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© 2024 International Monetary Fund
SIP/2024/013
IMF Selected Issues Paper
African Department
Recent Challenges to the Conduct of Monetary Policy in the WAEMU
Prepared by Alain Feler and Lawrence Norton
Authorized for distribution by Luca Antonio Ricci
May 2024
IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries. It is based on the information available at the time it was completed on March 1, 2024. This paper is also published separately as IMF Country Report No 24/091.
ABSTRACT: This paper discusses recent challenges in BCEAO monetary policy, from a recent spike in inflation, the persistent erosion of external reserves, and strains in the regional financial market. In response to these shocks, the BCEAO operated via both policy rates and liquidity management, including by shifting from fixed to variable rate auctions. The paper finds that the conduct of monetary policy became progressively more constrained by financial stability and external viability challenges, arguing for enhanced monetary-fiscal policy coordination to help the BCEAO meet its reserves objectives.
RECOMMENDED CITATION: Alain Feler and Lawrence Norton, Recent Challenges to the Conduct of Monetary Policy in the WAEMU. IMF Selected Issues Paper (SIP/2024/013). Washington, DC: International Monetary Fund
| JEL Classification Numbers: | E4, E5, |
| Keywords: | BCEAO, WAEMU, monetary policy, CFA franc |
| Author’s E-Mail Address: | afeler@imf.org, lnorton@imf.org; |
| JEL Classification Numbers: | E4, E5, |
| Keywords: | BCEAO, WAEMU, monetary policy, CFA franc |
| Author’s E-Mail Address: | afeler@imf.org, lnorton@imf.org; |
Title page
SELECTED ISSUES PAPERS
Recent challenges to the Conduct of Monetary Policy in the WAEMU
WAEMU
Prepared by Alain Feler and Lawrence Norton
Title page
WEST AFRICAN ECONOMIC AND MONETARY UNION
SELECTED ISSUES
March 1, 2024
Approved By
African Department
Prepared By Alain Feler and Lawrence Norton.
Contents
RECENT CHALLENGES TO THE CONDUCT OF MONETARY POLICY IN THE WAEMU
A. Introduction
B. The WAEMU’s Monetary Policy Framework
C. The Shift of Refinancing Allotment Method from FRFA to FQVR
D. Secondary Market Sovereign Debt Purchases by the BCEAO
E. Addressing the Need to Restore External Reserve Adequacy
TABLE
1. Auctioned Sovereign Securities- BCEAO Purchases and Concomitant Primary Issuances
ANNEX
I. Potential Operationalization of a Baseline Path for Net