## IMF Executive Board Concludes Regional Consultation with West African Economic and Monetary Union

_IMF News, March 18, 2019_

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## Bibliographic details
- Published: March 18, 2019

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### Background: recent performance and vulnerabilities
- Real GDP growth exceeded 6 percent for the 7th consecutive year in 2018, fueled by strong domestic demand.
- Aggregate fiscal deficit was reduced by ½ percentage point of GDP in 2018.
- External current account deficit estimated to have increased to 6.8 percent in 2018 from 6.6 percent of GDP in 2017.
- Public debt and servicing costs increased in 2018, partly because of below‑the‑line budgetary operations:
  - Total debt rose to 52.5 percent of GDP in 2018 from 50.1 percent in 2017.
  - Total debt service increased to 33 percent of government revenue in 2018 from 26.4 percent in 2017.
- Liquidity pressures in the regional financial system were temporarily eased in 2018:
  - BCEAO significantly reduced its refinancing volume to banks between early 2017 and end‑2018.
  - Liquidity improved following sizeable Eurobond issuances, which also reduced sovereigns’ demands on the regional debt market.
- Banking sector reforms implemented in 2018 included:
  - Move to Basel II/III prudential standards (with a 5 year‑phasing period).
  - New bank accounting rules.
  - Banking supervision based on a risk‑sensitive consolidation approach to groups.
  - Steps to operationalize the new resolution framework of the Banking Commission.

### Medium‑term outlook and risks
- Growth projection and conditions:
  - Growth is projected to stay above 6 percent, conditional on fiscal consolidation to meet the regional fiscal deficit convergence criterion of 3 percent of GDP and elimination of below‑the‑line budgetary operations from this year onwards, and implementation of structural reforms.
- Downside risks identified:
  - Potential slippages in fiscal consolidation.
  - Slow progress in implementing structural reforms and improving inclusiveness.
  - Larger imports or lower capital inflows relative to projections.
  - Persistent security concerns.
  - Weaker‑than‑expected global recovery and tighter international financial conditions.

### Executive Board assessment and policy recommendations
- General assessment:
  - Executive Directors agreed with the thrust of the staff appraisal, welcoming continued strong growth and progress on banking sector reforms.
  - Directors noted downside risks from rising public debt and higher external current account deficit.
- Fiscal policy priorities:
  - Growth‑friendly fiscal consolidation is critical to reduce public debt distress risks and preserve external stability.
  - Urged member‑countries to adhere to the regional fiscal deficit convergence criterion of 3 percent of GDP.
  - Emphasized adjustment should focus on domestic revenue mobilization by curbing tax exemptions and enforcing regional tax policy directives to create space for development spending.
  - Urged more effective control of below‑the‑line budget operations and encouraged a review of the regional surveillance framework to better contain risks to debt sustainability.
- Monetary and financial sector recommendations:
  - Current monetary policy is broadly appropriate; BCEAO should stand ready to tighten if external reserves deteriorate.
  - Encourage BCEAO to address cautiously the banking sector’s structural liquidity deficit.
  - Advise authorities to develop more active and liquid secondary debt and interbank markets to deepen WAEMU financial markets and enhance monetary policy transmission.
- Banking sector and supervision:
  - Welcome smooth introduction of Basel II/III prudential regulations and new accounting standards in 2018.
  - Highlighted need to increase banks’ capital, reduce concentration risks and non‑performing loans.
  - Encouraged prompt resolution of ailing banks, operationalization of the new resolution framework, improved supervision of banking groups, and identification of criteria for defining systemic institutions.
- Financial inclusion and oversight:
  - Called for further efforts to improve financial inclusion with adequate supervision of financial innovations to avoid new stability risks.
  - Stressed close monitoring of microfinance institutions and strengthening AML/CFT risk‑based supervision.
- Structural and regional reforms:
  - Emphasized intensifying structural reforms and regional initiatives to improve competitiveness and inclusiveness, including continued efforts to promote cross‑border infrastructure projects and ease customs procedures.
  - Encouraged sustaining progress in improving the quality, coverage, and timeliness of regional data.

