2023-04-16 11:49:00
(Ecofin Agency) – It has already been two years since the WAEMU central bank withdrew its assets from the operations account which was housed in the French Treasury and their management is still not profitable. In the CEMAC zone, the BEAC continues to enjoy guaranteed returns, but all things considered, the end result seems to benefit the BCEAO
The financial results for the year 2022 of the central banks of the CEMAC and theWAEMU which have in common the use of the CFA Franc, shows that the recovery by the countries of West Africa of the share of foreign exchange reserves which were housed in the account of operations with the Public Treasury in France, does not is not yet beneficial to them. However, the two sub-regions increased the stock of these resources over the period analysed.
For these resources which are included in the category of “securities portfolio”, the BCEAO announced a negative net result (-25.4 billion FCFA), once morest a gain of 13.2 billion FCFA in 2021, which was already in down compared to the previous year. At the same time, the assets placed by the BEAC on the account of the operations of the public treasury in France brought it interest income of around 43 billion FCFA, up 246.7% compared to that of the same period in 2021.
An unprofitable securities portfolio for the BCEAO
Within the framework of the BCEAO, it is noted that, in the management of its foreign exchange reserves, it experienced a 50% drop in its assets in the accounts of correspondence banks, mainly in Europe, from 3800 billion FCFA to only 1942 billion FCFA. The reasons for this decline are not mentioned.
A strong hypothesis is that the central bank wanted to compensate for this decline by granting additional loans of 2.3 billion euros to European countries, for maturities mostly greater than 5 years. However, the institution has invested a significant portion of these resources in securities at amortized cost, which protects them once morest immediate risks of changes in interest rates, while generating income. The choice had a direct positive impact, since the revenues from this category of financial products brought in 19 billion FCFA to the BCEAO, up 23% compared to those of 2021. But the fact of having almost divested on the securities valued at fair value, reduced revenues from this product category by nearly $9 billion.
With charges (unexplained) on the securities portfolio which increased by 236%, the net margin of these products was only 11.7 billion FCFA, once morest 26 billion in 2021. In this context, the BCEAO is not failed to generate a positive net margin on its investments, especially since its unrealized losses on investment securities remained stable at CFAF 47 billion.
An operations account whose profitability has increased for the BEAC
The BEAC for its part did not have to undergo the stress of investments. Its holdings in the operations account in France increased throughout the year, from 4 trillion FCFA at the end of the first half of 2022, to 5.5 trillion FCFA at the end of the year. At the same time, the level of return on this investment continued to rise.
According to the monetary cooperation agreements with France, which are still in full force in this sub-region, the operations account pays an interest of 0.75%, when the rates of the European Central Bank are lower than this latter figure. But when the reverse happens, the trading account pays at least 1%. However, mainly on the 3e et 4e quarter of 2022, the average returns on this investment yielded between 1.4% and 2.48%, and these are also the periods when the reserves placed have increased the most.
« From December 21, 2022, the interest rate for the main refinancing operations is 2.50% and the marginal lending facility rate is 2.75% compared to 0.00% and 0.25% respectively in 2021 These two rates remunerate respectively the special leveling account and the operations account “Explains the Central Bank commenting on these figures.
BCEAO the final winner, with additional monetary flexibility
In the end, the BCEAO was more profitable than the BEAC, with a net profit for the year of nearly 126 billion FCFA ( once morest 114 billion FCFA for its twin). The West African institution benefited from a record increase in income from activities with the International Monetary Fund, and above all from a more dynamic and therefore more profitable domestic monetary market than that of CEMAC. Also, even if the investments of certain assets in foreign currencies of the BCEAO are slow to generate positive net returns, this may still be attributable to a very volatile situation on the main markets where these resources are invested.
The BEAC can benefit from more stable and higher yields, but it loses autonomy and flexibility.
The debate on the relevance of the CFA franc continues to fuel discussions. WAEMU proves that we can keep the guarantee, by having more flexibility in the management of foreign exchange reserves, and therefore more autonomy. But so far, the price tag is building up negatively.
In the CEMAC zone, we are still thinking regarding it and various scenarios are being discussed. But for now, the sub-region can still benefit from the improvement in interest rates on its deposits, once morest less flexibility, and ever-present control by the French monetary authorities.
Idriss Linen
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