Economic performance and outlook Economic activity in 2016 was driven mainly by structural public investment and the dynamism of the private sector. This trend continued in 2017, with real GDP growth estimated at 8%, despite domestic and external shocks at the beginning of the year. The 35% drop in the price of cocoa, the main source of export earnings, between November 2016 and January 2017 led to an estimated CFAF 200 billion loss for local producers. Growth was helped by the upswing in the primary sector, the good performance of the energy sector, and higher domestic consumption. Due to the dynamism of the secondary and tertiary sectors, growth is projected to reach 7.9% in 2018 and 7.8% in 2019.
Macroeconomic evolution: In December 2017, the IMF completed the second reviews of Côte d’Ivoire program supported by the Extended Credit Facility and the Extended Fund Facility, which allowed disbursements of $137 million. Performance under the program was considered strong enough for the decisions on the reviews to take place without a Board meeting. The budget deficit was estimated at 4.5% of GDP in 2017, higher than the anticipated 3.7%. This deterioration is explained by several internal and external shocks, including the downward revision of the single exit tax and registration duty, which are intended to support producer prices and to limit revenue losses to 0.5% of GDP. Social demands resulted in additional one-off expenditures of 0.6% of GDP in 2017 and are projected to require recurrent spending equal to at least 0.07% of GDP in 2018. The deficit is projected to gradually decrease to 3.8% in 2018 and to 2.8% in 2019. Inflation stood at 0.7% in 2016, was estimated at 1% in 2017, and is projected to remain moderate, at 1.8% in 2018 and 1.9% 2019. Debt remains under control; in 2016, the country was considered a moderate risk by the International Monetary Fund. However, the consolidation of repayments due on 2014 and 2015 Eurobonds over 2024–28 poses a potential risk to debt sustainability.
Tailwinds: Several factors could consolidate the health of the economy, including the Economic and Financial Program 2016–2019 and reforms set out in the Memorandum of Economic and Financial Policies 2016–2019. In addition, a $525 million grant for the Millennium Challenge Corporation Program Compact will strengthen economic competitiveness through investment in education, technical and vocational training, and transportation. The country was selected to benefit from the G20 Compact with Africa, which is expected to boost the private sector, particularly through increased foreign direct investment (FDI). In addition, Côte d’Ivoire is continuing to improve the business environment with its Focus on Doing Business program, which has increased digitization and simplified procedures.
Headwinds: Membership in a monetary union helps Côte d’Ivoire maintain low inflation rates. But it limits its options for adjusting to negative shocks and ensuring external competitiveness. Some major fiscal issues remain to be resolved. The government still carries large, unpaid bills and past liabilities of about CFAF 150 billion, dating back to extra budgetary spending in 1993–2002. In addition, unpaid bills and liabilities to independent power and gas producers are estimated at 1.1 percent of GDP. The authorities should also monitor the arrangements reached with mutinous soldiers and striking civil servants to ensure that there are no new flare-ups and conflicts. The economy remains vulnerable to negative macroeconomic shocks, particularly those related to exports (lower commodity prices) and FDI. A continuing decline in the price of cocoa could lead to social tensions similar to those in 2017. This vulnerability is a reminder that the country needs to accelerate its economic diversification and identify alternate sources of growth to reduce its dependence on cocoa beans. The upcoming elections in 2020 and the uncertainty surrounding a reshuffling of political forces could be additional sources of instability.
The West African Economic and Monetary Union (WAEMU) comprises eight countries: Benin, Burkina Faso, Cote d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo.. Bond issuance strategies vary from one state to another but most use the MTDS tool to develop their issuance strategy. Generally, most programs are focused on short-term tenor and characterized by securities with repayments by amortization and deferred coupon. Recently, with the advent of the AUT, the zone has progressed towards lengthening and standardizing securities.
For the moment, there is no benchmark maturity in the WAEMU. The region is in the assessment phase of developing a yield curve. WAEMU countries understand that issuance policies need to evolve towards considering the need for a yield curve.
Yield curve calculation models
There is no benchmark yields curve in the WAEMU Zone.
As there is no yield curve in the WAEMU, no method for interpolation is in use.
Yield curve managed by
Agence UMOA-Titres is responsible for the yield curve.
There is no yield curve in the WAEMU.
