On Wednesday, June 1, 2016, the Monetary Policy Committee of the Central Bank of West African States (BCEAO) held its second ordinary meeting of FY 2016 on the premises of the headquarters of the Central Bank of West African States in Dakar, Republic of Senegal, under the chairmanship of Mr Tiémoko Meyliet Koné, Governor of the Central Bank and statutory chairman of the Committee.

The Committee reviewed the main trends unfolding recently in the economy and assessed the risk factors that could affect the outlook for price stability and economic growth in the Union.

In international terms, the Committee noted that the trend in the global economy remained moderate in the first quarter of 2016, with low growth rates in most industrialized countries and a slowdown in emerging countries. Against this backdrop, global prices for major raw materials, particularly those exported by WAEMU countries, fell with the exception of prices for palm oil, palm kernel oil, cashew nuts and gold

In terms of the internal situation within the Union, the Committee pointed out that the trend in the economy remained strong, driven by the recovery in the secondary and tertiary sectors. Year over year, the rate of growth in the gross domestic product (GDP) in the Union stood at 7.1% compared to 7.2% the previous quarter. In FY 2016, economic growth in the Union is expected to average 7.2% compared to a revised level of 7.0% in 2015. This development is chiefly due to the consolidation of activity in the secondary sector as well as the strong performance by the tertiary sector.

The members of the Monetary Policy Committee noted that, over the first three months of FY 2016, the execution of the budgets of the WAEMU member states resulted in an overall deficit, based on commitments, including grants, of 251.7 billion compared to 355.1 billion one year prior. The reduction in the budget deficit was due to the fact that the increase in revenue was larger than the increase in spending. The Committee urged the states to continue their efforts to mobilize fiscal revenue and rationalize public spending with a view to reducing the budget deficit and bringing it into line with the community standard of 3.0% of GDP by 2019.

Analysing price trends in the Union, the Committee observed that year-over-year inflation in WAEMU had slowed to 0.8% at the end of March 2016, compared to a figure of 1.3% at the end of December 2015. This trend was chiefly due to the decrease in the price of food products, notably vegetables and cereals. In 24 months’ time, the year-over-year inflation rate is forecast at 1.9%, in phase with the Central Bank’s goal of price stability.

The Committee noted that monetary conditions were tense in the Union in the first quarter of 2016. On the one-week interbank market compartment, the weighted average rate stood at 3.82% compared to 3.49% the previous quarter, while the weighted average rate for weekly cash injection transactions stood at 3.13% compared to 2.59% the previous quarter.

Based on these analyses, the Monetary Policy Committee decided to maintain both the minimum bid rate on cash injection tender transactions and the marginal lending rate unchanged, at respectively 2.50% and 3.50%, the levels in force since September 16, 2013. The required reserve coefficient applicable to the banks of the Union remained at 5.0%, the level that has been in force since March 16, 2012.

Done in Dakar on June 1, 2016

The President of the Monetary Policy Committee

Tiémoko Meyliet Koné