rapport annuel 2005 (en langue anglaise).qxd
Transcription
rapport annuel 2005 (en langue anglaise).qxd
2005 ANNUAL REPORT IMPRIMERIE BCEAO SUMMARISED VERSION Avenue Abdoulaye Fadiga BP 3108 - Dakar - Sénégal www.bceao.int ORIGINAL : FRENCH 2005 ANNUAL REPORT SUMMARISED VERSION ORIGINAL : FRENCH © Central Bank of West African States Avenue Abdoulaye Fadiga - BP 3108 - Dakar - Sénégal ISSN 0850-8674 CONTENTS PAGES HIGHLIGHTS OF BCEAO IN 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .viii MEMBERSHIP OF THE STATUTORY ORGANS AND ORGANISATION CHART OF BCEAO GOVERNOR'S MESSAGE OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . xiii . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 I - ECONOMIC AND FINANCIAL ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 1 - INTERNATIONAL ECONOMIC AND FINANCIAL ENVIRONMENT 2 - WAMU ECONOMIC AND FINANCIAL ENVIRONMENT 2.1 - Gross Domestic Product 2.2 - Agricultural Production 2.3 - Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 2.4 - Industrial Production and Turn-Over of Retail Trade 2.5 - Price Developments 2.6 - Public Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 2.7 - Balance of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 2.8 - Resource Mobilisation and External Debt Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 II - IMPLEMENTATION OF MONETARY POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1 - OBJECTIVE OF MONETARY POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 2 - MONETARY ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 2.1 - Interest Rate Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 2.2 - Open Market Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 2.3 - Actions through Permanent and Exceptional Financing Windows . . . . . . . . . . . . . . . . . . . . . . . . .13 2.4 - Reserve Requirement Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 3 - RESULTS OF MONETARY ACTION AND TRENDS IN MONETARY AGGREGATES 3.1 - Net Foreign Assets 3.2 - Domestic Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 3.2.1 - Net Position of Governments 3.2.2 - Credit to the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 3.2.3 - Trends in Credit Registered with the Financial Risk Control Unit . . . . . . . . . . . . . . . . . . . . . . .20 3.3 - Money Supply and Monetary Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 3.4 - Private Savings collected by Banks and Savings Banks 3.5 - Central Bank Financial Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 3.6 - Trends in Reserve Requirement Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 3.7 - Interbank Market Operations and Trends in Bank Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 3.8 - Public and Private Security Market Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 III - CURRENCY ISSUE AND PAYMENT SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 1 - MANAGEMENT OF CURRENCY OUTSIDE BANKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 1.1 - Outflows and inflows through BCEAO windows 1.1.1 - Outflows 1.1.2 - Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 1.2 - Structure of Currency Outside Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 Annual Report - 2005 iii 2 - IMPLEMENTATION OF SETTLEMENTS WITHIN THE WAMU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 2.1 - Cross - border flows of banknotes through BCEAO Branch windows 2.2 - Flows among WAMU Member States 3 - IMPLEMENTATION OF EXTERNAL PAYMENTS 3.1 - External Banknote Operations 3.2 - Bank Money Transfers . . . . . . . . . . . . . . . . . . . . . . . . . .33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 4 - OPERATION OF PAYMENT SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 4.1 - Automated Transfer and Settlement System within the WAEMU (STAR-UEMOA) 4.2 - Automated Interbank Clearing System within the WAEMU (SICA-UEMOA) 4.3 - Regional Interbank Electronic Banking System 4.4 - Regulatory Texts . . . . . . . . . .35 . . . . . . . . . . . . . . . .37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 4.5 - Telecommunications System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 4.6 - Payment Incident Centre IV - BANKING AND FINANCIAL SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 1 - REVIEW OF DEVELOPMENTS IN THE BANKING SYSTEM 1.1 - Regulatory Texts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 1.2 - Development of Banking Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 1.3 - Activities of Banks and Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 1.4 - Status in relation to Prudential Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 1.5 - Rating Agreements Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 2 - REVIEW OF DEVELOPMENTS IN REGIONAL FINANCIAL MARKET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 3 - REVIEW OF DEVELOPMENTS IN DECENTRALISED FINANCIAL SYSTEMS 3.1 - Sector Growth Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 3.2 - PRAFIDE Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 3.3 - Legal Framework and Prudential Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 3.4 - Capacity Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 3.5 - Studies and Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 3.6 - Sector Supervision V - OTHER ACTIVITES OF THE BCEAO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 1 - MANAGEMENT OF FOREIGN EXCHANGE RESERVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 2 - ECONOMIC INTEGRATION OF WAEMU MEMBER STATES 3 - MONETARY AND FINANCIAL COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 3.1 - Relations with the Bretton Woods Institutions 3.2 - Relations with Other Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 4 - OTHER ACTIVITES AND PROJECTS OF BCEAO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 4.1 - Collection, Management and Diffusion of Statistical Information 4.2 - Balance Sheet Centre . . . . . . . . . . . . . . . . . . . . . . . . . .52 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 VI - BCEAO’s INSTITUTIONAL AND ADMINISTRATIVE FRAMEWORK 1 - ACTIVITIES AND OPERATION OF STATUTORY BODIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 1.1 - Conference of the Union Heads of State and Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 1.2 - The WAMU Council of Ministers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 1.3 - Board of Directors of the BCEAO 2 - ADMINISTRATION OF BCEAO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 2.1 - Management of Human Resources iv . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 2.1.1 - Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 2.1.2 - Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Annual Report - 2005 2.2 - Expansion of BCEAO’s Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 2.3 - Information and Communication System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 2.4 - Modernisation of Documentation and Archives 2.5 - Activity and Operation Control Mechanism 2.6 - Management Control Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 VII - BCEAO’s FINANCIAL ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 1 - BALANCE SHEET ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 1.1 - Analysis of Asset Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 1.2 - Analysis of Liability Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 2 - STATEMENT OF PROFIT AND LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 2.1 - Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 2.2 - Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 3 - ACCOUNTS AUDITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 4 - AUDIT REPORT ON FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 5 - FINANCIAL STATEMENTS OF THE BCEAO AS AT DECEMBER 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . .73 LIST OF GRAPHS WAEMU Real GDP Growth Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Agricultural Export Productions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Production of Food Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Country Distribution of Domestic Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Country Distribution of Money Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Country Distribution of Monetary Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Integrated Monetary Position of WAMU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Country Distribution of Domestic Savings by Individuals and Companies within the WAMU . . . . . . . . . . . . . . . . . .23 Breakdown of Earnings per type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 Breakdown of Charges per type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 LIST OF TABLES Changes in Annual Average Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Changes in Quarterly Average Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Changes in Consumer Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Reserve Requirement Ratios Applicable to Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Integrated Monetary Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Country Changes in Net Foreign Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Review of Country Changes in Net Position of Governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Country Trends in Credit to the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Country Changes in Money Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Trends in Country Private Savings collected by Banks and Savings Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Central Bank Financial Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 Interventions by the BCEAO by end of December 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Credit to the Economy and Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Trends in Reserve Requirements built up by banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Trends in Reserve Requirements built up by Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Changes in Interbank Rates (Weighted Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..28 Changes in Interbank Lending within the WAMU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Breakdown of outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Breakdown of inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 Annual Report - 2005 v Breakdown of Banknotes and Coins in Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Cross - border Flows of Banknotes through BCEAO Branch Windows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Flows among WAMU Member Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 Trends in Transactions carried out through STAR-UEMOA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 Country Distribution of Credit Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Trends in Uses and Resources of the WAMU Banks and Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . .44 Rating Agreements examined in 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Trends in Main Indicators of Decentralised Financial Systems (SFD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Comparative Trend in Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 vi Annual Report - 2005 The West African Monetary Union (WAMU) established by the November 14, 1973 Treaty, which replaced that of May 12, 1962, is made up of the following eight member countries located in West Africa : BENIN MALI BURKINA NIGER COTE D’IVOIRE SENEGAL GUINEA-BISSAU TOGO The Central Bank of West African States (BCEAO), the forty-third year of activity of which is described herein, is the common central bank of the WAMU ; it is in charge notably of managing the common currency of member countries, the African Financial Community Franc (CFA Franc), their foreign exchange reserves as well as implementing their common monetary policy. N.B. Unless otherwise specified, the values indicated hereinafter are expressed in CFA francs. Annual Report - 2005 vii HIGHLIGHTS OF BCEAO IN 2005 The following are the highlights that characterised past financial year for the BCEAO : AT THE INSTITUTIONAL LEVEL Visit by the Grand Chancellors of the National Order of the sub-rregional countries to the Headquarters of BCEAO. On April 1, 2005, the Grand Chancellors of the National Order from the West African sub-region visited the Headquarters of the BCEAO. They were about ten Grand Chancellors from Benin, Burkina, Côte d'Ivoire, Senegal, Cape Verde and Guinea-Conakry. The Group was welcomed by the Secretary General of the BCEAO, Mr. Amadou Sadickh DIOP. It attended the screening of a documentary film on the BCEAO and then visited the Currency Museum. At the end of the visit, the Group was received in audience by Mr. Damo Justin BARO, Vice-Governor and Interim Governor of the BCEAO. In his address to the guests, Mr. BARO, on behalf of the Governor, extended a welcome to the Grand Chancellors and reiterated thanks of the Authorities and staff of the Central Bank for this initiative. In response to the Vice-Governor's address, General Amadou Tidiane DIA, Grand Chancellor of the National Order of Senegal, spokesman for the group expressed warm thanks to the BCEAO Authorities for their spontaneous and quality welcome. He stated that this Dakar meeting, which falls within the scope of the Conference of the Grand Chancelleries of the WAEMU, extended to France and counterparts from Cape Verde and Guinea Conakry, was focused on regional integration. This is the reason why they deemed essential to visit the BCEAO, the most successful symbol of integration in West Africa. Opening ceremony of the meeting of the Association of African Central Banks (AACB). Chaired by Mr. Jean-Félix MAMALEPOT, Governor of the Central Bank of Central African States (BEAC) and Chairperson of the AACB, the opening ceremony of the ordinary meeting of the AACB Bureau was held on April 29, 2005, in the presence of the Governor of the BCEAO, Mr. Charles Konan BANNY, the Executive Secretary of the AACB Bureau, Mr. Bernard KONAN and the Representative of the African Union, President of the Commission, Mr. Mamadou Lamine DIALLO. The agenda of this meeting included, among other items, considering the progress made in implementing the African Monetary Cooperation Programme (AMCP). Visit by a delegation of the Central Bank of the Union of the Comoros to the Headquarters of the BCEAO . On September 8, 2005, the Governor of the BCEAO received in audience, at the Headquarters of the BCEAO, a delegation from the Central Bank of the Union of the Comoros which was led by Mr. Salim Ahmed ABDALLAH, Chairperson of the Board of Directors. The delegation also comprised Messrs. Ali NASSOR, Director and Mzé Abdou Mohamed CHANFIOU, Director of the Research Department. This visit was part of the effort to strengthen cooperation among African central banks and experience sharing in the area of institutional organisation and conduct of monetary policy. viii Annual Report - 2005 AT THE MONETARY AND FINANCIAL LEVELS Outcome of the operation to withdraw the 1992 range of banknotes At a videoconference held on Wednesday, January 12, 2005, the Governor of the BCEAO, Mr. Charles Konan BANNY, gave an assessment of the operation to withdraw the 1992 range of banknotes which took place from September 15 to December 31, 2004, in pursuance of the decision taken by the WAMU Council of Ministers at its December 22, 2003 meeting, in Lomé. The Governor seized this opportunity to announce the launching, as from January 17, 2005, of the « exceptional » operation to retrieve the 1992 range of banknotes which were not withdrawn at the end of the first operation. This measure of a social nature aimed at providing a supplementary period to those who did not exchange their old banknotes. The operation was definitely closed on February 18, 2005. BCEAO - Universities - Research Centres Third Symposium The BCEAO- Universities - Research Centres third symposium was held at the Headquarters of the BCEAO on August 22-23, 2005 in Dakar, Republic of Senegal. This symposium on the theme "Financial Stability and Macroeconomic Management in the West African Monetary Union (WAMU)", brought together 64 participants including 30 representatives of the BCEAO and 34 guests from central banks, universities and research centres from the WAEMU member States, Africa and Europe. The discussions focused on the two sub-themes : "Financial stability, a mission for the Central Bank ?" and "Financial stability and WAMU member States Economic performances". The closing panel dealt with the theme : "What macroeconomic environment for the solidity of the financial system ?". During the discussions, participants noted the positive relationship between economic growth and financial solidity. On the whole, they agreed that implementing appropriate macroeconomic policies, which are growth factors, contributes to financial stability. Besides, the key role of the central Bank financial stability supervision was reaffirmed. In this respect, participants underlined the importance of prudent and rigorous regulation and supervision of the financial system notably in periods of stability, in order to prevent and avoid crises. New Mechanism for the Management of Foreign Exchange Reserves As per Decision n° 127-08-05, of August 25, 2005 designing the framework for the management of foreign exchange reserves of the BCEAO, a steering and supervisory committee for the management of foreign exchange reserves and a foreign exchange reserves investment committee were created at the Headquarters of the BCEAO. The Direction of Financial Operations of the BCEAO is responsible for the operational implementation of the foreign exchange reserves investment policy. This new framework defines the policy in respect of the strategic investment policy regarding foreign exchange reserves held outside the operations account and formalises the relevant decisionmaking process. An Additional clause to the December 4, 1973 Agreement on the operations account, coming into force on September 1, 2005, was signed between BCEAO and the French Treasury. Annual Report - 2005 ix Launching of SICA-U UEMOA The reform of payment systems launched in 1999 by the BCEAO was materialised by the establishment of an Automated Transfer and Settlement System (STAR-UEMOA) and an Automated Interbank Clearing System within the WAEMU (SICA-UEMOA). STAR-UEMOA ensures the real-time gross settlement of large-value transactions. The operationalisation of this system took place in June 2004. SICA-UEMOA is an automated payment exchange system ensuring the multilateral clearing of transactions among participants which notably permits to reduce the processing time of payment transactions. The launching of this system marks significant progress towards the modernisation of the financial sector infrastructures. The country-based progressive launching of SICA-UEMOA started on November 17, 2005, in Mali. Project for the creation of a corporate data marketing firm within WAEMU With a view to further secure business relations and financial stability in WAEMU member States, the BCEAO decided to create, in partnership with the West African Development Bank (BOAD), the Fonds de Garantie des Investissements Privés en Afrique -GARI (guarantee-fund for private investments in West Africa), the Fonds Africain de Garantie et de Coopération Economique -FAGACE (African guarantee and economic cooperation fund), the ECOWAS Bank for Investment and Development (EBID) and the WAEMU-based banks, a private-law firm whose purpose will be to produce, promote and diffuse raw or processed data on the sub-regional non financial companies. In this regard, the BCEAO organised on October 3-4, 2005, a meeting which brought together representatives of the above-mentioned institutions. The purpose of this meeting was to adopt the economic and financial case for the project and to agree on the next steps for its implementation. Considering the stakes involved, the institutional promoters welcomed the BCEAO Authorities decision to transfer the database of the Centrale des Bilans des Entreprises - CBE/ UMOA (Corporate Balance Sheet Centre) to a private-law firm for the production and diffusion of corporate data. They expressed their conviction that with relevant sensitisation actions, the conditions for a profitable operation of this firm could be rapidly be met. A meeting was held on November 10, 2005, at the Headquarters of the BCEAO, in Dakar in order to present to the WAEMU-based credit institutions, to consider how they could contribute to its success, determine the shareholding structure and agree on the next steps towards the establishment of this company. This meeting was attended by the Directors-General of the WAEMU-based banks and financial institutions which are likely to be shareholders and by the promoters (BCEAO, BOAD, GARI, FAGACE, EBID). The banks and financial institutions which attended this meeting welcomed the initiative taken by the institutional promoters to create such a firm and to associate them in the project. They acknowledged the impact such a project will have on the security of their operations and on their internal management capacity. Indeed, the services are likely to facilitate the access of credit institutions to reliable and up-dated data on the companies operating in the Union, thus allowing better assessment of their financial performances. In view of the forthcoming entry into force of the new Basel II capital Accord, the corporate ratings of the enterprises by the future company will contribute to modernise credit risk management. x Annual Report - 2005 ON THE MANAGEMENT OF BCEAO The Governor of BCEAO appointed Prime Minister of Côte d’Ivoire On December 4, 2005, Mr. Charles Konan BANNY, Governor of the Central Bank of West African States was appointed Prime Minister of the Republic of Côte d’Ivoire to conduct the political transitional period ending in October 2006, as per Resolution n°1633 of the United Nations Organisation Security Council. This appointment brings credit to the institution he is leading. It should be recalled that it is the seventh time a high personality of the BCEAO is appointed Prime Minister in a Union State . At its December 23, 2005, extraordinary meeting, the Conference of Heads of State and Government of the Union noted with satisfaction the progress achieved in peace consolidation in Côte d’Ivoire, with the appointment of Mr. Charles Konan Banny as Prime Minister; the Conference extended its warm congratulations to him for the quality of the services he rendered to the Union and wished him success. Governor Charles Konan BANNY greeting the staff of the BCEAO. Extension of Governor BANNY's mandate and designation of Vice-G Governor BARO as Interim Governor by the WAEMU Conference of Heads of State and Government, at its December 23, 2005 extraordinary meeting. The WAEMU Conference of State and Government held an extraordinary session on December 23, 2005 in Niamey, Republic of Niger. Noting that the term of the Governor of BCEAO, Mr. Charles Konan BANNY, expires on December, 31 2005, the Conference extended his mandate until its next ordinary meeting scheduled in March 2006. Noting that Governor BANNY is unavailable due to his appointment as Prime Minister of the Republic of Côte d’Ivoire, the Conference designated Mr. Damo Justin BARO, Vice-Governor, as Interim Governor, as from January 