## 2. Monetary and Financial Indicators, 2021–25 ## Source details **Canonical URL:** [2. Monetary and Financial Indicators, 2021–25](https://www.imf.org/-/media/files/publications/cr/2025/english/1wauea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1wauea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1wauea2025001-print-pdf.pdf.json) --- ### Context: growth, divergence, and outlook - WAEMU growth averaged 6.4 percent in 2014-2019, and 5.9 percent in 2021-2024. - Per capita income averaged growth of 2.7 percent a year between 2015-2024 (including 2020). - Per capita income ranges from US$900 in Mali to US$2,700 in Côte d’Ivoire. - GDP growth rose from 5.3 percent in 2023 to 6.3 percent in 2024, ranging from 4.4 percent in Mali to 10.3 percent in Niger. - WAEMU growth projected to reach 6.4 percent in 2025 and settle around 6 percent in the medium term (projections based on latest data available as of April 9, 2025). ### External balances, reserves, and external position - Average current account deficit rose from 4.8 percent of GDP in 2014-2019 to 8.4 percent of GDP in 2021-2023. - Current account deficit narrowed to 6.1 percent of GDP in 2024 from 9.5 percent in 2023, ranging from 2.9 percent of GDP in Togo to 12.1 percent in Senegal. - In 2024 external position estimated to have been moderately weaker than fundamentals and desirable policy settings. - Reserves: - Fell by US$8.4 billion over 2022-2023, then rose by almost US$6 billion in 2024, to US$21.6 billion (or 4.6 months of imports). - Rose by a further US$3.4 billion in the first three months of 2025, to US$25.0 billion, or 5.0 months of imports. - Annex I estimates the lower bound of reserve adequacy at 4.4 months of imports. - Annex II reserve coverage projections (months of prospective imports): - Baseline: 4.7 months in 2025 and 5.2 in 2029. - If values of oil-related exports in Senegal and Niger remain at 2024 levels: 4.3 months in 2025 and 3.9 in 2029. - If prices of gold (for Mali and Burkina Faso) and cocoa (for Côte d’Ivoire) remain at 2024 levels: 4.0 months in 2025 and 1.4 in 2029. - If WAEMU countries are unable to increase PPG external debt beyond 2024 levels but can roll it over: 3.4 months in 2025 and 1.9 in 2029. ### Fiscal balances, public debt, and data revisions - Fiscal deficit averaged 3.1 percent of GDP over 2014-2019, jumped to 6.0 percent of GDP in 2020. - Fiscal deficits averaged 6.8 percent of GDP over 2021-2023. - 2024 average fiscal deficit declined to 5.2 percent of GDP (higher than the 4.2 percent projected earlier mainly because Senegal revised its deficit estimate). - Public debt: - Increased from 46 percent of GDP in 2019 to 64 percent of GDP in 2023 and ticked up to 65 percent of GDP in 2024 (compared with 59.6 percent of GDP expected for 2024 at the time of the last discussions). - Debt levels reported: around 50 to 55 percent of GDP in Benin, Burkina Faso, Mali, and Niger; authorities’ current estimate of about 110 percent of GDP in Senegal. - Senegal revisions: - Authorities estimate central government deficits during 2019-2023 to have averaged 11.1 percent of GDP (about 5.6 percent of GDP higher than previously reported). - Court of Auditors estimate central government debt revised to 99.7 percent of GDP as of end-2023. - Broader public sector definition brings overall government public debt to 107.4 percent of GDP as of end-2023 (27.8 percent of GDP higher than at the time of the discussions). ### Inflation and monetary policy stance - Average yearly inflation was 3.5 percent in 2024. - Inflation fell within the BCEAO’s 1-3 percent target band since November 2024 and stood at 2.1 percent y/y in February 2025. - Food inflation: 4.6 percent y/y in February 2025. - Core inflation (excluding energy and fresh produce): 1.3 percent in February 2025. - Average inflation in 2024 ranged from 0.8 percent y/y in Senegal to 9.1 percent in Niger. - BCEAO actions: - Raised the minimum bid rate cumulatively by 150 bps between June 2022 and December 2023; policy rates left unchanged in 2024. - Effective refinancing rate remained at 5.5 percent (the upper limit of the monetary policy corridor) in 2024. - Interbank rate remained around 6 percent in 2024. - Rate on three-month T-bills around 6-7 percent in 2024 (with considerable heterogeneity across countries). - Starting in February 2025, effective rate for weekly financing fell to about 5 percent by end-March 2025. - BCEAO purchased CFAF 2,000 billion of government securities in 2023 and refrained from further purchases except CFAF 77 billion of Nigerien debt in early 2024. ### Regional sovereign securities market and financing conditions - Stock of securities being auctioned or syndicated increased by CFAF 3,500 billion during 2024. - Market issuance shifted to short maturities in 2024 with increasing fragmentation along national lines. - Burkina Faso, Guinea-Bissau, Mali, and Niger paid much higher rates than other members. - Weighted-average yield on debt issued: - Rose to 8.3 percent in April 2024 (peak) and averaged 7.3 percent in December 2024. - Weighted-average yield on debt issued in March rose to 7.9% from 7.8% in February. - Yield on three-month bills dipped to 6.5%. - Maturity of debt at issuance: averaged 52 months in 2021, 44 months in 2022, fell to 21 months in 2023 (trough of 13 months in March and April 2023); in 2024 maturities rose modestly from 22 to 25 months from H1 to H2. - Near-term rollover needs: June 2025 sees near-term rollover needs peak at 840 brillion FCFA. - Over CFAF 1 trillion falling due in March 2025 alone. ### Banking system soundness and financial sector developments - Overall capital adequacy ratio (CAR) declined from 13.7 percent at end-2023 to 13 percent in June-2024 (regulatory norm: 11.5 percent). - Main contributors to CAR deterioration: Burkina Faso, Togo, and Niger. - Some banks remain non-compliant with solvency regulations; recapitalization needs persist. - Minimum regulatory capital base for regional banks doubled to CFAF 20 billion in December 2023 with a three-year implementation period. - NPLs and restructured loans rose from 8.7 percent at end-2023 to 9 percent in June-2024; rises concentrated in Niger, Senegal, Burkina Faso, and Guinea-Bissau. - Number of financial institutions failing to meet the 11.5 percent norm decreased from 27 (including 5 SIBs) to 21 (including 4 SIBs) as of June 2024. - Credit to the private sector: - Growth declined to 5.5 percent in December 2024 versus 10.3 percent a year prior. - Credit to private sector in percent of GDP fell from about 25 percent in 2023 to 24 percent in 2024. - Banks' sovereign credit (including securities and loans) represented about 37 percent of assets. - Banking Commission adopted three new resolution plans of systemic banks (SIBs), bringing total approved plans to 23 (six regional and 17 domestic institutions) out of 34. - BCEAO and the Banking Commission conducted regional crisis simulation exercises in February 2025 with BIS and World Bank. - BCEAO adopted Instruction N°001-01-2024 on payments in 2024. - New regulations for Fintech firms introduced (Annex IX) and implementation of a new regional AML/CFT law in WAEMU member states. ### FX access, regulations, and processing - Since 2023 BCEAO strictly enforced foreign exchange regulations but did not impose new FX restrictions. - Average processing time of FX requests about two days in 2024. - December 2024: WAEMU Ministers adopted updated regulatory framework on financial transactions between WAEMU residents and non-residents clarifying proceed surrender requirements for services’ exports, loans, and FDI. ### Security, political, and climate context - Security deteriorated in the Sahel over the past decade, notably in Burkina Faso, Mali, and Niger. - Three AES countries departed ECOWAS in response to sanctions against Niger in 2023; ECOWAS announced in January 2025 it would not apply common external tariff against the three departing members nor suspend freedom of movement for the time being. - Prolonged border closure between Benin and Niger noted. - Conflict and internal displacement intensified across the Sahel and affected northern Benin, Côte d’Ivoire, and Togo. - Climate disasters remain frequent and significant. ### Medium-term outlook, risks, and scenarios - Baseline projections: - Growth: 6.4 percent in 2025; around 6 percent in the medium term. - Inflation projected to remain within the BCEAO’s target range. - Under baseline scenario, overall debt would decline gradually after peaking at 65 percent of GDP in 2024, while debt service would remain high. - Fiscal consolidation path and debt risks: - Benin, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, and Togo projected to reduce deficits to 3 percent of GDP by 2025 (Benin achieved this in 2024); Burkina Faso projected to do so in 2027. - Senegal intends to reduce its deficit to 3 percent of GDP in 2027 but faces significant challenges following large fiscal data revisions. - All WAEMU member states at moderate risk of external debt distress except Guinea-Bissau and Niger (high risk). - Downside risks (selected, verbatim): - Dependence on high export commodity prices (especially cocoa) and hydrocarbon production. - Domestic financing constraints, fiscal slippages, and continued stock-flow adjustments (SFA). - Rising obligations to the Fund and heightened capacity-to-repay risks. - Potential reporting of higher-than-envisaged debt in Senegal or other countries. - Larger-than-expected sovereign financing needs and unwillingness/inability of banks to increase or maintain sovereign exposure. - Reimposition of ECOWAS external tariffs affecting Niger most. - Heightened security risks for AES members and vulnerability to climatic shocks. - Potential permanent suspension of humanitarian and development aid (U.S. support to WAEMU countries in 2024 estimated by authorities at 0.6 percent of WAEMU’s GDP); full suspension could increase WAEMU’s overall fiscal and current account deficits by approximately 0.5 percent of GDP if national authorities preserved humanitarian efforts through higher expenditures. - Upside risks: - Export prices remain high. - Hydrocarbon exports rise more than expected. - Annex II shock impacts on reserve coverage (months of prospective imports) summarized above under External balances, reserves, and external position. ### Policy recommendations — preserving sustainability and promoting integration - Fiscal policy (key recommendations): - Commitments to reduce deficits to 3 percent of GDP this year (unless agreed otherwise with the Fund) are critical for external sustainability, debt sustainability, and financial stability. - Factor increases in security and interest spending and prospective reduction in foreign aid into medium-term fiscal plans and offset by decreased other spending or enhanced revenue mobilization. - Make realistic assumptions in medium-term budget frameworks about security spending needs, expected foreign support of investment projects, and likely interest costs of regional market borrowing. - Improve data transparency and reporting: promote transparent, timely, comprehensive, and unified public finance reporting, including debt and guarantees; revise regional transparency code; conduct more regular in-depth audits; perform consistency checks of government borrowing with the Budget Law; ensure consistency between fiscal, monetary, and external sector statistics. - Contain SFA: urgent measures needed; SFA added 0.6 percent of GDP to the debt stock in 2024; adopt measures to regularize DAO and revise reporting practices. - Domestic revenue mobilization (DRM) should drive fiscal adjustment; priorities include tax policy/TADAT diagnostics, tax administration improvements, streamlined tax systems, rationalized exemptions, and a Medium-Term Revenue Strategy. - Enhanced Convergence Pact: retain 2015 convergence criteria (3 percent deficit, 70 percent debt, 35 percent public wage bill–tax revenue ratio); include exogenous escape clause (fall in GDP of at least 4 percentage points compared to the average of the last three years); implement fiscal correction mechanism when public debt exceeds 70 percent of GDP. - Monetary policy (key recommendations): - Monetary policy should continue to be closely calibrated to external buffers and inflation; decisions remain data dependent; maintain a cautious stance until sustained recovery in reserve adequacy. - Once situation normalizes, make the collateral framework for refinancing more risk-sensitive by revisiting the uniform 10 percent haircut on regional