator (CREPMF), and the regional agency in charge of managing the auction segment of the WAEMU market for governments’ securities (UMOA-Titres or UT). CD delivery to individual country authorities is covered in country Article IV reports.

A. Technical Assistance to WAEMU Institutions during the Pandemic

3. TA provided by the IMF to WAEMU institutions has generally focused on strengthening their core competencies. AFRITAC West (AFW), as well as the Fiscal Affairs Department (FAD) and the Monetary and Capital Markets Department (MCM), are the main Fund TA providers to WAEMU regional institutions. Over recent years, TA has aimed at strengthening banking and macroprudential supervision in support of the transition to Basel ll/lll prudential norms, reinforcing regional macroeconomic surveillance anchored on the WAEMU’s Convergence pact, promoting the adoption and implementation of regional directives in the areas of domestic resource mobilization and public financial management (PFM), and fostering the development of the regional government security market. Some TA was also provided in recent years by the IMF Statistics Department in collaboration with AFW to WAEMU regional institutions with a view to improving government, national accounts, the consumer price index, external and banking sector data.

4. The Covid pandemic shock has altered the focus, delivery mode and intensity of Fund TA to WAEMU institutions. Covid-related travel and health restrictions initially led to the postponement of all TA missions until a shift to virtual missions could be effectively implemented in the Fall of 2020. This contributed to a decline in the number of missions that took place in fiscal year 2021.3 Overall, WAEMU regional institutions have adapted relatively well to this new mode of TA delivery, despite some occasional connectivity issues. The pandemic also stretched the absorptive capacity of recipient institutions and shifted their interest to more immediate policy challenges raised by the crisis. Against this background, efforts were made by traditional TA providers as well as the IMF African Department to share and discuss with WAEMU regional institutions relevant analyses and guidance notes prepared by Fund Staff on PFM and on monetary and financial stability policies in response to the Covid crisis. For instance, webinars were organized by FAD and AFW for WAEMU government and regional institutions’ officials on all PFM aspects linked to Covid operations. Similarly, AFW provided TA aimed at helping the BCEAO better anticipate and manage the potential deterioration of banks’ asset quality following the unwinding of prudential forbearance measures introduced in response to the pandemic. Notwithstanding Covid-related constraints, some CD projects initiated prior to the pandemic were successfully pursued, particularly in the PFM area, with the completion of three regional guidance manuals on employment ceiling budgeting, government’s opening balance sheet, and budget and accounting internal control respectively.

5. Furthermore, the virtual interactions with regional institutions since the beginning of the pandemic have allowed a better integration of CD and surveillance activities of the IMF. Experts from AFW and relevant Fund TA departments were able to contribute directly to the regular dialogue of the WAEMU team (from the African department) with regional institutions, in the context of ad-hoc virtual meetings, staff visits and annual consultation missions. Similarly, members of the WAEMU team have been able to participate into many virtual meetings between MCM and regional institutions in the context of the ongoing FSAP. Finally, in the context of the 2021 WAEMU regional consultation, a member of the WAEMU team and an expert from the MCM department collaborated closely with relevant reginal institutions to undertake a pilot in-depth assessment of the development of the WAEMU’s local currency sovereign security market.

Table 1.

WAEMU: Overview of TA Provided to Regional Institutions 2020–21

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B. Near-Term Capacity Development Strategy

6. The CD Strategy developed for the 2020 consultation discussions with WAEMU regional institutions remains broadly appropriate.4 The CD strategy for regional institutions should continue to support the WAEMU authorities’ goals of alleviating the impact of the Covid shock and fostering strong and inclusive growth, including by preserving macroeconomic and financial stability. Thus, in coordination with all forms of IMF engagement at the national level, the CD strategy should continue to focus on enhancing regional institutions’ core competencies in five main areas:

  • Banking regulation and supervision. Although the banking system has been resilient to the crisis, the authorities should remain vigilant and ensure that all tools are in place to further strengthen banks’ balance sheets, restructure weak institutions, and mitigate risks, including through the full operationalization of banking resolution procedures. In addition, the authorities should plan to address the source of financial sector vulnerability stemming from the high reliance of some banks on central bank refinancing of government securities. The ongoing regional FSAP, whose findings will be discussed by the Fund’s Executive Board in the Spring of 2022, should provide further guidance for CD needs to strengthen macroprudential policy and banking supervision and fully operationalize the resolution framework.