1, 2006. Decoration of the Vice-G Governor of BCEAO Mr. Ali Badjo GAMATIE, Vice-Governor of BCEAO was made Commandeur dans l’ordre du mérite de l’enseignement supérieur de Côte d’Ivoire (Commander of the Order of Merit of Higher Education of Côte d'Ivoire). He received this distinction from the hands of the Ivorian Minister of Higher Education, Mr. Zemogo FOFANA, on June 24, 2005 in the premises of the Ecole Nationale Supérieure de Statistiques et d’Economie Appliquée - ENSEA - (National high school of statistics and applied Economics), in Abidjan. The ceremony organised for this purpose, was attended by the State Ministers Mr. Léon Monnet, Minister of Mining and Energy and Théodore MEL EG, Minister for Integration. Extension of the Visual Identity System to all the sites of the BCEAO On December 12, 2005, the office automation component of the BCEAO Visual Identity System (SIV) became effective on all the sites of the Central Bank. Prior to this extension, a pilot phase was conducted from July to October 2005, at the BCEAO Headquarters and at the Main Branch of Annual Report - 2005 xi BCEAO in Dakar. The SIV allows harmonising the presentation of the Bank's documents and improving the image of the various supports produced by the Institution. It enhances the corporate image of the Central Bank with its partners and the public. Launching of the online training platform On May 18, 2005, online training activities were launched. The establishment of this e-learning platform contributes to the strengthening of staff-directed actions. It is based on an increased use of new technologies which enable henceforth, to provide remote knowledge to all BCEAO sites. It provides further training concurrently with classical training, videoconference sessions and laboratory courses, as well as self-learning courses in English and Portuguese. Adoption and circulation of the 2006-2 2008 business plan On December 15, 2005, the 2006-2008 business plan was circulated to the staff. This plan, adopted by the Executive Committee of the Central Bank at its August 25, 2005 meeting, aims mainly at : – highlighting the strategic orientations, clarifying the objectives underlying the fulfilment of the missions assigned to the Bank and pooling energies around its ambitions in a constantly changing environment ; – providing to responsibility centres a tool for their annual budget programming and assessment of their contribution to the implementation of the Bank's priority actions. . xii Annual Report - 2005 MEMBERSHIP OF THE STATUTORY ORGANS AND ORGANISATION CHART OF THE BCEAO Annual Report - 2005 xiii MEMBERSHIP OF THE CONFERENCE OF HEADS OF STATE OF THE WAMU As at December 31, 2005 CHAIRPERSON : His Excellency Mamadou TANDJA, President of the Republic of Niger. His Excellency Mathieu KEREKOU, President of the Republic of Benin. His Excellency Blaise COMPAORE, President of Burkina Faso. His Excellency Laurent GBAGBO, President of the Republic of Côte d’Ivoire. His Excellency João Bernado VIEIRA, President of the Republic of Guinea-Bissau. His Excellency Amadou Toumani TOURE, President of the Republic of Mali. His Excellency Mamadou TANDJA, President of the Republic of Niger. His Excellency Abdoulaye WADE, President of the Republic of Senegal. His Excellency Faure GNASSINGBE , President of the Republic of Togo. xiv Annual Report - 2005 MEMBERSHIP OF THE WAMU COUNCIL OF MINISTERS As at December 31, 2005 CHAIRPERSON : Mr. Cosme SEHLIN, Minister of Finance and Economy of the Republic of Benin Republic of Benin MESSRS. Cosme SEHLIN, Minister of Finance and Economy ; Zul Kifl SALAMI, State Minister, in charge of Planning and Development. Burkina Faso MESSRS. Jean-Baptiste COMPAORE, Minister of Finance and Budget ; Jean de DIEU SOMDA, Minister for Regional Cooperation Attached to the Minister of Foreign Affairs and Regional Cooperation. Republic of Côte d'Ivoire * MR. Koffi Charles DIBY, Minister attached to the Prime Minister in charge of Economy and Finance. Republic of Guinea-Bissau MESSRS. Victor MANDINGA, Minister of Finance ; Issufo SANHA, Minister of Economy. Republic of Mali MESSRS. Abou-Bakar TRAORE, Minister of Economy and Finance ; Oumar Hammadoun DICKO, Minister of Malians living abroad and African Integration. Republic of Niger MESSRS. Ali Mahamane Lamine ZEINE, Minister of Economy and Finance ; Seyni OUMAROU, State Minister, Minister of Equipment. Republic of Senegal MESSRS. Abdoulaye DIOP, Minister of Economy and Finance ; Cheikh Hadjibou SOUMARE, Minister of Budget, Attached to the Minister of Economy and Finance. Republic of Togo MESSRS. Payadowa BOUKPESSI, Minister of Economy, Finance and Privatisations ; Yandja YENTCHABRE, Minister of Development and Spatial Planning. (*) The Government was formed on December 28, 2005. Annual Report - 2005 xv MEMBERSHIP OF THE BCEAO BOARD OF DIRECTORS As at December 31, 2005 CHAIRPERSON : Mr. Charles Konan BANNY Governor of BCEAO Republic of Benin MESSRS. Georges Denis Marc QUENUM, Director General, Treasury and Public Accounting ; Mathias N. HOUNDONOUGBO, Technical Secretary, National Commission on Development and the Fight against Poverty. Burkina Faso MESSRS. Lucien Marie Noël BEMBAMBA, Director General, Treasury and Public Accounting ; Léné SEBGO, Director General of Cooperation, Ministry of Finance and Budget. Republic of Côte d'Ivoire MESSRS. Charles Koffi DIBY, Director General, Public Accounting and Treasury ; Kouamé KOUASSI, Director General, Budget and Finance. Republic of Guinea-Bissau MESSRS. Amizade Fará MENDES, Director General, Treasury ; Gabriel Lopes SO, Technical Advisor to the Prime Minister. Republic of Mali MESSRS. Aboubacar Alhousseyni TOURE, Director General, Treasury and Public Accounting ; Sambou WAGUE, Secretary General, Ministry of Economy and Finance. Republic of Niger MESSRS. Boubacar Moumouni SAIDOU, Economy Commissioner, Ministry of Economy and Finance ; Abdou SOUMANA, Secretary General, Ministry of Economy and Finance. Republic of Senegal MESSRS. Falilou Mbacké DIAGNE, General Treasurer, Central Payer of the Treasury ; Adama DIEYE, Technical Advisor, Ministry of Economy and Finance. Republic of Togo MESSRS. Essowédéou AGBA, Secretary General, Ministry of Economy, Finance and Privatisations ; Hèmou Badibawu BAKALI, Director General, Customs Service. French Republic MESSRS. Xavier MUSCA, Director General, Treasury and Economic Policy, Ministry of Economy, Finance and Industry ; Serge TOMASI, Deputy Director, Development and Technical Cooperation, Ministry of Foreign Affairs. xvi Annual Report - 2005 Annual Report - 2005 xvii CENTRAL BANK OF WEST AFRICAN STATES As at December 31, 2005 MANAGEMENT Governor Vice-Governor Vice-Governor Secretary General Special Advisors to the Governor : : : : : : Charles Konan BANNY Damo Justin BARO Ali Badjo GAMATIE Amadou Sadickh DIOP Tiémoko Meyliet KONE Pascal Irénée KOUPAKI ADVISOR TO THE GOVERNOR : Mr. Sosthène Boureima BAMBARA GENERAL CONTROL Comptroller General : Mr. Tiémoko Meyliet KONE ASSISTANT TO THE GOVERNOR : Mr. Alain KOUTANGNI DEPARTMENTS Director, Department of General Administration and Training : Director, Department of Issuance, Accounting and Finance : Director, Department of Economic Research and Money : Director, Department of Projects and Missions : Director, Department of Security and Legal Matters : ADVISORS TO THE COMPTROLLER GENERAL AND TO THE DIRECTORS OF DEPARTMENTS Advisor to the Comptroller General Advisor to the Director of the Department of Issuance, Accounting and Finance Advisors to the Director of the Department of Economic Research and Money DEPARTMENTS OF CENTRAL SERVICES Director, Administrative Matters Director, Legal Matters Director, Communication Director, Accounting and Budget xviii Mr. Mr. Mr. Mr. Mr. Mr. Annual Report - 2005 Mr. Sosthène Boureima BAMBARA Mr. Ambroise KONE Mr. Pascal Irénée KOUPAKI Mr. Ousmane OUEDRAOGO Mrs. Sockna Bèye SAKHO : Mr. Thiémoko DIARA : Mr. Christian KOFFI : Mr. Mawuena Kodzo DOSSA : Mr. François de Salles NARE : Mr. Mahamadou GADO : : : : Mr. Mr. Mr. Mr. Marcel de SOUZA Elpidio FREITAS Venance Adamah KANGNI Soulé Mana LAWANI Director, Management Control Director, Control and Risk Prevention Director, Credit Director, Issuance Director, Research Director, Training Director, Information Technology Director, Inspection and Internal Audit Director, Financial Operations Director, Property Director, International Relations Director, Research Studies and Statistics Director, Human Resources Director, Security Director, General Services Director, Payment Systems Director, Decentralised Financial Systems Director to the Secretary General MISSIONS Director responsible for the Mission on the Realisation of the Balance Sheet Centre Principal Coordinator, Technical Assistance, Mission to the National Branch of BCEAO for Guinea-Bissau REPRESENTATIONS Acting Resident Representative of the Governor with the West African Economic and Monetary Union (WAEMU) Commission Acting Representative of BCEAO with European Cooperation Institutions NATIONAL BRANCHES National Director for Benin National Director for Burkina National Director for Côte d’Ivoire National Director for Guinea-Bissau National Director for Mali National Director for Niger National Director for Senegal National Director for Togo : : : : : : : : : : : : : : : : : : Mr. Alain KOUTANGNI Mr. Soumaïla OUEDRAOGO Mr. Charles KI-ZERBO Mr. Amadou BACHIR Mr. Jean-Claude BROU Mr. Modienne GUISSE Mr. Abdoulaye SECK Mr. Denis N'GBE Mr. Oumar Tatam LY Mr. Siriki KONE Mr. Samuel MEANGO Mr. Antonin DOSSOU Mr. Jean-Baptiste Ayayé AMAN Mr. Paul Marie KYELEM Mr. Félix DJAN DJE Mrs. Fatimatou Zahra DIOP Mr. Eric Amah EKUE Mr. Mamadou Lamine DIOUF : Mr. Joseph Pindana SAMA : Mr. Blaise Djomand DIPLO : Mr. Théophile Ahoua N’DOLI : Vacant : : : : : : : : Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Lyassou Idriss DAOUDA Bolo SANOU Kablan YAO SAHI Aguinaldo EMBALO Idrissa TRAORE Abdoulaye SOUMANA Seyni NDIAYE Ayéwanou GBEASOR Annual Report - 2005 xix ADDRESSES OF BCEAO NETWORK HEADQUARTERS Avenue Abdoulaye FADIGA - Boîte Postale : n° 3108 - Dakar Telephone : (221) 839 05 00 - Fax : (221) 823 93 35 or 822 61 09 Telex : BCEAO 21 833 SG, 21 815 SG, 21 530 SG, 21 597 SG Website : http ://www.bceao.int BENIN Bouaké Cotonou Boîte Postale : n° 773 Avenue Jean-Paul II Telephone : (225) 31 63 33 13 and 31 63 33 14 01 Boîte Postale : n° 325 RP Telex : BCEAO BOUAKE 69 109 Telephone : (229) 21 31 24 66 and 21 31 37 82 Fax : (225) 31 63 38 31 Telex : 5211 BCEAO COTONOU Sub Branch Manager : Vacant Fax : (229) 21 31 24 65 Daloa Director of the Main Branch : Mr. Roger AGBOZOGNIGBE Boîte Postale : n° 46 Parakou Telephone : (225) 32 78 38 85 Boîte Postale : n° 201 Telephone : (229) 23 61 03 25 Telex : 5099 BCEAO PARAKOU Fax : (229) 23 61 10 91 Telex : BCEAO DALOA Fax : (225) 32 78 13 10 Sub Branch Manager : Mr. Célestin Angoua NANGOH Korhogo Sub Branch Manager : Mr. Evariste BONOU Boîte Postale : n° 54 BURKINA Telex : 63 106 KORHOGO CI Ouagadougou Fax : (225) 36 86 15 30 Avenue Gamal Abdel NASSER Boîte Postale : n° 356 Telephone : (226) 50 30 60 15/16/17 Telex : 0978 5205 BCEAO BF and 0978 5235 BCEAO BF Fax : (226) 50 31 01 22 Director of the Main Branch : Mr. Lallé COULIBALY Bobo-D Dioulasso Boîte Postale : n° 603 Telephone : (226) 20 97 04 44/45/46 Telex : 0978 8228 BCEAO BF Fax : (226) 20 97 04 58 Sub Branch Manager : Vacant COTE D’IVOIRE Abidjan Avenue Terrasson de Fougères Boîte Postale : n° 01 1769 ABIDJAN 01 Telephone : (225) 20 20 84 00 et 20 20 85 00 Telex : BC ABJ CI 23 474 – 23 761 et 23 607 Fax : (225) 20 22 28 52 and 20 22 00 40 Director of the Main Branch : Mr. Ernest ADOHI ASSEU Telephone : (225) 36 86 01 10 and 36 86 01 11 Sub Branch Manager : Vacant Man Boîte Postale : n° 1017 Telephone : (225) 33 79 02 67 Telex : BCEAO MAN 89 106 Fax : (225) 33 79 02 28 Sub Branch Manager : Vacant San Pedro Boîte Postale : n° 387 Telephone : (225) 34 71 21 74 Telex : BCEAO 91 130 SAN PEDRO Fax : (225) 34 71 24 48 Sub Branch Manager : Mr. Niangoran ALLE GUINEA-B BISSAU Bissau Boîte Postale : n° 38 Telephone : (245) 21 55 48 - 21 41 73 et 21 14 82 Telex : 289 BCGB 1 Fax : (245) 20 13 05 and 20 13 21 Director of the Main Branch : Mrs Felicidade Soares Correia de Brito ABELHA. Abengourou Boîte Postale : n° 905 Telephone : (225) 35 91 37 15 and 35 91 39 15 Telex : 59 103 ABENGOUROU CI Fax : (225) 35 91 31 76 Sub Branch Manager : Mrs. Odile COULIBALY AGNERO MALI Bamako Boulevard du 22 octobre 1946 Boîte Postale : n° 206 Telephone : (223) 22 25 41 and 22 54 06 Telex : 2574 BCEAO BAMAKO Fax : (223) 22 47 86 Director of the Main Branch : Mr. Soumaïla KIDA xx Annual Report - 2005 Mopti Kaolack Boîte Postale : n° 180 Boîte Postale : n° 79 Telephone : (223) 43 01 02 and 43 05 65 Telephone : (221) 941 13 86 and 941 13 87 Telex : BCEAOMPT 8001 MJ Telex : BCEAO SG 74071 Fax : (223) 43 05 07 Fax : (221) 941 33 23 Sub Branch Manager : M. Idrissa Matoti TOURE Sub Branch Manager : Mr. Alain Serge NICOD Sikasso Ziguinchor Boîte Postale : n° 453 Boîte Postale : n° 317 Telephone : (223) 62 06 57 Téléphone : (221) 991 10 39 Fax : (223) 62 08 79 Télex : BCEAO SG 73027 Sub Branch Manager : M. Ibrahima TOURE Téléfax : (221) 991 16 59 Sub Branch Manager : Mr. Abdoulaye BA NIGER Niamey Rue de l'uranium Boîte Postale : n° 487 Telephone : (227) 72 33 30 and 72 33 40 Telex : BCEAO 5218 NI Fax : (227) 73 47 43 Director of the Main Branch : Mr. Oumarou GAGERE Maradi Boîte Postale : n° 265 Telephone : (227) 41 00 96 Telex : BCEAO 8244 NI Fax : (227) 41 00 45 Sub Branch Manager : Mr. Sahaka MAHAMAN SALAH Zinder Boîte Postale : n° 133 Telephone : (227) 51 00 94 Telex : BCEAO 8226 NI Fax : (227) 51 07 24 Sub Branch Manager : Mr. Salifou SAÏDOU TOGO Lomé Rue Abdoulaye FADIGA Boîte Postale : n° 120 Telephone : (228) 221 53 84 Telex : 5216 BCEAO TO Fax : (228) 221 76 02 Director of the Main Branch : Mr. Kokou Seretti GOZAN Kara Boîte Postale : n° 75 Telephone : (228) 660 60 79 and 660 61 37 Telex : 7202 Fax : (228) 660 62 69 Sub Branch Manager : Mr. Novignon GABOUTOU GOVERNOR REPRESENTATION WITH THE WAEMU COMMISSION Avenue Gamal Abdel NASSER, Ouagadougou, Burkina Boîte Postale : 64 OUAGADOUGOU 01 Telephone : (226) 30 60 15 Telex : BCEAO 5205 BF SENEGAL Fax : (226) 30 63 76 Dakar Boulevard Général De Gaulle x Triangle sud Boîte Postale : n° 3159 Telephone : (221) 889 45 45 Telex : BCEAO SG 21 839 Fax : (221) 823 57 57 Director of the Main Branch : Mr. Birame SENE BCEAO REPRESENTATION WITH EUROPEAN COOPERATION INSTITUTIONS 29 rue du Colisée, 75008 Paris, France Tel. : (33) 01 42 25 71 60 Telex : BCEAO PARIS 650087 Fax : (33) 01 42 56 00 37 Annual Report - 2005 xxi Governor's Message I n an increasingly globalised world, the existence of reliable and secure payment systems is one of the key conditions for financial stability and economic growth. Aware of this stake, the Central Bank of West African States (BCEAO) undertook in March 1999, a far-reaching reform of the payment systems in the member States of the West African Economic and Monetary Union (WAEMU). The implementation of the WAEMU's new payment systems, equipped with advanced technologies, aims at promoting bank money transactions, and at facilitating and promoting exchanges within the member States and at the Community level, and more generally, at contributing to the expansion of the financial sector and to a deeper regional economic integration. Their design and implementation are the result from a wide consultation with the credit institutions, Public Treasuries, Post Office Financial Services, Employers Organisations, large corporates and Consumers' Associations of all the Union member States. The reformed framework thus set up is organised around three payment systems, of which two are managed by the BCEAO. The first, known as Automated Transfer and Settlement System within WAEMU (STAR-UEMOA) was operationalised on June 25, 2004 and ensures the real-time gross settlement of large-value transactions . The second system, which started its activities on November 17, 2005, is an automated multilateral clearing system for transactions among participants, known as Automated Interbank Clearing System within the WAEMU (SICA-UEMOA). This system is based on the automated exchange of smallvalue payments media, backed up by the exchange of scanned images of paper-based money. In addition, the Central Bank plays a unifying and active role, as part of the implementation of the sub-regional bank card system. This third system, managed by the banking professionals, seeks to provide the economic units with a legal payment instrument, accepted by all the affiliated traders and all the distributors of the sub-region. The three systems are governed by a legal and regulatory framework and an arsenal of operating principles in conformity with the relevant international standards. Their implementation was, in addition, supported by the establishment of a mechanism for the collection and diffusion of payment incidents on cheques, bills of exchange, promissory notes and banking cards, with a view to restoring the public confidence in bank money. The WAEMU has thus been endowed with efficient payment, clearing and settlement systems which are the essential mechanisms of an efficient financial sector and play a decisive role in reducing systemically important risks, notably credit and liquidity risks. The importance and the quality of the contribution of the new payment systems to the economic and social development of the Union will depend on the extent of the participation of actors, corporates and individuals. In particular, the member States are expected to complete the legal foundation of the new payment systems by adopting the implementing decree, in other words, the legislation on the adaptation of the Directive on the measures to promote the number of bank account holders and the use of bank money for payment. Annual Report - 2005 1 For its part, the Central Bank, guarantor of the smooth functioning of the payment systems of the Union will continue the process of modernisation and constant adaptation of these systems to the technological development and to the financial globalisation requirements, while ensuring the prevention and management of inherent risks. All these measures are expected to contribute to the harmonious and integrated development of the Union. On behalf of the Governor of the Central Bank of West African States and Chairperson of the Board of Directors Damo Justin BARO Vice-Governor 2 Annual Report - 2005 OVERVIEW T he world economic growth remained well oriented in 2005, as a result of buoyant economic activity in industrialised and emerging countries, despite increased pressures on oil markets. In this context of fears about a high inflation, caused by soaring oil prices, many central banks have tightened their monetary policy. Developing countries have experienced an increase in Gross Domestic Product (GDP). Thus, economic activity in Latin America continued to be driven by the good performance of productive investments due to the improved macroeconomic environment induced by the structural reforms implemented with a view to address the 1990's crisis. In Africa, the economic growth rate stood at 5.2%, compared to the 5.5% level recorded a year earlier, as the economic situation improved in oil-producing countries. The signs of a buoyant economic activity, particularly in the USA, partially dissipated fears of foreign exchange market dealers about the magnitude of the deficits of the American budget and current payments. Accordingly, on average, the American currency depreciated only by 0.016% in relation to the Euro. The role of gold as a hedge became reinforced with growing demand for gold especially from China and India in Asia, as well as of the central banks willing to diversify their assets portfolio. On the commodity markets, the prices of the main agricultural export products of the WAMU member States remained on a declining trend, as a result notably of a surplus in the world production. The gross domestic product of WAMU increased in real terms by 4.1% in 2005, compared to 2.8% a year earlier. Speeding up economic growth was due to the increase in the agricultural production and to the favourable trend in industrial activities. However, annual inflation rate slightly rose to 4.4% compared to 0.5% in 2004, due to both lower cereals supply on markets, resulting from the adverse climatic conditions of the previous crop season and soaring crude oil prices. The overall deficit in public finance excluding grants stood at CFAF 1,080.6 billion. Weighted by GDP, it improved slightly to 4.5% compared to 4.8% in 2004. Outstanding external debt amounted to CFAF 14,325.1 billion. By end 2005, debt balance represented 59.9% of GDP compared to 60.9% in 2004. The balance of external payments showed a surplus of 58.1 billion compared to 210.6 billion in 2004. The deficit in current transactions, excluding official transfers, deteriorated to 7.0% of GDP compared to 5.7% in 2004. The cautious orientation given to monetary action by the BCEAO over the past few years was maintained so as to bring inflationary pressures under control and consolidate savings and growth. Thus, in a context mainly characterised by the fragile economic activity in most of the Union member States and an increase in prices, the Central Bank maintained its intervention rates at 4.50% for the discount rate and 4.00% for the repurchase rate, in force since March 22, 2004. Taking into consideration the expansion of credit to the economy in some States, the Central bank raised, as from June 16, 2005, the reserve requirement ratio from 13.0% to 15.0% for the banks in Benin, from 3.0% to 7.0% for the banks in Burkina and from 5.0% to 9.0% for the banks in Niger. The reserve requirement Annual Report - 2005 3 ratios remained unchanged in Côte d'Ivoire at 5.0%, in Guinea-Bissau and in Togo at 3.0%, in Mali and Senegal at 9.0%. In view of banks' cash position, the BCEAO did not organise any auction to inject or withdraw liquidity from the economy in 2005. Monetary action helped to raise by 141.8 billion the net external position of monetary institutions to 3,327.0 billion. Foreign exchange reserves amounted to 3,768.9 billion inducing a money issuance coverage ratio of 120.3% by end of December 2005, reflecting an increase of 3.0 percentage points compared to its level reached in 2004. Domestic credit was up by 10.3% to stand at 4,660.4 billion, due to an increase in credit to the economy and to the decline in the net position of Governments. Interventions by the Central Bank stood at 366.4 billion in December 2005, reflecting a decline of 8.5 billion compared to the level recorded a year earlier. This development followed the 17.7 billion decline in central bank financial assistance to the States, moderated by the 9.2 billion increase in refinancing in favour of banks and financial institutions. Reflecting trends in its counterparts, money supply increased by 7.3% to 6,413.9 billion. The payment systems modernisation project was pursued. Particularly, the BCEAO gradually launched the Automated Interbank Clearing System within the WAEMU (SICA-UEMOA). In addition, the Automated Transfer and Settlement System within the WAEMU (STAR-UEMOA), operationalised in 2004, functioned regularly. The Central Bank initiated some actions in terms of centralising the balance sheets of non financial enterprises, promoting Decentralised Financial Systems (SFD) and regional monetary cooperation. Besides, the Central bank continued to participate in the consolidation of the integration process by contributing to the implementation of the integration chart of the West African Economic and Monetary Union (WAEMU) and the Regional Economic Programme (PER), designed to stimulate strong growth as a way of efficiently fighting poverty. At the end of 2005, and in accordance with Article 64 of its Statutes, the accounts of the BCEAO were submitted to the National Controllers and the external auditor appointed by the Council of Ministers for consideration. The latter then examined jointly with the controller designated by France, the implementation of the Agreement on an Operations Account. 