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Mr. Johannes Mueller, Irene Yackovlev, and Hans Weisfeld
Most WAEMU countries are likely to see economic growth deteriorate over the next two years as a result of the global economic crisis, and some WAEMU countries will be more severely affected by the crisis than others. This could have a detrimental effect on efforts to reduce poverty. Deteriorating remittances and commodity export prices are projected to negatively affect the WAEMU countries’ external current account deficit and reserves, although the impact should be cushioned by positive terms-of-trade shocks, such as declining import prices for food and fuel products. These developments should also help lower inflation pressures, bringing WAEMU inflation closer to its historical level of about 2 percent by 2010.
Mr. Johannes Mueller, Irene Yackovlev, and Hans Weisfeld

. This needs to be carefully monitored. Box 1 . Vulnerability of WAEMU Countries to Falling Inflows An illustrative scenario emphasizes how vulnerable WAEMU members are to a drying up of remittances and capital flows . In this scenario, aid inflows decline by 10 percent, FDI and remittances by 20 percent, and net portfolio inflows by 20 percent. The following first-round effects could then be expected: WAEMU reserves would fall to 1½ months of imports, below the 3-month benchmark level . Correcting for the fact that all such inflows generally lead to a rise

International Monetary Fund. African Dept.

government finances Revenue and grants (% GDP) 14.8 15.0 15.0 14.7 15.3 Expenditure (% GDP) 17.7 17.3 20.6 20.3 19.9 Fiscal balance (% GDP) -2.9 -2.3 -5.6 -5.6 -4.7 Public debt 1/ (% GDP) 36.0 38.8 47.7 49.4 50.5 Money and Credit Broad money (% change) 13.5 11.0 21.4 7.9 8.2 Balance of payments Current account (% GDP) -3.9 -2.3 -3.5 -4.3 -4.2 FDI (% GDP) 0.8 1.3 1.0 1.1 1.2 WAEMU reserves (in months of imports

International Monetary Fund. African Dept.

rating, projected reserve coverage could stay below these levels even in the medium term. Figure 6. WAEMU: Reserve Adequacy D. Non-Price Competitiveness 9. The business climate has improved on average, but remains challenging ( Figure 7 ). 4 The WAEMU’s position in the Doing Business ranking has improved compared to the 2014 Doing Business assessment, with half of the regions’ member countries improving their ranking by at least 10 positions. However, all WAEMU countries are still lagging behind African and Asian benchmark groups. 5 Access to and the

International Monetary Fund. African Dept.

.2 Fiscal balance (% GDP) -2.3 -5.6 -5.1 -5.3 -4.0 Public debt (% GDP) 38.4 47.6 52.1 52.9 52.3 Money and Credit Broad money (% change) 11.0 21.4 17.7 10.4 … Credit to private sector (% change) 6.1 9.2 12.6 4.5 … Balance of payments Current account (% GDP) -2.3 -3.2 -3.8 -4.8 -4.6 Net FDI Inflows (% GDP) 1.3 1.2 1.1 1.1 1.2 WAEMU reserves (in months of imports) 5.6 5.5 … … … External public debt (% GDP) 25.5 30.5 31.6 31

Mr. Amadou N Sy

reform of the payment and settlement system is well underway with the setting up of an RTGS system (STAR-UEMOA), an interbank settlement system (SICA-UEMOA) and plans for an interbank payment system for bank cards (GIM-UEMOA and CTMI-UEMOA). The conduct of monetary policy in the Union will have to be adapted as financial markets become more integrated. In the WAEMU, reserve requirements have been used extensively as other sterilization instruments have proved to be less effective in a context of excess liquidity and thin interbank money markets. These reserve

Mr. Amadou N Sy
This study assesses the degree of financial integration in the West African Economic and Monetary Union (WAEMU). The structure of the financial sector and its institutional arrangements indicate that financial integration is well advanced in some aspects. Common and foreign ownership of banks is very high and cross-border transactions are frequent in the government securities markets. Common institutions help achieve a high degree of similarity of rules. There is nonetheless scope for further financial integration as indicated by persistent deviations from the law of one price, limited cross-border bank transactions, and differences in treatment. Policy measures could therefore help achieve greater financial convergence.
Mr. Amadou N Sy

conduct of monetary policy in the union will have to be adapted as financial markets become more integrated. In WAEMU, reserve requirements have been used extensively because other sterilization instruments have proved to be less effective in a context of excess liquidity and thin interbank money markets. These reserve requirements are, however, differentiated as they differ by country, indicating that there is scope for further financial integration ( Table 9.11 ). Table 9.11 . WAEMU: Reserve Requirements (In percent) Oct. 16, 1993-Aug. 15, 1998