  • Financial sector development. Notwithstanding strong growth during the last decade the WAEMU’s sovereign security market remains underdeveloped and exhibits important gaps in most building blocks needed for such markets to be sufficiently deep, liquid, and efficient. Addressing these gaps will be essential to reduce the dependence of some WAEMU governments on external financing, foster financial inclusion, and enhance monetary policy transmission. To this end, reform efforts should target improvements in the functioning of the money/interbank market and primary bond market as well as in the financial market infrastructure that most critically hamper the development of the secondary bond market. Incentives to broaden the investor base would also contribute to deepening the WAEMU fixed-income markets.

  • Monetary policy. The BCEAO has implemented a wide range of reforms of its monetary policy and governance frameworks since 2010, which has helped it respond very effectively to the Covid shock. Going forward, with a view to improving the effectiveness of monetary policy transmission, further reforms that may warrant consideration could aim at (1) protecting the central bank’s balance sheet from possible valuation losses of some of the assets eligible to its refinancing, (2) reviewing the transparency practices to ensure that they are up to date, and (3) establishing a proper framework for the provision of emergency assistance to banks experiencing temporary liquidity shortfalls. Further guidance in these areas could also stem from the ongoing regional FSAP exercise.

  • PFM and fiscal institutions. The ability of fiscal consolidation by all WAEMU member states over the medium term to preserve public debt sustainability will require significant progress on PFM reforms, including to contain below-the-line and off-budget operations and increase the efficiency of public spending. Such progress could be greatly facilitated by the preparation, by the WAEMU Commission, of guidance notes for a timelier and more effective implementation of regional PFM Directives by member states. In addition, the credibility of fiscal consolidation would be strengthened by re-establishing the WAEMU Convergence Pact with enhanced enforcement and monitoring mechanisms.

  • Tax policy. Greater progress on domestic revenue mobilization is needed to generate space for development spending even in a context of fiscal consolidation. Going forward, CD priorities for regional institutions include revising some regional tax directives, especially those related to VAT and achieving further improvements in harmonizing customs procedures and exchanging information among member states’ tax and customs administrations. In addition, the harmonization across WAEMU countries of the taxation of income from financial assets would contribute to further developing the regional financial market.

7. Fund CD priorities and challenges for WAEMU regional institutions are summarized in the table below. Five main priority areas are highlighted, with their respective strategic goals, more tangible intermediate targets/deliverables, and outstanding challenges. Among these challenges, one can note the limited enforcement powers of some regional institutions to make regional commitments binding and credible, as well as capacity constraints by national implementing agencies.

Table 2.

WAEMU: Near-Term Capacity Development Priorities

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Annex VIII. Authorities’ Responses to the 2020 Policy Recommendations

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1

If countries pursue the same pace of vaccination as in 2021, about 15 percent of the WAEMU population would be fully vaccinated at end-2022, compared to 5 percent at end-2021 (this simulation should be treated with caution since vaccination progresses through nonlinear increments).

2

Both private consumption and private investment are projected to accelerate in 2021. The latter is associated with strong business confidence and accommodative monetary conditions, while the former is, to a large extent, related to the easing of COVD-related restrictions and the supportive fiscal stance.

3

The increase in the aggregate fiscal deficit ratio in 2021 compared to 2020 is mostly due to higher security and social spending in Niger and higher capital investment in Benin.

4

The SDR allocation represented 1.3 percent of 2021 regional GDP, while Eurobonds issued in 2021 were equivalent to 2.6 percent of regional GDP.

5

Between March and December 2020, the BCEAO established a framework allowing banks and MFIs to postpone, for a renewable period of 3 months, the debt repayments of distressed customers that they assessed to be solvent, without reclassifying these claims as non-performing.

6

MFI credit at end-2020 represented about 1.8 percent of GDP and 7.8 percent of bank credit to the private sector.

7

The surge in NPLs in 2020 is partly explained by the fact that MFIs are particularly exposed to sectors, like agriculture, that have been heavily impacted by the Covid crisis. In addition, contrary to banks, most MFIs did not make significant use of the regulatory forbearance measures due to capacity constraints.

8

In Burkina Faso and Senegal, where a significant reduction in current expenditure is projected, the adjustment also assumes new measures to contain wage bill growth, reduce fuel subsidies, and better control spending on goods and services.

9

Revenue efforts are projected to be larger than anticipated before the pandemic. In February 2020, the regional framework projected an increase in the revenue ratio (excluding grants) of 0.9 percent of GDP between 2021 and 2024. In the current framework, the increase is 1.2 percent of GDP over the same period.

10

These include reforms of the VAT (streamlining of exemptions and improving administration), mining and property taxation, as well as tax digitalization.