4 Annual Report - 2005 I - ECONOMIC AND FINANCIAL ENVIRONMENT 1 - INTERNATIONAL ECONOMIC AND FINANCIAL ENVIRONMENT another, due to the impact of soaring oil prices. he international economic activity remained well oriented in 2005, despite a slowdown compared to its 2004 level, due to natural disasters and to the persistent increase in world oil prices. Thus, the economic growth rate stood at 4.8% compared to 5.3% a year earlier. In Africa, economic growth rate stood at 5.2% down from 5.5% in 2004. The relatively low prices of agricultural commodities, notably cotton, elimination of quotas textile, persistent socio-political unrest and poor food crops in many West, East and South African countries limited the economic performance of the African continent, even if some net oil exporters countries benefited from rising crude oil prices. T Almost all the industrialised countries recorded a slowdown in the pace of economic growth. In the USA, the Gross Domestic Product (GDP) increased by 3.5% in 2005 compared to 4.2% in 2004. Domestic demand made stronger with tax relieves was the main driver of economic growth. In Japan, economic activity grew by 2.7% compared to 2.3% in 2004 and was underpinned by investments and exports which benefited from an increase in trade flows in Asia. This Japanese economic growth recovery, after the 90's long deflation, reflects an improved macroeconomic framework following the restructuring of companies and the banking system. British GDP growth rate stood at 1.8%, down from 3.1% in 2004. This sluggishness was induced by a faltering service sector. In the euroland, the tentative recovery initiated in the second-half of 2004 lost momentum in 2005. GDP growth rate stood at 1.3% from 2.1% in 2004 due to the decline in household consumption, notably in France and Germany. In these countries, gross domestic product grew by 1.4% and 0.9% compared to 2.1% and 1.6% in 2004. Economic activity remained firm in emerging countries despite a slowdown compared to 2004. GDP grew by 6.4% compared to 7.3% in 2004. This development however masked contrasted trends from a group of countries to Despite rising world oil prices and the relative improvement of the employment situation in industrialised countries, inflationary pressures weighted by the changes in consumer price index, remained relatively contained. In the USA, average inflation rate stood at 3.4% from 2.7% in 2004, following an increase in import prices induced by US$ slight depreciation and skyrocketing prices of oil products. In the United Kingdom, it stood at 2.3% from 2.8% a year earlier. In euroland, it levelled off at 2.2%. In Japan, despite the good performance of domestic demand, the overall consumer price level declined by 0.3%, following a level-off in 2004. In light of the context of uncertainty in which the world economy evolved, central banks in industrialised countries adopted different reactions. Thus, in USA, fears about an accelerated inflation revived by the increase in the oil barrel price, led the Federal Open Market Commission (FOMC) of the Federal Reserve to tighten its monetary policy. The federal funds target rate and the discount rate were thus increased to 4.25% and 5.25% respectively, after raising on eight consecutive occasions by one quarter percentage point in 2005. In the euroland, smaller scale increase was applied to intervention rates by the Board of Governors of the European Central Bank (ECB). The mini- Annual Report - 2005 5 ECONOMIC AND FINANCIAL ENVIRONMENT mum bid rate applicable to major refinancing operations, the marginal lending facility rate and the deposit facility rate were increased by 2.25%, 3.25% and 1.25%, respectively. In United Kingdom, the Monetary Policy Committee of the Bank of England, taking into account the lower domestic demand, implemented a more accommodating monetary policy, reducing by 25 basis points to 4.50% its main intervention rate. In Japan, the discount rate remained unchanged to 0.1%. However, the Bank of Japan continued its policy of injecting liquidity on markets, with a view to stabilise the yen exchange rate. The foreign exchange market was marked by the revaluation of the Chinese yuan and by the expectations of market dealers on the orientations of the economic situation and the monetary policy in the main industrialised countries. Thus, the fears caused by the new all-time high reached by the US trade deficit, were moderated by the relative buoyancy of the American economy and as it continues to attract capital due to the favourable interest rate spread generated by the tightening of monetary policy by the Federal Reserve. Thus, 6 Annual Report - 2005 the US$ depreciated on average only by 0.016% in relation to the euro. The single European currency rose by 0.8% and 1.8% against the Pound sterling and yen, respectively. It was on annual average at £ 0.68 and 136.85 yen. The Chinese yuan was revaluated by 2.1% compared to US$ and pegged to basket of currencies since July 21, 2005. Besides, its fluctuation margin around its central parity (8.1 units per dollar) was set at 0.3%. Due to its nominal pegging to the euro, the CFA Franc followed the same pattern as the European single currency against major currencies. At the sub-regional level, changes in the average exchange rates of major currencies of the Economic Community of West African States (ECOWAS) against the CFA Franc were contrasted in 2005. Indeed, over the period, the Ghanaian cedi depreciated by 1.0% and the Guinean Franc by 30.2 %. It is to be noted that Guinean Authorities devalued by 35.5% their currency on April 29, 2005. However, the Nigerian naira and the Gambian dalasi appreciated by 1.4% and 0.4%, respectively. ECONOMIC AND FINANCIAL ENVIRONMENT The relative depreciation of the dollar was a support factor to the world gold price which role as a hedge became reinforced. Indeed, the gold ounce peaked at US$ 537.5 by the end of 2005 compared to US$ 430, a year earlier. This development was due to demand from India, China and Russia where central banks undertook to balance their foreign exchange reserves with gold. The average price of a gold ounce thus grew by 8.8% to US$ 445.3. The prices of other commodity such as oil, natural rubber, coffee also peaked up, as a result of strong demand. On the other hand, the price trend of cocoa, cotton and vegetable oils was unfavorable. 2 - WAMU ECONOMIC AND FINANCIAL ENVIRONMENT The West African Monetary Union (WAMU) economic dynamics was favoured by abundant crops due to satisfactory and well-distributed rainfall and a relative good performance of industrial output. 2.1 - Gross Domestic Product The Union gross domestic product increased in real terms by 4.1% in 2005 compared to 2.8% a year earlier. This accelerated economic growth was partly due to the rise in gold and agricultural production as well as to the dynamism of investments. Indeed, savings rate stood at 11.0% and investment rate at 16.9% compared to 11.9% and 16.1%, respectively in 2004. As regards agricultural production, it was boosted by a normal rainy season and good performance of shea and cashew nuts production. Thus, all the Union member States recorded positive real GDP growth rates compared to the previous year. In Burkina, economic activity grew by 7.1% compared to 4.6% a year earlier. In Niger, GDP also increased by 7.1% compared to -0.6% a year earlier. In Mali, GDP growth rate stood at 6.8%, up from 2.3% in 2004. In Senegal, it stood at 5.5% compared to 5.6% in 2004. In Benin, GDP rose from 3.1% in 2004 to 3.5%. In GuineaBissau, the wealth growth rate stood at 3.5% compared to 2.2% in 2004, due to a period of calm on the socio-political front. In Côte d'Ivoire, political tensions continued to weigh on the economic situation. Economic growth rate stood at 1.8% compared to 1.5% a year earlier. In Togo, GDP growth rate was of 1.5%. Source : BCEAO. Annual Report - 2005 7 ECONOMIC AND FINANCIAL ENVIRONMENT 2.2 - Agricultural Production The 2005/2006 crop season was better than the previous year. Indeed, it resulted in an increased main crop production , with the exception of cocoa and cotton. Groundnut production was estimated at 1,440,954 tons, up by 1.4% compared to the previous season. The quantity of coffee collected increased by 68.5% to 175,500 tons compared to 104,200 tons a year earlier. As regards cashew nut production in Guinea-Bissau, it increased by 10.0% to 126,500 tons. On the other hand, the downward trend of cocoa production continued. Indeed, it declined by 2.4% to 1,258,110 tons due to an equivalent fall in Côte d'Ivoire and a 2.7% drop in Togo. In Côte d'Ivoire and Togo, cocoa production stood at 1,254,510 tons and 3,600 tons respectively. Purchases of seed cotton by the Union dropped by 10.2% to 1,970,872 tons. Sources : National Marketing Boards. Food production in the Union rose by 9.1% after a 3.6% decline in 2004. All Union member States contributed to this output, with the exception of Benin, where food production dropped by 2.6% to 6,623,000 tons. In Burkina, it increased by 24.7% to 3,649,530 tons. In Côte d'Ivoire, food crops increased by 2.8% to 9,451,329 tons. In Guinea Bissau, they increased by 29.5% to 8 Annual Report - 2005 223,300 tons compared to the previous year. In Mali, food production improved by 18.4% to 3,367,200 tons. In Niger, it increased by 3.2% to 3,741,200 tons. In Senegal, estimates showed a 4.5% increase in food production which reached 1,864,000 tons. In Togo, it amounted to 2,345,200 tons, up by 5.5%. ECONOMIC AND FINANCIAL ENVIRONMENT Sources : National Marketing Boards. 2.3 - Mining In the mining sector, with the exception of gold mining and crude oil production, the main mining activities were on a downward trend. Gold production increased by 18.9% to 57,482.6 kilogrammes, due to the reorganisation of the sector in Burkina, the opening of new mines in Niger and the increase by 10.2% of the Malian supply which stood at 49,121.6 kilogrammes. In Côte d'Ivoire, crude oil production rose by 80.0% to 14,573,600 barrels, with the exploitation of new wells. However, uranium production, declined by 8.6% in Niger to 2,999.7 tons. Phosphate production fell by 3.7% in Senegal and 8.5% in Togo to 1,689,040 tons and 1,020,870 tons, respectively. 2.4 - Industrial Production and Retail Trade Turn-O Over The overall index of industrial production at the Union level rose by 3.3% in 2005, compared to 1.7% in 2004. This increase was due to the improved production in Burkina (7.7%), Côte d'Ivoire (2.6%), Mali (18.6%) and Togo (0.6%). In the other Union member States, industrial activity declined. Indeed, it dropped by 3.2% in Benin, 0.3% in Niger and 2.4% in Senegal. On the whole, industrial activity relied on household consumption as reflected by the upsover index. wing in retail trade turn-o Indeed, this index rose by 5.9% compared to 2.6% a year earlier. This development was attributable to the dynamism of trading in oil products, cars and motorcycles, spare parts and housing equipment. These sales increased in almost all Union member States. Thus, the retail trade turn-over index rose by 0.6% in Côte d'ivoire, 18.7% in Mali, 4.6% in Niger, 16.9% in Senegal and 9.0% in Togo. The positive trend in retail trade turn-over which is indicative of household confidence, was favoured by growing demand. However, trade activity declined by 16.1% in Benin and by 0.3% in Burkina due to competition from the informal sector. Annual Report - 2005 9 ECONOMIC AND FINANCIAL ENVIRONMENT 2.5 - Price Developments Inflation measured by changes in Harmonised Consumer Price Index (HCPI) increased in 2005. Indeed, the general level of consumer price within WAEMU increased by 4.4% on annual average, compared to 0.5% in 2004. In all the Union countries, with the exception of Senegal, it was higher than the 2.0% target set under the monetary programme. This situation was mainly due to the conjunction of two factors viz. lower supply of food products on the market and soaring world oil prices. The decline in food supply induced by deficits in the cereal production recorded at the end of the previous harvesting period, particularly in the Sahelian countries of the Union, following the early ending of the rainy season and the locust invasion in 2004 was a major source of inflationary pressures within WAEMU. Rising prices of foodstuffs in 2005 contributed to the Sources : National Statistics Institutes (NSI). * Guinea-Bissau not included. 10 Annual Report - 2005 tune of 2.4 percentage points to the total inflation which rate stood at 4.4%. Thus, rising prices of foodstuffs justified the average 55.0% of inflation in the WAEMU area in 2005. The non-food component contributed to 2.0 percentage points to the inflation rate, which is indicative of rising prices of oil at the pumps following the rise in world oil prices. Indeed, the increase by 16.8% of prices at the pumps of oil products extended to other goods and services, notably transport prices which grew by 12.0% throughout the year. Besides, broadening of the tax base and increase in the valued-added tax, as well as lack of sugar and domestic kerosene in Niger, disturbances in the distribution of oil products in Benin, the impact of the socio-political context on the prices in Côte d'Ivoire, Guinea-Bissau and Togo had the effect of maintaining inflation in the area. ECONOMIC ECONOMIC AND AND FINANCIAL FINANCIAL ENVIRONMENT ENVIRONMENT Underlying inflation, which expresses long term price trend that may be influenced by monetary policy, stood at a 2.9% annual average compared to 1.7% in 2004. Thus, transitory shocks mainly those due to the poor 2004-2005 crop season and to the oil prices recovery globally contributed to the increase in inflationary pressures. On a country basis, the analysis allows to distinguish three groups of countries. The first group is distinguished by an inflation rate higher than 5.0%. It includes Niger (7.8%), Togo (6.8%), Burkina (6.4%) Mali (6.4%) and Benin (5.4%). In the second group consisting of Côte d'Ivoire (3.9%) and Guinea-Bissau (3.4%), the increase of price general level ranged between 3.0% and 4.0%. Lastly, the third group comprising only Senegal (1.7%) was characterised by an inflation rate below 2.0%. On the whole, inflation differential between the Union and its main partners remained globally favourable. Vis-a-vis neighbouring partners, it stood at 12.2 points. However, rising prices in the Union was higher by 2.4 points compared to the performances in the peg area of the CFAF. Thus, despite accelerated inflation within WAEMU, the competitiveness of the economies was preserved. However, this favourable result was not fully taken advantage of to support sound economic growth due notably to the difficulties experienced by the States in the process of streamlining their public finance. 2.6 - Public Finance In all the Union member States, budgets were implemented in 2005 under economic and financial programmes concluded with the Bretton Woods Institutions. On this basis, the States’ financial operations carried out at the Union level showed in 2005, a slight fall in overall deficit excluding grants and commitments basis, to 1,080.6 billion, representing 4.5% of GDP. On a country basis, this deficit weighted by GDP stood at 20.1% in Guinea-Bissau, 9.5% in Burkina, 7.7% in Niger, 7.1% in Mali, 3.1% in Benin, 2.8% in Senegal, 2.7% in Côte d'Ivoire and 0.3% in Togo. The position of public finance remained characterised by cash pressures notably in Côte d'Ivoire, in Guinea-Bissau and in Togo, translating into accumulations of payment arrears. The great majority of the Union member States did not comply with the convergence criteria retained in the convergence, stability, growth and solidarity pact. In addition to Treasury bonds issue, the deficits recorded were also partly financed with drawings on borrowings worth 563.0 billion and debt service relieves amounting to 108.5 billion. 2.7 - Balance of Payments The external accounts of WAEMU member States recorded in 2005 a surplus of 58.1 billion compared to 210.6 billion in 2004, due mainly to the degradation of the current transactions account. The deficit stood at 1,337.7 billion compared to 1,014.4 billion in 2004. The trend in current account stemmed mainly from the different orientation of its components. Indeed, the trade balance showed a deficit of 286.4 billion. The income balance deficit exacerbated. The positive balance of current transfers consolidated and the net outflows under services were reduced. The surplus in the capital and financial operations account increased by 161.3 billion to 1,381.9 billion in 2005. This improvement reflected the increase in the portfolio investment balance which showed a surplus of 19.5 billion compared to 10.5 billion in 2004. On a country basis, balance of payments analysis in 2005 showed under current account excluding official transfers, deficits higher than the community standard set at 5% of GDP in all member States, with the exception of Côte d'Ivoire, which exhibited a surplus representing 0.1% of its GDP. The ratio of the current deficit excluding grants weighted by GDP deteriorated between 2004 and 2005 from 13.4% to 14.7% in Burkina, from 10.9% to 16.0% in GuineaBissau, from 8.0% to 9.7% in Senegal and from Annual Report - 2005 11 ECONOMIC AND FINANCIAL ENVIRONMENT 11.4% to 16.2% in Togo. It stabilised at 10.9% in Niger. It dropped from 7.7% to 7.1% in Benin and 10.2% to 9.1% in Mali. External resources mobilised under capital and financial operations account allowed to achieve in 2005 overall positive balances in all the Union countries, with the exception of Burkina, Senegal and Togo where due to the size of the current deficit, the balance of payments showed a deficit of 104.7 billion, 10.7 billion and 8.8 billion, respectively. 2.8 - Resource Mobilisation and External Debt Position The Union member States continued to benefit from the financial support of the international community under the implementation of their economic and financial recovery programmes. Resource inflows to support these programmes increased to 473.3 billion from 457.1 billion in 2004. Mobilisation rate stood at 59.5% compared to 50.7% the previous year. Besides, trends in net repayment flows and debt cancellations under the HIPC Initiative did not contribute to reducing WAMU’s outstanding external debt which amounted to 14,325.1 billion by end of December 2005, compared to 13,630.5 a year earlier. This increase in the outstanding debt was mainly attributable to drawings on borrowings. However, outstanding debt to GDP ratio improved to 59.9% against 60.9% a year earlier. Due service stood at 1,078.4 billion, up by 90.7% billion compared to the level achieved in 2004. It represented 14.0% of exports of goods and non-factor services, compared to 14.2%, a year earlier. Following debt relieves (189.2 bil- 12 Annual Report - 2005 lion) and accumulations of payment arrears (517.1 billion), service payments amounted to 372.2 billion, representing 10.5% of tax revenue compared to 9.6% in 2004. Under Highly Indebted Poor Countries Initiative (HIPC), the Union member States (Benin, Burkina, Mali, Niger and Senegal) which have reached the completion point, did benefit from a relief of their external debt to the tune of 140.1 billion of which 120.0 billion for Benin ; 24.1 billion for Burkina ; 30.0 billion for Mali ; 18.2 billion for Niger and 55.8 billion for Senegal. Côte d'Ivoire, Guinea-Bissau and Togo have not yet reached the completion point. Besides, under the implementation of the Multilateral Debt Relief Initiative (MDRI), proposed by the group of the eight most industrialised countries in the world (G-8), in favour of low-income countries, the Board of Directors of the International Monetary Fund (IMF) cancelled the totality, as at December 31, 2004, of the outstanding debt vis-à-vis the nineteen selected countries. Thus, since January 6, 2006, the relevant debt of five countries of the Union notably Benin (31.3 billion), Burkina (54.1 billion), Mali (64.7 billion), Niger (65.9 billion) and Senegal (85.9 billion) have totally been cancelled. The overall amount of the debt forgiveness granted by the IMF is estimated at 351.1 billions of SDR, representing 301.9 CFAF billion. On the whole, the Union countries which did not benefit from the relief and from the cancellation of the external debt continued to experience financial difficulties which translated into an accumulation of new external payment arrears. II - IMPLEMENTATION OF MONETARY POLICY 1 - OBJECTIVE OF MONETARY POLICY T he guidelines of monetary and credit policy for 2005 were based mainly on the economic policy outlines approved by the WAMU Council of Ministers at its meeting held on September 17, 2004. These guidelines aimed at pursuing efforts to stabilise public finance, accelerated structural reforms, particularly, in the agricultural industries and to satisfy the requirements for benefiting from debt relief mechanisms under Highly Indebted Poor Countries Initiative. Based on these considerations, the objective retained for monetary action was price stability, with a maximum inflation rate of 2.0% in order to strengthen the common currency pegging to the euro. Projected monetary equilibria highlighted the following trends in 2005 for the Union : - a 367.0 billion improvement in the external position of monetary institutions ; - a 6.5 billion decrease (or -0.2%) in domestic credit resulting from a 148.4 billion improvement (or 25.8%) in the net position of Governments and a 141.9 billion increase (4.3%) in the credit to the economy ; - a 6.3% increase in money supply. Furthermore, the Central Bank's interventions were anticipated at 378.0 billion, down by 75.3 billion from the revised forecasts by end of December 2004, due mainly to reimbursement of consolidated direct central bank assistance and amortisation of 5%-2006 Government securities. The overall amount of the assistance to Governments was to be capped at 365.9 billion, down by 70.9 billion. Refinancing in favour to the credit institutions were expected to the tune of 12.1 billion, down by 4.4 billion. 2 - MONETARY ACTION The Central Bank’s action in 2005 was mainly based on the use of indirect liquidity regulating instruments in order to consolidate monetary stability and contribute to non-inflationary financing of growth. 