sovereign debt used as standard collateral. - Examine drivers of strong reserve performance and assess sustainability over medium term, including prospects for hydrocarbon exports and fiscal developments in Senegal. - Staff is analyzing new FX regulation and changes to the surrender requirement to the BCEAO according to the Fund’s Institutional View of Liberalization and Management of Capital Flows. - ECOWAS currency union plans should require significant and persistent adherence to stricter convergence criteria and disallow monetary financing and strengthen price stability. - Financial sector (key recommendations): - Monitor and target gradual reduction of sovereign claims as share of bank assets; prepare exit plan from temporary exclusion of government securities from prudential standards for banks with at least 10 percent public participation. - Broaden governments’ domestic financing sources beyond banks and promote market integration by ending tax advantages for domestic debt over debt issued elsewhere in WAEMU. - Strengthen capital buffers; introduce macroprudential measures to restrain sovereign exposures; apply Pillar 2 capital surcharges for concentration risk and interest rate risk. - Introduce pending Basel III liquidity ratios and emergency liquidity assistance as soon as possible. - UMOA-Titres should finalize plans to launch a platform to trade sovereign securities to develop the secondary market, interbank market, and repo operations. - Move to quarterly publication of financial soundness indicators (FSI), preferably within the quarter following the reference date. - Regional integration and structural policies: - Strengthen economic coordination mechanisms and rapidly adopt a new and enhanced Convergence Pact to signal commitment to debt sustainability. - Continue promoting regional integration, structural reforms, food security, education, human capital development, and trade integration; reduce non-tariff barriers within the customs union and advance AfCFTA discussions. - Proposal for a Macroeconomic Stabilization Fund (MSF) should be fully funded and not leverage; require strong implementation of the Convergence Pact and enhanced PFM procedures. ### Stock‑Flow Adjustments (SFA) — measurement, drivers, and policy measures - Definition: SFA is the difference between the change in public debt and the fiscal balance for a given period. - IMF staff estimate SFA in WAEMU at 1.2 percent GDP annually on average for 2013-2022. - WAEMU Commission estimates SFA at 1.3 percent GDP annually on average for 2012-2022 (missions excluded Mali and Niger; WAEMU exercise excluded some SFA factors used by IMF). - Key SFA contributors: - Emergency and urgent national interest expenditures not timely regularized (DAO). - Differences in institutional coverage between fiscal balance and public debt. - Extrabudgetary operations and special funds. - Discounted issuance of public securities: discount estimates from MCM TA around 8% in AES and 5% in other WAEMU members can create unrecorded accrued interest and positive SFA. - Recommended measures: - Incorporate ceilings on non-regularized expenditures in Fund-supported programs where DAO are an issue. - Adopt GFSM 2014 reporting to align stock and flow perimeters. - Regular public debt audits and regular SFA evaluation exercises by the WAEMU Commission. - Improve TOFE coverage and information systems for public finance statistics. - WAEMU Council of Ministers adopted Recommendation No. 01/2024/CM/UEMOA on economic policy guidelines for member states for 2025, including measures to reduce SFA. ### Financial sector policy framework, supervision, and FSAP implementation - Business cycle leads the financial cycle within WAEMU; limited feedback from financial shocks to broader economy. - Regulatory progress: - Regional AML/CFT law adopted March 31, 2023. - New regulations for FinTech firms introduced (Annex IX). - Minimum regulatory capital base doubled to CFAF 20 billion in December 2023 with three-year implementation. - Supervisory priorities and gaps: - Strengthen risk-based supervision, finalize Banking Commission risk matrix, improve risk-based inspections of EMIs, and train AMF and CB supervisory teams on new supervisory tools. - Introduce macroprudential regulatory measures to restrain sovereign exposures; apply Pillar 2 capital surcharges. - Implement pending Basel III liquidity ratios and an emergency liquidity assistance framework. - Finalize banks’ resolution plans and make the bank resolution framework fully operational. - FSAP Update 2022 recommendations and implementation status (selected): - Institute independence of the Banking Commission’s Supervisory Board: Annex amended March 31, 2023 addressing independence principle; decision-making remains one vote per member. - Supervisory staffing at SGCB increased to a total of 28 agents by 2024. - Draft instruction on LCR and NSFR calculation methods and monitoring tools is being finalized. - FGDR-UMOA achieved CFAF100 billion target for end-2023 (CFAF 103 billion) and set CFAF 200 billion target for end-2029. - Climate risk draft policy under development by the BCEAO. ### Data provision, surveillance shortcomings, and transparency - Data shortcomings hamper surveillance: - Fiscal sector: enhance transparency and produce government finance statistics according to GFSM 2014. - External sector: BPM6 format used but initial releases subject to significant revisions with delays up to two years for final statistics. - FSIs released semi-annually with significant delays; staff recommends quarterly publication (preferably within the quarter following the reference date). - Authorities’ actions: - WAEMU Commission prepared a draft Convergence Pact and adopted a Strategic Plan for 2025-2030 in November 2024. - WAEMU Commission integrated SFA monitoring into regional surveillance and held technical CNPE meetings on SFA in April/May 2024. - Authorities moving toward common regional definitions of public sector deficit and debt and broader TOFE scope. ### Staff appraisal (summary) - Growth rose above 6 percent in 2024, near the average of the past decade, with heterogeneity across countries. - Inflation fell back within target range since November 2024, driven by easing food price inflation and an appropriately tight monetary policy. - Banking system remains resilient but with large exposures to regional sovereigns. - Current account deficit narrowed significantly in 2024; reserves rebounded in 2024 and early 2025 and are back above minimum adequate levels, driven by windfall cocoa revenues, high commodity prices, IMF disbursements, and new hydrocarbon exports in Niger and Senegal. - External position assessed as moderately weaker than fundamentals and desirable policy settings in 2024. - External vulnerabilities remain salient despite favorable baseline; careful policy calibration and strengthened regional coordination recommended. *Source: 1wauea2025001-print-pdf* ### 2. Monetary and Financial Indicators, 2021–25 ___________________________________________________ 25 ### 2. Monetary and Financial Indicators, 2021–25 ### Context: Growth and divergence - WAEMU growth averaged 6.4 percent in 2014-2019, and 5.9 percent in 2021-2024. - Per capita income averaged growth of 2.7 percent a year between 2015-2024 (including 2020). - Per capita income ranges from US$900 in Mali to US$2,700 in Côte d’Ivoire. - GDP growth rose from 5.3 percent in 2023 to 6.3 percent in 2024, ranging from 4.4 percent in Mali to 10.3 percent in Niger. ### External balances and reserves - Average current account deficit rose from 4.8 percent of GDP in 2014-2019 to 8.4 percent of GDP in 2021-2023. - Current account deficit narrowed to 6.1 percent of GDP in 2024 from 9.5 percent in 2023, ranging from 2.9 percent of GDP in Togo to 12.1 percent in Senegal. - In 2024 external position estimated to have been moderately weaker than fundamentals and desirable policy settings. - Reserves fell by US$8.4 billion over 2022-2023, then rose by almost US$6 billion in 2024, to US$21.6 billion (or 4.6 months of imports). - Reserves rose by a further US$3.4 billion in the first three months of 2025, to US$25.0 billion, or 5.0 months of imports. - Annex I estimates the lower bound of reserve adequacy at 4.4 months of imports. ### Fiscal balances, public debt, and fiscal data revisions - Fiscal deficit averaged 3.1 percent of GDP over 2014-2019, jumped to 6.0 percent of GDP in 2020. - Fiscal deficits averaged 6.8 percent of GDP over 2021-2023. - 2024 average fiscal deficit declined to 5.2 percent of GDP (higher than the 4.2 percent projected earlier mainly because Senegal revised its deficit estimate). - Public debt increased from 46 percent of GDP in 2019 to 64 percent of GDP in 2023 and ticked up to 65 percent of GDP in 2024 (compared with 59.6 percent of GDP expected for 2024 at the time of the last discussions). - Note on Senegal revisions: authorities estimate central government deficits during 2019-2023 to have averaged 11.1 percent of GDP (about 5.6 percent of GDP higher than previously reported); Court of Auditors estimate central government debt revised to 99.7 percent of GDP as of end-2023; broader public sector definition brings overall government public debt to 107.4 percent of GDP as of end-2023 (27.8 percent of GDP higher than at the time of the discussions). ### Inflation and monetary policy - Average yearly inflation was 3.5 percent in 2024. - Inflation fell within the BCEAO’s 1-3 percent target band since November 2024 and stood at 2.1 percent y/y in February 2025. - Food inflation stood at 4.6 percent y/y in February 2025. - Core inflation (excluding energy and fresh produce) stood at 1.3 percent in February 2025. - Average inflation in 2024 ranged from 0.8 percent y/y in Senegal to 9.1 percent in Niger. - BCEAO raised the minimum bid rate cumulatively by 150 bps between June 2022 and December 2023; policy rates left unchanged in 2024. - Effective refinancing rate remained at 5.5 percent (the upper limit of the monetary policy corridor) in 2024. - Interbank rate remained around 6 percent in 2024. - Rate on three-month T-bills around 6-7 percent in 2024 (with considerable heterogeneity across countries). - Starting in February 2025, effective rate for weekly financing fell to about 5 percent by end-March 2025. - BCEAO purchased CFAF 2,000 billion of government securities in 2023 and refrained from further purchases except CFAF 77 billion of Nigerien debt in early 2024. ### Regional sovereign securities market and financing conditions - Stock of securities being auctioned or syndicated increased by CFAF 3,500 billion during 2024. - Market issuance shifted to short maturities in 2024 with increasing fragmentation along national lines; Burkina Faso, Guinea-Bissau, Mali, and Niger paid much higher rates than other members. ### Banking system soundness and financial sector developments - Overall capital adequacy ratio (CAR) declined from 13.7 percent at end-2023 to 13 percent in June-2024 (regulatory norm: 11.5 percent). - Main contributors to CAR deterioration: Burkina Faso, Togo, and Niger. - Some banks remain non-compliant with solvency regulations; recapitalization needs persist. - Minimum regulatory capital base for regional banks doubled to CFAF 20 billion in December 2023 with a three-year implementation period. - Share of nonperforming loans (NPLs) and restructured loans rose from 8.7 percent at end-2023 to 9 percent in June-2024; rises concentrated in Niger, Senegal, Burkina Faso, and Guinea-Bissau. - Number of financial institutions failing to meet the 11.5 percent norm decreased from 27 (including 5 SIBs) to 21 (including 4 SIBs) as of June 2024. - Credit to the private sector growth declined to 5.5 percent in December 2024 versus 10.3 percent a year prior; credit to private sector in percent of GDP fell from about 25 percent in 2023 to 24 percent in 2024. - Banks' sovereign credit (including securities and loans) represented about 37 percent of assets. - Banking Commission adopted three new resolution plans of systemic banks (SIBs), bringing total approved plans to 23 (six regional and 17 domestic institutions) out of 34. - BCEAO and the Banking Commission conducted regional crisis simulation exercises in February 2025 with BIS and World Bank. - BCEAO adopted Instruction N°001-01-2024 on payments in 2024. - New regulations for Fintech firms introduced (Annex IX) and implementation of a new regional AML/CFT law in WAEMU member states. - Senegal removed from FATF grey list in October 2024; Côte d'Ivoire joined Burkina Faso