IMF Executive Board Concludes the 2022 Discussions on Common Policies of Member Countries of the West African Economic and Monetary Union

IMF News, February 9, 2023

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IMF Executive Board Concludes the 2022 Discussions on Common Policies of Member Countries of the West African Economic and Monetary Union

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• Published: February 9, 2023

Overview

• Meeting concluded on February 1, 2023, covering WAEMU common policies for 2022.
• WAEMU's post-Covid-19 recovery has withstood new global and regional shocks but faces important risks including rising inflation, more limited access to international capital markets, eroding external reserve buffers, and regional security issues.
• Staff report projections were prepared in mid-December 2022 and do not incorporate developments after that date.

Macroeconomic developments and outlook

• 2022 outcomes and near-term projections:
  • Growth in 2022 is estimated to have reached 5½ percent.
  • Inflation averaged 7.5 percent in 2022, mainly due to higher local and global food prices.
  • External reserves declined by about 20 percent to reach the equivalent of 4.5 months of imports.
  • Monetary policy shifted through three consecutive rate hikes of 25 basis points in 2022.
• Medium-term outlook:
  • Growth is expected to rebound to about 6 percent over the medium term, including due to the coming on stream of new hydrocarbon production.
  • Inflation is projected to return to the BCEAO’s target band by the end-2024.
  • A gradual fiscal consolidation should start in 2023 and bring the aggregate fiscal deficit to 3 percent of GDP by 2025 at the latest.
• Downside risks highlighted:
  • Volatile global economic and financial outlook.
  • Regional security risks and political uncertainty.
  • Potential second-round inflationary effects.

Executive Board assessment

• Directors agreed with the thrust of the staff appraisal and noted:
  • Economy has shown resilience to global shocks, supported by policies and favorable initial conditions.
  • Fiscal and external positions weakened, and inflationary pressures intensified.
  • Risks are tilted to the downside.
• Fiscal policy guidance:
  • Urged reintroduction of regional fiscal rules and adoption of a credible medium-term fiscal framework to ensure fiscal sustainability and preserve external viability.
  • Any justifiable delay of the envisaged convergence of fiscal deficits to 3 percent of GDP in 2024 should be limited to one year and supported by reasonable financing expectations.
  • Critical to enhance domestic revenue mobilization and public financial management and control stock-flow adjustment operations to preserve debt sustainability while protecting priority spending.
• Monetary and financial sector guidance:
  • Authorities should stand ready to further tighten monetary policy as needed to contain inflationary pressures.
  • Tighter monetary policy, together with tighter fiscal policies, can help strengthen external reserve adequacy.
  • Financial system broadly sound but subject to risks from increased exposure of some banks to sovereigns and refinancing from the BCEAO.
  • Emphasized finalizing operationalization of the bank resolution framework; introduce “targeted” Pillar 2 capital surcharges and liquidity requirements; enhance supervisory independence; and implement an emergency liquidity assistance scheme.
  • Priority to enhance depth and liquidity of the sovereign security market.
  • Encouraged enhancing AML/CFT supervision and assessing climate-related risks in the financial sector in line with the 2022 FSAP recommendations.
• Structural and regional recommendations:
  • Growth prospects would benefit from more robust structural reforms, regional trade integration, and greater coordination and pooled resources to implement regional development projects, particularly in energy, digital and physical infrastructure, and food resilience.

Key statistics (selected, as reported)