2.1 - Interest Rate Policy The interest rate policy pursued by the Central Bank is implemented through the money market and permanent window interventions (rediscount and repurchase windows). Considering the economic and monetary situation of the West African Monetary Union member states, characterised mainly by a fragile economic activity in a number of countries and rising prices due mainly to supply shocks resulting from the decline in cereal reserves and impact of the rising oil prices on energy and transport costs, the Central Bank decided to maintain its intervention rates at 4.50% for the discount rate and 4.00% for the repurchase rate, in force since March 22, 2004. The regulated rates applicable to savings accounts remained unchanged at 3.50%. 2.2 - Open market Operations In view of bank cash position, the BCEAO did not organise any auction to inject or withdraw liquidity in 2005. 2.3 - Actions through Permanent and Exceptional Financing Windows Given the high level of cash in the banking system, managing applications for advances through permanent monetary resource allocation windows remained guided by the principle of uncertain refinancing. The objective pursued is to avoid in particular that loans granted lead to inflationary pressures and are used to feed resource outflows abroad or build up Annual Report - 2005 13 IMPLEMENTATION OF MONETARY POLICY assets with correspondents. It also aims at better rechannelling liquidities on the interbank and financial markets. In a context of plenty bank liquidity within the Union, Central Bank’s lending to banks and financial institutions remained at relatively low levels standing at 11.6 billion by end of December, 2005 compared to 2.4 billion as at December 31, 2004. 2.4 - Reserve Requirement Mechanism Instituted since October 1993, the reserve requirement system aims at enhancing the efficiency of interest rate policy by acting on banks’ liquidity and lending capacity. The reserve requirement mechanism makes it possible, if necessary, to differentiate per State Considering the developments in the economic situation characterised by inflationary pressures and the expansion of credit to the economy, the Central Bank decided to raise from 13.0% to 15.0% the reserve requirement ratio applicable to banks in Benin, from 3.0% to 7.0% to banks in Burkina and from 5.0% to 9.0% to banks in Niger, as from June 16, 2005. The levels of reserve requirement ratios were maintained at 5.0% in Côte d’Ivoire, 3.0% in Guinea-Bissau and Togo and at 9.0% in Mali and Senegal. Overall, the reserve requirement ratios of banks evolved as follows : The reserve requirement ratios applicable to financial institutions remained unchanged at the 5.0% level, in force since October 1, 1993. pace of price increases was on average 4.4% by end of December 2005, with inflation target set at a maximum of 2.0%. 3 - RESULTS OF MONETARY ACTION AND TRENDS IN MONETARY AGGREGATES Besides, the monetary situation of the Union was characterised by end of December 2005 by a consolidation of the net external position of monetary institutions and an increase in both domestic credit and money supply. Insufficient supply of foodstuffs to the market and soaring world oil prices per barrel triggered the resurgence of inflationary pressures. The 14 the reserve ratios required of banks and financial institutions depending on observed trends. Annual Report - 2005 ECONOMIC AND FINANCIAL ENVIRONMENT IMPLEMENTATION OF MONETARY POLICY 3.1 - Net Foreign Assets The net foreign assets of monetary institutions stood at 3,327.0 billion, up by 141.8 billion compared to the level reached by end of December 2004. This stronger net external position partly reflects the mobilisation of external resources to support States’ economic and financial programmes and debt relieves received by some countries under the HIPC initiative. The strengthening of net external position of monetary institutions exclusively concerned the Central Bank as its net foreign assets reached 3,195.4 billion, up by 165.6 billion. The official foreign exchange reserves increased by 5.5 billion to 3,768.9 billion, by end of December 2005. Subsequently, currency issue coverage ratio of the Central bank was to the tune of 120.3%. The net foreign assets of the Central Bank declined by 126.1 billion to 573.5 billion due to the payments to the International Monetary Fund on behalf of the States. On the other hand, the net foreign assets of the banks declined by 23.8 billion to 131.6 billion, reflecting an increase of 78.6 billion in foreign liabilities, the impact of which was limited by the increase of 54.9 billion in gross foreign assets. Net foreign assets increased in all the Union countries with the exception of Burkina, Senegal and Togo. Annual Report - 2005 15 IMPLEMENTATION OF MONETARY POLICY 3.2 - Domestic Credit At 4,660.4 billion by end of December, 2005, outstanding domestic credit within the Union increased by 10.3% annually due to a 423.4 bil- 16 Annual Report - 2005 lion increase in lending to the private sector and to a 13.0 billion increase in net credit to the States. IMPLEMENTATION OF MONETARY POLICY Source : BCEAO. 3.2.1 - Net Position of Governments The net debit position of governments vis-à-vis the banking system stood at 718.9 billion as at December 31, 2005, reflecting a deterioration of 13.1 billion compared to the level reached by end of December 2004. This development was due to the 87.8 billion decline in Governments’ liabilities vis-à-vis the banking system, the impact of which was moderated by the 74.8 billion decrease in their liabilities. The reduction of Governments’ claims was due mainly to a 83.3 billion decline in their bank deposits with the Central Bank. The decline in Governments’ liabilities mainly reflects reimbursement of 92.8 billion uses of IMF credit. The Central Bank’s financial assistance to the States reached 354.8 billion by end of December 2005, down by 4.8% compared to December 2004. It consisted mainly of consolidations of statutory advances the outstanding amount of which declined from 356.0 billion by end of December 2004, to 340.7 billion by end of December 2005. Annual Report - 2005 17 IMPLEMENTATION OF MONETARY POLICY 3.2.2 - Credit to the Economy Outstanding credit to the economy rose from 3,518.1 billion in December 2004 to 3,941.5 billion in December, 2005, following a 12.0% increase attributable to a 10.9% and 46.4% increase in ordinary credit and seasonal credit, respectively. 18 Annual Report - 2005 On the whole, trends in credit to the economy translated into an expansion of short term as well as medium and long term credit by 252.8 billion and 170.6 billion, respectively. IMPLEMENTATION OF MONETARY POLICY Annual Report - 2005 19 IMPLEMENTATION OF MONETARY POLICY 3.2.3 - Trends in credit registered with the Financial Risk Control Unit all registered risks in 2005 compared to 78.0% in 2004 and 77.6% in 2003. Outstanding credit uses registered with the financial risk control unit stood at 3,613.7 billion, up by 381.8 billion compared to 2004. The country distribution of registered overall outstanding credit was 10.2% for Benin, 10.8% for Burkina, 29.4% for Côte d'Ivoire, 0.04% for Guinea-Bissau, 9.8% for Mali, 3.7% for Niger, 31.2% for Senegal and 4.9% for Togo. This development followed an increase in financing to enterprises in sectors such as trade (195.4 billion), manufacturing industries (82.3 billion), transport, warehouse and communication (62.6 billion), insurance, real estate businesses and company services (26.0 billion), construction and public works (28.3 billion), agriculture, forestry and fishery (14.0 billion), power (16.3 billion), mining industries (2.9 billion). Conversely, the financing granted to sectors such as community services, social and personal services declined by 46.0 billion. The increase in financing concerned both liquidity credit to the tune of 270.1 billion and investment credit of an amount of 111.7 billion. The outstanding short term financing amounted to 2,790.8 billion and represented 77.2% of Source : BCEAO. 20 Annual Report - 2005 3.3 - Money Supply and Monetary Base Money supply expanded by 7.3% in 2005 to 6,413.9 billion. Its counterparts increased by 2.4 and 7.3 points respectively, reflecting an increase in net foreign assets and domestic credit and by -2.4 points under other net items. Money supply expanded as deposits rose by 4.5% to reach 4,367.6 billion and currency outside banks, which increased by 13.7% to 2,046.3 billion. The share of currency outside banks in money supply represented 31.9% compared to 30.1% the previous year. IMPLEMENTATION OF MONETARY POLICY Monetary base rose by 71.1 billion to 2,801.6 billion from the level reached in December 2004, following a 246.5 billion increase in currency outside banks moderated by declines of 148.9 billion in bank reserves and 26.5 billion in other deposits. Annual Report - 2005 21 IMPLEMENTATION OF MONETARY POLICY Source : BCEAO. Source : BCEAO. 22 Annual Report - 2005 IMPLEMENTATION OF MONETARY POLICY 3.4 - Private Savings collected by Banks and Savings Banks The savings mobilised by the banking system within the WAEMU countries was estimated at 2,070.9 as at December 31, 2005, up by 179.5 billion or 9.5% from its level of previous year due mainly to increases of 119.9 billion and 59.4 billion in time deposits and accounts governed by special regulation, respectively. The following graph and table give country ratios of private savings collected by banks and savings banks. Source : BCEAO. Annual Report - 2005 23 IMPLEMENTATION OF MONETARY POLICY 3.5 - Central Bank Financial Assistance Central Bank financial Assistance declined by 8.5 billion to 366.4 billion by the end of December, 2005, from their December 2004 level following decreases of 17.7 billion in assistance to governments, dampened by the 9.2 increase in refinancing in favour of banks and financial institutions. . 24 Annual Report - 2005 IMPLEMENTATION OF MONETARY POLICY Claims on National Treasuries reached 354.8 billion by end of December, 2005, reflecting a decline of 17.7 billion compared to the 2004 level due to the reimbursement of consolidated direct monetary assistance of BCEAO to the States (15.3 billion), payment of 2.3 billion on 5%- 2006 government securities and amortisation of 0.1 billion out of consolidated claims in respect of ex-Banque Centrale of GuineaBissau (ex-BCGB) and ex-Banque de Crédit National (ex-BCN) of Guinea-Bissau. The share of outstanding government securities in the Central Bank’s portfolio declined from 10.9 billion in 2004 to 8.6 billion due to half-yearly amortisations. Consolidated claims in respect of ex-Banque Centrale of Guinea-Bissau (BCGB) and ex-Banque de Crédit National (BCN) of Guinea-Bissau stood at 5.5 billion compared to 5.6 billion the previous year. Refinancing by banks and financial institutions increased by 9.2 billion, from 2.4 billion in 2004 to 11.6 billion as at December 31, 2005. As in 2004, lending to banks and financial institutions were exclusively granted in 2005 through the repurchase window. Besides, the Central Bank did not organise any auction to inject or withdraw liquidity like in 2004. On the whole, with reference to the figures retained for the 2005 monetary programmes, the amounts granted by end of December under assistance to National Treasuries and refinancing in favour of banks and financial institutions can be broken down per country as follows : Annual Report - 2005 25 IMPLEMENTATION OF MONETARY POLICY 26 Annual Report - 2005 IMPLEMENTATION OF MONETARY POLICY 3.6 - Trends in Reserve Requirement Formation The number of banks subject to reserve requirement increased to seventy-six (76) from seventy-four (74) units. In addition, five (5) financial institutions were subject to the reserve requirement system as in previous year. The average amount of reserve requirement for banks stood at 420.2 billion as at December 15, 2005 compared to 339.4 billion a year ear- lier. On average, the reserves actually built up declined by 153.5 billion to 624.0 of which 27.5 billion represented government securities. Thus, from one year to another, net surplus in banks declined from 438.1 billion to 203.9 billion. For financial institutions, the average amount of reserve requirement stood at 0.5 billion while built up reserves amounted to 0.3 billion, reflecting a net overall average deficit of 0.2 billion. Annual Report - 2005 27 IMPLEMENTATION OF MONETARY POLICY 28 3.7 - Interbank Market Operations and Trends in Bank Prime Rate demand with respective weekly average amounts of 2.8 and 2.7 billion. The Union interbank market the primary role of which is to recycle bank liquidity, expanded its activities in 2005. Weekly volume of transactions amounted to 17.5 billion on average compared to 12.4 billion a year earlier. The operations involved a wide range from 1-day to 9-month maturities. However, the categories of 1-week, 2-week, 1-month and 3-month maturities were most active with respective average weekly transactions amounts of 6.7 billion and 4.2 billion, 2. 7 billion, 2.0 billion and 1.2 billion. Like in previous year, six-, nine- and twelve-month maturity transactions were marginal. Minimum and maximum interest rates were 2.50% and 8.50% respectively in 2005 compared to 1.50 and 10.50 like in the previous year. The most active hubs were Abidjan and Dakar. Lomé and Abidjan emerged as the main resource providers, as supply exceeded local Bank prime rates remained within a 4.00 % to 12.00% range compared to the 6.50% to 12.00% range observed the previous year. Annual Report - 2005 Average interbank rates for 1-day, 1-week, 2week, 1-month, 3-month, 6-month and 9month maturities were 4.86%, 3.90%, 3.88%, 4.51%, 4.83, 5.33%, 6.75%, respectively, reflecting from the previous year, a decrease in 1week, 2-week and 9-month maturities and an increase in 1-day, 3-month and 6-month maturities. As regards category of 12-month maturities, no transaction was noted compared to the 2004 year where a weighted average rate of 5.17% was recorded. IMPLEMENTATION OF MONETARY POLICY 3.8 - Public and Private Security Market Operations Issues of negotiable debt securities totalled 270.7 billion compared to 160.0 billion in 2004. They consisted of Treasury bills the cumulative amount of which stood at 270.5 billion and regional financial institutions’ bonds worth 0.2 billion. Twelve issues of Treasury bills were made through variable rate auction by five Union States representing : - three by Mali in February, August and November 2005, respectively, for a cumulative amount of 84.9 billion ; - two by Burkina, Côte d’Ivoire and Niger for cumulative amounts of 43.3 billion, 47.5 billion and 30.0 billion, respectively ; - one by Benin, Guinea-Bissau and Senegal for amounts of 23.4 billion, 6.0 billion and 35.5 billion, respectively. Average rates of these bonds varied between 3.3858% and 4.9300%. An issue of financial institutions’ bonds, with a 4-year maturity and an interest rate of 5.50% rate was made by an institution of Senegal in January 2005 for an amount of 180.0 million. No issue was made in respect of commercial papers, deposit certificates and regional financial institutions’ bonds. By end of December 2005, the outstanding negotiable debt securities stood at 237.4 billon compared to 175.2 billion by end of December 2004 and included : - one issue of commercial papers worth an amount of 15.0 billion ; - one issue of certificates of deposit worth 0.3 billion ; - two issues of financial institutions' bonds of a cumulative amount of 4.3 billion ; - four lines of regional financial institutions' bonds (BOAD) worth 70.2 billion ; - and seven issues of Treasury bills of a cumulative amount of 147.6 billion. Annual Report - 2005 29 III - CURRENCY ISSUE AND PAYMENT SYSTEMS 1 - MANAGEMENT OF CURRENCY OUTSIDE BANKS T he operations carried out through the windows of the Central Bank were characterised in 2005 by a surplus in outflows over inflows of banknotes and coins. The share of banknotes in the currency outside circulation stood at 95.04% compared to 95.72% in 2004. 1.1 - Outflows and inflows through BCEAO windows The operations carried out through the windows of the Central Bank slightly increased in 2005. Outflows and inflows in 2005 represented a total value of 2,391.9 millions of banknotes and coins compared to 2,383.5 billion a year earlier, representing a 0.3% increase. 1.1.1 - Outflows Outflows of banknotes rose by 5% in volume and 8% in value to 1,122.0 million units (6,150.4 billion) from 1,071.3 million of units in 2004 (5,662.3 billion). The most significant outflows of banknotes were recorded in Côte d’Ivoire (25.4%), Burkina (17.2%), Senegal (16.6%) and Benin (15.5%). Coins outflows increased over the review period by 14% from 106.4 million units to 121 million units. In value terms, they amounted in 2005 to 24.9 billion compared to 17.9 billion the previous year. This increase was due mainly to the introduction of significant quantities of CFAF 500- and CFAF 200-denomination coins, in order to compensate the withdraw of the CFAF 500-denomination banknote from circulation. Annual Report - 2005 31 CURRENCY ISSUE AND PAYMENT SYSTEMS 1.1.2 - Inflows Inflows of banknotes through the windows of the Central Bank amounted to 1,124.0 million of banknotes (6,011.8 billion) compared to 1,200.1 million of banknotes (5,734.2 billion) in 2004, representing a 7% decrease in volume and a 0.5% increase in value. As for coins, their inflows through the windows of the Central Bank increased from 5.6 million units in 2004 to 23.1 million, thus recording over the review period a significant increase. In value terms, they amounted to 3,102 million in 2005 compared to 404.7 million the previous year. The most significant inflows in value terms were observed in Benin (19.2%), Senegal (18.6%), Côte d’Ivoire (18.4%), and Burkina (17.7%). 1.2 - Structure of Currency outside Banks By end of December, 2005, currency outside banks (excluding Central Bank) increased by 11.4% to 2,213.9 billion from 1,988.1 billion a year earlier. 32 Annual Report - 2005 Big denominations made up 85.8% of currency outside banks as at December 31, 2005 compared to 85.3% in 2004. In number terms, they represented 44.11% of banknotes in circulation compared to 41.7% in 2004. CURRENCY ISSUE AND PAYMENT SYSTEMS 2 - IMPLEMENTATION OF SETTLEMENTS WITHIN THE WAMU 2.1 - Cross-b border flows of Banknotes through BCEAO Branch windows Cross-border flows of banknotes caused by sorting operations increased by 90.3% to 820.1 billion in the 2005 financial year, from 430.9 billion in the previous financial year. Displaced banknotes were mostly made up of those issued by the Côte d'Ivoire (40.6%), Mali (14.7%), Benin (13.9%) and Burkina (13.6%) Branches. The Togo, Benin, Senegal, and Burkina Branches recorded the highest amounts of cross-border flows of banknotes through their windows with respective shares of 25.6%, 22.6%, 21.2% and 12.4%. Annual Report - 2005 33 CURRENCY ISSUE AND PAYMENT SYSTEMS 2.2 - Flows among WAMU Member States Net capital flows among the Union member States rose by 1,128.5 billion or 43.9% from 2,566.3 billion in 2004 to 3,694.8 billion in 2005. 3 - IMPLEMENTATION OF EXTERNAL PAYMENTS compared to 242.1 billion in 2004, reflecting a 238 billion degradation. 3.1 - External Banknote Operations The Treasuries and other public administrations transferred abroad 343.8 billion mainly in respect of public debt service settlements and embassy provisioning compared to 369.3 billion As at December 31, 2005, the equivalent of banknote cash on hand in euro stood at CFAF 3.4 billion compared to CFAF 3.3 billion the previous year. No remittance was made to the Banque de France in the 2005 financial year. 3.2 - Bank Money Transfers Money transfers made through the Central Bank represented at the end of the 2005 financial year a net outflow of 185.7 billion compared to 23.8 billion a year earlier. This increase is mainly attributable to the banking system. Transfers made abroad by banks increased by 265.5 billion to 1,228.4 billion by end of December, 2005 compared to 962.9 billion the previous year. Amounts received by banks rose by 27.4 billion to 748.3 billion. In summary, net banking transfers showed a 480.1 billion deficit 34 Annual Report - 2005 in 2004. Fund inflows, the bulk of which representing the financial contributions of the international community, stood at 628.3 billion compared to 592.3 billion a year earlier. In summary, the financial operations of Treasuries and other public administrations translated into a net capital inflow of 284.5 billion in 2005 compared to 223.1 billion in 2004. The volume of transactions carried out through the West African Monetary Agency (WAMA) is still very low. Received transfers slightly rose by 09 million to 163 million in 2005 compared to 154 million in the previous financial year. In 2005, no issue was recorded compared to 1 million in 2004. CURRENCY ISSUE AND PAYMENT SYSTEMS 4 - OPERATION OF PAYMENT SYSTEMS The modernisation of payment systems within the WAEMU, initiated by the BCEAO since 1999 aims at consolidating basic infrastructures of the financial sector, reducing costs and processing time of payment transactions within the sub-region, enhancing transactions safety and promoting new electronic payment instruments. The new payment systems are based on the following main lines : z z z modernisation of the exchange and settlement system for large-value transactions, with the establishment of a real-time gross settlement system for systemically important payments, known as Automated Transfer and Settlement System within the WAEMU (STAR-UEMOA) ; automation of the exchange and settlement system for small-value transactions, viz. mass payment with the operationalisation of an automated multilateral clearing system known as Automated Interbank Clearing System within the WAEMU (SICAUEMOA) ; development of a subregional interbank card-based payment system, to be set up by the banking system at the instigation of the BCEAO. In 2005, the work on the implementation of the new payment systems in the WAEMU countries as well as the accompanying components, notably the appropriate legal framework, consolidated telecommunications infrastructures and the establishment of a payment incident centre was pursued. Thus, the gradual operationalisation of SICA-UEMOA took place on November 17, 2005 in Mali and the Automated Transfer and Settlement System within the WAEMU (STAR-UEMOA) operationalised in June 2004 functioned regularly. 