Is the BCEAO authorized to repurchase 77 billion CFA francs in public securities from Niger?

Is the BCEAO authorized to repurchase 77 billion CFA francs in public securities from Niger?
Is the BCEAO authorized to repurchase 77 billion CFA francs in public securities from Niger?

According to an article published by the Ecofin agency on May 4, and taken up by several sites, the BCEAO is preparing to buy back 77 billion worth of Niger public securities on May 7. Note that the country defaulted on its debt the day after the sanctions. He resumed borrowing on April 26, mobilizing 457 billion FCFA over 3 different operations, we learn. According to the article, the repurchase operation targets securities issued by Niger, which mature within a period of between 3 months and 3 years.

The BCEAO, following the approach of the ECB (the European Central Bank), is not authorized to intervene in the primary debt market, that is to say it must under no circumstances buy securities issued by a Member State. Because this would be akin to directly financing this State, to printing money for this State. This is prohibited. On the other hand, can it repurchase securities, that is to say buy securities already held by initial buyers? In other words, can it intervene in the secondary debt market? Things seem a little unclear at this level. This operation appears to be the first of this type since the establishment of the sub-regional debt market in 2015.

To get banks to sell the Nigerien securities they hold without fear of losses, the BCEAO specified that they can sell these securities “without the need for a downward adjustment of their book value”, in other words these securities will be repurchased by the BCEAO at the initial book value if this is higher than the current selling price, i.e. the market price. The objective of the BCEAO, as we can see, is to relieve the country of part of its debt by taking it on board with a view to future restructuring, therefore allowing the country to “breathe”.

By taking over part of the Nigerien debtis the institution in its role?

Certainly, these are debt obligations which Niger will have to pay, one would be tempted to say? But is it up to the BCEAO to intervene in the normal functioning of the market? Why not let this state restructure all its debt with its creditors? Is it up to the BCEAO to do it? It will be recalled that in the context of the Greek debt crisis, the restructuring of this country’s debt was carried out by the IMF-EU-ECB troika.

It is not the ECB alone which took charge of this operation.

The operation would have amounted to direct financing of the Greek economy, which is prohibited by the treaties of this institution.

This type of “arrangement” must be avoided in the CFA zone. Other states could also request similar treatment, as the debt crisis seems to be looming on the horizon for them as well. They could rely on this precedent to ask the institution to take on part of their debt, debt which they will later restructure with it. We won’t be far from the “printing machine”. The BCEAO must avoid directly financing countries in any form whatsoever. We all know the origin of Niger’s current difficulties. This country had a resilient economy with good indicators. Today this economy is on the ground for reasons we know. It is normal that the debt market sanctions this situation.

Douglas Mountain

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The Circle of Liberal Reflections



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