### Key statistics (selected indicators, 2015–2023 as presented)
- GDP at constant prices:
  - 2015: 6.3
  - 2016: 6.4
  - 2017: 6.6
  - 2018: 6.5
  - 2019: 7.4
  - 2020: 6.8
- GDP per capita at constant prices:
  - 2015: 3.4
  - 2016: 3.5
  - 2017: 3.7
  - 2018: 3.6
  - 2019: 4.5
  - 2020: 4.0
- Consumer prices (average):
  - 2015: 1.0
  - 2016: 0.3
  - 2017: 1.4
  - 2018: 1.6
  - 2019: 1.9
- Terms of trade (selected years):
  - 2015: 8.4
  - 2016: 11.9
  - 2017: -0.8
  - 2018: -1.7
- Gross national savings:
  - 2015: 17.3
  - 2016: 16.2
  - 2017: 16.7
  - 2018: 16.5
  - 2019: 17.9
  - 2020: 18.3
  - 2021: 19.2
  - 2022: 20.8
  - 2023: 22.1
- Gross domestic investment:
  - 2015: 23.2
  - 2016: 21.8
  - 2017: 23.4
  - 2018: 24.2
  - 2019: 25.1
  - 2020: 25.8
  - 2021: 27.1
- Public investment (of which):
  - 2015: 7.7
  - 2016: 8.2
  - 2017: 8.7
  - 2018: 8.8
  - 2019: 8.9
  - 2020: 9.0
- Government total revenue, excl. grants:
  - 2015: 17.6
  - 2016: 18.1
  - 2017: 18.2
  - 2018: 18.6
  - 2019: 19.0
  - 2020: 19.6
  - 2021: 19.8
- Government expenditure (selected years):
  - 2015: 23.9
  - 2016: 24.1
  - 2017: 24.6
  - 2018: 23.8
  - 2019: 24.0
  - 2020: 24.3
- Overall fiscal balance, incl. grants (commitment basis):
  - 2015: -4.0
  - 2016: -4.4
  - 2017: -4.3
  - 2018: -3.1
  - 2019: -2.8
  - 2020: -2.7
  - 2021: -2.6
- Current account, excl. grants:
  - 2015: -7.3
  - 2016: -7.2
  - 2017: -8.5
  - 2018: -8.9
  - 2019: -8.3
  - 2020: -8.7
  - 2021: -8.4
  - 2022: -6.6
  - 2023: -5.9
- External public debt:
  - 2015: 27.5
  - 2016: 28.4
  - 2017: 29.6
  - 2018: 33.8
  - 2019: 33.9
  - 2020: 32.5
  - 2021: 30.5
  - 2022: 29.7
- Total public debt:
  - 2015: 43.3
  - 2016: 46.8
  - 2017: 50.1
  - 2018: 52.5
  - 2019: 51.3
  - 2020: 50.2
  - 2021: 49.4
  - 2022: 47.7
  - 2023: 46.5
- Nominal GDP (billions of CFA francs):
  - 2015: 56,299
  - 2016: 59,901
  - 2017: 64,208
  - 2018: 69,351
  - 2019: 75,119
  - 2020: 81,588
  - 2021: 88,306
  - 2022: 96,755
  - 2023: 105,257
- Nominal GDP per capita (US dollars):
  - 2015: 1,013
  - 2016: 1,045
  - 2017: 1,112
  - 2018: 1,227
  - 2019: 1,258
  - 2020: 1,343
  - 2021: 1,421
  - 2022: 1,525
  - 2023: 1,619
- Gross international reserves (millions of US dollars):
  - 2015: 12,725
  - 2016: 11,015
  - 2017: 12,367
  - 2018: 15,419
  - 2019: 16,514
  - 2020: 17,361
  - 2021: 19,068
  - 2022: 20,999
  - 2023: 23,576

*IMF Press Release No. 19/81, March 18, 2019.*

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_Source: https://www.imf.org/en/news/articles/2019/03/18/pr1981-waemuimf-executive-board-concludes-regional-consultation-with-waemu_