IMF Executive Board Concludes Regional Consultation with West African Economic and Monetary Union
IMF News, March 2, 2021
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- Published: March 2, 2021
Context and main outlook
- After almost a decade of strong growth, the WAEMU region is facing a triple crisis impacting health, the economy, and security.
- For 2021, growth is projected at 5.4 percent, mostly driven by a rebound in private consumption and private investment, reflecting the relaxation of lockdown constraints and the return of foreign direct investment.
- A gradual fiscal consolidation is expected to start this year and bring the aggregate fiscal deficit to 3 percent of GDP by 2023.
- Significant downside risks to the outlook remain; new virus outbreaks or security shocks could derail the recovery and create additional fiscal pressures.
Executive Board assessment and policy guidance
- Directors agreed with the thrust of the staff appraisal, noting the triple crises (health, economic, security) and commending early containment and policy support measures.
- Directors emphasized preparedness to respond to a deterioration in the economic outlook and further propagation of the virus, given high uncertainty and constrained fiscal space.
- Fiscal policy:
- Directors concurred that a gradual return to the aggregate fiscal deficit ceiling of 3 percent of GDP by 2023 would support internal and external stability.
- Converging toward the fiscal deficit anchor is essential to maintain an adequate level of external reserves, limit risks of pressures on the regional financial market, and ensure debt sustainability.
- Some Directors saw merit in granting flexibility to countries facing security risks.
- Consolidation should protect priority social and infrastructure spending and shift to targeted policies.
- Enhancing revenue mobilization, public financial management, and fiscal transparency is crucial.
- The upcoming reform of the regional fiscal governance framework was noted as an opportunity to anchor the consolidation path.
- Monetary and financial sector policy:
- Directors welcomed BCEAO measures that prevented a tightening of financial conditions.
- Monetary policy could be relaxed further if the economic outlook deteriorates, provided an adequate buffer of foreign exchange reserves is maintained.
- The loan forbearance framework (set up in March 2020) provided relief to solvent firms and households, but banks should not relax monitoring of customers in difficulty.
- Capital shortfalls in the banking system emerging from the crisis would call for targeted and proactive supervisory actions.
- Making the bank resolution framework fully operational in 2021 is essential to ensure prompt intervention and resolution of nonviable banks.
- Directors urged close monitoring of the microfinance sector and strengthening AML/CFT supervision.
- Structural policy:
- Directors supported authorities’ intent to pursue structural reforms and regional infrastructure investment to enhance competitiveness.
- Continued support for the development of regional financial markets was highlighted.
Key socioeconomic and macroeconomic indicators (selected)
- Social indicators (latest available):
- Nominal GDP (2019, millions of US Dollars): 151,154
- GDP per capita (2019, US Dollars): 1,190
- Total population (2019, millions): 127
- Urban Population (2018, percent of total): 40.3
- Life expectancy at birth (2017, years): 60.9
- Headcount ratio at $1.90 a day (2011 PPP): 46.3
- Undernourishment (percent of population): 15.9
- Income share held by highest 10 percent of population: 32.1
- Income share held by lowest 20 percent of population: 6.1
- Gini index: 40.8
- Selected economic projections and historicals (annual percentage change unless noted):
- GDP at constant prices: 2017: 6.4; 2018: 6.5; 2019: 6.6; 2020: 5.9; 2021: 0.3; 2022: 5.4; 2023: 7.4
- GDP per capita at constant prices: 3.5; 3.7; 3.0; -2.5; 2.5; 4.4; 3.6; 3.2
- Consumer prices (average): 0.8; 0.9; 1.6; -0.1; 1.9; 1.7
- Terms of trade: -7.6; -2.2; -0.6; 18.4; 2.3; -5.6; -5.3; -1.8; -1.2
- National accounts (percent of GDP):
- Gross national savings: 18.0; 18.6; 14.9; 19.1; 15.2; 19.4; 19.8; 21.3; 21.4
- Gross domestic investment: 23.0; 24.3; 20.1; 23.7; 20.9; 24.0; 25.1; 24.9; 25.3; 25.4
- Of which: public investment: 7.3; 6.3; 7.1; 6.8
- Money and credit (year-on-year change, end December):
- Net foreign assets: 4.5; 2.6; 1.3; 2.1
- Net domestic assets: 8.0; 7.6; 3.8; 9.7; 10.1; 8.1; 7.2
- Broad money: 8.5; 12.5; 10.2; 10.3; 11.0; 10.4; 6.9; 8.4; 9.2
- Credit to the economy: 8.3; 4.2; 5.6; 3.3; 3.4
- Government finance (percent of GDP):
- Government total revenue, excl. grants: 15.0; 14.6; 15.4; 15.6; 15.8; 14.7; 15.5; 16.3; 16.5; 16.8
- Government expenditure: 20.3; 19.6; 19.7; 19.9; 23.1; 22.3; 21.0; 21.1
- Overall fiscal balance, excl. grants: -5.0; -4.4; -4.1; -4.2; -8.4; -6.9; -4.8; -4.3
- Overall fiscal balance, incl. grants (commitment basis): -3.6; -3.3; -2.3; -2.4; -5.9; -4.9; -3.8; -3.1; -2.9; -2.8
- External sector (percent of GDP unless otherwise indicated):
- Exports of goods and services: 19.3; 19.0; 18.8; 18.5; 17.0; 18.1; 18.7; 20.2
- Imports of goods and services: 25.5; 26.4; 24.6; 26.5; 23.4; 24.4; 24.7
- Current account, excl. grants: -5.8; -6.5; -8.3; -6.0; -8.7; -6.8; -6.3; -4.7
- Current account, incl. grants: -5.4; -5.7; -5.2; -4.0
- Debt indicators:
- External public debt: 27.7; 28.2; 30.2; 27.0; 32.9; 33.3; 32.7; 31.5; 30.5; 29.4
- Total public debt: 40.4; 43.0; 42.6; 44.8; 41.7; 48.5; 49.6; 49.5; 48.4; 47.6; 46.8
Memorandum and reserves
- Nominal GDP (billions of CFA francs): 77,736; 83,391; 90,359.6; 88,561; 98,154.8; 90,231; 96,476; 104,539; 114,189; 123,865; 133,761
- Nominal GDP per capita (US dollars): 1,118; 1,218; 1,279.4; 1,365.5; 1,198; 1,322; 1,403; 1,494; 1,576; 1,652
- CFA franc per US dollars, average: 581; 555; 585.9
- Foreign exchange cover ratio: 73.5; 85.3; 88.4
- Gross international reserves (in months of imports of goods and services): 4.7; 4.3; 5.5; 5.0; 4.6; 3.9
- Gross international reserves (in millions of US dollars): 12,963; 14,858; 16,514.2; 17,547; 17,360.5; 19,275; 19,497; 19,801; 21,135; 22,276; 22,555
- Gross international reserves (in percent of broad money): 31.1; 32.2; 34.1; 31.9
IMF Executive Board Concludes Regional Consultation with West African Economic and Monetary Union, Press Release No. 21/56, March 2, 2021.
