West African Economic and Monetary Union: Selected Issues

IMF Staff Country Reports, April 13, 2015

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The paper presents an external stability assessment report for the West African Economic and Monetary Union.
The current account deficit declined in 2014.
Although gross international reserve coverage has increased slightly, part of the current account deficit has been financed by a decline in commercial banks’ net foreign assets.
Contingent on the implementation of government’s consolidation plans, and helped by a favorable oil price outlook, the current account deficit would further gradually decline and be matched by enough financial inflows in the medium term.
According to various metrics, the real exchange rate appears to be broadly aligned with fundamentals.
International reserve coverage should increase to provide stronger buffers against immediate short-term risks.
Structural competitiveness and investment efficiency improvements will be essential to ensure that the planned large investment programs translate into growth and export gains as well as increased private inflows into the region.

Implement government consolidation plans to support external adjustment.
Use favorable oil price outlook to foster gradual decline in the current account deficit matched by financial inflows.
Increase international reserve coverage to strengthen buffers against short-term risks.
Pursue structural competitiveness reforms and improve investment efficiency to convert large planned investment programs into growth, export gains, and increased private inflows.

Part of the 2014 current account deficit was financed by a decline in commercial banks’ net foreign assets.
Monitoring and managing commercial banks’ foreign asset positions is important for reserve adequacy and external stability.

Multiple metrics indicate the real exchange rate is broadly aligned with fundamentals.

Large planned investment programs require improvements in structural competitiveness and investment efficiency to ensure positive impacts on growth, exports, and private capital inflows.

Subjects: Commercial banks, Financial institutions, Imports, International trade, Mobile banking, Population and demographics, Tariffs, Taxes, Technology
Keywords: Commercial banks, CR, credit-to GDP ratio, dynamics well, ECOWAS country, GDP, Imports, ISCR, liquidity provision, Mobile banking, payment service, Tariffs, WAEMU, West Africa

International Monetary Fund. African Dept. "West African Economic and Monetary Union: Selected Issues", IMF Staff Country Reports 2015, 101 (2015).