and Mali on the list. ### FX access, regulations, and processing times - Since 2023 BCEAO strictly enforced foreign exchange regulations but did not impose new FX restrictions. - Average processing time of FX requests about two days in 2024. - December 2024: WAEMU Ministers adopted updated regulatory framework on financial transactions between WAEMU residents and non-residents clarifying proceed surrender requirements for services’ exports, loans, and FDI. ### Security, political, and climate context - Security deteriorated in the Sahel over the past decade, notably in Burkina Faso, Mali, and Niger. - Three AES countries departed ECOWAS in response to sanctions against Niger in 2023; ECOWAS announced in January 2025 it would not apply common external tariff against the three departing members nor suspend freedom of movement for the time being. - Prolonged border closure between Benin and Niger noted. - Conflict and internal displacement intensified across the Sahel and affected northern Benin, Côte d’Ivoire, and Togo. - Climate disasters remain frequent and significant. ### Medium-term outlook and projections - WAEMU growth projected to reach 6.4 percent in 2025 and settle around 6 percent in the medium term (projections based on latest data available as of April 9, 2025). - Current account balance expected to improve in 2025 due to rising hydrocarbon exports, lower investment imports for hydrocarbon projects, favorable terms of trade, and continued fiscal consolidation. - Capital inflows expected to decline with completion of hydrocarbon projects but will contribute to rebuilding foreign exchange reserves beyond minimum adequacy. - Inflation projected to remain within the BCEAO’s target range. - Under baseline scenario, overall debt would decline gradually after peaking at 65 percent of GDP in 2024, while debt service would remain high. ### Fiscal consolidation path and debt risks - Benin, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, and Togo projected to reduce deficits to 3 percent of GDP by 2025 (Benin achieved this in 2024); Burkina Faso projected to do so in 2027. - Senegal intends to reduce its deficit to 3 percent of GDP in 2027 but faces significant challenges following large fiscal data revisions. - Debt levels reported: around 50 to 55 percent of GDP in Benin, Burkina Faso, Mali, and Niger; authorities’ current estimate of about 110 percent of GDP in Senegal. - All WAEMU member states at moderate risk of external debt distress except Guinea-Bissau and Niger (high risk). ### Downside and upside risks - Key downside risk factors: - Dependence on high export commodity prices (especially cocoa) and hydrocarbon production. - Domestic financing constraints, fiscal slippages, and continued stock-flow adjustments (SFA). - Rising obligations to the Fund and heightened capacity-to-repay risks. - Potential reporting of higher-than-envisaged debt in Senegal or other countries. - Larger-than-expected sovereign financing needs and unwillingness/inability of banks to increase or maintain sovereign exposure. - Reimposition of ECOWAS external tariffs affecting Niger most. - Heightened security risks for AES members and vulnerability to climatic shocks. - Potential permanent suspension of humanitarian and development aid (U.S. support to WAEMU countries in 2024 estimated by authorities at 0.6 percent of WAEMU’s GDP); full suspension could increase WAEMU’s overall fiscal and current account deficits by approximately 0.5 percent of GDP if national authorities preserved humanitarian efforts through higher expenditures. - Upside risks: - Export prices remain high. - Hydrocarbon exports rise more than expected. *Source: 1wauea2025001-print-pdf - 2. Monetary and Financial Indicators, 2021–25* ### 14. Scenario analysis highlights the region’s continued vulnerabilities to an array of shocks. ### 14. Scenario analysis highlights the region’s continued vulnerabilities to an array of shocks. ### Scenario analysis — projected reserve and balance of payments impacts - Annex II shows shocks to benign baseline assumptions could sharply affect the projected balance of payments and reserve path. - Reserve coverage under alternative shocks (months of prospective imports): - Baseline: 4.7 months in 2025 and 5.2 in 2029. - If values of oil-related exports in Senegal and Niger remain at 2024 levels: 4.3 months in 2025 and 3.9 in 2029. - If prices of gold (for Mali and Burkina Faso) and cocoa (for Côte d’Ivoire) remain at 2024 levels: 4.0 months in 2025 and 1.4 in 2029. - If WAEMU countries are unable to increase PPG external debt (in nominal values) beyond 2024 levels but can roll it over: 3.4 months in 2025 and 1.9 in 2029. - These shocks would elevate risks to capacity to repay the Fund, given still relatively low reserves and depleted SDR buffers relative to the 2021 SDR allocation. ### Authorities’ views on prospects, reserves, and external position - Regional authorities: - Shared staff views on prospects and risks, but not on the external assessment. - Project growth will increase this year and inflation would remain contained. - Highlighted increased resilience through economic diversification in the secondary sector. - Expressed concern about reduction in U.S. international humanitarian and development aid and associated social, development, and security implications. - Balance of payments and reserve views: - Authorities’ balance of payments projections are similar to IMF staff but assume a somewhat lower import growth rate, generating a faster improvement of reserve-to-import coverage. - Authorities proposed focusing reserve coverage on short-term central bank liabilities, noting this is the official BCEAO measure of reserve adequacy. - Authorities noted reserves have recovered strongly since 2023 and are now well above what IMF Staff estimates as minimum adequate levels. - Authorities disagreed with staff’s assessment for the external position for 2024, arguing it is consistent with, rather than moderately weaker than, economic fundamentals and desirable policies. - BCEAO specific views: - Under their projections for imports (somewhat lower than Fund staff), reserves were already 4.7 months of imports at end-2024 and would reach 5.3 months at end-2025. - Reserve coverage of short-term central bank liabilities is already over 70 percent, compared with a 20 percent minimum under the BCEAO statute. - Processing times for handling FX requests are within internal benchmarks at about 2 days. - The revised monetary cooperation agreement with France is fully effective; updating the BCEAO statute would require parliamentary approval in each member state. ### Policies — preserving sustainability and promoting integration (overview) - WAEMU members’ divergent economic performance and financing conditions underscore the need to strengthen economic coordination mechanisms to support debt sustainability and external viability. - Rapid adoption of a new and enhanced Convergence Pact would signal stronger commitment to debt sustainability and guide sound fiscal policies in the absence of IMF programs. - WAEMU institutions should continue promoting regional integration, structural reforms, food security, and human capital development to foster job-rich and inclusive growth and regional stability. ### A. Fiscal policy — ensuring debt sustainability and promoting convergence - Fiscal consolidation and deficit guidance: - Commitments (often made in the context of Fund-supported programs) to reduce deficits to 3 percent of GDP this year (unless agreed otherwise with the Fund) are critical for external sustainability, debt sustainability, and financial stability. - Increase in security and interest spending, and prospective reduction in foreign aid, should be factored into medium-term fiscal plans and offset by decreased other spending or enhanced revenue mobilization. - National authorities should make realistic assumptions in medium-term budget frameworks about security spending needs, expected foreign support of investment projects, and likely interest costs of regional market borrowing. - Data transparency and reporting: - Recent developments in Senegal highlight the need for effective national and union-level mechanisms for transparent and accurate data reporting. - The WAEMU Commission should promote transparent, timely, comprehensive, and unified public finance reporting, including debt and guarantees. - Suggested measures: revisions to the regional transparency code; more regular in-depth audits by national authorities; regular consistency checks of government borrowing with the Budget Law; consistency between fiscal, monetary, and external sector statistics. - The Banking Commission is encouraged to evaluate and act on necessary adjustments to supervisory practices. - Regional financing capacity: - Recent fiscal revisions and other factors could strain regional financing capacity; avoiding fiscal slippages is important. - Increasing spreads between member states on regional securities and international markets underscore the role of fiscal consolidation. - BCEAO should resist securing member governments’ funding through new rounds of public securities purchases given adverse implications on FX reserves (as seen in 2023). - Enhanced Convergence Pact: - Draft Pact retains 2015 convergence criteria: budget deficit ceiling of 3 percent of GDP, public debt ceiling of 70 percent of GDP, and 35 percent threshold for the public wage bill–tax revenue ratio. - Draft will include an exogenous escape clause triggered by a fall in GDP of at least 4 percentage points compared to the average of the last three years; framework could specify activation horizon and extension conditions. - Timely adoption by the WAEMU Conference of State and Government would signal commitment to debt sustainability and offer guidance to national fiscal policies. - Draft regulations implementing the Pact should include a fiscal correction mechanism when public debt exceeds 70 percent of GDP, with a deadline to bring debt back into compliance and a requirement to reduce debt by a minimum amount each year during the correction period; a transition process for countries already exceeding 70 percent should be envisaged. - Containing SFA (Stock of Financial Arrears): - Urgent measures needed; latest data suggest SFA continued to add to the debt stock (0.6 percent of GDP in 2024). - Key sources of SFA: non-regularized emergency and urgent national interest expenditures; differences in institutional coverage between fiscal balance and public debt; extrabudgetary operations. - Common WAEMU practice of issuing public securities at a discount in the regional market may contribute to persistently high SFA and requires further investigation. - WAEMU Council of Ministers adopted economic policy guidelines for member states for 2025, including measures to reduce SFA: ensure compliance with PFM expenditure procedures, expand and harmonize coverage of debt and the fiscal reporting table (TOFE), and regularly conduct public debt audits. - WAEMU Commission is integrating monitoring of SFA into regional surveillance. - Domestic revenue mobilization (DRM): - DRM should drive fiscal adjustment. - Insufficient progress toward regional goal of 20 percent of GDP for tax revenue due to narrow tax bases, weak enforcement capacity, and high informality. - WAEMU Commission’s modified 2024 DRM Action Plan calls for Medium-Term Revenue Strategy for all countries; the 2025 deadline seems unrealistic. - Immediate priorities: tax policy/TADAT diagnostics, tax administration improvements, streamlined tax systems, rationalized exemptions. - Consider surveillance mechanisms for monitoring implementation of regional DRM commitments, revising regional Directives (e.g., digital economy taxation), and convening members more regularly to promote best practices. ### Authorities’ views on fiscal policy and SFA - Regional authorities agreed with IMF staff on the importance of fiscal consolidation, including addressing SFA, and argued high fiscal deficits since 2020 reflect several shocks. - Despite Senegal data revisions, authorities consider fiscal consolidation on track, supported by active IMF arrangements. - Authorities stressed intention to rapidly adopt a new and enhanced Convergence Pact with unchanged fiscal deficit and debt ceilings and clearly defined escape clauses. - Authorities highlighted efforts to implement common regional definitions of public sector deficit and debt, broaden TOFE scope, and conduct public debt audits to help lower SFA. ### B. Monetary policy — maintaining reserve adequacy - Policy stance and calibration: - Monetary policy should continue to be closely calibrated to external buffers and inflation. - Macroeconomic conditions don’t currently call for further tightening, given improvement in reserves and the fall in inflation since late 2024, and related favorable baseline projections. - Recent decline of the effective central bank refinancing rate slightly below the ceiling of the monetary policy corridor, alongside continued improvements in external position and bank liquidity under the baseline, should help normalize monetary operations. - Collateral framework and risk sensitivity: - Once situation normalizes, BCEAO should make the collateral framework for refinancing more risk-sensitive by revisiting its uniform 10 percent haircut on regional sovereign debt used as standard collateral. - Decisions on monetary stance should remain data dependent; maintain a cautious stance until sustained recovery in reserve adequacy. - BCEAO should examine drivers of strong reserve performance and assess sustainability over medium term, including prospects for hydrocarbon exports and fiscal developments in Senegal. - Inflation prospects and risks to consider, particularly climate-related ones and possible effects on food prices from the security situation in the Sahel. - Staff is analyzing the new FX regulation and changes to the surrender requirement to the BCEAO according to the Fund’s Institutional View of Liberalization and Management of Capital Flows. - ECOWAS currency union considerations: - Plans for an ECOWAS-wide currency union should require significant and persistent adherence to stricter convergence criteria than currently envisaged, given differing inflation and exchange rate volatility across countries (notably Nigeria and Ghana). - ECOWAS convergence criteria should be revised to disallow monetary financing and strengthen price stability. - Safeguards: - Last assessment in August 2023 found BCEAO continues to have well-established audit arrangements and a strong control environment. - BCEAO should finalize efforts to align its Statute with changes in the 2019 cooperation agreement with France. ### C. Financial sector — ensuring stability and growth - Sovereign‑bank nexus and risks: - Bank claims on governments increased moderately in 2024 and at 37 percent of total assets remain a significant share of domestic credit. - High interconnectedness increases intersectoral contagion risk and feedback loops. - BCEAO should monitor banking system’s ability to meet government financing needs and target gradual reduction of sovereign claims as share of bank assets. - High government debt share risks crowding out private sector credit; credit growth declined in 2024. - BCEAO should prepare exit plan from temporary exclusion of government securities issued by WAEMU states from prudential standard on loans to major shareholders (applies to banks with at least 10 percent public participation in voting rights). - Regional and national authorities should broaden governments’ domestic financing sources beyond banks and promote market integration by ending tax advantages for domestic debt over debt issued elsewhere in WAEMU. - Bank soundness and capital buffers: - Staff advised close monitoring of bank soundness indicators due to recent deterioration in solvency ratios and bank weaknesses in some countries. - Strengthening capital buffers may be necessary given weaknesses in asset quality, the sovereign-bank nexus, high levels of unreserved impaired loans, and zero-risk weight assigned to sovereign securities in capital ratio calculations. - Decisive action has yet to be taken to address some banks’ persistent non-compliance with solvency regulations. - Implementation of FSAP recommendations and market infrastructure: - Authorities should continue implementing 2022 FSAP recommendations. - Introduce macroprudential measures to restrain sovereign exposures; apply Pillar 2 capital surcharges to manage concentration risk and possibly for interest rate risk. - Pending Basel III liquidity ratios and emergency liquidity assistance should be introduced as soon as possible. - UMOA-Titres should finalize plans to launch a platform to trade sovereign securities to develop the secondary market, the interbank market, and repo operations. - Authorities should move to quarterly publication of financial soundness indicators (FSI), preferably within the quarter following the reference date. *Source: 1wauea2025001-print-pdf - 14. Scenario analysis highlights the region’s continued vulnerabilities to an array of shocks.* ### 30. Strengthening the financial sector policy framework is crucial for addressing the ### 1wauea2025001-print-pdf - 30. Strengthening the financial sector policy framework is crucial for addressing the ### Financial sector policy framework and macrofinancial linkages - The business cycle leads the financial cycle within the WAEMU, with limited feedback from financial shocks to the broader economy, suggesting a relatively easy trade-off for the macroprudential regulator in managing excessive credit growth and systemic risks. - Incorporating macro financial linkages—including the macro-feedback effects stemming from banks' solvency problems on the real economy—into policy decisions will help align macroprudential and macroeconomic policies more effectively. - Strengthening the financial sector policy framework is crucial for addressing the macroeconomic implications of financial sector developments. ### Regulatory progress and AML/CFT; supervisory priorities - The regulatory framework for risk-based supervision was strengthened by the adoption of the AML/CFT Regional Law in 2023 and some actions were taken towards addressing the relevant FSAP recommendations. - Authorities should take regional-level steps to facilitate the removal of Côte d'Ivoire, Burkina Faso, and Mali from the FATF's list for increased monitoring by: - finalizing the ongoing revision of the WAEMU Banking Commission’s instructions on financial penalties; - making further progress on the Banking Commission’s risk matrix (in particular on the risk rating of Electronic Money Institutions, EMIs, and on risk-based inspections of EMIs); - ensuring that the financial markets regulator AMF conducts risk-based inspections, in line with the recent finalization of its risk-based supervisory framework; and - training the AMF and CB supervisory teams on the use of the newly developed supervisory tools. - The authorities should continue their efforts to closely monitor financial stability risks and implement FSAP recommendations, including introduction of macroprudential regulatory measures to restrain sovereign exposures. ### Authorities’ views on banking system vulnerabilities and reforms - The authorities concurred with staff’s assessment that the banking system presents vulnerabilities to liquidity and sovereign risks. - They noted that credit growth is slowing, largely due to a decrease in bank deposits and tight monetary policy, while credit quality has been deteriorating until mid-2024. - The authorities indicated that the envisaged doubling of the minimum share capital for banks will enhance the resilience of the banking system and contribute to financial deepening. - Based on preliminary supervisory data, the end-2024 FSI are expected to improve compared to end-June. - The authorities are considering the publication of quarterly FSI data and reiterated their commitment and active efforts towards addressing the FSAP recommendations that have not yet been completed or remain outstanding (Annex VII). ### Regional and structural policies to strengthen WAEMU - WAEMU's prosperity depends on political cohesion, economic integration, and strengthening the regional institutional framework and infrastructure. - The WAEMU Commission plans to propose a Macroeconomic Stabilization Fund (MSF) to support members impacted by idiosyncratic shocks and enhance regional solidarity; strong implementation of the Convergence Pact and enhanced PFM procedures are essential prerequisites for such a fund. - Staff recommended the proposed MSF should be fully funded and not leverage, to avoid contingent liability risks for sovereigns. - The BCEAO's fast payment system, expected to become operational in the summer of 2025, is expected to promote efficiency, inclusion, and regional integration by offering interoperable payments services across the region. - Broader efforts at promoting financial inclusion are essential in weaker areas, notably Niger, where financial inclusion stands at 16 percent compared to 46 percent in the WAEMU as a whole. - With trade integration and export diversification remaining limited, authorities should redouble efforts to reduce non-tariff barriers within the customs union and help move AfCFTA discussions forward. ### Education, food security, and trade recommendations - Policies to promote inclusive and sustainable economic growth should place particular emphasis on education; empirical estimates indicate that educational improvements could lead to large income gains. - Regional policy options include launching regional frameworks, standards, and training programs to improve the capacity and quality of teachers; establishing quality assurance mechanisms to enable student and skilled workforce mobility; and developing regional response plans to build resilience to climate and health shocks. - Food insecurity has worsened significantly, particularly in the Sahel: during the 2023 lean season, over 11 million people (7 percent of the population) experienced food crisis, emergency, or catastrophe; historical floods in 2024 further increased food insecurity and adversely affected the outlook for 2025. - Increasing regional and broader African trade could support integration; longstanding efforts to promote trade integration have had limited impact due in part to non-tariff barriers that complicate cross-border trade. ### Staff appraisal — macroeconomic and financial assessments - Economic growth rose above 6 percent in 2024, near the average of the past decade, with heterogeneity across countries and widening gaps in per capita income among member countries. - Inflation fell back within its target range since November 2024, driven by easing regional food price inflation and an appropriately tight monetary policy. - The banking system remains resilient, although it maintains large exposures to regional sovereigns. - After widening in 2021-2023, the WAEMU current account deficit narrowed significantly in 2024; reserves rebounded in 2024 and early 2025 and are back above minimum adequate levels, due mainly to windfall revenues from the annual cocoa harvest, high commodity prices, several IMF disbursements, and exports of new hydrocarbon resources in Niger and Senegal. - The WAEMU’s external position is assessed to have been moderately weaker than fundamentals and desirable policy settings in 2024. ### Fiscal framework, debt, and recommended fiscal policy settings - Public debt ratios have increased significantly and heterogeneously in recent years due to large fiscal deficits and stock-flow adjustments. - Union-wide fiscal consolidation is proceeding, albeit at a slower pace than expected mainly because of large data revisions in Senegal. - The WAEMU Commission proposed a revised Convergence Pact with a 2026 convergence deadline, while maintaining fiscal deficit and debt ceilings of 3 and 70 percent of GDP, respectively, and the public wage bill limit of 35 percent of tax revenue. - Proposed implementing regulations should include a well-designed escape clause based on numerical values for exogenous indicators (notably growth) and a fiscal correction mechanism when a member’s public debt exceeds the 70 percent of GDP ceiling. - Domestic revenue mobilization should drive the fiscal adjustment; slow progress toward the regional goal of 20 percent of GDP of tax revenue prompted the WAEMU Commission’s modified 2024 DRM Action Plan calling for adoption of a Medium-Term Revenue Strategy for all countries. ### Monetary policy guidance and sovereign–bank nexus risks - Monetary policy should continue to be closely calibrated to external buffers and inflation; decisions should remain data dependent and maintain a cautious stance until there is a sustained recovery in reserve adequacy. - Plans for a new ECOWAS-wide currency union should rely on strong macroeconomic convergence criteria and targets. - The sovereign–bank nexus poses risks: bank claims on the government continue to account for a large share of domestic assets, increasing financial risks and potentially crowding out private sector credit, whose growth slowed significantly in 2024. - The BCEAO should carefully monitor the banking sector's ability to meet government financing needs, monitor implications of rising public ownership in the banking sector, and establish an exit plan for the temporary suspension of the limits of exposure to sovereigns for banks with at least 10 percent public participation in voting rights. - Policy recommendations include: introduction of macroprudential regulatory measures to restrain sovereign exposures; applying Pillar 2 capital surcharges to manage concentration and interest rate risk; introducing pending Basel III liquidity ratios and emergency liquidity assistance as soon as possible; and further strengthening capital buffers given weaknesses in asset quality, high levels of unreserved impaired loans, and the zero-risk weight assigned to sovereign securities in capital ratio calculations. - The authorities should move to quarterly publication of FSI. ### Data provision and surveillance shortcomings - Data provision has shortcomings that hamper surveillance: - In the fiscal sector, national authorities should enhance transparency and intensify efforts to produce government finance statistics according to the GFSM 2014 manual. - External sector data are reported in the BPM6 format, but initial releases have been subject to significant revisions, with delays of up to two years in the release of final statistics. - The release of FSIs only semi-annually and with significant delays hampers financial sector surveillance. *Source: 1wauea2025001-print-pdf - 30. Strengthening the financial sector policy framework is crucial for addressing the (PDF chapter).