The Monetary Policy Committee (CPM) of the Central Bank of West African States (BCEAO) held, on Wednesday June 1, 2022, its second ordinary meeting for the year 2022, by videoconference, under the presidency of Mr. Mamadou DIOP, Vice-Governor of the Central Bank in charge of the interim.
At the opening of the work, the members of the Committee congratulated the Governor of the BCEAO, Mr. Tiémoko Meyliet KONE for his appointment as Vice-President of the Republic of Côte d’Ivoire, on April 20, 2022. The Committee underlined the rigor, professionalism and leadership demonstrated by Governor KONE during his tenure at the BCEAO. He wished him every success in his new functions as Vice-Presidency of the Republic of Côte d’Ivoire.
The Committee reviewed the main developments in the international and regional economic situation, as well as the risk factors that could affect the medium-term outlook for inflation and economic growth in the Union.
With regard to the international situation, the Committee noted that the recovery in global economic activity has been faced, since the start of 2022, with a further deterioration in the health situation, mainly in the regions of Asia and Pacific, as well as the consequences of the conflict between Russia and Ukraine. According to projections published by the International Monetary Fund in April 2022, the recovery in global economic activity should continue, but at a slower pace, with growth expected at 3.6% in 2022 and 2023. Nevertheless, the extension geopolitical tensions, the tightening of international monetary conditions and the slowdown in the growth of the Chinese economy induced by its “zero Covid-19” strategy could weigh negatively on this outlook.
On the commodity markets, the rise in the prices of energy products accelerated during the first quarter of 2022, under the effect of disruptions in supply and the drop in production. Similarly, the prices of non-energy products increased, driven by the increase in food prices.
In this context, inflation rates reached record levels in advanced economies as well as in emerging and developing countries, prompting almost all central banks to begin or accelerate the raising of their key interest rates .
Examining the economic situation in WAEMU, the Committee noted the continued recovery of economic activity in the first quarter of 2022, with real GDP growth, at an annual rate, of 5.6%, after 5.7% in the previous quarter. Forecasts call for the Union’s GDP to rise in 2022 and 2023 by 5.9% and 7.2%, respectively. The Monetary Policy Committee however noted that the recovery still remains fragile and surrounded by essentially downside risks, in connection with the evolution of the security and socio-political situation in the sub-region, the persistence of geopolitical tensions and the tightening of international financing conditions.
The execution of financial operations of WAEMU member states during the first quarter of 2022 shows a slight improvement in the budget deficit compared to the same period of the previous year. The overall deficit, on a commitment basis, including grants, stood at 979.2 billion in the first quarter of 2022 against 1,059.5 billion a year earlier.
Monetary conditions remained favorable during the first quarter of 2022, in line with the continued accommodative monetary policy stance of the BCEAO. Refinancing requests from Union banks have been fully serviced at the minimum rate of 2.00%. The Central Bank has also renewed, for the year 2022, its initiatives launched in 2021 aimed at refinancing at its minimum interest rate the Recovery Bonds (OdR) and the Support and Resilience Bonds (BSR) issued by the States. on the regional financial market, with a view to financing their recovery plans.
Outstanding claims on the economy increased, on an annual basis, by 13.0% at the end of March 2022. On the other hand, the net foreign assets of the monetary institutions of the Union contracted by 1,876.2 billion in one year, mainly in connection with the increase in the energy bill and the increase in the supply of food products. Reflecting these developments, the money supply increased, on an annual basis, by 11.9% at the end of March 2022. Official reserve assets stood at 13,501.9 billion on the same date, corresponding to a coverage rate of 1 issue of 79.9% against 79.3% three months earlier. These reserves provide the Union with 5.2 months of imports of goods and services against 5.5 months in the previous quarter.
The Monetary Policy Committee noted the accentuation of inflationary pressures in the Union. The general price level increased, year on year, by 6.4% in the first quarter of 2022 against 5.0% a quarter earlier. This acceleration is mainly attributable to the rise in the prices of food products and the increase in the cost of solid and liquid fuels.
Since the second quarter of 2021, the inflation rate in the Union has been above 3.0%. While inflation should remain high in the short term, consumer prices should gradually decelerate in line with an expected increase in food production during the 2022/2023 campaign and the impact of budgetary measures taken by States to counter the recent rise in inflation. The inflation rate in the Union is projected to average 6.2% in 2022 and 3.2% in 2023, after 3.6% in 2021.
The Monetary Policy Committee underlined that the persistence of the deviation of inflation from the target poses risks to the anchoring of inflation expectations in the Union. While judging it appropriate to maintain an accommodating monetary policy, the Committee decided to raise the BCEAO key rates by 25 basis points, in order to encourage the gradual return of inflation to the target zone, an essential condition for economic growth. healthy and inclusive. Thus, the minimum bidding rate for liquidity injection calls for tenders goes from 2.00% to 2.25% and the marginal lending window rate from 4.00% to 4.25% as of 16 June 2022. The reserve requirement coefficient applicable to banks in the Union remains unchanged at 3.0%.
Done in Dakar, June 1, 2022
For the Chairman of the Monetary Policy Committee,
The Vice-Governor in charge of the interim
Mamadou DIOP