Challenges in building an efficient yield curve
- Market fragmentation: fragmented securities market and non-standardized securities.
- Price discovery issue
- Narrow investor base: comprising homogeneous investors such as banks.
- Limited and illiquid secondary market: nonexistent secondary market where the securities are acquired for "buy and hold”.
- Coexistence of two agencies for issuing bonds and bills: The “Conseil Régional de l’Epargne Publique et des Marchés Financiers” (CREMPF) is in charge of monitoring the syndication. The Agence UMOA-Titres is responsible for auctions.
Guide to Buying Bonds
Procedures for market participation
The frequency of auctions is determined by the states, together with the Central Bank. Each state cannot hold T-Bills and Government bonds auction more than once a week.
For Treasury Bills, a calendar program specifying the instruments and their amounts and maturities, is published quarterly by the Minister of Finance in consultation with the Central Bank, and in consideration mainly the foreseeable revenue and government spending. Whereas Treasury bonds, an indicative issuance calendar specifying the instruments and their amounts and maturities, is set annually by the Minister of Finance in consultation with the Central Bank.
Each issuance should be advertised at least 7 days before the auction by describing the issuance characteristics. Bidders submit to the Central Bank, sealed in a ballot box reserved for this purpose, a submission form specifying the amounts and the interest rates or the price offered. Submissions may also be made electronically in the conditions defined by the Central Bank.
Later than one hour after the deadline for bids submission, the National Directions of the BCEAO transmit electronically, by fax or any other means of rapid communication accepted by the Central Bank, the main submissions to the principal agency of the BCEAO, which is organizing the auction.
Treasury bills are eligible for refinancing by the Central Bank. Investors and the Central Bank may buy or sell Treasury bonds on the secondary market, awarded by private treaty. In this context, they are required to post the purchase price and sale, which they are willing to transact.
Treasury bonds can be traded on the secondary market. As such, they can be exchanged at the Regional Stock Exchange (BRVM) or outside the BRVM.
The settlement date is T+1 for domestic operations and T+3 for operations between Members of the Union. This period can be modified by BCEAO. However, the contracting parties are free to agree on a minimum term above to unwind their operations. If the instructions given by the two parties are identical, the operation is definitely offset the value date agreed. In case of discrepancy between the evidences, the Central Bank suspends the transaction and notifies this decision to both parties for correction. Central Bank ensures the existence of adequate provisions before executing the compensation requested. Transmission to the Central Bank of notifications occurs in the selection of speakers, fax, telex, ordinary mail or any other means of rapid communication accepted by the BCEAO.
Treasury bills and Treasury bonds incomes are tax-free throughout the territory of the Member States of the WAEMU. But for non-members, the tax rates are different from one country to another. In Cote d’Ivoire, the common tax rate one securities income is equal to 12%. Bonds with issuance of minimum 5 years have a tax rate of at least 6%.
|Rating Agency||Current rating||Outlook|
|Moody’s||No rating||No outlook|
|Fitch||No rating||No outlook|
|Standard and Poor’s||No rating||No outlook|
There is no appropriate Primary Dealers System in the WAEMU zone.
Subscription of Treasury bills is reserved to banks, financial institutions as well as regional financial institutions with an ordinary current account in the books of the Central Bank. Other investors, physical or legal persons, whatever their country of origin can also purchase Treasury bills in the primary market through banks located in the territory of the Union.
The primary subscription of Treasury bonds is restricted to banks, financial institutions, regional organizations and financial management company and intermediation (IMS). Other investors, physical or legal persons, whatever their country of origin may also purchase Treasury bonds on the primary market through banks and brokerage firms (SGI) located on the territory of the Union.
Openness to international investors
The members of the zone are actively encouraging foreign investment. Foreign companies are free to invest and list on the regional stock exchange (BRVM), which is based in Abidjan and is dominated by Ivorian and Senegalese firms.
There are no significant limits on foreign investment nor are there generally differences in treatment of foreign and national investors, either in terms of the level of foreign ownership or sector of investment.
Restriction on FX and profit repatriation
WAEMU has unified foreign exchange regulations. Under these regulations, there are no restrictions for transfers within the community, and designated commercial banks are able to approve routine foreign exchange transactions inside the community. The transfer abroad of the proceeds of liquidation of foreign direct investments no longer requires prior governments approval.