11

Other factors include: (1) the reduction in the FDI ratio following the completion of the hydrocarbon projects, and (2) lower expected project grants (reflected in a decline in the capital account).

12

According to Article 6 of the Macroeconomic Convergence and Stability Pact among ECOWAS member states: “The deadline for macroeconomic convergence shall be 31 December 2026. By the aforementioned date, a majority of Member States shall, in a sustainable manner, have complied with all primary criteria over the last three (3) years (2024–2026).” The 3 percent of GDP deficit ceiling is one of the primary convergence criteria.

13

Even with successful consolidation and strong growth, the public debt-to-GDP ratio would remain about 5 percentage points higher in 2026 compared with pre-Covid level of 45.5 percent in 2019.

14

The “above the line” fiscal deficit is measured as government revenue (including grants) minus expenditure.

15

Revenue measures at the country level could include improvements in tax administration through increased digitalization as envisaged in Burkina Faso and Senegal; broadening the tax base by eliminating some tax exemptions and tax expenditures as recommended in Senegal and Niger; as well as measures to enhance the efficiency of customs collections.

16

These could include spending on education with a stronger focus on primary and secondary education (as envisaged in the Niger program) as well as social protection, including cash transfer programs to support the most vulnerable.

17

For 2021, the ratio is computed using data until October.

18

These measures include: the update of MOUs with foreign supervisors for subsidiaries of foreign groups operating in the WAEMU; decisions concerning the design of resolution options (such as the shareholder structure of bridge banks); and more clarity on the financing of resolution operations (especially if the guarantee and resolution fund proves insufficient in some cases and financial backstops are needed). Some of the legislative measures necessary for the full operationalization of the resolution framework will be incorporated into the new draft Banking Law under preparation.

19

Banks’ exposure to WAEMU sovereigns has expanded in the context of the supportive monetary policy during the pandemic. At the aggregate level, bank’s claims on central governments increased from 27 percent of total assets at end-2019 to 34 percent at end-September 2021.

20

Currently, BCEAO refinancing is provided for the main open market operations at 2 percent, which is well below yields on government bonds (e.g., yields on 3-year bonds averaged 5.6 percent in the first 10 months of 2021 across all member states). In addition, government securities benefit from favorable regulatory treatment: they carry a zero-risk weight (no capital need); they can be refinanced at the BCEAO with a uniform 10 percent haircut; and they are included in regulatory liquid assets without discount.

21

Banks’ access to refinancing is capped at 35 percent of their assets (all windows) and twice their regulatory capital (specifically for the marginal lending facility).

22

In a bond reopening, additional amounts of a previously issues security are auctioned. For a given coupon structure, any variation in market yields would translate into price changes.

23

The AfCTA agreement aims at eliminating tariffs on most goods, liberalizing trade in services, addressing nontariff barriers to trade, and eventually creating a single market with free movement of labor and capital. As of September 2021, the AfCTA had been ratified by 38 countries including Burkina Faso, Cote d’lvoire, Mali, Niger, Senegal, and Togo.

1

Prepared by Can Sever (AFR).

2

The literature shows how the lack of access to finance can lead to poverty traps and inequality (see 2014 World Bank Global Financial Development Report).

3

Due to data availability limitations, the analysis focuses on the past five years before the pandemic for all financial inclusion measures.

4

See, for instance, Fu and Mishra 2020 (“The Global Impact of COVID-19 on Fintech Adoption”); Khera 2021 (Indonesia Selected Issues Papers in IMF Country Report No. 21/47); and the World Bank Africa’s Pulse of April 2021.

1

The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. “Short term (ST)” and “medium term (MT)” are meant to indicate that the risk could materialize within 1 and 3 years, respectively

1

Prepared by Giulio Lisi (SPR). The analysis was conducted at end-2021 when data for 2021 constituted projections.

2

2020 CA data are still estimation. Final data will be available in the first quarter of 2022.

3

Estimates for the region reflect the average of WAEMU member countries, weighted by contribution to 2020 nominal GDP.

4

These estimates should be interpreted with caution, given considerable uncertainty surrounding projections for 2021.

5

At the time of drafting this annex, Benin, the BOAD, Cote d’lvoire and Senegal had all issued Eurobonds in 2021 for a cumulative amount of around 2.6 percent of regional GDP.

6

The import cover ratio is based on prospective imports.

7

The 2018 LPI edition is the most recent vintage currently available on the World Bank’s website.

8

Data on regional exports is obtained from the BCEAO.

