Economic performance and outlook: Real GDP growth averaged 6.5% between 2014 and 2015 before slowing to 5.8% in 2016. The decline continued in 2017, to an estimated 5.5%, likely because of the primary sector’s underperformance (38% of GDP) due to a poor agricultural season. In the medium term, the economic outlook remains positive; real GDP growth is projected to be 5% in 2018 and 4.9% in 2019. However, the economy still faces the risk of a downturn, particularly given the fragility of the security situation.
Macroeconomic evolution: The budget deficit stood at 3.1% of GDP in 2016 and was estimated at 3.5% in 2017. Tax revenues as a share of GDP increased 0.3% percentage points, due to ongoing efforts to modernize the tax administration and broaden the tax base. Inflation in 2017 was estimated at 2%, up from –1.8% in 2016, below the West African Economic and Monetary Union (WAEMU) ceiling of 3%. The current account deficit was an estimated 7% of GDP in 2017, down from 7.1% in 2016, and is expected to decline to 5.7% in 2018 due to improvements in the terms of trade, which are likely to improve from –6.4% in 2017 to –0.1% in 2018. Public debt increased slightly to 31.8% of GDP in 2017, largely a result of an increase in domestic debt from 7% in 2015 to 15% in 2017. The most recent debt sustainability analysis in July 2017 indicated a moderate risk of debt distress.
Tailwinds: Mobilization of tax, customs, and land-related revenues continues to be at the core of public finance reforms to ensure the financing of increasing development needs. The government’s commitment to make fiscal decentralization a key priority entails carrying out regional development projects as part of government-region contracts, supported by a transfer of necessary skills and resources, as well as greater regional accountability. Resource transfers accounted for 22.9% of budget revenues in 2016 and were estimated at 23.4% in 2017.
Headwinds: Despite economic recovery and efforts to gradually restore the government’s ability to provide basic social services, three major challenges remain. First is lasting improvement in the security situation, a key factor in development. Second is private-sector development, which requires improving governance in public management by better mobilizing resources for growing investment needs, boosting the quality of public investment, distributing resources equitably across the country’s regions and priority sectors, and achieving transparency in public procurement. Third is generating strong and inclusive economic growth, given the constraints created by the structural fragility of the economy and strong population growth of 3.6%.
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 Mali, the tax rate one securities income is equal to maximum 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.