IMF Executive Board Concludes 2011 Discussion on Common Policies of Member Countries of the West African Economic and Monetary Union

Public Information Notice (PIN) No. 11/37
March 17, 2011

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On March 14, 2011, the Executive Board of the International Monetary Fund (IMF) concluded the annual Discussion1 on Common Policies of Member Countries of the West African Economic and Monetary Union (WAEMU).2


An economic recovery has started in the WAEMU last year following a slowdown in growth in 2009. In 2010, economic growth is estimated to have on average returned to levels similar to those prior to the previous global food and fuel price shocks and the global financial crisis. Growth has been supported by monetary and fiscal easing, good agricultural production, recovery in the region’s main trading partners, and a pick-up in Guinea-Bissau and Togo.

In 2010, average inflation remained low in all WAEMU countries, but edged up in the second half of the year. On average, annual consumer price inflation reached 1.4 percent, up from 0.4 percent in 2009. More recently, however, higher international oil and food prices have started to feed through to inflation, but core inflation has remained subdued.

After a moderate fiscal easing by about 1½ percentage points of GDP in 2009, mostly the result of higher capital spending, the area-wide average deficit is estimated to have declined slightly to 3.2 percent of gross domestic product (GDP) in 2010. Revenues have started to recover, while government expenditure has stabilized.

Following a compression of imports in 2009, the region’s external current account deficit is estimated to have reached about 5½ percent of GDP in 2010. In months of imports of goods and services, international reserves were comfortable at well above 6 months in 2009 and 2010, in part due to the SDR allocation made by the IMF to all member countries in 2009.

Political stability in the region is a precondition for the recovery to continue. With a rapid and peaceful solution in Côte d’Ivoire and the right policies, the region could still experience a continuation of the recovery to close to 4½ percent in 2011, and above 5 percent in the medium term, but regional growth will continue to lag the Sub-Saharan Africa average. With recently rising international food and fuel prices, inflation is projected to edge up.

There are considerable risks to the projected recovery. In particular, the political crisis in Côte d’Ivoire has intensified in recent weeks with significant adverse fallout for domestic financial and economic activity. If not resolved soon, this could also have severe human and financial cost for neighboring countries in the WAEMU and the region, including though trade, migration, and financial sector channels. A more sluggish global economy could slow the regional recovery by dampening exports, remittances, and capital inflows. In turn, this could put pressure on the current account and on the quality of the loan portfolios of banks, and reduce the amounts available for the financing of fiscal deficits. A persistent rise in international food and fuel prices poses inflationary risks, which should be monitored carefully.

Executive Board Assessment

While an economic recovery is underway, Executive Directors expressed deep concern that the ongoing political crisis in Côte d’Ivoire poses serious risks—in particular, through trade and financial sector linkages—and that the spillovers for the region could be severe should the crisis persist. In addition, rising food and fuel prices could risk inflationary pressures, with an adverse impact on poverty. In this context, Directors emphasized the importance of an increased focus on contingency planning and crisis management to limit the impact of the crisis, and underscored the need to closely monitor the economic and financial situation in WAEMU member countries.

Directors considered that fiscal policy should balance support for growth, including large investment needs, with debt sustainability. They emphasized the need to create fiscal space for priority spending—including for infrastructure investment—through broad-based tax and administration reforms, better quality expenditures, and control on recurrent spending. Directors recognized the potential impact of rising food and fuel prices on the poorest segment of the population and underscored that any transfers or subsidies should be carefully targeted to protect the most vulnerable. Directors also called for timely implementation of the WAEMU directives in public financial management.

Directors urged the authorities to be vigilant to upside inflation pressures from higher international food and fuel prices and possible spillovers from the crisis in Côte d’Ivoire. They welcomed the new institutional framework for monetary policy, including the newly established Monetary Policy Committee. To make the framework effective, Directors recommended improving analytical underpinnings, transparency, and communication.

Directors noted the staff’s assessment that the real effective exchange rate appears broadly in line with economic fundamentals. However, the recent large movements in the euro exchange rate have resulted in greater volatility of the WAEMU’s real effective exchange rate. Directors emphasized that it will be critical to make further efforts in supply-side reforms, including reducing infrastructure bottlenecks and improving the business climate and governance.

Directors stressed that restoring the functioning of the Banking Commission is critical to ensure effective supervision and minimize the spillover risk from Côte d’Ivoire. They encouraged the authorities to accelerate the follow-up work on the Financial Sector Assessment Program recommendations, and emphasized the importance of comprehensive and up-to-date banking data and vulnerability indicators to ensure timely assessments of financial stability. Directors also called for further reforms to broaden and deepen financial market development.

The views expressed by Executive Directors today will form part of the Article IV consultation discussions on individual members of the WAEMU that take place until the next Board discussion of WAEMU common policies.

WAEMU: Selected Economic and Financial Indicators, 2008—2012


2008 2009 2010 2011


    Est. Proj. 1
  (Annual percentage change)

National income and prices


GDP at constant prices

4.1 3.0 4.0 4.3

GDP per capita at constant prices

1.4 0.3 1.3 1.5

Consumer prices (average)

7.4 0.4 1.4 3.1

Terms of trade

12.4 12.3 8.7 -1.9

Real effective exchange rates

5.7 0.5 -6.3
  (Annual percentage change)

Money and credit 2


Net foreign assets

0.3 11.6 10.8

Net domestic assets

18.0 14.7 18.6

Broad money

8.7 14.7 17.0

(Percent of GDP, unless otherwise indicated)

Government financial operations


Government total revenue, excl. grants

17.6 17.4 18.0 18.1

Government expenditure

22.4 23.9 23.8 24.0

Overall fiscal balance, excl. grants

-4.8 -6.5 -5.8 -5.9

Overall fiscal balance, incl. grants

-2.0 -3.5 -3.1 -3.2

External sector


Exports of goods and services 3

27.0 27.3 26.6 30.5

Imports of goods and services 3

36.7 33.3 34.4 36.7

Current account, excl. grants

-8.6 -5.4 -7.1 -6.3

Current account, incl. grants

-7.1 -3.5 -5.5 -5.0

External public debt

33.8 36.0 35.0 34.5

Memorandum items:


Nominal GDP (in billions of CFA francs)

31,228 32,623 34,613 37,048

CFA franc per US dollars, average

447.8 472.2 495.3

Reserves in months of imports (excl. intra-WAEMU imports)

5.8 6.5 6.1 6.0

Sources: IMF, African Department database; World Economic Outlook; IMF staff estimates.

1 Projections based on end-January WEO assumptions.

2 The estimates for 2010 refer to the annual change at end-Nov.

3 Excluding intra-regional trade.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of these bilateral Article IV consultation discussions, staff hold separate annual discussions with the regional institutions responsible for common policies in four currency unions—the Euro Area, the Eastern Caribbean Currency Union, the Central African Economic and Monetary Union, and the West African Economic and Monetary Union. For each of the currency unions, staff teams visits the regional institutions responsible for common policies in the currency union, collects economic and financial information, and discusses with officials the currency union’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. Both staff’s discussions with the regional institutions and the Board discussion of the annual staff report will be considered an integral part of the Article IV consultation with each member. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:

2 WAEMU’s members are Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo.


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