9

See World Trade Organization: “Trade Policy Review: Member Countries of the West African Economic and Monetary Union” (2018).

1

Prepared by Cecilia Melo Fernandes (MCM). This annex was prepared in early December 2021.

1

Prepared by Cecilia Melo Fernandes (MCM).

2

The Taylor rule regressions also display a better fit when using the marginal bid rate (the rate of the last bid in a variable-rate auction) than with the minimum bid rate.

3

The output gap and NFA gap estimations are done with the HP filter. The use of alternatives methods to estimate economic gaps, which address the undesirable properties of the HP filter, such as the filter proposed by Hamilton (2018), further restricts the time series data sample.

4

Including the lagged interest rate is also important from the statistical point of view, as it removes the serial correlation from the residuals.

5

Specifically, the BCEAO should not let the monthly average of foreign exchange reserves fall below 20 percent of its sight liabilities (banknotes in circulation and deposits at the central bank) for three consecutive months. However, exchange rate stability is not a de jure objective of monetary policy.

6

Given the short time series and small number of observations, a state-dependent analysis cannot be conducted over sub-periods, for example by considering different policy responses based on potential thresholds on the level of NFAs. Therefore, we assume a linear response of the BCEAO to the level of NFAs.

7

Alternative specifications using gross reserves instead of net reserves and alternative measures of the gap had lower explanatory power.

8

In March 2020 the BCEAO changed the tender procedure from variable rate fixed quantity to fixed rate full allotment, which implies that the marginal rate became anchored to the policy rate, free of any volatility. This exogenous change, which brought mechanically down the marginal rate, is not captured by the Taylor rule. Furthermore, given the strong lag dependency in the equation, the rule adjusts relatively slowly to abrupt changes. Therefore, the persistent gap between the estimated and actual rates does not solely reflect that monetary policy has been accommodative. It is also a reflection of the structural break.

9

Given that the shift to FRFA creates a structural break and a persistent gap between actual and estimated data, the Taylor rule results should be interpreted by comparing the estimated policy rate in Q3 2021 to the estimated policy rate in Q4 2022, rather than by comparing estimated and observed rates. This means that the estimated Taylor rule recommends a 50-basis point increase by end-2022—an order of magnitude similar to the result of the Orphanides rule.

1

Prepared by Alain Feler (AFR).

1

Prepared by Can Sever and Alain Feler (both AFR).

2

See Annex VII of IMF Country Report N° 21/49.

3

During most of 2020, the provision of TA in the area of banking supervision was also hampered by an extended vacancy for the long-term AFW expert, in part due to the Covid pandemic.

4

See Annex VIII of IMF Country Report N° 21/49.

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Cover IMF Staff Country Reports
West African Economic and Monetary Union: Staff Report On Common Policies for Member Countries-Press Release; Staff Report; and Statement by the Executive for the WAEMU
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2022: Issue 067
Publisher:
International Monetary Fund
ISBN:
9798400203244
ISSN:
1934-7685
Pages:
68
DOI:
https://doi.org/10.5089/9798400203244.002

New Covid Cases Per Million

(7-day moving average)

People Fully Vaccinated

(percent of population)

Fatalities Linked to Security Incidents

(number of fatalities)
Figure 1.

WAEMU: Recent Economic Developments
Figure 2.

WAEMU: Recent Monetary and Financial Sector Developments

WAEMU: Gross International Reserves

(months of next year’s imports)

WAEMU: Exports and Imports of Goods

(year-on-year growth rate)

WAEMU: Bank Capital Adequacy Ratio

(percent)

WAEMU: Contribution to GDP Growth

(percentage points)

WAEMU: Fiscal Adjustment between 2021 and 2024

(percentage points of GDP)

WAEMU: GDP Growth

(percent)

WAEMU: Overall Fiscal Balance (Commit. Basis) and Components

(percent of GDP)

WAEMU: Firms Identifying Issue as Major Constraint

(percent of firms)
Figure 3.

WAEMU: Medium-Term Prospects
Figure 4.

WAEMU: Regional Macroeconomic Heterogeneity
Figure 1.

Financial Inclusion Indicators in the WAEMU
Figure 2.

Indicator of Overall Use of Financial Services in the WAEMU

Percent of adult population

WAEMU: Effective Exchange Rate, 2000–2021

(Indices, 2000=100)

WAEMU: Decomposition of Inflation Increase during 2020–21

WAEMU: Measures of Core Inflation

WAEMU: Inflation Persistence

WAEMU: Policy Rate based on Taylor Rule

WAEMU: Policy Rate based on the Orphanides Rule