REUTERS, Abidjan | Thursday
THE central bank that serves all the francophone West African countries, the BCEAO, has tightened the minimum reserve requirements for banks in some of the zone’s countries, but not in the area’s biggest economy, Ivory Coast.
Previously, minimum obligatory reserves of 3% were required of banks in all eight countries of the zone. The rate has now risen to 9% in Benin and Senegal and 5% in Niger.
The decision was taken last week by the Senegalese-based BCEAO.
The BCEAO said it had altered the rates “taking into account the recent and foreseeable evolution in the economic, monetary and financial situation” of zone countries.
Liquidity is normally ample in Ivory Coast at this time of the year until the start of cocoa and coffee marketing in the fourth quarter.
However, central bank sources said reserve requirements there had not been tightened because of the difficult economic situation after a military coup last December.
Business activity has dwindled and economic growth may well be negative this year as investors hold back ahead of elections to return the country to democratic rule starting in September.
The BCEAO said reserve requirements for credit institutions other than banks remained at 5%.
Key interest rates are also unchanged, with the discount rate at 6.50% and the repurchase rate at 6.00%. These rates were increased by 0.75 points from June 19.
The BCEAO said at the time it had raised the rates because of an increase in credit demand at a time of falling economic activity, a combination it saw as a threat to inflation and external accounts.
The BCEAO also said that the suspension of its money market activities would continue in the near term.
In the past it regulated liquidity on a weekly basis through the injection of funds or the sale of treasury bills, but has intervened little over the past two years, in an attempt to stimulate a regional interbank market.
The BCEAO is the common central bank of Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo, which share a common currency, the CFA franc, convertible at a fixed rate of 655.957 per euro guaranteed by the French Treasury.