• Social and population indicators:
  • Nominal GDP (2021, millions of US Dollars): 178,720
  • GDP per capita (2021, US Dollars): 1,322
  • Headcount ratio at $1.90 a day (2011 PPP): 22.0
  • Undernourishment (percent of population): 12.3
  • Total population (2020, millions): 130.9
  • Urban Population (2020, percent of total): 40.4
  • Life expectancy at birth (2020, years): 61.7
  • Gini index: 39.1
  • Income share held by highest 10 percent of population: 31.1
  • Income share held by lowest 20 percent of population: 6.9
• Selected economic indicators (annual percentage changes and percent of GDP where indicated):
  • GDP at constant prices (2019–2026 shown): 5.7 (2019), 1.8 (2020), 5.9 (2021), 6.1 (2022), 5.1 (2023), 6.2 (2024), 7.3 (2025)
  • GDP per capita at constant prices: 2.8 (2019), -1.0 (2020), 3.0 (2021), 3.1 (2022), 2.2 (2023), 3.3 (2024), 4.4 (2025)
  • Consumer prices (average): -0.7 (2019), 2.1 (2020), 3.6 (2021), 2.5 (2022), 7.5 (2023), 2.0 (2024), 1.9 (2025)
  • Terms of trade: -3.0 (2019), 23.5 (2020), -3.1 (2021), -6.5 (2022), -1.7 (2023), -8.7 (2024), -0.5 (2025)
  • Gross national savings (percent of GDP): 19.3 (2019), 20.9 (2020), 19.5 (2021), 21.3 (2022), 20.1 (2023), 23.7 (2024), 22.7 (2025)
  • Gross domestic investment (percent of GDP): 24.3 (2019), 24.9 (2020), 25.4 (2021), 27.4 (2022), 25.9 (2023), 29.0 (2024), 28.7 (2025)
  • Government total revenue, excl. grants (percent of GDP): 15.6 (2019), 15.2 (2020), 15.3 (2021), 16.2 (2022), 15.7 (2023), 16.1 (2024), 17.0 (2025), 17.2 (2026), 17.3 (2027), 17.5 (mem.)
  • Government expenditure (percent of GDP): 19.7 (2019), 22.8 (2020), 23.3 (2021), 22.4 (2022), 22.6 (2023), 22.3 (2024), 21.5 (2025), 21.6 (2026), 21.8 (2027)
  • Overall fiscal balance, excl. grants (percent of GDP): -4.1 (2019), -7.6 (2020), -7.1 (2021), -5.3 (2022), -4.3 (2023)
  • Overall fiscal balance, incl. grants (percent of GDP): -2.3 (2019), -5.6 (2020), -5.9 (2021), -4.7 (2022), -6.0 (2023), -5.0 (2024), -4.0 (2025)
  • Current account, excl. grants (percent of GDP): -6.8 (2019), -7.0 (2020), -8.5 (2021), -5.1 (2022), -4.8 (2023), -4.6 (2024)
  • External public debt (percent of GDP): 30.4 (2019), 33.7 (2020), 36.4 (2021), 36.5 (2022), 35.1 (2023), 34.6 (2024), 32.9 (2025), 30.8 (2026), 29.2 (2027), 26.9 (mem.)
  • Total public debt (percent of GDP): 45.2 (2019), 51.9 (2020), 55.6 (2021), 57.1 (2022), 55.5 (2023), 56.8 (2024), 56.6 (2025), 54.9 (2026), 53.1 (2027), 51.5 (mem.)
• Memorandum items:
  • Nominal GDP (billions of CFA francs): 88,607 (2019), 91,608 (2020), 98,891 (2021), 99,054 (2022), 106,762 (2023), 108,834 (2024), 118,459 (2025), 129,680 (2026), 140,050 (2027), 150,824 (mem.), 162,363 (mem.)
  • Nominal GDP per capita (US dollars): 1,186 (2019), 1,214 (2020), 1,332 (2021), 1,394 (2022), 1,263 (2023), 1,298 (2024), 1,383 (2025), 1,454 (2026), 1,525 (2027), 1,599 (mem.)
  • CFA franc per US dollars, average: 585.9 (2019), 574.8 (2020), 554.2 (2021)
  • Gross international reserves (in months of next year's imports of goods and services): 5.6 (2019), 5.8 (2020), 4.5 (2021), 4.3 (2022), 4.6 (2023)
  • Gross international reserves (in millions of US dollars): 17,547 (2019), 21,764 (2020), 24,228 (2021), 24,194 (2022), 24,898 (2023), 18,490 (2024), 17,938 (2025), 18,668 (2026), 20,373 (2027), 22,531 (mem.), 24,130 (mem.)

IMF Executive Board Concludes the 2022 Discussions on Common Policies of Member Countries of the West African Economic and Monetary Union — Press Release No. 23/39

References

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