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International Monetary Fund. Monetary and Capital Markets Department
Since the 2008 Financial Sector Assessment Program (FSAP), the financial sector of the West African Economic and Monetary Union (WAEMU) has undergone major changes that have altered its risk profile. Three structural changes have played a key role since the 2008 FSAP: (i) the financial sector has grown significantly; (ii) regional banking groups have become dominant; and (iii) the high concentration of bank portfolios in sovereign exposures, which accounted for an average of 31 percent of banking assets at end-2020, are almost triple the level observed in 2004. These changes have altered the structure of systemic risks and vulnerabilities and raised the need for implementing reforms to strengthen the effectiveness of the macroprudential policy and banking supervision frameworks.
International Monetary Fund. African Dept.
This technical note presents the stress tests on credit, interest rate, and concentration risk conducted by the WAEMU FSAP.1 Stress tests on contagion and liquidity risks are addressed separately.2 Stress tests are an important tool for detecting financial sector vulnerabilities, setting up targeted banking sector monitoring, imposing preventive measures, and informing public decision-makers of macrofinancial risks and costs.
International Monetary Fund. African Dept.
The WAEMU has, so far, demonstrated strong resilience to the Covid crisis. The economic rebound that started in the second half of 2020 firmed up in 2021, while fiscal and monetary policies remained supportive. External reserves have risen to comfortable levels and the financial system appears to be broadly sound. However, the region faces significant challenges to ensure the sustainability of macroeconomic policies, while supporting the economic recovery and navigating the uncertain outlook.
Mr. Bruno Imbert, Hoda Selim, Ms. Gwenaelle Suc, and Qing Zhao
This paper takes stock of unorthodox expenditure procedures in CEMAC and WAEMU countries and assesses their potential fiscal impact. “Unorthodox procedures” are defined as spending practices that bypass legal provisions governing public expenditure processes and circumvent regular controls or other budgetary rules, including those related to budget time limits, approved ceilings, or approved appropriations. The paper shows that despite PFM reforms, recourse to such procedures has persisted—resulting in the accumulation of arrears; inadequate fiscal reporting, including large stock-flow adjustments; and corruption vulnerabilities.
International Monetary Fund. African Dept.
After years of political turmoil and delayed reforms, the authorities started implementing in 2021 an ambitious fiscal consolidation and reform program to ensure debt sustainability, create fiscal space to address developmental needs and strengthen state capacity. A Rapid Credit Facility (RCF) disbursement of SDR 14.2 million (50 percent of quota) was approved in January 2021 to provide urgent financing to support critical spending in health. A 9-month Staff-Monitored Program (SMP) with three quarterly reviews was approved in July 2021 to support the government’s reform program aimed at stabilizing the economy, strengthening governance, and building track record of policy implementation to underpin the authorities’ request for an Extended Credit Facility (ECF) arrangement. The August 2021 SDR 27.2 million allocation and the reforms underpinned by the SMP have helped address the adverse impact of the pandemic, improve government spending transparency, mitigate debt vulnerabilities.