4.1 - Automated Transfer and Settlement System within the WAEMU (STAR-U UEMOA) The main actions taken with respect to the real-time gross settlement component focused on the operational management of STARUEMOA, interconnection between STAR- UEMOA and SICA-UEMOA for the settlement of clearing balances, realisation of pre-production tests for the settlement of the transactions of the Central Depository/Settlement Bank (CD/SB) of the Regional Stock Exchange (BRVM) and work for the implementation of intraday advances. As regards the operational management of STAR-UEMOA, the activities carried out in 2005 involved the operation, assistance to participants (Main Branches of the BCEAO and banks), verification of accounting entries generated by the accounting system of the BCEAO in order to ensure their conformity to the balances of the settlement accounts in STAR-UEMOA, compilation of statistics and reports on the operation of STAR-UEMOA. With a view to extend STAR-UEMOA operations to BRVM under the implementation of a settlement system/securities delivery, pre-production tests of the operations of the Central Depository/Settlement Bank (CD/SB) took place from December 19 to 26, 2005 and have been successful. The operationalisation of BRVM is planned for February 2006. Following a survey carried out with participants on the functioning of STAR-UEMOA, the BCEAO undertook to revise its procedures with a view to enhance efficiency in the system management. Since the launching of STAR-UEMOA, the quality target which guided the BCEAO helped improve the system management and services offered to participants. After eighteen months of operational functioning of STAR-UEMOA, it is important to underscore the active participation of the Union banks and an increase in the volume and value of operations processed as evidenced by the following indicators : z z z the full participation in the system by all Union banks to the exchange days with an average daily number of 58 participants ; the participation of banks newly established in the Union ; the average daily number of operations processed significantly increased by 25% to 716 in 2005 from 572 in 2004 ; Annual Report - 2005 35 CURRENCY ISSUE AND PAYMENT SYSTEMS z z 36 the average value of operations settled increased by 24% to 102.0 billion from 82.0 billion in 2004 ; the average rate of rejections for lack of funds was 0.1% compared to 0.3% in 2004 Annual Report - 2005 and is largely below the maximum standard of 1% set in the Credit Agreement signed with IDA (World Bank) ; z the reduction of operation incidents of the system. CURRENCY ISSUE AND PAYMENT SYSTEMS 4.2 - Automated Interbank Clearing System within the WAEMU (SICA-U UEMOA) The activities carried out regarding SICAUEMOA mainly focused on the monitoring of real operations testing, preparation for the launching of the clearing system, finalising interbank procedures, launching work on cheques and commercial papers (bills of exchange and promissory notes) standardisation and training of staff of BCEAO Branches. With these actions, the clearing system was launched on November 17, 2005 in Mali and scheduled to operate in Senegal on January 19, 2006. Since the launching of SICA-UEMOA in Mali, the total number of processed transactions during the six clearing weeks amounted to 12,761 transactions in November 2005 and 25,259 transactions in December 2005. The clearing balances settled on a daily basis in STARUEMOA stood at 65.3 billion of which 19.3 billion in November 2005 and 46.0 billion in December 2005. 4.3 - Regional Interbank Card Processing Regarding the card processing system, the BCEAO assisted the banks for setting up the WAEMU Interbank Card Processing Centre (CTMI-UEMOA) and in the negotiations with the international issuers notably VISA and MasterCard. Under its assistance to the banking community for the launching of the subregional card processing system, an officer was seconded by the BCEAO as Director- General of CTMI-UEMOA as from August 2005. As part of its supervisory missions, the Central Bank consolidated the legal framework applicable to the issuance of electronic money by drawing up a draft directive on the issuance of electronic money and electronic money institutions. Following the creation of CTMI-UEMOA as a limited public company in February 2005, the BCEAO participated in the negotiations with the BOAD as part of fund-raising activities. The equity capital of GMI-UEMOA and its members was increased by 11 million to CFA F 2,179 million by the end of December 2005. The CTMIUEMOA comprised sixty-five (65 ) members by end December 2005. The BCEAO also took part on November 7-9, 2005, along with the CTMIUEMOA, in the negotiation of contracts with card processing solution providers and in the definition of the card processing solution implementation timetable. This timetable provided for the operationalisation of CTM-I and CTM-D (issuance, cash dispenser withdrawals and Cash advance) in 2006. Regarding the agreements with VISA and Mastercard, the BCEAO took part along with the GIM-UEMOA in the negotiations which resulted in licensing GIM-UEMOA as principal member of VISA International and MasterCard International. Under training actions, BCEAO staff took part in the seminar organised by the GIM-UEMOA on the concepts and issues relating to Europay, Visa and MasterCard (EMV) standards. They also attended to the 11th African Conference on the payment cards held in Johannesbourg, South Africa from October 24 -28, 2005. 4.4 - Regulatory texts Under the reform of the legal and regulatory framework governing the Union payment systems, the BCEAO participated in 2005 in many meetings organised by the WAEMU Commission. Thus, the activities carried out regarding the legal and regulatory framework focused mainly on harmonising in collaboration with the States, WAEMU and BCEAO Authorities, of the legal and institutional framework for standardisation and electronic evidence in the banking and financial area. Thus, the Rule on the harmonisation scheme for the accreditation, certification, standardisation and metrology activities, within the WAEMU member States was adopted by the Council of Ministers of the Union in June 2005. The draft implementation rule on the duties, organisation and operation of the Regional Secretariat for Standardisation, Certification and Promotion of Quality (NORMCERQ) was finalised. The first structure agreed was the Annual Report - 2005 37 CURRENCY ISSUE AND PAYMENT SYSTEMS Bureau for Financial and Banking Standardisation which will be set up at the instigation of BCEAO. Considering the regulatory framework defined with the WAEMU Commission, the Central Bank drafted the basic texts of the future Bureau of financial and banking standardisation taking into account the requirements of the national and international systems for standardisation. The adoption of the legal framework implementation text, viz. some instructions and ministerial decrees accompanying Regulation n°15/2002/CM/UEMOA on the payment systems is underway. The Ministerial decree setting the standard amount of operations that can be carried out in fiduciary currency was signed in all States with the exception of GuineaBissau. The law on the adoption of Directive n° 08/2002/CM/UEMOA defining measures to increase the number of bank account holders and use of bank money for payment was adopted by the Parliaments of Burkina, Guinea-Bissau, Mali, Niger, Senegal, and Togo. Lastly, the draft instruction on electronic money was drawn up and will be adopted in 2006. Concerning the legal protection of the names of the new payment systems known as STARUEMOA and SICA-UEMOA, the BCEAO received the decree of the African Intellectual Property Organisation (AIPO), protecting the trademarks of its payment systems. Work is being done for the protection of STAR-UEMOA and SICA-UEMOA names within the European Union, United States and Canada. 4.5 - Telecommunications Systems On the telecommunications front, the main achievements in 2005 consisted mainly in the deployment and monitoring of the operation of the telecommunications network, connec- 38 Annual Report - 2005 ting banks to the BCEAO sites as part of the preparation for the launching of SICA-UEMOA. Thus, in collaboration with the national telecom providers, the access network was put in place in Côte d'Ivoire and Niger. The deployment of the access network was done in Benin from December 22 to January 5, 2006. Togo's has been planned for 2006, mainly because participants were late in their preparations and due to the difficulties met by the national telecom operator (delivery of routers and modems, availability of dedicated lines). 4.6 - Payment Incident Centre The activities of the Payment Incidents Centre (CIP) focused on performing additional work on the detailed operational specifications, deploying the new computer software of the Payment Incidents Centre (CIP), testing and interpreting files received from the account keeping institutions (ETC). Furthermore, many videoconference sessions were organised with a view to assess the progress made in the work on the CIP and provide necessary assistance to BCEAO National Branches staff. A training seminar on the new computer software of the CIP was organised from July 11 to 15, 2005 for the staff in charge of the CIP in BCEAO National Branches. In conclusion, STAR-UEMOA has been in operation for one year and a half. SICA-UEMOA was launched in 2005 and its operationalisation in all the Union member States will be completed in 2006. Concerning CIP, a gradual operationalisation will be started in 2006. As for the interbank card-based payment system, its operationalisation is scheduled in 2007. CURRENCY ISSUE AND PAYMENT SYSTEMS Building hosting the "Banque Régionale de Solidarité - Bénin -BRS-Bénin” (Regional Solidarity Bank) Annual Report - 2005 39 IV - BANKING AND FINANCIAL SYSTEM 1 - REVIEW OF DEVELOPMENTS IN THE BANKING SYSTEM 1.1 - Regulatory Texts A s far as the banking system is concerned, the draft framework law on the designing of a legal and regulatory framework developed to favour the emergence of open-end investment funds and adopted by the Council of Ministers of the West African Monetary Union, was transmitted to the Union States, for incorporation in their internal legal order. Developing a framework law to govern openend investment funds is justified by the need to better integrate national orientations in the area of economic policy. Following its adoption by the Union States, a draft Directive on tax aspects will be submitted to WAEMU competent Instances, the Council of Ministers in particular. The choice of the directive-tool for adopting tax harmonisation measures is binding, through a flexible approach, upon the Union States on the objectives to be reached in terms of incentives while giving them the freedom to choose the form and instruments that should be implemented. The main purpose in establishing a legal framework governing open-end investment funds is to reinforce equity capital of unlisted corporations, in particular SMEs. In fact, though being important for the WAEMU member States economies, they are often confronted with difficulties due to insufficient equity capital. The specificities of investment funds relating, on the one hand, to their intervention field and, to the peculiar risks incurred by their creditors, on the other, were taken into account in designing the proposed framework. 1.2 - Development of Banking Network In 2005, the WAMU banking network was marked by a consolidation of the number of banks and financial institutions. The Union banking landscape was further diversified with the creation of new banking groups. Twenty-four (24) new licenses were delivered, including twenty two (22) to banks and two (2) to financial institutions. However, the licenses of two banks and one financial institution were withdrawn. Per country, the banking network was marked by the following actions : - in Benin, licensing of Banque Atlantique du Bénin, Banque Régionale de Solidarité (BRS – Bénin) and African Investment Bank (AIB) ; - in Burkina, licensing of three new banks : Banque Régionale de Solidarité – Burkina (BRS – Burkina), Banque Atlantique du Burkina and Banque de l'Habitat du Burkina Faso (BHBF) ; - in Côte d'Ivoire, two ministerial decrees licensing Banque Régionale de Solidarité – Côte d'Ivoire (BRS - Côte d'Ivoire) and CITIBANK Côte d'Ivoire (CITIBANK), whereas the license of the CITIBANK NA – Abidjan branch was withdrawn ; - in Guinea-Bissau, two new banks, namely Banco Da Uniao (BDU) and Banque Régionale de Solidarité (BRS - Guinée Bissau) were licensed, whereas the license of Banco da Guiné-Bissau (BIGB) was withdrawn ; - in Mali, licensing of Banque Régionale de Solidarité (BRS – Mali) and Banque Atlantique Mali ; - in Niger, licensing of two banks Banque Régionale de Solidarité (BRS – Niger) and Annual Report - 2005 41 BANKING AND FINANCIAL SYSTEM Banque Atlantique Niger and of a financial institution, Société Sahélienne de Financement (SAHFI) ; - in Senegal, the number of banks increased by five (5) units, with the licensing of Banque des Institutions Mutualistes d'Afrique de l'Ouest (BIMAO), Banque Atlantique Sénégal, Banque Régionale de Solidarité-Sénégal (BRS Sénégal), International Commercial Bank - Sénégal (ICB - Sénégal) and Attijariwafa Bank Sénégal. The number of financial institutions 1.3 - Activities of Banks and Financial Institutions In 2005, the activities of the WAMU banks and financial institutions were generally characterised by a steady increase in uses (12.0%) and, to a lesser extent, in resources collected (7.7%). Resources rose by 431.3 billion to 6,013.5 billion from 5,582.2 billion a year earlier. This was mainly due to an increase of 386.7 billion in deposits and borrowings, 42.0 billion in net equity and 2.6 billion in miscellaneous resources. 42 Annual Report - 2005 remained unchanged, as the licensing of Sénégal Factoring (SENFAC) was compensated by the withdrawal of the license of Société d’Investissement (Séninvest) ; - in Togo, the number of banks increased by three units, following the licensing of Banque Régionale de Solidarité - Togo (BRS - Togo), Banque Atlantique Togo and Banque Sahélo-Saharienne pour l'Investissement et le Commerce - Togo (BSIC – Togo). Uses increased by 535.6 billion to 5,238.6 billion as at December 31, 2005. This was due to an increase of 448.7 billion in credit and 86.9 billion in other uses (including investment securities). Indeed, credit totalled 4,187.7 billion by end of December 2005 compared to 3,739.0 billion a year earlier, following mainly an increase of 273.1 billion in medium and long term credit and of 206.1billion in short term financing, whereas leasing operations and similar credit, and overdue loans dropped by 3.3 billion and 17.3 billion, respectively. BANKING AND FINANCIAL SYSTEM Due to the higher increase in uses than in resources, the cash surplus of banks and financial institutions fell by 104.3 billion to 774.9 billion. The quality of the portfolio of the Union banks and financial institutions, assessed on the basis of gross rate of credit degradation, improved slightly. The gross rate of portfolio degradation dropped by 0.9 percentage point to 19.5% in December 2005, compared to 20.4% as at December 31. The net rate of degradation fell more sharply from 8.8% by end of December 2004 to 7.4% as at December 31, 2005, due mainly to greater provisioning of overdue loans. Indeed, provisions accounted for 66.9% of these loans compared to 62.4% in 2004. The resources of banks rose by 426 billion or 7.8% compared to December 31, 2004, to 5,902.7 billion as at December 31, 2005. Uses increased by 530.3 billion, or 11.5% to 5,142.4 billion compared to 4,612.1 billion a year earlier. Cash position of banks declined by 104.3 billion or 11.9% to 760.3 billion compared to 864.6 billion by end of December 2004. The gross rate of credit degradation fell by one (1) percentage point to 19.2%. The net rate of degradation fell more sharply (1.4%), from 8.8% in 2004 to 7.4% in 2005. Developments in the activities of financial institutions was characterised by a rise of 5,3 billion in resources which amounted to 110.8 billion as at December 31, 2005. Uses increased by 5.4 billion or 5.9% to 96.3 billion, from 90.9 billion a year earlier. The cash position of financial institutions remained quite unchanged at 14.5 billion compared to 14.6 billion in 2004. The credit portfolio quality of Union financial institutions deteriorated in 2005. Indeed, the gross rate of portfolio degradation increased from 33.4% by end of December 2004 to 37,4% by end of December 2005. Furthermore, the net rate of credit portfolio degradation deteriorated to 11.2% by end of December 2005 from 9,0% a year earlier. 1.4 - Status in relation Mechanism to Prudential The average risk coverage ratio, which measures the ratio between effective equity capital and weighted risks of banks and financial institutions, declined to 8.33% compared to 9.49% by end of December 2004. That of banks (7.40%) went down below the norm of 8%. In December 2004, it stood at 8.65%. However, the proportion of banks and financial institutions having met the solvency ratio rose slightly from 65% in 2004 to 67% by end of September 2005. As for the liquidity ratio, 56% of Union banks and financial institutions met the minimum norm of 75% as at September 30, 2005. This development reflects a quite significant drop in banking liquidity. Indeed, 65% of them met this ratio as at December 31, 2004. Regarding the other prudential regulations, insufficiencies were recorded with respect to coverage of medium and long term uses by stable resources, portfolio structure and risk spreading, particularly limits on credit exposure to a single signature. Concerning supervision in general, as at September 30, 2005, five (5) credit institutions were placed in trusteeship due to financial imbalances and management and operational insufficiencies. Annual Report - 2005 43 BANKING AND FINANCIAL SYSTEM 44 Annual Report - 2005 BANKING AND FINANCIAL SYSTEM 1.5 - Rating Agreements Mechanism The rating agreements mechanism was instituted by the WAMU Council of Ministers in December 1990 and readjusted in September 2002. It provides a qualitative control tool allowing a posteriori control of the portfolio quality of banks and financial institutions. In this respect, all credit institutions must maintain a ratio equal to or higher than 60% between outstanding credit benefiting from a rating agreement and total outstanding gross credit. Given the small number of requests submitted by credit institutions, the 2002 adjustment instituted the obligation for banks subject to this mechanism to submit to BCEAO applications 2 - REVIEW OF DEVELOPMENTS IN REGIONAL FINANCIAL MARKET By end 2005, the activities of the regional stock market were marked by an increase in all indicators with however a contrasted evolution throughout the year. By end December 2005, BRVM10 and BRVM composite indexes rose by 45.9% to 149.87 points and by 28.6% to 112.6, respectively. This rise is notably due to improvement in the price of SONATEL SN security which went up from CFAF 36,030 by end December for rating agreements for at least their 50 largest credit users. This measure has not yet yielded expected results. However, in 2005, 364 applications for rating agreement, representing a total amount of 826,785 million, were documented by the Central Bank. In 2004, 377 applications, representing credit totalling 662,868.4 million, were documented. After file examination, 253 applications that complied with the standards provided for by the mechanism and representing outstanding credit totalling 315,069 million, were approved, while 111 applications representing a global amount of 373,319 million were not granted rating agreement by the Central Bank. 2004 to CFAF 67,015 by end December 2005. Correlatively, the capitalisation of the equity market grew by 29.1% to 1,297.1 billion. Compared to the date when BRVM started its activities, equity capitalisation augmented by 55.1%. Bond capitalisation increased by 17.2% to 326.3 billion by end December 2005 from 278.6 billion the previous year. The global volume of transactions grew by 6.5% to 3,207,644 securities from 3,011,421 securities by end December 2004. Over the same period, Annual Report - 2005 45 BANKING AND FINANCIAL SYSTEM the total value of transactions increased from 35,986.7 million to 39,372.7 million. On the equity market, the volume of transactions involved 3,088,465 securities compared to 1,718,984 exchanged exchanged in 2004. On the bond market, the volume of transactions went down to 119,181 bonds from 1,292,437 exchanged in 2004. By December 31, 2005, 57 securities were listed including 39 shares and 18 bonds compared to 59 securities comprising 39 shares and 20 bonds by December 2004. 3 - REVIEW OF DEVELOPMENTS IN DECENTRALISED FINANCIAL SYSTEMS 2005 has confirmed the development of the microfinance sector in the Union States, as a result of the constant efforts of monetary Authorities to consolidate the performances achieved by Decentralised Financial Systems (SFD). The initiatives and measures aimed at promoting the development of this sector can be assessed through growth indicators and are focused on the actions undertaken for financing the Regional Decentralised Finance Support Programme (PRAFIDE), the progress achieved in recasting the legal framework, BCEAO's active participation in the events marking the International Year of Microcredit, the organisation of training sessions in microfinance, studies and publications, and the supervision of SFDs. 46 Annual Report - 2005 3.1 - Sector Growth Indicators The estimates on developments in the sector are indicative of the vitality of grassroots finance. Indeed, the dynamism of this sector is confirmed by the ever growing number of SFDs and their service points, which stood at 652 and 3500 by end December 2005. As of this date, these institutions collected deposits amounting to CFAF 278.9 billion and their outstanding credit totalled CFAF 297.2 billion. Services were provided to 5.8 millions of net beneficiaires. The quality of portfolio, measured through the ratio of overdue claims to outstanding credit deteriorated to 6.2% compared to 5.2% in 2004. This ration stands above the 5% level commonly accepted in the sector. The financial performance of institutions, measured against net operating results showed a surplus. Indeed, the operating result stood at CFAF 7.3 billion in 2005. In terms of job creation, the most recent available data estimated at roughly 10,300 the number of people holding a wage earning employment in the sector. The analysis of these indicators reveals that the overall performances of microfinance in the Union are constantly improving in spite of the weak financial position of some institutions. Therefore, it appears necessary to pursue initiatives in order to implement the measures provided for in the PRAFIDE. BANKING AND FINANCIAL SYSTEM 3.2 - PRAFIDE Funding The arrangements made by BCEAO for the funding of PRAFIDE included : - successful negotiations with the consortium of donors (the Consultative Group to Assist the Poor (CGAP), the Swedish International Development Authority (SIDA) and the United Nations Capital Development Fund (UNCDF) which agreed to grant to the Central Bank an assistance amounting to US$ 2.1 million. This manifestation of interest was materialised by the signature of a partnership and grant agreement amounting to US$ 107 million. Another agreement amounting to US$ 450,000 is expected to be signed during the first quarter of 2006 ; - pursuing contacts with the African Development Bank (ADB). As a result of these contacts, ADB may accept to provide a financial contribution towards the implementation of some activities contained in the new mechanism designed by BCEAO to support microfinance. 