* ### 48. The discussions with the WAEMU authorities will be on the 12-month cycle in ### The discussions with the WAEMU authorities will be on the 12-month cycle in accordance with Decision No. 13656-(06/1), as amended. ### Discussion cycle and institutional context - Discussions with the WAEMU authorities will be on the 12-month cycle in accordance with Decision No. 13656-(06/1), as amended. ### Monetary and financial developments (2021–25) - The average bank refinancing rate remained at the ceiling of the monetary policy corridor until early 2025. - The effective interest rate is now well above that of the U.S. Federal Reserve and the ECB. - Lending rates are trending up, but deposit rates have remained little changed. - The BCEAO has held the total volume of liquidity injections steady in recent months, as gradual increases in weekly financing has offset falls in emergency financing and longer-term refinancing. - The BCEAO's continued provision of emergency financing has reduced the gap between the liquidity demanded and quantity supplied. - NPL average rates have been stable for the past three quarters. - Sources cited for charts and calculations: BCEAO, Bloomberg, US Federal Reserve, IMF Staff Calculations. ### Monetary policy rates and operations (2022–25) - Chart observations and labels indicate series for: - OdR (6-month) refinancing, Monthly injections, Average weekly injections, Bond Purchase Program, Lending Facility, Average Rate (RHS). - Lending facility rate, Minimum bid rate (Policy rate), Refinancing rate, Average interbank rate (weekly), Marginal rate. - BCEAO Weekly Liquidity Provision: Gap (Demand - Supply), Weekly financing including lending facility, Weekly Refinancing, Bank Demand. - Policy rates comparison series noted: US - Fed rate; Euro area - ECB rate; WAEMU minimum policy rate; WAEMU Effective Interest Rate. ### Sovereign securities market and debt dynamics - Sovereigns accepted 91 percent of all bids in February (left), and bids were close were 139 percent of the amounts proposed, suggesting tight financing conditions, particularly in some members. - The weighted-average yield on debt issued in March rose to 7.9% from 7.8% in February; the yield on three-month bills dipped to 6.5%. - After the stock of debt rising by about 3 trillion CFAF in 2024, gross issuance volumes stood at CFAF 911 billion in March, with the weighted-average maturity at issuance at 21 months in March versus 26 months in February. - The interest rate on the stock of debt continues to rise, and there is an almost 250 bps spread across WAEMU members. - June 2025 sees near-term rollover needs peak at 840 brillion FCFA. - Scheduled Monthly Debt Redemptions plotted for Apr-25 to Oct-26 suggest substantial monthly redemptions (chart axis in billions of FCFA). ### Financial vulnerability and banking system indicators (2016–24) - Financial Vulnerability Systemic Vulnerability Heatmap presented for 2010–24; darker color indicates higher vulnerability relative to historical performance. - Selected banking-system ratios (Dec. 2016–Jun. 2024) include: - Regulatory capital to risk weighted assets: 11.3, 11.7, 10.5, 11.5, 11.8, 12.4, 12.9, 13.7, 13.0. - Tier I capital to risk-weighted assets: 10.3, 10.8, 9.7, 10.6, 11.1, 11.8, 12.2, 12.7, 12.3. - Gross NPLs to total loans: 13.8, 13.9, 12.4, 11.4, 11.0, 10.3, 8.4, 8.4, 9.0. - Provisioning rate: 65.5, 63.6, 65.3, 63.3, 67.2, 65.1, 68.0, 63.3, 62.3. - Net NPLs to total loans: 5.2, 5.5, 4.7, 4.5, 3.9, 3.9, 2.8, 3.4, 3.6. - Capital to total assets: 5.8, 6.3, 6.8, 6.6, 6.6, 6.7, 6.5, 7.3, 7.2. - Total loans to total assets: 52.2, 54.1, 55.7, 56.2, 52.3, 50.0, 51.3, 53.5, 53.4. - Liquid assets to total assets: 27.1, 27.3, 27.8, 26.0, 24.4, 23.1, 24.1, 24.2, 22.8. - Total loans to total deposits: 89.5, 92.0, 92.2, 90.2, 82.2, 76.3, 80.1, 83.2, 83.7. - Earnings and profitability indicators include: - Average interest rate on loans series: 9.8, 8.4, 7.6, 7.1, 7.6, 6.9, 7.1, 8.1,... - After-tax return on average assets (ROA): 1.3, 1.3, 1.2, 1.3, 1.2, 1.5, 1.5, 1.8,... - After-tax return on average equity (ROE): 20.2, 17.6, 14.6, 15.3, 13.9, 17.4, 17.4, 17.4, 19.5... - Source of financial soundness indicators: BCEAO. ### Macroeconomic projections and heterogeneity (2021–29) - WAEMU aggregate Real GDP growth (Act./Est./Proj.): - 2021: 6.2; 2022: 5.9; 2023: 5.3; 2024: 6.3; 2025: 6.4; 2026: 5.8; 2027: 5.9; 2028: 6.0; 2029: 5.9. - Country-level Real GDP highlights (selected): - Benin: 2021: 7.2; 2022: 6.3; 2023: 6.4; 2024: 6.5; 2025: 6.5; 2026: 6.2; 2027: 6.2; 2028: 6.0; 2029: 6.0. - Côte d'Ivoire: 2021: 7.1; 2022: 6.4; 2023: 6.5; 2024: 6.0; 2025: 6.3; 2026: 6.4; 2027: 6.4; 2028: 6.5; 2029: 6.7. - Niger: (noted footnote) Higher growth rates in 2024 in Niger and Senegal in 2024-2025 reflect coming on stream of hydrocarbon production. - Inflation (annual averages) WAEMU: 2021: 3.6; 2022: 7.6; 2023: 3.7; 2024: 3.5; 2025: 2.9; 2026: 2.3; 2027: 2.0; 2028: 2.0; 2029: 2.0. - Investment and savings metrics (WAEMU aggregates): - Gross national savings: 2021: 20.4; 2022: 18.8; 2023: 18.8; 2024: 20.8; 2025: 21.7; 2026: 23.1; 2027: 23.2; 2028: 23.4; 2029: 23.8. - Gross domestic investment: 2021: 26.5; 2022: 28.8; 2023: 28.7; 2024: 26.9; 2025: 26.2; 2026: 26.3; 2027: 26.7; 2028: 27.3; 2029: 27.7. - Cross-group comparison (WAEMU, CEMAC, Sub-Saharan Africa) highlights: - WAEMU overall fiscal balance, incl. grants: 2021: -6.3; 2022: -7.8; 2023: -6.3; 2024: -5.2; 2025: -3.8; 2026: -3.3; 2027: -3.0; 2028: -3.0; 2029: -3.0. - WAEMU total public debt (% of GDP): 2021: 58.5; 2022: 61.5; 2023: 64.0; 2024: 65.0; 2025: 63.4; 2026: 61.9; 2027: 60.4; 2028: 58.8; 2029: 57.5. ### Balance of payments and external sector (2021–29) - WAEMU balance on current account (Millions of USD): - 2021: -10,747; 2022: -17,707; 2023: -19,036; 2024: -13,456; 2025: -10,821; 2026: -8,487; 2027: -9,751; 2028: -11,690; 2029: -12,567. - Exports of goods and services (Millions of USD): 2021: 42,598; 2022: 44,452; 2023: 45,568; 2024: 51,947; 2025: 62,062; 2026: 68,739; 2027: 72,843; 2028: 76,883; 2029: 82,373. - Imports of goods and services (Millions of USD): 2021: 54,235; 2022: 63,013; 2023: 65,158; 2024: 64,753; 2025: 69,484; 2026: 73,775; 2027: 78,518; 2028: 84,170; 2029: 90,498. - Balance on capital and financial account (Millions of USD): 2021: 7,278; 2022: 12,293; 2023: 15,657; 2024: 19,284; 2025: 13,393; 2026: 10,575; 2027: 12,464; 2028: 14,879; 2029: 15,596. - Overall balance (Millions of USD): 2021: 2,444; 2022: -5,774; 2023: -2,633; 2024: 5,828; 2025: 2,572; 2026: 2,089; 2027: 2,713; 2028: 3,189; 2029: 3,029. - In percent of GDP (selected): - Balance on current account: 2021: -5.9; 2022: -9.8; 2023: -9.5; 2024: -6.1; 2025: -4.6; 2026: -3.3; 2027: -3.5; 2028: -3.9; 2029: -3.9. - Exports of goods and services: 2021: 23.4; 2022: 24.6; 2023: 22.8; 2024: 23.6; 2025: 26.3; 2026: 26.9; 2027: 26.4; 2028: 25.8; 2029: 25.6. ### External sector assessment and policy recommendations (Annex I) - Overall assessment: The 2024 WAEMU external position is assessed as moderately weaker than fundamentals and desirable policy settings. - Key drivers noted: - The current account deficit is estimated to have narrowed significantly in 2024, reflecting favorable terms of trade and the completion of hydrocarbon projects. - The level of reserves is just above the lower bound of adequacy metrics. - The exchange rate is found to be moderately overvalued than suggested by fundamentals. - Potential policy responses: - In 2025, carefully tailored monetary policy remains appropriate to maintain external sector and macroeconomic stability. - Over the medium term, compliance with a reinstated fiscal rule in the context of the Convergence Pact, along with the implementation of structural reforms, will be critical to supporting the external position. - Foreign assets and liabilities trend: - The WAEMU’s net international position (NIIP) deteriorated to -49.1 percent of union GDP at end-2022, from -46.8 percent of GDP at end-2021, driven largely by an increase in external public debt. *Source: IMF, WAEMU staff report content as provided in the source PDF.* ### 37.4 percent of GDP at end-2022 from 35.9 percent in 2021. Current account deficits amid tightening global financing con ### 1wauea2025001-print-pdf - 37.4 percent of GDP at end-2022 from 35.9 percent in 2021. Current account deficits amid tightening global financing con ### Net International Investment Position (NIIP) and External Liabilities - NIIP at end-2022: -49.1 percent of GDP. - Gross Assets (2022): 33.5 percent of GDP. - Gross Liabilities (2022): 82.6 percent of GDP. - Assessment: - Current account deficits amid tightening global financing conditions are likely to have continued to erode the NIIP. - The current account deficit observed in 2024 is expected to continue to worsen the NIIP. - Projected improvement in current account positions should contribute to stabilizing the NIIP ratio in the medium term. - Foreign direct investments (FDI) and other investments each constitute over 40 percent of WAEMU’s external liabilities; portfolio investments and derivatives are relatively small parts. - A high share of FDI mitigates risks from the negative NIIP, which appear contained. ### Current Account (CA) — Background, Model Estimates, and Assessment - Background: - WAEMU external CA deficit (including grants) estimated to have contracted from 9.5 percent in 2023 (revised up from 7.2 percent) to 6.2 percent of GDP in 2024. - Over the medium term, CA deficit projected to improve towards 3.5 percent of GDP, reflecting expected export increases from hydrocarbon potential in Niger, Senegal and Côte d’Ivoire. - EBA-Lite model (based on published autumn 2024 WEO data): - CA-Actual: -6.2 percent of GDP. - Cyclical contributions (from model): (-)0.7 percent of GDP. - Additional temporary/statistical factors: (-)-0.6 percent of GDP. - Natural disasters and conflicts: (-)0.1 percent of GDP. - Adjusted CA: -6.4 percent of GDP. - CA Norm (from model, cyclically adjusted): -5.2 percent of GDP. - Adjusted CA Norm: -5.2 percent of GDP. - CA Gap: -1.2 percent of GDP. - o/w Relative policy gap: 1.3 percent of GDP. - Elasticity: -0.2. - REER Gap (in percent): 6.7 and -0.7 (two model estimates presented). - Assessment: - The CA deficit in Senegal was unusually large due to temporary import requirements from large-scale hydrocarbon projects expected to generate significant exports later; 0.6 percentage points of Union GDP adjusters applied to avoid temporary factors disproportionately impacting union-level assessment. - The EBA-Lite CA model gap suggests WAEMU’s external position is moderately weaker than implied by fundamentals and desirable policies. - When EBA-Lite CA and REER models contradict, best practice is to opt for the CA deficit model. ### Real