the potential economic impacts incurred by Mali, Burkina Faso and Niger.

the potential economic impacts incurred by Mali, Burkina Faso and Niger.
the potential economic impacts incurred by Mali, Burkina Faso and Niger.

On January 28, 2024, in a joint statement, the transitional governments of Burkina Faso, Mali and Niger announced their “immediate” withdrawal from ECOWAS, claiming that ECOWAS had become a threat to member states. The announcement was followed by official notifications from the three countries to ECOWAS on January 30, 2024. Despite their choice, these three countries are still considered members of ECOWAS, in accordance with article 91 of the revised ECOWAS treaty. ECOWAS which provides for a notification period of one year necessary to leave ECOWAS, and at the end of this period, if the countries have not withdrawn their notification, the withdrawal becomes effective. Consequently, ECOWAS considers the three countries as members until January 28, 2025. If their exit is confirmed, it will not be without consequences according to a study by the World Bank Group on the preliminary evaluation of potential economic impacts.

Political commercial

Firstly, their implications in terms of trade policy of leaving ECOWAS (while remaining in UEMOA) could impact trade. The increase in customs duties could lead to an increase in trade costs and a reduction in trade volumes between the three countries and ECOWAS. Exiting ECOWAS could result in the suspension of ETLS Scheme benefits for exports from the three countries to non-UEMOA ECOWAS countries, namely Ghana and Nigeria. This would mean that previously registered exporters could now face the CET external tariff – increasing the costs of their exports and reducing their export competitiveness. Exiting ECOWAS could lead the three countries to impose customs duties on imports from ECOWAS countries that are not members of UEMOA. This would increase import costs for consumption and investment and reduce import volumes. The three countries will no longer have access to ECOWAS forums to address trade policy issues from ECOWAS counterparts.

Trade facilitation

According to the World Bank report, the potential consequences on trade facilitation are difficult to assess. Several ECOWAS trade facilitation instruments which are reflected in the WAEMU instruments, have been partially integrated into national laws and regulations or are part of bilateral agreements on transit transport, which constitutes a solid basis. However, many trade facilitation instruments are not applied in practice (e.g. capping the number of checkpoints on corridors). It is likely that current practices, for better or worse, will continue to prevail regardless of ECOWAS membership. The three countries mainly use the ports of UEMOA countries. However, the transit corridor from Burkina Faso to the port of Tema could be impacted if cooperation with Ghana is affected by the exit from ECOWAS. A rerouting of traffic towards Lomé and Abidjan would then be expected.

Exit from ECOWAS and UEMOA

In the event of a rapid withdrawal from ECOWAS with an exit from UEMOA, major changes will take place in the flow of people, financial and regional financing.

On people flows, the withdrawal will automatically affect the immigration status of citizens, as they may be required to obtain a visa to travel to the region. Citizens may no longer be able to reside or establish businesses under ECOWAS agreements and may be subject to various national laws. The three countries will stop using ECOWAS passports, the ECOWAS biometric national identity card and the region-wide “ECOWAS Brown Card” motor insurance.

Financial flow

With the Financial Flow, there will be a reduction in remittances from the diaspora to the 3 ECOWAS countries from 2025. As for regional financing, the three countries will lose access to the Bank of Investment and Development of ECOWAS (EBID) in 2024. The EBID currently has 27 public sector projects underway in the three countries (9 in Burkina Faso, 8 in Mali and 10 in Niger) and 20 private sector projects (5 in Burkina Faso, 13 in Mali and 2 in Niger). These projects are collectively valued at approximately US$322 million (38% public sector projects and 62% private sector projects). The Bank’s portfolio in these three countries represents approximately 22.5% of the Bank’s total portfolio in the 15 Member States. The three countries contributed to the capital of the Bank for a total amount of approximately 33 million USD (Burkina Faso – 13 million USD; Mali – 9.5 million USD; and Niger – 10.5 million USD). ‘USD).

Monetary Policy

The BCEAO sharply increases interest rates (or tightens capital flow management standards) while the FCFA is under strong pressure. For all three countries from 2025, interest rates would be set at higher levels to control inflation and prevent currency depreciation. However, a depreciation of the new currency is likely (lack of track record, lower levels of pooled reserves and lack of guarantor of convertibility), leading to higher inflation. The short and medium term growth prospects (2024-2026) for the three countries are lower due to the exit from ECOWAS. The main transmission channels are: increased trade costs and reduced trade flows (i.e. imports from ECOWAS: food, fuel and electricity); disruption of transit corridors; and increased risk for investors and the cost of regional financing for WAEMU. The extent of the expected impacts will depend on the scenario, in particular the timing and modalities of exit from ECOWAS and the fallout on UEMOA and regional energy trade.

An exit from UEMOA would constitute a much more serious negative scenario. It could cause significant disruptions in UEMOA trade (imports). Furthermore, leaving the Monetary Union could significantly increase the risks of macroeconomic instability, which, combined with limited or no regional financing, could lead to sharp reductions in private and public investment. Imported inflation, the likely depreciation of the new currency and looser monetary policy could lead to high inflation. Private consumption could fall due to high inflation and reduced remittances if people flows are also affected by this disruption. Average annual growth could be significantly lower (initial estimates: 1.6 to 2.3% of GDP less in 2024, up to 3.8% of GDP less in 2025 and 2026 for the three countries) , with additional risks of macroeconomic crisis and debt crisis if the exit is not well managed. Even if the three countries remain in the WAEMU, an increased risk of leaving the WAEMU could further increase their country risk premia and regional financing costs at a time when gross financing needs are high and they are dependent on more and more of the regional WAEMU bond market. This could lead to reduced public spending to limit financing needs or increased debt vulnerability due to higher interest rates. Bond issues from Burkina Faso and Mali in February 2024 following the withdrawal from ECOWAS were undersubscribed and at higher yields. Current average yields on 3-year bonds are now 9-10% for Mali and Burkina (the highest in WAEMU).



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