The Central Bank of West African States, under the leadership of His Excellency Jean-Claude Kassi Brou, recently announced a decision aimed at ending the liquidity crisis in the regional sovereign debt market. The purpose of this decision is to help member states of the West African Economic and Monetary Union (UEMOA) to mobilize the necessary resources to finance their budget deficits.
In an announcement made public on April 11, 2023, the BCEAO temporarily authorized credit institutions to exclude the public securities they hold in their portfolio from the scope of the prudential standard relating to loans to the main shareholders, senior managers , staff and auditors.
In other words, the banks, in which the States are shareholders, now have more flexibility to contribute to the financing of public policies through the acquisition of public securities such as treasury bills and bonds.
This decision by the Central Bank is a response to the current liquidity crisis in the region’s sovereign debt market. Banks now have the option of buying more government securities to help WAEMU member states mobilize the resources needed to finance their budget deficits. This should help alleviate the liquidity strain that is currently preventing states from mobilizing the resources they need.
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