Exchange Rate (REER) - Background: - CFA Franc (CFAF) appreciation: about 6.8 percent between 2022 and 2024 (two consecutive years). - Model findings: - EBA-Lite REER model estimates an undervaluation of approximately 0.7 percent relative to fundamentals and equilibrium policies. - EBA-Lite CA model suggests a moderate overvaluation of 6.7 percent for 2024 assuming a REER elasticity to the CA deficit of -0.2 (IMF staff assumption). - Assessment: - Models provide contradictory signals; practice is to opt for the CA deficit model when in contradiction. ### Capital and Financial Accounts: Flows and Policy Measures - Background and projections: - Net capital inflows: 7.6 percent of GDP in 2023 to 9.1 percent of GDP in 2024 (projected increase). - Net portfolio inflows estimated to increase from -0.3 percent of GDP in 2023 to 3.2 percent of GDP in 2024. - Over the medium term, net inflows from financial and capital accounts projected to remain around 5 percent of GDP as official loans to the government and FDI weaken. - Assessment: - 2023–2024 market perceptions broadly favorable, but tight advanced-economy monetary policies led to tight international financing conditions in 2023, prompting greater reliance on domestic and regional financing and contributing to reserve loss. - 2024 saw a rebound in public external financing, with increased Eurobond issuances. - Policies to improve competitiveness and guarantee sound macroeconomic frameworks are important to enhance attractiveness and boost capital inflows. ### FX Intervention and Reserves Level - WAEMU pooled reserves: - End-2023: about 9.5 trillion CFAF (3.3 months of prospective imports). - 2024: about 13.5 trillion CFAF (4.6 months of prospective imports). - Projected to recover to about 10 percent of union GDP (4.8 months of imports) by 2026. - Drivers: - Better terms of trade, ramp-up of hydrocarbon exports in Senegal and Niger, and significant IMF disbursements. - ARA CC adequacy range: - Adequate range estimated at 4.4 to 6.4 months of prospective import coverage. - 2024 level (4.6 months) is slightly above the lower bound. - Medium-term projection: 5.2 months of prospective imports by 2029. - Policy priorities to sustain reserve accumulation: - Growth-friendly fiscal consolidation. - Appropriate monetary policy. - Implementation of structural reforms. ### Annex II — Drivers of Reserve Accumulation and Risk Scenarios - Baseline scenario: - Reserves would rise from 4.6 months of imports in 2024 to 4.7 in 2025 and 5.2 in 2029. - Improvement driven mainly by narrower CA deficits: from 9.5 percent of GDP in 2023 to 4.5 percent in 2025 and 3.8 percent in 2029. - Comparing 2023 and 2029, Côte d’Ivoire and Senegal would each account for about 40 percent of the improvement in the regional current account; Niger and Mali about 10 percent each. - Contributions: - Higher commodity exports (cocoa for Côte d’Ivoire; hydrocarbons for Niger and Senegal) and higher prices (gold for Mali and Burkina Faso; cocoa for Côte d’Ivoire). - Increased external government borrowing in some countries contributes to reserve accumulation to a lesser degree. - Shock scenarios (impact on reserves/imports): - No ramp-up in oil production in Senegal and Niger (oil-related exports remain at 2024 levels): import coverage would fall to 4.3 months in 2025 and 3.9 months in 2029. - Commodity price shock (gold for Mali and Burkina Faso; cocoa for Côte d’Ivoire remain at 2024 levels): reserve coverage would drop to 4.0 months in 2025 and 1.4 months in 2029. - Financing shock (unable to increase PPG external debt beyond 2024 levels, but able to roll over): reserve coverage would drop to 3.4 months in 2025 and 1.9 months in 2029. - Overall conclusion: - External vulnerabilities in WAEMU are salient despite a favorable baseline scenario. ### Annex III — Divergence in Financing Conditions in the WAEMU Regional Market - Key developments and statistics: - BCEAO effective rate for central bank liquidity at the top of the policy corridor: 5.5 percent throughout 2024. - Debt increased from 46 percent of GDP in 2019 to 65 percent of GDP in 2024. - Weighted-average yield on newly issued government debt rose from around 4 percent in 2022 to a peak of 8.3 percent in April 2024; average yield declined to 7.3 percent in December 2024. - Maturity of debt at issuance: averaged 52 months in 2021, 44 months in 2022, fell to 21 months in 2023 (trough of 13 months in March and April 2023); in 2024 maturities rose modestly from 22 to 25 months from H1 to H2. - Over CFAF 1 trillion falling due in March 2025 alone. - Fragmentation and divergence: - A large gap opened between Burkina Faso, Guinea-Bissau, Mali, and Niger (AES+GNB) and Benin, Côte d’Ivoire, Senegal, and Togo. - Home-country investor bias increases fragmentation; regulatory forbearance in 2023 allowed local public banks to increase exposure to their own sovereigns. - AES+GNB members sometimes sold longer-term debt to local banks at below-market rates, generating financial stability risks and market distortions. - Policy recommendations to reduce divergence: - Continued commitment to debt sustainability by higher-risk members. - Commitment by all WAEMU members to a new Convergence Pact. - Clear communication about continued commitment to WAEMU membership. - Relaunch regional integration agenda and widen investor base beyond banks. ### Annex IV — Risk Assessment Matrix (July 2024): Key Risks and Policy Responses - Country-specific risks: - Intensified conflict in the Sahel region: Likelihood High; Economic Impact High. - Effects: Lower growth, rising inflation, weaker external balance, pressure on budget and reserves, increased debt sustainability risks, social tensions. - Policy responses: Provide targeted fiscal support; promote security budget transparency; seek concessional external financing. - Delays in hydrocarbon production and export in Senegal or Niger: Likelihood High; Economic Impact High. - Effects: Weaker external balance, lower reserves, lower growth, risks to debt sustainability, more difficult access to external financing. - Policy responses: Adopt medium-term fiscal adjustment plan covering the entire public sector; seek additional concessional external financing. - Lack of liquidity leading to financing difficulties: Likelihood Medium; Economic Impact High. - Effects: Banks incur recapitalization needs, damaging ability to finance the economy. - Policy responses: Accelerate fiscal consolidation; take prudential measures to address the sovereign/bank nexus; deepen the local financial market. - Conjunctural/global shocks: - Intensification of regional conflicts (e.g., Gaza/Israel, Ukraine) disrupting trade, FDI, financial flows: Likelihood High; Economic Impact High. - Policy responses: Provide temporary targeted fiscal support; seek concessional external financing for budget support; pursue medium-term reforms to increase resilience. - Commodity price volatility: Likelihood High; Economic Impact Medium. - Policy responses: Maintain flexible energy prices; provide targeted fiscal support within existing budget envelope; seek additional concessional external financing. - Structural/global risks: - Systemic financial instability (high interest rates, asset repricing): Likelihood Medium; Economic Impact High. - Policy responses: Tighten monetary policy as needed; adopt medium-term fiscal adjustment plan with revenue mobilization; accelerate structural reforms to attract capital flows and FDI. - Sovereign debt distress: Likelihood Medium; Economic Impact High. - Policy responses: Tighten monetary policy as needed; adopt medium-term fiscal adjustment plan and revenue mobilization; accelerate structural reforms to attract capital flows and FDI. - Deepening geoeconomic fragmentation: Likelihood High; Economic Impact Medium. - Policy responses: Provide targeted fiscal support; expand budget envelope by mobilizing and reducing tax expenditures; adopt a medium-term fiscal adjustment plan covering the entire public sector. - Climate change risks: Likelihood Medium; Economic Impact High. - Policy responses: Provide targeted support to the vulnerable; pursue medium-term reforms to increase climate change adaptation. *Source: 1wauea2025001-print-pdf - 37.4 percent of GDP at end-2022 from 35.9 percent in 2021. Current account deficits amid tightening global financing con* ### Annex V. Status of Fund Relations ### Annex V. Status of Fund Relations ### Country Arrangements and Recent Executive Board Actions - Benin - IMF Executive Board approved on July 8, 2022, 42-month arrangements under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) for Benin (391 percent of quota, about US$650 million). - On December 14, 2023, a new 24-month arrangement under the Resilience and Sustainability Facility (RSF) (about US$200 million, 120 percent of quota) was approved. - Program performance under the EFF/ECF and RSF arrangements has been robust. - The combined Fifth EFF/ECF and Second RSF reviews were completed by the Executive Board on December 17, 2024. - Burkina Faso - On September 21, 2023, the IMF Executive Board approved a 48-month arrangement under the ECF for Burkina Faso (190 percent of quota, about $302.5 million). - On March 27, 2023, a disbursement of about US$79.2 million (50 percent of quota) under the Food Shock Window of the Rapid Credit Facility was approved. - The second ECF program review was completed by the Executive Board on December 19, 2024. - Côte d’Ivoire - On May 24, 2023, the IMF Executive Board approved 40-month arrangements under the EFF and ECF (400 percent of quota, about US$3.5 billion). - On March 15, 2024, a new 30-month arrangement under the RSF (150 percent of quota, about US$1.3 billion) was approved. - Performance under the current EFF/ECF has been strong. - The Executive Board completed the combined third EFF/ECF reviews and second RSF review and 2024 Article IV consultation on December 11, 2024. - Guinea-Bissau - On January 30, 2023, the IMF Executive Board approved a new 36-month ECF arrangement. - In the context of the third ECF review, the IMF Executive Board approved an augmentation of access under the ECF arrangement from 100 to 140 percent of quota (equivalent to US$53.14 million). - The seventh ECF review was completed by the Executive Board on December 16, 2024. - Mali - The 2019-22 ECF-supported program expired in August 2022 after completing just three out of six reviews because of the coup d’état in 2021 and sanctions in 2022. - A disbursement for 50 percent of quota under the RCF Exogenous Shock Window was approved in April 2025, following the earlier approval of a Staff Monitored Program to establish a track record for a potential future Fund arrangement. - Niger - On December 8, 2021, the IMF Executive Board approved a three-year arrangement under the ECF for Niger (150 percent of quota, about US$275.8 million). - In July 2023 a RSF arrangement (75 percent of quota, about US$131.5 million) was approved. - The fourth and fifth ECF reviews and first RSF review were completed on July 17, 2024. - The two arrangements were extended by six months until December 2025, with the sixth ECF review, second RSF review, and 2024 Article IV completed on January 22, 2025. - Senegal - On June 26, 2023, the IMF Board approved US$1.83 billion in financial assistance to Senegal, including US$1.51 billion under the EFF and ECF (350 percent of quota), and US$324 million under the RSF (75 percent of quota). - The first program reviews were completed on December 13, 2023, unlocking disbursements of US$214.86 million from the EFF/ECF and US$64.45 million from the RSF. - Given the deteriorated fiscal position and policy inaction around and after the 2024 presidential elections, the programs went off track and are set to expire. - The authorities have requested to negotiate a new program to reflect their new development strategy. - Togo - On March 1, 2024, the IMF Board approved a new 42-month ECF arrangement for Togo (200 percent of quota, about US$390 million). - The 2024 Article IV consultation was concluded on September 4, 2024. - The Executive Board completed the first ECF review on December 20, 2024. ### Regional Policy Recommendations and Authorities’ Responses (Annex VI excerpts) - Fiscal Policy Coordination - Recommendation: Bring fiscal deficits to 3 percent of GDP by 2025 (unless otherwise agreed with the IMF) while keeping deficits consistent with available financing; reintroduce and revamp regional fiscal rules with enhanced supporting elements and unchanged fiscal deficit and debt ceilings; implement