3.3 - L e g a l F r a m e w o r k a n d P r u d e n t i a l Mechanism Concertations relating to a diligent implementation of the legal texts governing the financial activities of SFD were organised in all Union States. In this respect, the actions undertaken include : - finalising of draft legal texts applicable to SFD, based on the amendments proposed by actors involved in the sector. The final version of these texts will be submitted to decision-making instances of the Union, following the organisation of a sub-regional validation seminar ; - drafting of the SFD accounting system and manual. Two training and outreach sessions are scheduled in 2006 in order to enable microfinance institutions to become familiar with these management and follow-up tools ; - completion of the drafting of a blueprint of the Uniform Act relating to cooperative and mutual institution legislation, taking into Annual Report - 2005 47 BANKING AND FINANCIAL SYSTEM account the expectations and concerns of actors involved in the cooperative and associative movement, in particular those concerning sureties and the ways and means of compulsory execution. The Permanent Secretariat, after formatting the document according to OHADA standards, will organise an official concertation on this document, prior to submitting it to OHADA validation and decision-making instances in 2006. 3.4 - Capacity building BCEAO has pursued the capacity building actions launched a decade ago. In this respect, training sessions were organised for staff from Finance Ministries of the UEMOA and CEMAC zones. In addition, the Central Bank delivered training sessions in microfinance for economic operators providing grassroots financial services. 3.5 - Studies and publications In order to maintain updated and periodic data on the decentralised finance sector, the Central Bank has published monographs on SFD. It has also produced quarterly notes on developments in microfinance and completed studies on the impact of the services provided by SFD on poverty in Burkina and in Mali, together with a study on the contribution of these institutions to the financing of craftsmanship activities in Mali. Lastly, various communications and technical papers were prepared in 48 Annual Report - 2005 the framework of the International Year of Microcredit. 3.6 - Sector supervision A document assessing the supervision conducted in 2004 was produced. It appraises the activities carried out in this field and reviews all actions implemented in each Union State in order to ensure an efficient follow-up of SFD.In this respect, a seminar was organised to evaluate the operation of the data base established in all BCEAO main branches. An orientation paper relating to the creation of a risk centre was also drafted. In addition, an inspection mission was carried out with the most important institution in Côte d'Ivoire, namely the “Fédération Nationale des Coopératives d'Epargne et de Crédit – FENA-COOPEC” (National federation of savings and credit cooperatives). Pursuing the implementation of activities contained in the PRAFIDE should permit to grant priority to actions like establishing efficient management information systems in SFD, creating a support fund for institutions in difficulty, adopting legal texts expected to help modernise the sector, starting actions relating to the creation of a risk centre, strengthening the supervision mechanism and improvement of alert and diagnosis tools, and crisis prevention mechanisms in the field of decentralised finance. V - OTHER ACTIVITIES OF THE BCEAO 1 - MANAGEMENT OF FOREIGN EXCHANGE RESERVES T he management of foreign exchange reserves by the Central Bank is governed by an institutional framework including the cooperation Agreement between the French Republic and WAMU member States, the Operations Account Agreement, the Statutes and management rules of the Central Bank. The institutional framework governing the management of foreign exchange reserves was subject to major changes in 2005. In this respect, the Addendum n°1 to the December 4, 1973 Agreement on an operations account was signed between BCEAO and the French Treasury. This clause became effective on September 1, 2005. The major amendments to the Agreement of an Operations Account were focused on the following points : - lowering from 65% to 50% of the portion in foreign currency which the Central Bank must deposit, as per Agreement, on the operations account ; - diversifying investment tools for foreign currency assets not deposited with the Operations account , in accordance with generally accepted principles and practices. Taking into account liquidity, security and profitability requirements, the new management framework sets out the policy of strategic distribution of foreign exchange reserves held outside the operations account and formalises the relevant decision-making process, based on international standards, particularly the International Monetary Fund Directives and the experience of some central banks and of the Bank for International Settlements. As at December 31, 2005, 53.3% of BCEAO's foreign exchange reserves were held in the Operations account, compared to 99.68% by end 2004. Foreign currency assets managed outside the Operations account were used to build up an investment portfolio and a liquidity portfolio, including bond assets of sovereign issuers or quasi-sovereign issuers and monetary investments denominated in euro. 2 - ECONOMIC INTEGRATION OF THE WAEMU MEMBER STATES - maintaining the exchange guarantee and its current modalities of application only for the portion in foreign currency which must be deposited with the Operations account ; During the 2005 financial year, the Central BANK participated in the implementation of the West African Economic and Monetary Union (WAEMU) integration chart. Against this - maintaining the level of the European Central Bank (ECB) rate on marginal lending facility for the portion in foreign currency that BCEAO must deposit on the Operations account and application of ECB minimum bid rate on the main refinancing operations for BCEAO's assets placed with the French Treasury beyond the conventional rate on pooled foreign exchange reserves on the said account ; backdrop, it took part in the work of both the joint (BCEAO/WAEMU Commission/BOAD) Secretariat in charge of monitoring the policies, performances and macroeconomic policies of the WAEMU member States and the Statutory Experts Committee. In this respect, the Central Bank contributed to the assessment of the 2005-2007 multi-year convergence programmes and to the drafting of half-yearly reports on the implementation of Annual Report - 2005 49 OTHER ACTIVITIES OF THE BCEAO multilateral monitoring of macroeconomic policies and performance of the WAEMU member States under 2005, in particular, the monetary and external trade aspects. Analysis revealed that the weak performances of the States in the area of macroeconomic convergence are mainly due to slowness in the implementation of macroeconomic and structural reforms, in particular, in the field of public finance stabilisation. Furthermore, insufficient drafting, implementation and monitoring of multi-year programmes caused failure to comply with the operational timetable set for the implementation of the Convergence, Stability, Growth and Solidarity Pact in the WAEMU member States. In addition, the macroeconomic performances of the Union member States were affected by exogenous factors, including the low price of exported commodities and the rise in the price of crude oil barrel. They were also affected by the degradation of the social and political situation in some member States. The recommendations towards the achievement of macroeconomic convergence focused notably on strong political impulse and greater involvement of the States in the effective application of the multilateral surveillance mechanism. Besides, it appeared necessary to take into account systematically macroeconomic convergence constraints in designing national fiscal policies. As part of the reflection aimed at improving the multilateral surveillance mechanism, the Central Bank conducted a study on the relevance of the key criterion of the Pact, namely the base fiscal balance. Besides, since the move to the stability phase was postponed to January 1, 2006, efforts to be made by the Union member States towards economic convergence were evaluated and proved to be particularly important for almost all countries. The actions of the Central Bank in terms of deepening the integration process in WAEMU were 50 Annual Report - 2005 pursued as part of the activities aimed at implementing the Regional Economic Programme (REP), dedicated to stimulate strong growth with a view to fight efficiently poverty. In particular, the Central Bank took part in the work of the REP steering committee and consultations with foreign partners in order to raise the required resources for funding selected projects. 3 - MONETARY AND FINANCIAL COOPERATION 3.1 - Relations with the Bretton Woods Institutions The operations carried out by the Central Bank with the International Monetary Fund (IMF) on account of the WAMU member States translated, during the 2005 fiscal year, into net resource outflows of SDR 88.8 millions or CFAF 69.9 milliards de FCFA compared to negative net flows of SDR 134.2 million or CFAF 104.7 billion a year earlier. The drop in net outflows was induced by a downward trend in member States repayments to the IMF and by the lower amounts of drawings. Gross drawings made under the Poverty Reduction and Growth Facility (PRGF) stood at SDR 27.7 million or CFAF 21.6 billion compared to SDR 18.0 or CFAF 14.2 billion in 2004. Thus, they increased from SDR 9.7 million or CFAF 7.4 billion, mainly as a result of the execution by most Union States of the economic and financial programmes supported by the PRGF resources. Currency repurchases and repayments of loans granted by the IMF, excluding debt reductions under the HIPC Initiative, which were estimated at SDR 37.1 billion (CFAF 29.1 billion), totalled SDR 111.0 million or CFAF 87.1 billion compared to SDR 146.9 million (CFAF 114.5 billion) the previous year. These operations translated into foreign exchange losses of CFAF 654.0 million compared to CFAF 248.5 million in 2004. Interest and commission payments amounted to SDR 5.9 million or CFAF 4.7 billion, which equalled the amount of the previous year. Commission payments under use of general resources reached SDR 2.9 mil- OTHER ACTIVITIES OF BCEAO lion or CFA 2.3 billion. Interest payments under use of administered resources amounted to SDR 3.0 million or CFAF 2.3 billion. For the purpose of settling charges related to interest and commission payments, the Union member States purchased SDR 21.1 million or CFAF 16.4 billion. Sales amounted to SDR 25.3 million or CFAF 19.6 billion. On the other hand, the IMF paid SDR 0.4 million or CFAF 0.3 billion to the WAMU member countries as remunerations in respect of their creditor position, compared to SDR 0.3 million or CFAF 0.2 billion the previous year. As at December 31, 2005, the net commitments of the WAMU member States under Structural Adjustment Facility (SAF) and PRGF declined by 18.1% to SDR 535.0 million from SDR 653.6 million the previous year. Lastly, in readjusting its holdings of member States' currencies, governed by Article V, section 11 of its Statutes, the IMF on April 30, 2005 revised downward by about 46.1 billion, its CFA currency holdings in the books of the Central Bank in the aftermath of a 3.7% year-over-year appreciation of euro to which CFAF is pegged by a fixed parity. 3.2 - Relations with others Institutions Monitoring the implementation of the ECOWAS Monetary Cooperation Programme (EMCP) notably focused on the components relating to macroeconomic convergence, statistics harmonisation and effective application of the institutional and organisational convergence mechanism. In this respect, the Central Bank contributed to the reflections towards speeding up the sub-regional integration process by participating in Accra (Ghana) on January 12, 2005, in the meeting of the Committee of Governors of Central Banks of the ECOWAS member Countries and on September 1, 2005, in the meeting of the ECOWAS Convergence Committee. The Central Bank also took part in the reflection on the reorganisation of the West African Monetary Agency (WAMA), on the occasion of the meeting of Directors of Research and that of the Ad hoc Working Group, held in Freetown (Sierra Leone) on May 25-27, 2005 and December 5-6 December, 2005, respectively. The Central Bank also took part as an observer in the meetings of the instances of the West African Monetary Zone (WAMZ)1 held, in Banjul (The Gambia) and Accra (Ghana), on May 1 – 7, 2005 and August 29 – September 2, 2005, respectively. At these meetings, the level of macroeconomic convergence of the economies and the progress made regarding the various components of the Zone's monetary cooperation programme. At the end of this meeting, the WAMZ's Conference of Heads of State and Government adopted the Banjul Declaration on the launching of the Zone's monetary union on December 1, 2009, so as to speed up the process. In this respect, a plan of action for the advent of a common currency by the agreed deadline was adopted by the WAMZ instances. Under the African Monetary Cooperation Programme, the BCEAO participated in the work of the 29th ordinary meeting of the Assembly of Governors of the Association of African Central Banks (AACB) held, on July 29, 2004 in Accra (Ghana) and of the symposium on the theme domestic “Capital markets and mobilisation of resources for growth and poverty reduction” organised concurrently with this meeting. The Central Bank also took part in the reflection undertaken on the advent of an African single currency and provided adequate support to the AACB Permanent Secretariat. Lastly, the Central Bank participated in the work of the Franc Zone Convergence 1 : The WAMZ comprises The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone. Its aim is to promote the advent of a single currency among these countries by 2009. This zone is expected, at the end of a successful convergence process to merge with the ECOWAS Single Monetary Zone. Annual Report - 2005 51 OTHER ACTIVITIES OF THE BCEAO Committee. In this respect, it made contributions on the conduct of multilateral surveillance of macroeconomic policies, in particular, the definition of additional convergence indicators. 4 - OTHER ACTIVITIES AND PROJECTS OF THE BCEAO 4.1 - Collection, Management and Diffusion of Statistical information The collection and management of statistical information n the WAEMU member States in particular is in response to the need to have at all times necessary information for study project, (economic, sociological and historical) research work and publishing of the Bank's official publications. A statistical database has been established for this purpose. Established since 1998, BCEAO's statistical database known as BASTAT puts at the disposal of the Bank's departments historical and recent data on the economic,monetary and financial situation of the Union States as well as on the administration and management of the Central Bank. The database has 28,882 statistical series 39.0% of which belong in the monetary sector, 26.0% in administration and management of the BCEAO, 10.0% in the external sector, 12.0% in the real sector, 7.0% in 7.0% in government finance and 3.0% in the social sector. Besides, 2.0% of data are macroeconomic performance indicators and 1.0% relates to the environment. Most of the data in the base are available for the 1960s up to 2005 period. The diffusion of statistics by the Central Bank is done through BCEAO's various publications and posting of materials on the Bank's Website. 52 Annual Report - 2005 4.2 - Balance Sheet Centre Following the adoption of common accounting rules applicable to non financial institutions operating in the Union and organisation of data collection on these entities, the project to establish a balance sheet centre started data exploitation in order to meet the economic units needs. In this perspective, BCEAO has chosen to outsource the balance sheet centre activities concerning the production and the diffusion of tradeable information. In this respect, the BCEAO consulted the West African Development Bank (BOAD), the ECOWAS Regional Investment Bank (ERIB), the "Fonds Africain de Garantie et de Coopération Economique - FAGACE" (African Guarantee and Economic Cooperation Fund), the "Fonds de Garantie des Investissements Privés en Afrique - GARI" (Guarantee Fund for Private Investments in West Africa), the Regional Stock Exchange (BRVM) and the Union credit institutions with a view to create a Société de Commercialisation d'informations d'entreprise SCIE (marketing company of corporate data). The economic and financial case relating to this project was prepared by the institutional promoters at their October 3-4, 2005 meeting at the Headquarters of the Central Bank in Dakar. It was then discussed and finalised with the credit institutions which have shown some interest in participating in the capital of the company at a meeting held on November 10, 2005. The promoters of the company set the deadline of January 31, 2006 for the subscription to the registered capital of the SCIE. In the 2005 financial year, the units of the Balance Sheet Centre in all the Union States, with the exception of Guinea-Bissau, collected 22,223 form sets of financial statements of which 18,305 from the 2004 financial year and OTHER ACTIVITIES OF BCEAO 3,918 from the previous financial years, compared to 12,520 form sets in 2004, or a 78.0% increase in volume. The proportion of directly exploitable financial statements in the database increased from 46.0% to 50.0% from a year to another, whereas the proportion of incomplete form sets declined from 9.0% to 5.0%. Building the Balance Sheet Centre for companies was pursued with the edition of the following products "Effect of Deposit", "Legal Identification Sheet of the Company", "Financial Statements in conformity with the BCEAO's Originals" and "Analysis of financial aggregates". The Central Bank contributed to the translation and edition, in September 2005, of the Portuguese version of the Regulation adopting the SYSCOA. The trainer training session to this accounting manual was held from November 28 to December 2, 2005 in Bissau. Stocks of books on the SYSCOA have been offered free of charge to university and accountancy training structures of the States so as to ensure a better ownership of this accounting manual. The SYSCOA manual entitled "Complete list of accounts and financial statements" has been re-edited and put on sale. The second meeting of the "Conseil Permanent de la Profession Comptable" (CPPCPermanent Council of the Accountancy Profession) was held, in Ouagadougou in October 2005, under the chairmanship of the WAEMU Commission. At this meeting, a draft preliminary Regulation on the free movement and right of establishment of chartered accountants within the WAEMU space was drawn up and the Regional controller of the professional training course concerning the "Diplôme d'Expertise Comptable et Financière DECOFI" (Diploma in Finance and Accounting) was appointed. Annual Report - 2005 53 OTHER ACTIVITIES OF THE BCEAO Mr. Damo Justin BARO, Vice-Governor and Interim Governor of BCEAO 54 Annual Report - 2005 VI - BCEAO’s INSTITUTIONAL AND ADMINISTRATIVE FRAMEWORK 1 - ACTIVITIES AND OPERATION OF THE STATUTORY BODIES D uring the 2005 fiscal year, the governing bodies of the Union convened, in accordance with the provisions of the November 14, 1973 Treaty establishing the West African Economic and Monetary Union and the Statutes of the Central Bank appended thereto. 1.1 - The Union Conference of Heads of State and Government The Union Conference of Heads of State and Government held an ordinary meeting on March 30, 2005 and an extraordinary meeting on December 23, 2005, at the Palais des Congrès in Niamey, under the chairpersonship of His Excellency Mr. Mamadou TANDJA, President of the Republic of Niger and its current Chairperson. 1.2 - WAMU Council of Ministers Chaired by Mr. Cosme SEHLIN, Minister of Finance and Economy of the Republic of Benin, the WAMU Council of Ministers underwent the following changes in the 2005 fiscal year : - under Benin, on February 4, 2005, Mr. Cosme SEHLIN, Minister of Finance and Economy, was appointed member of the Council of Ministers in replacement of Mr. Grégoire LAOUROU, and Mr. Zul Kifi SALAMI, State Minister, in charge of Planning and Development was appointed to be member of the Council, in replacement of Mr. Bruno AMOUSSOU ; Bissau, on April 29, 2005, Mr. - under Guinea-B Issufo SANHA, Minister of Economy, was appointed member of the Council of Ministers in replacement of Mr. Carlos Alberto ANDRADE. On November 9, 2005, Mr. Victor MANDINGA, Minister of Finance, was appointed member of the Council of Ministers in replacement of Mr. João Aladje Amadù FADIA ; - under Togo, on June 29, 2005, Mr. Payadowa BOUKPESSI, Minister of Economy, Finance and Privatisations was appointed member of the Council of Ministers in replacement of Mr. Débaba BALE and Mr. Yandja YENTCHABRE, Minister of Development and Regional Planning was appointed member of the Council, in replacement of Mr. M'Ba LEGZIM ; - under Côte d'Ivoire, on December 28, 2005, Mr. Koffi Charles DIBY, Minister attached to the Prime Minister in charge of Economy and Finance, was appointed member of the Council of Ministers in replacement of Mr. Bohoun BOUABRE. In 2005, the Council of Ministers held four ordinary meetings on April 6, 2005 at the Main Branch of BCEAO in Cotonou, on July 4, 2005 at the Headquarters of the BCEAO in Dakar, on September 16, 2005 at the Main Branch of BCEAO in Ouagadougou and December 16, 2005 at the Main Branch of BCEAO in Bamako, respectively. It also held extraordinary meetings to prepare for the extraordinary meetings of the Conference of Heads of State and Government on March 26, 2005 at the Main Branch of BCEAO in Niamey and on December 16, 2005 at the Main Branch of BCEAO in Bamako. Annual Report - 2005 55 BCEAO’s INSTUTIONAL AND ADMINISTRATIVE FRAMEWORK 1.3 - Board of Directors of BCEAO In 2005, the Board of Directors of BCEAO held four ordinary meetings under the Chairpersonship of Mr. Charles Konan BANNY, its statutory Chairperson, on April 4, 2005 at the Main Branch of BCEAO in Cotonou, on July 3, 2005 at the Headquarters of the BCEAO in Dakar, on September 15, 2005 at the Main Branch of BCEAO in Ouagadougou respectively, and under the Chairpersonship of Mr. Damo Justin BARO, Vice-Governor of the BCEAO, on December 15, 2005 in Bamako. During the financial year under review, the membership of the Board of Directors underwent the following changes : - under Benin, Mr. George Denis Marc QUENUM was appointed Director of BCEAO in replacement of Mr. Cosme SEHLIN, effective from March 11, 2005 ; - under Mali, Mr. Sambou WAGUE was appointed Director of BCEAO in replacement of Mr. Samba DIALLO, effective from November 24, 2005 ; - under France, Mr. Serge TOMASI was appointed Director of BCEAO in replacement of Mrs Bérengère QUINCY, effective from December 2, 2004. 