Abstract
IMF Country Report No. 23/103
Copyright Page
IMF Country Report No. 23/103
WEST AFRICAN ECONOMIC AND MONETARY UNION
SELECTED ISSUES
March 2023
This Selected Issues Paper on the West African Economic and Monetary Union regional member countries was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member countries. It is based on the information available at the time it was completed on January 17, 2023.
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© 2023 International Monetary Fund
Title Page
WEST AFRICAN ECONOMIC AND MONETARY UNION
SELECTED ISSUES
January 19, 2023
Approved By
Luca Antonio Ricci for the African Department
Prepared by Can Sever, Athene Laws, Cecilia Melo Fernandes, Tryggvi Gudmundsson with research assistance provided by Zarina Bentum and editorial support by Fairoza Jaghori.
Contents
REVAMPING THE WAEMU FISCAL FRAMEWORK
A. Overview
B. Debt Dynamics and Stock Flow Adjustments in WAEMU Countries
C. Supporting Arrangements
D. Conclusions
FIGURES
1. Debt Dynamics
2. Stock Flow Adjustments Over Time and 2013-21 Average
3. Debt Dynamics and Stock Flow Adjustments Over Time
4. Debt, Deficit and SFA
5. Debt Dynamics Scenarios
6. The Impact of Stock Flow Adjustments Over Time in Member States
TABLES
1. Estimated SFA, 2013–21
2. Scenario Assumptions
3. Countries For Which Debt Does Not Stabilize Under Each Case
4. Coverage of Public Debt and Fiscal Deficit
ANNEX
I. Reasons for Discrepancies Between Change in Debt and Fiscal Deficit
References
INFLATION DYNAMICS IN THE WAEMU
A. Recent Developments in the WAEMU Inflation
B. Sectoral Dynamics and Inflation Contagion
C. Going Forward: Inflation Forecasts and Monetary Policy Implications
D. Other Factors Relevant for Inflation Developments and Desirable Monetary Response
FIGURES
1. Headline Inflation
2. Contributions to Headline Inflation
References
THE WAEMU REGIONAL FINANCIAL MARKET IN A PERIOD OF TIGHTENING FINANCIAL CONDITIONS
A. Composition of Debt
B. Segmentation of Domestic and External Markets
C. Borrowing Costs: Likely to Increase Especially for Smaller Countries (Size Matters)
D. Rollover Risks
E. Conclusions
FIGURES
1. Composition of WAEMU Public Debt
2. Estimated Auction Market Debt in Percent of Total Government Debt
3. Pairwise Rolling Correlations Between Interest Rates in WAEMU
4. PCA Results for WAEMU Interest Rates
5. Correlations Between Local and External Interest Rates
6. Local Interest Rates
7. Local and External Financial Conditions
8. Local Market Borrowing Costs
9. Yields on External Issuances 2019-22
10. Estimated Interest Payments in 2022
11. Weight in WAEMU Region's GDP
12. Country Sizes and Borrowing Costs
13. Maturity Profiles for Auction Market Debt
TABLES
1. Correlations Between Spreads on External Debt
ANNEX
I. Country Yield Curves on the Auction Market