PFM reforms to contain extra-budgetary and below-the-line operations (stock flow adjustments, SFA). - Authorities’ Response (Partially Consistent): - Fiscal deficits are projected to be reduced to 3 percent of GDP by 2025 in six member countries, and by 2026-2027 in Burkina Faso and Senegal (the latter, following large past fiscal data revisions). - Sovereigns satisfied financing needs on the regional security market in 2024, but at shorter maturities; increasing fragmentation of the market along national lines; Burkina Faso, Guinea-Bissau, Mali, and Niger paid much higher rates than other members. - WAEMU Commission prepared a draft Pact; Council of Ministers agreed in April 2024 to submit it for approval by the Conference of Heads of State and Government. The draft retains the 2015 convergence criteria and includes an exogenous escape clause (triggered by a fall in GDP of at least 4 percentage points compared to the average of the last three years). - SFA continued to add to the debt stock in 2024 (0.6 percent of GDP). In 2024, the Council of Ministers adopted policy guidelines for WAEMU member states for 2025, which include measures aimed at reducing the level of SFA, and the WAEMU Commission has initiated efforts to identify SFA sources in member countries. - Monetary Policy Stance - Recommendation: Further tighten monetary policy to rebuild external buffers to adequate levels and contain financial risks. - Authorities’ Response (Broadly Consistent): - Inflation rose above the target band in 2024 mainly due to flooding in the Sahel before falling back below 3 percent by year-end. - FX reserves have bounced back to adequate levels since November 2024. - The BCEAO has maintained a tight monetary policy stance by keeping policy rates unchanged, while the effective refinancing rate remained at the ceiling of the policy corridor in 2024, before starting to recede from the ceiling in February 2025. - Financial Regulation and Supervision - Recommendations: Make the bank resolution framework fully operational and effective; introduce targeted Pillar 2 capital surcharges and liquidity requirements; enhance supervision independence; implement an emergency liquidity assistance scheme; develop a medium-term plan to address the sovereign bank nexus while avoiding disruptions in the regional debt market. - Authorities’ Response (Partially Consistent): - Banking Commission adopted resolution plans for 23 systemic banks by end-2024 and expects plans for the remaining 11 systemic banks in 2025; similar plans to be adopted for non-systemic banks. - Pillar 2 capital surcharges are under consideration; a draft instruction on LCR and NFSR calculation methods, along with monitoring tools for government securities discounts and mandatory reserves, is being finalized. - Banks’ sovereign claims increased moderately in 2024 but still account for 37 percent of total assets. There has been increased government shareholding in the banking sector. - Financial Sector Development - Recommendation: Improve the depth and liquidity of the secondary sovereign security market to mitigate market segmentation between syndication and auction modes of issuance. - Authorities’ Response (Partially Consistent): - Market remains segmented by mode of issuance. - Preparatory work ongoing to promote the role of security dealers in the regional financial market. - UMOA-Titres is finalizing plans to launch a platform to trade sovereign securities in the coming months, which would promote development of the secondary market. - Structural Reforms - Recommendation: Promote regional integration through fostering trade, enhancing competition, and developing cross-border infrastructure. - Authorities’ Response (Partially Consistent): - WAEMU Commission adopted a Strategic Plan for 2025-2030 in November 2024 as part of a regional development strategy running through 2040. - Plans to propose a Macroeconomic Stabilization Fund to support members impacted by idiosyncratic shocks and enhance regional solidarity. - BCEAO has made progress towards launching a fast payment scheme in 2025 to promote regional integration and reduce costs via interoperable services. ### FSAP Update 2022 — Key Recommendations and Implementation Status (Annex VII excerpts) - Banking Sector Supervision and Regulation (select recommendations and status) - Institute independence of the WAEMU Banking Commission’s (CBU) Supervisory Board from member states. - Status (ST): Annex to the Convention amended March 31, 2023, articulates principle of independence in Article 9; decision-making process (one vote per member) remains; appointment process modified—members to be appointed by the WAEMU Council of Ministers based on proposals from member states. - Make the WAEMU Court of Justice the appellate jurisdiction for CBU Supervisory and Resolution Boards’ decisions. - Status (MT): WAEMU Council of Ministers maintained as appeals body against Banking Commission decisions. - Continue strengthening Secretariat General of the Banking Commission supervisory staffing. - Status (ST): Supervisory staffing at SGCB increased by 12, 10, 3 and 3 employees in 2021, 2022, 2023, and 2024 respectively, reaching a total of 28 agents. - Impose capital surcharges for concentration risk and interest rate risk (Pillar 2). - Status (ST): Data collection framework developed and shared; CBU monitors interest rate risk as part of risk management analysis. - Make more consistent use of monetary sanctions and publish sanctions and censures. - Status (ST): Increased use and disclosure of pecuniary sanctions across 2021–2024 with specified counts by year and anonymity practices noted. - Publish guidance note for banks on stress tests. - Status (ST): A circular regarding crisis simulation within financial institutions is under development. - Strengthen AML/CFT supervision with a risk-based approach. - Status (ST): Regional AML/CFT law adopted March 31, 2023; shift to targeted approach in checkpoints; autonomous AML/CFT risk rating system completed and implemented. - Macroprudential Framework and Tools - Designate BCEAO as macroprudential authority and introduce mechanism for national authorities to raise concerns. - Status (ST): New Banking Law introduces requirements applied to macroprudential authority; draft note and decision prepared for submission to next WAEMU Council of Ministers meeting. - Fill residual data gaps on financial conditions of nonfinancial corporations, households, and real estate. - Status (MT): To be implemented by BCEAO as part of risk mapping and early warning indicators development. - Strengthen monitoring of CSF-UMOA recommendations with a “comply or explain” mechanism. - Status (MT): Being considered by CSF-UMOA. - Systemic Liquidity - Introduce Basel III liquidity ratios and related measures (haircut for government securities; count required reserves toward liquid assets; require reporting of residual maturities and interest rates). - Status (ST): Liquidity regulations have not yet incorporated LCR and NSFR; draft instruction on LCR and NSFR calculation methods and monitoring tools is being finalized. - Impose higher LCR for banks with riskier profiles (Pillar 2). - Status (MT): WAEMU Banking Commission considering stricter requirements based on liquidity risk profiles. - Support development of regional bond market (development objective in borrowing strategies; unify central depositories; reform primary dealers). - Status (MT): BCEAO working group established to propose guidelines for security dealers and enhance Treasury Securities Dealers’ activities; potential supportive measures and liquidity support mechanism discussed. - Introduce funding plans to manage banks' dependence on BCEAO funding; adapt haircuts and concentration limits for BCEAO eligible assets; establish ELA framework. - Status (ST): Being considered by the BCEAO. - Resolution and Crisis Management - Liquidate or resolve undercapitalized, nonviable credit institutions timely. - Status (ST): Decisive action yet to be taken for some banks’ persistent non-compliance with solvency regulations. - Finalize banks’ resolution plans per best practices. - Status (ST): At end-2024, resolution plans adopted for 20 out of 32 systemic banks; intention to adopt similar plans for non-systemic institutions. - Strengthen independence of Resolution Board and FGDR. - Status (MT): Article 177 of new banking law stipulates Resolution Board independence; Article 10 of FGDR Statutes establishes independence measures and disclosure/abstention rules for representatives. - Enhance loss-absorption capacity for systemically important banks; attain FGDR-UMOA target insurance reserves; enable FGDR-UMOA recourse to member states if needed. - Status (MT): FGDR-UMOA achieved CFAF100 billion target for end-2023 (CFAF 103 billion) and set a new goal of CFAF 200 billion for end-2029; proposed additional financing mechanisms including emergency “Backup” funding and refinancing mechanism for government securities. - Climate Risk - Adopt a strategy for managing climate risks and raise awareness among supervisors and financial institutions. - Status (ST): A draft climate policy is under development by the BCEAO. - Define prudential expectations for integration of climate and environmental risks. - Status (MT): Official memorandum being developed to guide a Banking Commission circular on integrating climate and environmental risks into risk management frameworks. *Source: Annex V. Status of Fund Relations (excerpts) from the provided document.* ### Annex VIII. Stock-Flow Adjustments ### Annex VIII. Stock-Flow Adjustments ### Definition and significance of Stock‑Flow Adjustments (SFA) - SFA is defined as the difference between the change in public debt and the fiscal balance for a given period. - SFA can arise from: - extra‑budgetary or off‑budget funding; - differences in institutional coverage or in accounting between the fiscal balance and debt; - asset valuation effects; - changes in financial assets (e.g., privatizations); - arrears and carryover; - government guarantees; - financial instruments covered in debt and debt relief. - Persistent one‑sided SFA complicates policymaking because targeting the fiscal balance alone may be insufficient to ensure debt sustainability. ### Measured SFA in WAEMU: magnitude and estimates - IMF staff estimate SFA in WAEMU at 1.2 percent GDP annually on average for 2013- 2022, accounting for exchange rate effects, nominal GDP growth effects, and guarantees. - The WAEMU Commission estimates SFA at 1.3 percent GDP annually on average for 2012-2022 for member countries covered by on‑site missions carried out in 2023-24 (all except Mali and Niger). - The WAEMU Commission’s exercise excluded additional SFA factors used by the IMF, such as accrued but unpaid interest, capitalized interest, debt relief, supplier arrears, and securitized bank claims. ### Key contributors to persistently high SFA in WAEMU - Emergency and urgent national interest expenditures not properly and timely regularized (simplified, expedited procedures that bypass standard PFM controls). - Differences in institutional coverage between the fiscal balance (typically central government) and public debt (often broader public sector coverage). - Extrabudgetary operations and special funds that are not included in central government annual budgets but are recorded in public debt and monetary statistics. - Improper fiscal recording of accrued interest on sovereign securities issued at a discount (potential contributor; not fully assessed by WAEMU Commission missions). ### Emergency expenditures and Dépenses avant ordonnancement (DAO) - Exceptional spending may bypass the standard 4‑phase procedure (“ELOP”: engagement, liquidation, ordonnancement, paiement) per Directive N°07/2009/CM/UEMOA. - Two DAO categories: - DAO relative to a credit line in the budget (can be regularized into the corresponding budget line). - DAO regardless of an existing credit line (regularization generally requires an Amended Budget Law (LFR) or ministerial order to transfer existing credits). - SFA emerges when such expenditures are not regularized within the same fiscal year and remain outside the budget perimeter for an extended period. ### Policy measures and program design to contain unregularized DAO - Recent Fund‑supported programs include indicative ceilings: - Guinea Bissau: indicative ceiling on non‑regularized expenditure (Non‑Titled Expenditures or “DNT”), defined as “any treasury outlay not properly accounted for by the National Budget Directorate and/or not