Cote d'Ivoire: IMF Board urges macroeconomic stability in WAEMU member countries

Abidjan, Cote d'Ivoire (PANA) - Executive Directors of the International Monetary Fund (IMF) have welcomed the West African region’s continued strong economic performance, with robust growth and low inflation. However, they note that risks to public debt sustainability and external stability have risen.

Concluding the Article IV consultation with the West African Economic and Monetary Union (WAEMU) in Washington, D.C., the IMF Executive Directors underscored that sustaining high growth would require well coordinated and consistent national fiscal policies and regional monetary policy to contain vulnerabilities and safeguard macroeconomic stability.

While the main responsibility in this regard falls on national and regional authorities, Directors noted that the Fund could play a key role through policy advice and capacity building, according to a statement issued on Wednesday.

"Structural reforms will also need to be accelerated to improve the business environment, boost competitiveness, and promote diversification," they said in their assessment, underscoring that growth friendly fiscal consolidation is key to reducing public debt and rebuilding foreign reserves buffers.  

Directors urged WAEMU member countries to adhere to their current budget deficit reduction plans, emphasising that adjustment efforts should be carefully calibrated and focus on reforms to enhance revenue mobilization and contain current expenditure while protecting priority capital and social spending.

According to report by IMF staff, economic activity has remained strong in WAEMU member countries but vulnerabilities have increased. Real GDP growth is estimated to have reached 6.2 percent in 2016, underpinned by robust and resilient domestic demand.

The report showed that inflation remained subdued, at about 0.4 percent on average in 2016 due to continued solid agricultural production and low oil prices. Preliminary data suggested an overall fiscal deficit of 4.5 percent of GDP in 2016, higher than initially planned (4 percent).

Credit to the public sector expanded at a significantly faster rate (43.6 percent) than credit to the private sector (9.7 percent). However, money growth remained moderate (10.2 percent), as net foreign assets declined.

Public debt, however, was on the rise and reserve coverage declined to 3.7 months of imports at end-December 2016, reflecting a continued expansion in public infrastructure and lower-than-expected external financing.

In their assessment, IMF Directors have encouraged the regional authorities to further improve public financial and debt management, enhance spending quality and efficiency, and develop alternative forms of financing to support infrastructure investment while being mindful of associated risks.

Commending the authorities for the ambitious set of regulatory reforms to modernise the financial sector, Directors highlighted the importance of adequately preparing for the effective implementation of the upgraded regulatory and prudential frameworks, making the financial safety net operational, and developing an effective regional bank resolution regime.

They also encouraged the authorities to step up efforts to address the current pockets of vulnerability in the banking system by enforcing existing prudential regulations.
-0- PANA AR/MA 6April2017

06 april 2017 08:31:34

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