US: IMF directors encourage WAEMU to improve business climate

Washington, D.C., US (PANA) -  The West African Economic and Monetary Union (WAEMU) should enhance its monetary policy effectiveness and improve the business climate while addressing income and gender inequalities in the region, according to the Executive Directors of the International Monetary Fund (IMF).

Concluding the annual Discussion on Common Policies of Member Countries of the WAEMU on Tuesday, the Directors viewed the benign inflation outlook in the region and favourable macroeconomic environment as an opportunity to focus on reforms to further improve liquidity management, deepen financial markets, and strengthen market-based operations.

Despite the fragile security situation in some member countries and a less favourable external environment in 2015, WAEMU economic growth exceeded 6 percent for the second consecutive year, driven by ongoing infrastructure investments, solid private consumption, and favourable agricultural campaigns.

The IMF has noted that inflation has remained subdued around 1 percent in 2015, reflecting the exchange rate anchor and positive terms of trade developments.

Monetary policy has remained accommodative, with the key policy rate unchanged at 2.5 percent since September 2013, and private sector credit grew by nearly 14 percent in 2015.

In their assessment, the Executive Directors welcomed the region’s "continued strong growth performance despite the fragile security situation in some member countries and a less favourable external environment".

The drop in oil prices has lightened the energy bills for all WAEMU countries while cocoa and groundnut prices have remained buoyant, thereby improving the trade balance, notably of Cote d’Ivoire, the largest economy in the region.

"However, the surge of imports associated with public investment and private consumption has partly offset the impact of lower energy bills," said an IMF report.

As a result, in 2015 the region’s overall current account deficit reached 5.6 percent of regional GDP, compared with 6.1 percent in previous year, and gross international reserves rose to 5 months of imports from 4.7 months in 2014.

In their assessment, the Executive Directors encouraged the WAEMU authorities to safeguard macroeconomic and financial stability by implementing prudent and well-coordinated national fiscal policies and regional monetary policy.

"Strong resolve to move ahead with the much-needed structural reforms would help achieve higher and more inclusive growth," said the Directors, underscoring that pursuing fiscal consolidation plans, while expanding space for development needs, is critical to preserve macroeconomic stability and support growth.

In this regard, the Directors encouraged the WAEMU Commission to help member countries move decisively on fiscal reforms.

They also encouraged the authorities to increase domestic revenue by broadening the tax base and strengthening tax administration, and rationalize current spending, particularly the wage bill.

In addition, they called for measures to improve public financial management and the quality of spending, and reforms to increase public investment efficiency, emphasizing the importance of further strengthening debt management.

"Accelerating the pace of structural reforms aimed at boosting competitiveness and diversification will be key to sustaining the growth momentum and reducing poverty," they stressed.

According to IMF,  the views expressed by Executive Directors will form part of the Article IV consultations with individual member countries.
-0- PANA AR/MA 23March2016

23 march 2016 08:46:00

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