2 - ADMINISTRATION OF BCEAO 2.1 - Management of Human Resources 2.1.1 - Staffing The overall number of staff employed by the Central Bank (all categories) represented 4,084 employees compared to 3,915 employees by end of December 2004. This staff strength is made up of 4,005 currently employed staff and 79 employees seconded or placed on nonactive status. As at December 31, 2005, the staff currently employed at the Headquarters, the eight Main Branches, the fifteen Sub-Branches, the two Representations of the BCEAO in Paris and Ouagadougou, as well as the General 56 Annual Report - 2005 Secretariat of the WAMU Banking Commission increased by 4.3% compared to its 3,840 employees as at December 31, 2004. This increase is mainly explained by the recruitments made in the 2005 financial year, designed to partly replace the staff members who went on early or normal retirement in 2003 and 2004 and to anticipate with staff departures for the 2005-2007 period as well as to meet specific needs related to the new activities carried out by the Central Bank. The executive staff, 1,441 employees of total, represented 36.0% of the employees currently employed. Representing a net increase of 63 members or 4.6% in relative value, it is made up of 63 Management officials and Directors, 742 senior executives and 636 middle executives. As at December 31, 2004, it was made up of 61 management officials and Directors, 715 senior executives, 602 middle executives. The non-executive staff, 2,564 employees of total, represented 64.0% of the staff currently employed. This category of staff, which is made up of clerical staff (782 employees), technical support staff (47 employees), cash officers and sorters (661 employees) and service employees (1.074 employees), increased by 4.1% from 2,462 employees by end of December, 2004 to 2,564 as at December 31, 2005. The overall number of currently employed staff can be broken down per site as follows : - Headquarters : 869 employees ; - National Head Offices (Main and SubBranches) : 3,014 employees ; - Representation of the Governor with European Cooperation Institutions : 09 employees ; - Representation with the Commission : 12 employees ; WAEMU - General Secretariat of the WAMU Banking Commission : 101 employees. BCEAO’s INSTUTIONAL AND ADMINISTRATIVE FRAMEWORK 2.1.2 - Training - Bank of Portugal : 03 participants ; The West African Centre for Banking Studies and Training (COFEB) pursued its training actions in favour of the BCEAO staff, economic and financial administrations as well as the - Federal Reserve Bank : 01 participant ; financial institutions and banks of the Union member States. It conducted also specific actions relating to the integration of staff newly recruited. Under continuing professional training of the BCEAO staff, the Centre organised courses and seminars initiated by the Central Bank or other institutions that brought together 2,102 employees and distributed as follows : - 11 courses and seminars at the Headquarters : 224 participants ; - 25 training sessions as part of the decentralised actions in the BCEAO National Branches : 575 participants ; - 4 training actions through videoconference sessions : 414 participants ; - 1 training on the new Regulation governing cash operations of the BCEAO conducted on all the Bank's site by a team from the Headquarters : 621 participants ; - other training actions : 119 participants ; - 15 courses and seminars organised by partner institutions including language courses : 149 participants. The distribution of participants in the training actions organised by partner institutions was as follows : - International Monetary Fund Institute : 10 participants ; - International Banking and Financial Institute : 09 participants ; - Banking Profession Training Centre : 28 participants ; - Institute of Banking Techniques : 06 participants ; - African Centre for Higher Studies in Management (CESAG) : 43 participants ; - Association of Senegalese lawyers (AJS) : 02 participants ; - SWIFT Company and the WAEMU Interbank Card Processing Grouping and the Interbank Card Processing Centre (GIM-CTMI) : 25 participants ; - Cabinet Futuris Formations of Dakar : 04 participants. The COFEB also pre-launched the online training platform (e-learning) dedicated to the staff of the BCEAO. The establishment of this elearning platform contributes to the strengthening of actions in favour of employees through the use of new technologies which enables henceforth, to provide remote knowledge and allow all sites to have access to it. It is a permanent capacity-building tool for the Central Bank's employees without restraints in terms of place or time, while allowing to monitor progress achieved by participants and generate reports and to set up an individual training programme through pre-evaluation tools and to automate the administration of courses and registration schedules. The self-learning facility activities which started operating in the last ten days of December 2004 were pursued in 2005. The facility, which has been equipped with many books and teaching aids aims at improving the knowledge of the employees of the Bank. - African Multilateral Institute (IMA) : 18 participants ; Annual Report - 2005 57 BCEAO’s INSTUTIONAL AND ADMINISTRATIVE FRAMEWORK The following actions were initiated under specific training sessions : - a session on the integration of newly-recruited staff was organised from May 17 to September 17, 2005 by the Central Bank. It brought together 110 executives including 68 senior executives and 42 middle executives. This training programme focused on core training consisting of a general introduction to the organisation and activities of Departments and presentations on specific themes in order to better prepare for the integration of employees in their Departments of destination. Besides, oversight of newly-recruited staff was done by 36 supervisors chosen among the Bank’s staff. Furthermore, the sociologists of the Bank attended the courses in order to monitor the dynamics of the group and psychological interviews were organised at the beginning and at the end of the training session ; - 22 newly-recruited employees were integrated to the Class 27 of the COFEB under a qualifying training which took place from November 2, 2004 to October 31, 2005. Their training ended by a 3-month degree training course from August 1 to October 31, 2005 in three Main Branches of the BCEAO viz. Dakar, Ouagadougou and Bamako. As part of the actions aimed at building the capacities of economic and financial administrations as well as credit institutions of the Union member States, the COFEB pursued its activities under vocational degree courses. During the 2005 financial year, the Centre managed the Class 27 and 28. The Class 27 which completed their course in December 2005 with the presentation of a thesis brought together 25 trainees from the following institutions : - Economic and Financial Administrations : 20 ; 58 Annual Report - 2005 - National Bank of Rwanda : 02 ; - Central Bank of the Republic of Guinea : 02 ; - Other (private structures) : 01 ; The distribution of fellow trainees of Class 28, 42 in number, whose courses started on November 2, 2005, is as follows according to their institutions of origin : - Economic and Financial Administrations : 33 ; - Central Bank of the Republic of Guinea : 02 ; - National Bank of Rwanda : 03 ; - Banks and Financial Institutions : 04 ; Under cooperation with external partners, the following actions were carried out. - Under the joint BCEAO/BEAC project on capacity building in Central and West Africa, the following actions were conducted : component on training in macroecono- mic management : 2 courses brought together a total of 69 participants including 05 from BCEAO. In addition, a local trainer training session on microfinance was held for 07 trainers from BCEAO and BEAC. Two external sessions were organised in favour of 02 employees from BCEAO and 01 employee from BEAC. Furthermore, the document on the third phase (2006-2009) was adopted. component on debt management : 02 national workshops under assistance to the States were organised in GuineaBissau and Chad. - under International Monetary Fund Institute (IMF) : two courses, which brought together 56 participants (including 19 from BCEAO) were organised in Dakar. 2.2 - Expansion of BCEAO's Network The expansion of the infrastructures of the Central Bank was notably marked by the pursuit of the construction of the new building for the Bissau-based Main Branch which started on BCEAO’s INSTUTIONAL AND ADMINISTRATIVE FRAMEWORK November 1, 2004 in order to equip the national branch with appropriate and secured premises compatible with the facilities required for the operation of services. As at December 31, 2005, 65% of the work was realised. - pursuing the migration towards freeware ; Besides, under the realisation of recreational centres of the main Branches of the BCEAO in Ouagadougou and Niamey, the work in the 2005 year concerned the completion of sites of Niamey and Ouagadougou. The constructions in Abidjan and Bamako and Lome started. In Cotonou, a parcel of land has been bought in November 2005. Servers, micro-computers and printers purchased before 2000 were replaced by new equipment. The new infrastructure put in place relies on a network storage system of type SAN (Storage Area network). Thus, the purchases consisted of 175 servers, 817 micro-computers and 195 printers. Concerning security, the programme on the strengthening of the security system on all the Central Bank's sites was completed for the Bank's security and the control of the access to the buildings. The restoration of the fire security installations is expected to be completed in 2006. In this respect, architectural studies were initiated in all the countries in order to set up vehicle portals for the banks at the entries of the buildings of BCEAO Main and SubBranches. The sorting and cash rooms were refurbished in order to improve working conditions regarding the constraints inherent to the use of banknote processing machines. 2.3 - Information and Communication System The achievements made in 2005 aimed at enhancing the security and the availability of the information system, improving communication and collaboration tools, consolidating existing infrastructures and controlling costs. Thus, the main tasks carried out consisted of : - replacing servers and working stations ; - development of the technical architecture of the Headquarters' local network ; - replacing the wiring and local networks in the Main Branches ; - recasting the intranet ; - establishing an online training platform ; - developing new computer applications. In order to strengthen the internal security, a new local network architecture based on an increased segmentation was developed and put in place at the Headquarters. Rewiring and active components capable of supporting data rates provided by the computer equipment put in place were deployed in the Main Branches. Under costs control, the Central Bank pursued its policy of computer system and applications migration towards freeware. In this context, the OpenOffice office automation package was spread on all the working stations. The new servers operationalised were configured with the LINUX operating system. Furthermore, new computer applications were developed on a free development platform. These applications cover the fields of management of activity indicators, monitoring of employees' activity time, management of the economic situation and indicators, management of employees' vacations and analytical accounting. An intranet was also designed and developed around the freeware. The new system incorporates advanced inter-working functionalities. The Central Bank acquired an online training platform with course modules on the new OpenOffice office automation package, com- Annual Report - 2005 59 BCEAO’s INSTUTIONAL AND ADMINISTRATIVE FRAMEWORK puter applications, management and English with a view to increase productivity and performance of its staff. 2.4 - Modernisation of Documentation and Archives The modernisation of the documentation and archives of the BCEAO initiated since 2000, aims at providing the Bank with an integrated system allowing all its sites to share archives and documentary resources through the use of appropriate computer tools. It also provides for rearranging the premises where documents are stored in order to make them more functional and conformed with existing conservation and security standards. The main actions carried out in 2005 in this context focused on the training of the staff in charge of the documentation and archives management to the Alexandrie documentary software and on the work related to the development of a classification system of current documents. A training session to the advanced functions of the Alexandrie documentary software was organised on July 25-27, 2005 at the Headquarters of the BCEAO. It brought together fourteen (14) participants from the Headquarters of the Central Bank, its National Head offices and from the General Secretariat of the WAMU Banking Commission. The classification system of current documents allows to complete the procedures on the management of intermediary and definitive archives. The objective pursued by its implementation is to make available to the employees tools to the classification of documents stored in the office rooms in order to easily find documents when searched for. Under the preparation of this operation, a questionnaire survey was conducted with a sample of executive staff and interview sessions were organised with a panel of secretaries in order to assess the needs. The exploita- 60 Annual Report - 2005 tion of the collected data will allow to put in place an harmonisation policy of the practices on the classification of documents in the Secretariats of the Departments of the Central Services as well as classification plans for current documents per Service. 2.5 - Activity and Operation Control Mechanism The work carried out in 2005 is part of the pursuit of the efforts to strengthen the control mechanism put in place in 2003 and based on an efficient risk management. This work focused notably on the design of control tools as well as training and sensitisation actions. Concerning the first level control, under the chapter of control tools, the activities focused on the improvement of the reporting of control outcomes, internal control assessment, operating procedures drawing up and updating of the regulatory texts and procedures database on the intranet network. The framework of the control outcomes reporting was subject to changes in order to reinforce the exhaustiveness and the quality of information on risks as well as causes of the dysfunctions which were identified. With a view to enable a better understanding of the nature of the risks identified during the controls, generic risks comprised in the risks families set in 2003 were specified. The assessment of the quality of the internal control activities was carried out in the form of self-assessment. This approach required, on the one hand, the definition of the main components of the Bank's internal control viz. control environment, risk assessment, control activities, communication and information system as well as piloting and, on the other hand, the drafting of questionnaires according to the activities and the components of the internal control. Self-assessment was conducted through the development of a computer application. The outcomes enabled to determine the residual risks per operation and centre. BCEAO’s INSTUTIONAL AND ADMINISTRATIVE FRAMEWORK The drawing up of operating procedures was pursued in 2005. Thus, most of the Departments of the Central Services completed the drafting of their procedures manuals. This drafting is being done at the National Head Offices level. Besides, the need to ensure the availability and accessibility of regulatory texts and procedures and thus limit the dysfunctions due to their ignorance, translated in the putting on the Intranet network the relevant documents adopted by the Bank in 2006. Concerning the inspection and internal audit, second level of the control, the adaptation and modernisation of working and method tools induced by the introduction of the internal audit function were pursued with the establishment of missions to assess the action taken regarding the recommendations made. These missions aim at assessing the progress achieved in the implementation, by the control structures, of the recommendations made by the various missions. In addition, missions to assess the quality of the operations control, and the degree of efficiency of the activities led by the operational structures were pursued. In this respect, audit missions were organised with a view to assess the security system and installations as well as information security of the Bank. Banknote destruction missions were also conducted to support the demonetisation operations in order to ensure that cellars on all the sites of the Bank meet storage standards and to limit property and issuance risks associated to activities related to the conservation of values. Furthermore, missions to supervise handingover of duties by staff occupying the positions of Directors and Branch Managers were conducted. In order to ensure an efficient exploitation of the tools designed and enhance risk culture, training was provided to the users. In this regard, under the first level mechanism, five sensitising and training actions in the form of videoconferencing or meetings with the operational structures were organised over the March 22-August 22, 2005 period. They focused on drafting the Bank's operating procedures, contents of monthly reports, methodology to identify and monitor new risks, internal control and the modalities for self assessment as well as the use of the relevant computer application. As part of the actions capacity-building of the inspectors and internal auditors, emphasis was put on the training focusing on the mastery of audit techniques specific to a central bank's environment. The inspectors and auditors benefited from a specific training on computer audit consistent with the important development of the Bank's computer system. As concerns the third level of control, the external control, the mechanism in force following the updating in 2004 of the terms of reference for the control of the BCEAO accounts was not subject to any change. A mission of the International Monetary Fund paid a visit to the Headquarters of the BCEAO on July 18 -29, 2005 to realise a review on the safeguarding of its resources and to update the first assessment conducted in October 2001. The objective pursued was to ensure that the control, accounting, information and audit systems as well as the legal framework of the Central Bank are likely to guarantee the safeguarding of its resources. 2.6 - Management Control Mechanism The deployment of the management control mechanism within the Central Bank was pursued in 2005 with the establishment of the first business plan of the Central Bank. In addition to this important steering tool, the implementation work of the management control was pursued with notably the updating of the segmentation of the activities per Annual Report - 2005 61 BCEAO’s INSTUTIONAL AND ADMINISTRATIVE FRAMEWORK Centre, production of indicators and management dashboards, launching of the project for the automation of indicators processing. Established over a three year period (20062008), the business plan highlights the strategic orientations of the Central Bank and their breaking down into short and medium term objectives. It has been built around eighteen (18) occupations. In 2005, the implementation work of the management control system focused notably on : - the updating of the list of activities and indicators per occupation ; - the production of indicators and management dashboards ; - the launching of the project for the automation of the indicators processing. Thanks to the creation of the "management and supervision of payment systems" and " performances piloting and management" occupations, as well as to the development of activities related to the management of information technologies and telecommunications, an updating of the list of activities and operations per occupation was realised. Thus, 1,825 elementary operations were listed. On the basis of these elementary operations, 241 activities were defined and grouped into 18 occupations. The indicators and indicators sheets of all the responsibility centres were also updated. As part of the monitoring of activities per occupation and improvement of the performances of the responsibility centres, monthly, quarterly and half-y yearly management dashboards for the Governor and National Directors were regularly produced. Furthermore, the outcomes of the indicators of the two previous fiscal years were exploited, with a view to determine internal management standards. The objective pursued is to have reference data as part of the production of dashboards. 62 Annual Report - 2005 The management control of the BCEAO entered its implementation phase with the launching of the manual for the production of indicators in January 2003 at the level of the Departments of the Central Services and Main Branches of the BCEAO. This allowed to produce the management dashboards of the Governor and National Directors. Pending the purchase of a software taking into account all the components of the management control, the BCEAO envisaged to automate the processing of indicators. In this regard, a descriptive document defining the needs was drawn up. To meet the needs which were expressed, an application of type "web" known as SAGINA (Automated system of activity indicators management) was developed and presented on December 14, 2005. The SAGINA project aims mainly at automating the processing of indicators with a view to facilitate data collecting and reduce the time required for managing dashboards production. This project aims at : - minimising the risks related to manipulation of indicators manual production. These risks focus mainly on information loss, nonreliable data and errors occurrence ; - sharing in real time common information to all the sites ; - standardising working methods at the level of each responsibility Centre. The automation of indicators processing represents for the management control : - the storing instrument of the database on occupations, activities, operations and indicators ; - the tool for processing and aggregating the outcomes of the management tools and monitoring of the Bank's activities ; - the tool for reporting on management dashboards. BCEAO’s INSTUTIONAL AND ADMINISTRATIVE FRAMEWORK Final recipe tests of the SAGINA application for its operationalisation are currently carried out. In summary, the implementation work of the steering tools were pursued in 2005. The next availability of the calculation components is expected to enable the full implementation of the management control within the Central Bank. Annual Report - 2005 63 VII - BCEAO’s FINANCIAL ACCOUNTS T he Central Bank’s accounts closed on December 31, 2005 were marked by the recasting of the institutional and regulatory framework of foreign exchange management at the level of the operations account and by the pursuit of the implementation of the IAS/IFRS standards. On the asset side, this decrease was mainly due to the decline in the assets in foreign currency and operations on behalf of National Treasuries. On the liability side, the decline was due to the deposits with the Central Bank and to the liabilities to the International Monetary Fund. 1 - BALANCE SHEET ANALYSIS The balance sheet figure totalled CFAF 5,099.9 billion, down by CFAF 38.4 billion from the level reached the previous financial year. Annual Report - 2005 65 BCEAO’s FINANCIAL ACCOUNTS 1.1 - Analysis of Asset Items The market value of gold stock increased by 70.7 billion to 315.5 billion as at December 31, 2005 compared to 244.8 billion as at December 31, 2004. This increase resulted exclusively from the rise in the average price of gold ounce from CFAF 208,701 as at December 31, 2004 to CFAF 269,001 as at December 31, 2005. Indeed, the volume of gold stock remained identical to the previous year's representing 36,484.42 kg (1,173,001.38 ounces). Thus, the foreign exchange reserves management policy shifted towards the diversification of foreign exchange investment tools, as from September 2005. Thus, the Central bank's financial instruments portfolio amounted to 1,567.3 billion as at December 31, 2005. 