included in the budget.” (Staff Report, December 2024). - Niger: indicative ceiling on the ratio of exceptional expenditures to authorized spending, defined as “payment made by the treasury without prior authorization, excluding debt service payments and expenditures linked to exemptions.” (Staff Report, January 2025). - Recommendation: Incorporate similar ceilings in other Fund‑supported programs for WAEMU countries where unregularized DAO are an issue. ### Institutional coverage, extrabudgetary operations, and GFSM 2014 - Fiscal reporting (TOFE) in WAEMU generally covers the central government; public debt reporting often has broader coverage (general government or wider public sector). - Misalignment of stock/flow perimeters (TOFE vs. public debt) can generate positive SFA. - GFSM 2014 adoption would align perimeters and require stock (debt) and flow (deficit) consistency; GFSM 2014 also expands TOFE coverage beyond the central government. - Status: Currently, only Senegal has fully transitioned to GFSM 2014 for all statistical and surveillance purposes. - Extrabudgetary operations (special funds, social security funds, entities with separate banking arrangements) not included in central government financial statements can be recorded under public debt and in monetary statistics, contributing to SFA. ### Discounted public securities as an SFA driver - In the regional sovereign debt market, securities are often issued at a discount because auction coupons are lower than yields demanded by investors. - Discount estimates based on MCM TA: around 8% in AES and 5% in other WAEMU members. - Mechanism: - Issuance at a discount lowers the amount of financing per security, requiring more issuance at face value to meet financing needs. - If the discount (which effectively represents higher accrued interest) is not properly recorded in the TOFE, debt will rise more than the fiscal deficit by the size of the unrecorded discount, creating positive SFA. - Empirical note: A staff report for Côte d’Ivoire (Staff Report, June 2024) documents a positive correlation between SFA and domestic debt, in particular securities usually issued at a discount, suggesting material contribution of this practice to SFA. - External financing and Eurobonds do not face the same issue; all Eurobonds issued by WAEMU member states since 2018 have been issued at face value (100%). ### Regional actions, recommendations, and surveillance integration - WAEMU Commission actions: - First technical meeting of the National Economic Policy Committees (CNPE) on SFA via videoconference on April 29, 30, and May 2, 2024, to examine mission results and raise awareness. - Council of Ministers session on July 11, 2024 adopted Recommendation No. 01/2024/CM/UEMOA on economic policy guidelines for member states for 2025, focusing on measures to reduce SFA. - Recommendation No. 01/2024/CM/UEMOA advised member states to: - Ensure compliance with public expenditure execution procedures, particularly regularization of expenditures executed through simplified or exceptional procedures, in accordance with regulatory provisions. - Improve the system for collecting and processing data of the State Financial Operations Table (TOFE), notably through establishment of a related information system. - Continue efforts to broaden and harmonize coverage of debt and TOFE by including data from the entire public sector in statistics, as well as contingent liabilities for memorandum purposes. - Take measures to avoid payment arrears and pre‑financing operations of expenditures. - Continue to strengthen capacities of staff responsible for public debt management and public finance statistics. - Regularly conduct audits of public debt. - Regularly evaluate stock‑flow adjustments. - Surveillance integration: - WAEMU Commission will regularly conduct SFA evaluation exercises in member states to raise awareness and assess compliance with public finance management procedures. - Discussions are underway to integrate compliance with community provisions related to public expenditure execution procedures into the evaluation grid for implementing harmonized public finance framework directives. - Provisions will be made in the regional regulatory framework for expansion and harmonization of the coverage of debt and TOFE. *Source: Annex VIII. Stock-Flow Adjustments, 1wauea2025001-print-pdf* ### 3.9 per cent real GDP growth in 2024. ### 1wauea2025001-print-pdf - 3.9 per cent real GDP growth in 2024. ### Overview: recent macro-fiscal outcomes - Real GDP growth was 3.9 per cent in 2024. - Inflation declined from 3.8 in 2023 to 3.6 per cent in 2024 and settled within the region’s target range; markedly lower than the 15.1 per cent average inflation in sub-Saharan Africa. - The region’s overall fiscal deficit declined from 6.3 percent of GDP in 2023 to 5.2 percent in 2024. - Public debt burden has increased on account of high debt service costs and rising spending pressures; the Union’s debt was contained at 65 percent of GDP, below the region’s 70 percent ceiling. - The current account balance and external reserve position strengthened, with reserves’ levels exceeding the recommended metrics. ### Outlook and risks - Projection highlights: - Most countries in the Union are expected to reach the regional convergence criterion of 3 percent of GDP fiscal deficit in 2025. - This would represent a fiscal consolidation effort of 1 percent of GDP per year. - The debt-to-GDP ratio is expected to decline from 65 percent in 2024 to 63.4 percent in 2025 and remain on a downwards trend. - Downside risks identified: - Difficult security situation in the region. - Vulnerability to extreme climate events such as flooding and drought. - Tight global and regional market conditions. - Declining official development assistance inflows. - Geo-economic fragmentation and shifting trade policies. - Upside risks identified: - Higher commodities prices. - Potential for regional integration to support economic diversification and enhance resilience to shocks. ### Regional fiscal policies and governance - Policy objectives: - Anchor fiscal and debt sustainability via fiscal consolidation, enhanced domestic revenue mobilization, and monitoring financing capacity on regional capital markets. - Convergence Pact: - A new Convergence Pact is in preparation; the fiscal deficit anchor of 3 per cent of GDP is expected to be maintained. - Proposals include escape clauses for exceptional circumstances and preventive measures to address fiscal slippages. - Fiscal consolidation approach: - Continue aligning deficits with available financing and reduce reliance on costly borrowing. - Implement realistic medium-term budget frameworks and pursue revenue-led fiscal consolidation plans while protecting priority spending. - Revenue mobilization: - A regional domestic revenue mobilization action plan was adopted in 2024 with the goals of closing the revenue mobilization gap in the Union. - The WAEMU Commission stepped up efforts to support meeting the revenue target of 20 percent of GDP. - The Commission engaged members towards implementation of the region’s tax Directives and partnered with FERDI to estimate tax potential and identify reforms. - Debt policy: - Renewed commitment to prudent debt policies, including proposals to maintain the debt ceiling of 70 percent of GDP in the new Convergence Pact. - Transparency and accountability: - Commitment to implement WAEMU data provision standards and best practices, including periodic audits by National Courts of auditors. - National authorities committed to transcribing WAEMU’s public financial management directives into domestic laws to harmonize fiscal data perimeters and reduce stock-flow adjustments. - Regional authorities will enforce existing laws and regulations, including sanctions as needed for misreporting. - Governance and anti-corruption: - All WAEMU countries have ratified and are actively implementing the United Nation’s Convention against Corruption (UNCAC). - WAEMU-commissioned Afristat’s ERI-ESI 2019 survey: only 8 per cent of the population aged 18 or over having paid bribes. - Recent surveys (Afrobarometer and World Bank’s Enterprise Surveys) found WAEMU countries among the least corrupt in sub-Saharan Africa, or lower income developing countries. - Authorities plan to use IMF Governance diagnostic recommendations to further reforms and improve trust and tax compliance. ### Monetary policy, external sector, and financial sector policies - Monetary policy: - Conducted by the Central Bank of West African States (BCEAO) to maintain price stability and the fixed exchange rate regime. - After a series of interest rate increases, the Monetary Policy Committee deemed further tightening may not be necessary as indicators align with fundamentals, but BCEAO will closely monitor data given high uncertainty. - Safeguards and institutional relations: - Latest safeguard assessment found BCEAO has strong controls and regular audits by leading international audit firms; all recommendations have been addressed. - The 2019 reform of the relationship between BCEAO and France is effective; parliamentary approval processes to reflect changes into domestic law in each member state are underway. - Financial sector stability and reforms: - Continued implementation of FSAP recommendations to strengthen stability and resilience while pursuing financial deepening. - Efforts to manage risks such as the sovereign-bank nexus and liquidity concerns; Banking Commission stepped-up onsite inspections. - Minimal capital adequacy requirements were doubled, with the three years mandatory implementation plans ending in 2026. - Authorities are mitigating the sovereign-bank nexus and monitoring liquidity to normalize refinancing conditions and ease pressures. - Market deepening and inclusion: - Reforms to diversify financing beyond banks, including developing capital markets and encouraging private sector participation. - Regulatory overhauls including for FinTech firms; AML/CFT reforms in train to address strategic vulnerabilities identified by the Financial Action Task Force. - Significant progress toward quick exit from FATF’s grey list of all WAEMU countries. - Financial inclusion strategy implementation progressed; financial access indicators improved despite higher consumer financing costs due to global tightening. - Implementation of BCEAO's fast payment system expected to foster efficiency and financial inclusion through interoperable payment services. ### Structural reforms (Impact 2030 and priorities) - WAEMU Commission’s 2025-2030 structural reforms agenda, Impact 2030, anchored in Vision 2040. - Key priorities and planned actions: - Creation of a stabilization fund to support member states during crises and compensate for losses resulting from trade integration, to strengthen resilience and foster solidarity for deeper regional integration. - Trade integration: reduce non-tariff barriers within the customs union, harmonize and simplify customs administration, and advance discussions under the African Continental Free Trade Area (AfCFTA). - Economic diversification: leverage economies of scale to encourage investments in manufacturing and services to create jobs and stabilize economies against external shocks. - Climate resilience: implement policies to mitigate climate risks, including sustainable agricultural practices and infrastructure development to combat flooding and drought. - Human capital and inclusion: improve education, promote gender equality and women’s participation, create incentives to invest in quality education, close gender gaps, and enhance healthcare systems. - Food security: intensify coordination of national and regional policy responses to food crises to maximize intervention impacts. ### Conclusion and request - Assessment: Despite significant challenges and downside risks, WAEMU achieved results in increasing growth, advancing fiscal consolidation, maintaining price stability, and implementing structural reforms to enhance resilience. - Commitment: Authorities remain committed to regional development plans and sound macroeconomic and structural policies at regional and member-state levels, and value the IMF’s regional policy advice, financial, and technical assistance. - Request: Authorities seek Executive Directors’ support for the conclusion of the 2025 regional consultation on WAEMU’s common policies. *Source: 1wauea2025001-print-pdf - 3.9 per cent real GDP growth in 2024.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1wauea2025001-print-pdf.pdf_