IMF Board says WAEMU region making strong economic growth

Dakar, Senegal (PANA) – The International Monetary Fund (IMF) Executive Board has welcomed the continued strong economic growth resilience and low inflation in the West African Economic and Monetary Union (WAEMU) member countries, but stressed that vulnerabilities had persisted in the region in 2017 with increased fiscal and external account deficits.

Although risks to debt sustainability remain moderate for seven-member countries and low for one member, the Board underscored the need for determined, growth-friendly fiscal consolidation to meet the WAEMU convergence criterion of 3 percent of GDP by 2019.

In a statement issued Friday following its consultation with WAEMU, the IMF Board noted that
despite lower terms of trade, social tensions, and security challenges within the region, real GDP growth is estimated to have exceeded 6 percent in 2017, underpinned by strong domestic demand.

The medium-term outlook remains positive but is subject to downside risks, and regional security issues remain a concern. Sustaining the growth momentum and preserving external stability require continued macroeconomic stability and accelerated structural reforms by member countries.

According to the statement, IMF Directors have called on the regional bank BCEAO to remain vigilant and stand ready to further tighten monetary policy if pressures persist on the money market or foreign exchange reserves.

The tightening of monetary policy since end-2016 stimulated the inter-bank market, reduced banks’ appetite for government debt, and contributed to Eurobond issuance by the two largest WAEMU sovereigns.

However, since September 2017, renewed liquidity pressures have pushed up the interbank market rate and maintained the average refinancing rate at the ceiling of the BCEAO’s policy corridor, according to an IMF staff appraisal.

In their assessment, the Fund’s Directors said: “Adjustment efforts should focus on reforms to enhance revenue mobilization and contain current expenditure while protecting priority capital and social spending. Directors emphasized the need to raise the efficiency of public investment, capture fiscal risks, and strengthen debt coverage and management.”

Commending the authorities for the important steps undertaken to modernize the financial sector, the Directors also called for the implementation of the regional strategy to promote financial inclusion and deepening to sustain robust and inclusive growth.

They highlighted the importance of lowering the cost of financial services, promoting financial literacy, enhancing consumer credit protection and closely supervising microfinance institutions to ensure prudential safeguards.
-0- PANA AR 30March2018

30 march 2018 17:24:01

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