2004 Fund-related assets amounted to 48 billion compared to 28.6 billion as at December 31, 2004 or a 19.4 billion increase due to the developments in the reserve position. Indeed, the reserve position of the Union States in the Fund increased by 22.4 billion from 23.5 billion as at December 31, 2004 to 45.9 billion as at December 31, 2005 due to the increase of the Fund's assets in national currency. On the other hand, the SDR-denominated assets of the Central Bank declined by 3.0 billion to 2.1 billion as at December 31, 2005 compared to 5.1 billion as at December 31, 2004. Foreign currency holdings declined by 60.0 billion to 3,453.8 billion as at December 31, 2005 from 3,513.8 billion a year earlier due to the net balance of the external transfers degradation. Foreign currency holdings held in the Operations Account declined by 1,613.8 billion or 46.8 % to 1,835.6 billion as at December 31, 2005, from 3,449.4 billion as at December 31, 2004. This decrease was mainly due to the amendment to the Operations Account Agreement by Addendum n°1 signed on September 20, 2005 between BCEAO and the French Treasury, coming into force on September 1, 2005. 66 Annual Report - 2005 2005 Changes Value % Billion CFAF Operations account 3,449.4 1835.6 -1,613.8 -46.8 -6.8 -12.2 -5.4 79.4 outside the Franc zone 9.2 10.8 1.6 17.4 Financial instruments 0.0 1567.3 1,567.3 - 3.8 4.1 0.3 7.9 4.5 4.9 0.4 8.9 53.7 43.3 -10.4 -19.4 3,513.8 3,453.8 -6 60.0 -1 1.7 Correspondents in the Franc Zone Correspondents Cash in foreign banknotes West African Monetary Agency Related claims Total Source : BCEAO. BCEAO’s claims fell by 4.7 billion to 473 billion compared to 477.7 billion as at December 31, 2004. As at December 31, 2005, the breakdown of Central Bank’s claims was as follows : BCEAO’s FINANCIAL ACCOUNTS The value of fixed assets rose by 9.6 billion from 202.3 billion in 2004 to 211.9 billion in 2005. 2004 2005 Changes Value 1.2 - Analysis of Liability Items % Billion CFAF Claims on credit institutions 2.5 11.7 9.2 368.0 Treasuries 475.2 461.3 -13.9 -2.9 Monetary claims 382.4 368.9 -13.5 -3.5 Financial claims 92.8 92.4 -0.4 -0.4 477.7 473.0 -4 4.7 -1 1.0 Claims on National Total The value of banknotes and coins in circulation stood at to 2,213.9 billion compared to 1,988.1 billion as at December 31, 2004. Creditor accounts and deposits fell by 222.5 billion from 1,226.3 billion in 2004 to 1,003.8 billion as at December 31, 2005. The rise can be analysed as follows : 2004 2005 Changes Value % Billion CFAF Source : BCEAO. Banks and foreign The operations carried out on behalf of National Treasuries amounted to 514.3 billion compared to 599.7 billion in 2004, or a 85.4 billion fall induced by the following drawings and repayments : institutions 66.0 79.1 13.1 19.8 96.3 71.7 -24.6 -25.5 651.0 522.9 -128.1 -19.7 399.6 317.6 -82.0 -20.5 13.4 12.5 -0.9 -6.7 1,003.8 -2 222.5 -1 18.1 Banks and WAMU common institutions Credit institutions National Treasuries and other public bodies Other deposit SAF GPRF Use of IMF credit Other Total accounts Total 1, 226.3 Source : BCEAO. Billion CFA F Balance as at 12/31/04 0.5 549.9 0.2 49.1 599.7 Drawings 0.0 21.8 0.0 0.0 21.8 -0.5 -114.3 -0.2 0.0 -115.0 0.0 7.8 7.8 0.0 56.9 514.3 Repayments Revaluation Balance as at 31/31/05 Source : BCEAO. 0.0 457.4 Under operations with the International Monetary Fund, liabilities declined by 96.7 billion to 519.2 billion compared to 615.9 billion a year earlier. Provisions for liabilities and charges rose by 3.7 billion to 31.0 billion in 2005 from 27.3 billion in 2004. Other liabilities fell by 17.1 billion from 180.1 billion as at December 31, 2004 to 163.0 billion as at December 31, 2005. The capital and reserves item rose by 90.1 billion to 1,148.6 billion after the following changes : Annual Report - 2005 67 BCEAO’s FINANCIAL ACCOUNTS 2004 Value Billion CFAF Capital 134.1 134.1 0.0 Merger surplus 43.6 43.6 0.0 Statutory reserve 59.8 62.7 2.9 General reserve 49.4 49.4 0.0 18.9 18.9 0.0 Special revaluation reserve 01/11/94 Gold revaluation special reserve 01/11/94 77.2 77.2 0.0 Gold revaluation reserve 6.6 77.3 70.7 Refinancing risk reserves 19.7 19.7 0.0 0.0 4.3 4.3 Other Reserves Building revaluation difference Carry forward 106.6 106.6 0.0 356.1 344.8 -11.3 138.5 162.0 23.5 48.0 48.0 0.0 1,058.5 1,148.6 90.1 Foreign currency revaluation fund General banking risk fund TOTAL 2004 2005 Change Source : BCEAO. EARNINGS Changes Value Earnings from credit operations 12.2 12.3 Earnings on foreign assets 106.6 100.6 -6.0 - Operations account 106.2 88.1 -18.1 - Interest on foreign currency holdings 0.4 6.1 5.7 Earnings on financial instruments 6.4 0.1 0.0 6.4 Earnings on exchange operations 41.7 55.2 13.5 Other earnings 33.0 5.6 -27.4 193.5 173.7 -1 19.8 TOTAL CHARGES Interest charges 17.5 16.2 -1.3 - Charges on operations with IMF 1.7 2.3 0.6 - Charges on operations with other correspondents 0.1 0.1 0.0 15.7 12.3 -3.4 0.0 1.5 1.5 - Interest paid to customers Charges on financial instruments Charges on exchange operations 22.0 28.1 6.1 Operating expenses 37.6 98.9 -10.6 - Maintenance of banknotes and coins in circulation 37.6 27.6 -10.0 - Overheads Appropriations 71.3 -0.6 21.8 19.5 -2.3 2 - STATEMENT OF PROFIT AND LOSS Appropriation to depreciation 16.1 15.4 -0.7 At the end of twelve months of activities, the Bank recorded in 2005 a profit of 8.7 billion, down by 10.6 billion compared to the previous financial year. Appropriations to Provisions 5.7 4.1 -1.6 From one financial year to another, earnings declined from 193.5 billion to 173.7 billion and charges from 174.2 billion to 165 billion. They were distributed as follows : 68 2005 Billion CFA F Annual Report - 2005 Other charges S/TOTAL RESULT FOR THE FINANCIAL YEAR TOTAL Source : BCEAO. 3.4 2.3 -1.1 174.2 165.0 -9.2 19.3 8.7 -10.6 193.5 173.7 -1 19.8 BCEAO’s FINANCIAL ACCOUNTS 2.1 - Earnings Earnings fell by 19.8 billion or 10.2% to 173.7 billion in 2005 from 193.5 billion in 2004 driven by trends in the following elements : Earnings on credit operations remained stable at 12.3 billion. This situation resulted mainly from the contrasted effects of the slight increase of the earnings generated by the Central Bank assistance to credit institutions and National Treasuries and from the decline of the remuneration of Government securities held by the Bank and products from the debit balances and consolidated liabilities. 2004 2005 Changes Value % Billion CFAF Credit institutions refinancing Assistance to National Treasuries 0.8 1.1 0.3 37.5 10.7 10.9 0.2 1.9 Earnings on Government securities 0.4 0.3 -0.1 -25.0 Debtor balances and consolidated claims 0.3 0.0 -0.3 -100.0 12.2 12.3 0.1 0.8 TOTAL Source : BCEAO. From a financial year to another, earnings on foreign assets dropped by 6.0 billion from 106.6 billion to 100.6 billion due mainly to the implementation of the new institutional and regulatory framework of Foreign exchange reserves. Indeed, earnings collected under the remuneration of assets deposited in the operations account with the French Treasury stood at 88.1 billion in 2005 compared to 106.2 billion in 2004, reflecting a decrease of 18.1 billion subsequent to the decrease in the assets held in the operations account following the application of clauses of the Addendum N°1 of the Operations Account Agreement. On the other hand, the earnings generated by the financial instruments portfolio amounted 6.4 billion. Other earnings fell by 27.4 billion to 5.6 billion from 33 billion in 2004. They were mostly made up of miscellaneous earnings amounting (1.7 billion), transfer of provisions and depreciation (2.8 billion), profits carried over from previous years (0.8 billion) and exceptional earnings (0.3 billion). 2.2 - Charges Charges under the financial year fell by 9.2 billion to 165 billion in 2005 from 174.2 billion in 2004 due mainly to the contrasted trends of charges on exchange operations and operating expenses, which amounted to 28.1 billion and 98.9 billion in 2005 compared to 22 billion and 109.5 billion in 2004, respectively. The 10.6 billion decline in operating expenses was due to the combined effect of a decrease in banknotes and coins maintenance costs and overheads, which fell by 10 billion and 0.6 billion respectively. This significant decrease resulted from the efforts made to strengthen the costs control of the Central Bank. Appropriations to depreciation and provisions stood at 19.5 billion from 21.8 billion a year earlier. Other charges dropped by 1.1 billion to 2.3 billion in 2005 from 3.4 billion in 2004. Annual Report - 2005 69 BCEAO’s FINANCIAL ACCOUNTS 3 - ACCOUNTS AUDITING The accounts of BCEAO’s Branches were audited by the following National Auditors appointed by the Ministers of Finance at the conclusion of a bidding process, in accordance with Article 64 of the Statutes : - in Benin, BENIN EXPERTISE firm, represented by Mr. Alidou KOUSSE ; - in Burkina, SECCAPI firm, represented by Mrs. Françoise TOE SAWADOGO ; - in Côte d’Ivoire, DELOITTE & TOUCHE firm, represented by Mr. René EDI ; - in Guinea-Bissau, BDO/MBA firm, represented by Mrs. Marie BA ; - in Mali, SARECI firm, represented by Mr. Bourahima SIBY ; 70 Annual Report - 2005 - in Niger, MAZARS & GUERARD/KMC firm, represented by Mr. Hassane KENEYE ; - in Senegal, SYNERGIES AUDIT & CONSEILS firm, represented by Mr. Libasse DIAGNE ; - in Togo, AFRIQUE AUDIT & CONSULTING firm, represented by Mr. Anani CLOMEGAH. Centralised accounts were audited by the COOPERS & LYBRAND/DIEYE firm, represented by Mr. Aziz DIEYE. The auditing of the application of the Agreement on an Operations Account signed on December 4, 1973 between France and the Union States was carried out for the French Republic by Mr. Michel REVEYRAND and for the Union by the COOPERS & LYBRAND/DIEYE, external auditor. BCEAO’s FINANCIAL ACCOUNTS 4 - AUDIT REPORT ON FINANCIAL STATEMENTS OF THE CENTRAL BANK OF WEST AFRICAN STATES OPINION REPORT Financial Year closed on December 31, 2005 Coopers & Lybrand/Dièye 2, place de l’Indépendance Immeuble BIAO – 1er Etage B.P. 188 - Dakar Tel. : 821.85.88 - 821.86.71 Fax : 821.75.94 Member of Coopers & Lybrand (International) Honourable Directors of the Central Bank of West African States- BCEAO Avenue Abdoulaye Fadiga DAKAR Honourable Directors, In pursuance of the mandate entrusted to us by the WAMU Council of Ministers on September 11, 2003, we hereby present our audit report on the attached balance sheet and income statement of the BCEAO for the financial year closed on December 31, 2005. Our assignment as external auditors included auditing of the accounts of the BCEAO Headquarters and centralised accounts of the National Head Offices which in turn had been audited by the National Auditors of the different WAMU member countries. The preparation of financial statements is the exclusive responsibility of the Management of the Central Bank while our role is to check their conformity with international accounting standards. An audit consists in reviewing through sampling the meaningful elements justifying the various items of the financial statements. An audit also consists in ascertaining that accounting principles are consistently implemented and that the meaningful estimates retained in the accounts statement are reasonable. We believe that our audit can validly provide a basis for the expression of an opinion on the financial statements of the Central Bank. Our audit was carried out in accordance with international auditing standards as defined by IFAC and covered all the verifications that we deemed necessary in view of the utilisation, in the case of National Head Offices, of the work done under their responsibility by National Auditors. Due to the socio-political crisis that Côte-d’Ivoire has been going through since the 2002 financial year, the Bouaké, Korhogo and Man Branches were forced to cease their activities between September and October 2002. Besides, these branches were attacked with subsequent damage yet to be assessed due to the insecurity prevailing in the area. The National Auditor for Côte d’Ivoire could therefore not audit the accounts of these branches for us to be able to give an opinion on them. In conclusion and based on the foregoing, our opinion is that the accounts of BCEAO closed on December 31, 2005 are true and sincere and reflect the financial position of the Bank and the result of its operations closed as at that date. Done in Dakar on June 13, 2006 Aziz DIEYE Managing Partner Annual Report - 2005 71 BCEAO’s FINANCIAL ACCOUNTS REPORT ON THE CHANGE IN METHOD Coopers & Lybrand/Dièye 2, place de l’Indépendance Immeuble BIAO – 1er Etage B.P. 188 - Dakar Tel. : 821.85.88 - 821.86.71 Fax : 821.75.94 Member of Coopers & Lybrand (International) Honourable Directors of the Central Bank of West African States - BCEAO Avenue Abdoulaye Fadiga DAKAR Honourable Directors, In accordance with international accounting principles (IASC 1 Standard), financial statements shall be prepared and presented from one financial year to another according to set standards, methods and formats in order to ensure their comparability in space and time. Departing from this basic principle can only be justified by the search for a truer and more correct image. The Central Bank of West African States (BCEAO) changed during the financial year under review its method of accounting for the balance of costs for banknotes and coins related to the demonetisation operation of the 1992 range for an amount of CFA F Million 25,061 which initially was expected to be written off over 3 years. During this financial year, the bank decided to adopt definitely the new international accounting standards and thus acted in accordance to the IFRS 1 standard setting the first-time application of IFRS conditions. The first time application of IFRS/IAS standards being a change in the accounting methods under IAS 8 Standard, the impact of this change is charged to the opening equity capital at the transition date. Under these circumstances, international audit standards require the external auditors to submit a report based on the elements supplied. This report must determine the incidence of the change in method on the financial statements. The change translated as follows : Result prior to change in method Result after change in method Incidence of change in method 12/31/2004 (Million CFAF) 19,276 -5,785 -25,061 Done in Dakar, on June 13, 2006 Aziz DIEYE Managing Partner 72 Annual Report - 2005 BCEAO’s FINANCIAL ACCOUNTS 5 - FINANCIAL STATEMENTS OF THE BCEAO AS AT DECEMBER 31, 2005 BALANCE SHEET OF BCEAO AS AT DECEMBER 31, 2005 Million CFAF (1) : The 2004 financial year figures have been reprocessed to make them comparable to those of the 2005 financial year. Annual Report - 2005 73 BCEAO’s FINANCIAL ACCOUNTS BCEAO’s STATEMENT OF PROFIT AND LOSS AS AT DECEMBER 31, 2005 Million CFAF (1) : The 2004 financial year figures have been reprocessed to make them comparable to those of the 2005 financial year. 74 Annual Report - 2005 BCEAO’s FINANCIAL ACCOUNTS STATEMENT OF CHANGES IN EQUITY CAPITAL AS AT DECEMBER 31, 2005 Million CFAF Annual Report - 2005 75 BCEAO’s FINANCIAL ACCOUNTS TABLE ON CASH FLOW AS AT DECEMBER 31, 2005 Million CFAF Million CFA F 76 Annual Report - 2005 CHRONOLOGY OF MAIN MONETARY POLICY MEASURES ADOPTED BY THE BCEAO BETWEEN 2002 AND 20051 January 7, 2002 The Central Bank made, value date January 7, 2002, its first invitation to tender for Central Bank bond issue under 2002. Thus, 400 bonds at a face value of 20.0 billion and with a 2-week maturity were auctioned. Six bidders whose bids totalled 17.3 billion were retained up to a maximum of 16.8 billion. The marginal rate was 5.00%. April 16, 2002 The Central Bank decided to raise from 3.00% to 9.00%, the reserve requirement ratio applicable to banks in Mali as from the formation period which started on April 16, 2002. Accordingly, the reserve requirement ratios applicable to WAMU banks were set, as from April 16, 2002, as follows : - Benin : 9.00% - Burkina : 3.00% - Côte d’Ivoire : 5.00% - Guinea-Bissau : 3.00% - Mali : 9.00% - Niger : 5.00% - Senegal : 9.00% - Togo : 3.00%. The reserve requirement ratio of credit-issuing financial institutions remained unchanged at 5.0% for all WAMU States. July 7, 2003 In view of the favourable results achieved in terms of inflation control and monetary stability, in general, the Central Bank decided to reduce its intervention rates by 100 basis points, or one percentage point as from Monday July 7, 2003. Thus, the discount rate was reduced from 6.50% to 5.50%, and repo rate, from 6.00% to 5.00%. This easing of interest rate policy was indicative of the confidence of the common central bank in the capacity of the Union financial system to ensure a sound and appropriate financing of regional economic recovery. It followed the dynamics of regional financial market which was revitalised notably through issues of government bonds organised in many of the Union States, with the assistance of the BCEAO. Lastly, the loosening of monetary policy reflected the confidence of the private sector, savers, investors and financial institutions in the robustness of the Monetary Union operating mechanisms. October 20, 2003 As the review of the economic, monetary and financial situation revealed some encouraging signs of economic recovery in most of the Union States, confirmation of falling prices and consolidation of foreign exchange reserves, the Central Bank decided to continue easing its monetary conditions by reducing its rates by 50 basis points, as from Monday October 20, 2003. Thus, the discount rate was lowered from 5.50% to 5.00%, and repo rate from 5.00% to 4.50%. This new flexibility of monetary policy was an expression of the confidence of the common central bank in the capacity of the financial system to contribute to the sound financing at a lower cost of economic activity revival in member States. It also followed the dynamics of regional financial market which was revitalised notably through issues of government bonds organised in many of the Union States, with the assistance of the BCEAO. March 16, 2004 The Central Bank of West African States decided to raise from 9.00% to 13.00%, the reserve requirement ratio applicable to banks in Benin, as from the formation period, which began on March 16, 2004. Thus, the reserve requirement ratios applicable to the WAMU banks were set, as from March 16, 2004 as follows : 1 These are measures which led to the change in the monetary policy instruments. Annual Report - 2005 77 - Benin : 13.00% - Burkina : 3.00% - Côte d'Ivoire : 5.00% - Guinea-Bissau : 3.00% - Mali : 9.00% - Niger : 5.00% - Senegal : 9.00% - Togo : 3.00% The reserve requirement ratio of credit-issuing financial institutions remained unchanged at 5.00% for all WAMU States. March 22, 2004 In view of the favourable trends observed in the orientation of economic activity, inflation control and consolidation of foreign exchange reserves, the Central Bank decided to continue easing its monetary conditions by reducing its rates by 50 basis points, as from Monday March 22, 2004. Thus, the discount rate was reduced from 5.00% to 4.50%, and repo rate from 4.50% to 4.00%. This new flexibility of monetary policy following reductions of Central Bank rates by 150 basis points in 2003, reflected the confidence of the common central bank in the capacity of the financial system to back up the economic recovery observed in the Union member States with financing at a lower cost. It also aimed at encouraging investment initiatives to consolidate economic activity. June 16, 2005 The Central Bank of West African States decided to raise the reserve requirement ratio applicable to banks from 13.00% to 15.00% in Benin, from 3.00% to 7.00% in Burkina, and from 5.00% to 9.00% in Niger, as from the formation period, which began on June 16, 2005. Thus, the reserve requirement ratios applicable to the WAMU banks were set, as from June 16, 2005 as follows : - Benin : 15.00% - Burkina : 7.00% - Côte d'Ivoire : 5.00% - Guinea-Bissau : 3.00% - Mali : 9.00% - Niger : 9.00% - Senegal : 9.00% - Togo : 3.00%. The reserve requirement ratio of credit-issuing financial institutions remained unchanged at 5.00% for all the WAMU States. 78 Annual Report - 2005 MAIN DOCUMENTS PUBLISHED BY THE CENTRAL BANK OF WEST AFRICAN STATES Periodicals 1 - BCEAO Annual Report - from 1956 to 2005 - (annual) 2 - Notes d'Information et Statistiques (Information Notes and Statistics) - from 1956 to 2004 - Monetary Statistics (monthly) - Economic Statistics (quarterly) - Studies and Research (quarterly) - General Information (quarterly) 3 – Bulletin mensuel de conjoncture (Monthly economic bulletin) -October 2005 to March 2006 4 – Bulletin mensuel de statistiques monétaires et financières (Monthly monetary and financial statistics bulletin) - from January 2005 to March 2006 5 - Note trimestrielle d'Information (Quarterly Information Note) - from March 2005 to March 2006 6 - Directory of Banks and Financial Institutions - from 1967 to 2004 - (annual) 7 - Balance Sheets of Banks and Financial Institutions - from 1967 to 2004 - (annual) - Balance Sheets of Banks - from 1967 to 2003 - Balance Sheets and result accounts of banks and financial institutions -2004 8 - Compilation of Legal and Regulatory Texts 2003 9 - Monographs on Decentralized Financial Systems - from 1993 to 2003 (annual) Ouvrages 10 - Plan Comptable Bancaire de l'UMOA (WAMU Banking Chart of Accounts) (4 volumes) - Dakar : BCEAO Publications, August 1994 - Compilation of directives relating to recording and assessment of banking operations - Volume I : General Regulatory Framework - Volume II : Synthetic Documents - Volume III : Transmission of Synthetic Documents 11 - History of the West African Monetary Union (3 volumes in French and English) - Paris : Georges Israël Publishing House, January 2000 12 - Système Comptable Ouest Africain (West African Accounting System) (SYSCOA) (4 volumes) - Company General Chart of Accounts - Paris : Foucher Publishing, December 1996 - Implementation Guide - Paris : Foucher Publishing, October 1997 - Minimum Cash System - Paris : Foucher Publishing, October 1997 - Bridge Tables - Paris : Foucher Publishing, October 199713 - Méthodologie d'Analyse Financière (Methodology of Financial Analysis) - Dakar : BCEAO Publications, 2004 - Annual Report - 2005 79 RELATÓRIO ANUAL DE 2005 IMPRIMERIE BCEAO VERSÃO RESUMIDA Avenue Abdoulaye Fadiga BP 3108 - Dakar - Sénégal www.bceao.int Original : Francês
Documents pareils
2012 ANNUAL REPORT SUMMARISED VERSION Original
III - CURRENCY ISSUE AND PAYMENT SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 3.1 - MANAGEMENT OF CURRENCY OUTSIDE BANKS . . . . . . . . . . . . . . . . . ...
Plus en détail