Finance

WAEMU: Food underproduction drives inflation again

Wednesday, 22 June 2022 07:37
WAEMU: Food underproduction drives inflation again

(Ecofin Agency) - Earlier this month, the BCEAO raised its key rates in a bid to curb inflation. However, its recent economic indicators suggest that monetary solutions will not be enough to achieve the targeted goal. Production needs to be revived, food production especially. 

In West Africa, inflation is mainly driven by food underproduction, the regional central bank (BCEAO) confirmed in a report published Monday (June 20).  Nevertheless, the institution will mainly take monetary solutions, notably increasing its policy rate, to reduce money supply. 

According to the report, in the quarter ending in March 2022, inflation reached 6.4% in the WAEMU region. This is more than twice the convergence rate (+/-1% on a reference value of 2%) approved by member countries.

The food component alone rose by 5.2% but some products recorded no quarter-to-quarter change in prices. The price of agricultural commodities increased all thanks to higher prices in global markets. The products whose prices rose the most are cocoa, cashew nut, palm oil, and rubber but, as those segments are controlled by multinationals, the rising prices have no noticeable impact on the revenues of local producers. 

During the 2021/2022 season that ended in late March,  food crop production declined by 8%. A total of 66.3 tons of cereals, tubers, and other crops were harvested in the region, according to official statistics reported by BCEAO. This is down by 8.1% compared to the 2020/2021 season (that season, production was already down by 6.7% compared to the previous season).  

The BCEAO's solution to reduce the amount of money circulating in the region is normal because, in economic theories, lowering key rates is a solution to reduce inflation. Also, underproduction coupled with excessive demand can widen the gap between exports and imports, therefore increasing the region’s trade deficit.  

Yet, the urgent action to take should be for the central bank to finance food production as it did to support its member states during the coronavirus pandemic. In the subregion, only 3.6% of bank credits go to the fisheries, livestock, and agriculture sectors. Meanwhile, other sectors  (such as the tertiary sector, which includes consumption and services) that receive the largest portion of bank credit have stable prices.

The central bank’s indicators point that the institution should adopt a case-by-case approach to control inflation in the region. During the quarter reviewed, Burkina Faso recorded the highest inflation (10.3%), followed by Mali and Togo (8.2%). In those countries, the situation is complex given that wage increase is not a sustainable solution for them.  Wage increase would increase the fiscal deficit and shake businesses (by increasing their wage bills). It will also cause inflation to rise again. 

 Commercial banks, which seem to have no other choice from a prudential standpoint, continue to inject more money into central governments. For countries like Burkina Faso, Mali, Niger, and Benin (recently), the situation is slowly but surely becoming more complicated. Microeconomic difficulties are exacerbated by security challenges that add to the already existing pressure on governments.


Idriss Linge



 
Telecom


 
Public Management


Ecofin Agency covers the news from 9 business sectors in Africa: Public management, Finance, ICT, Agribusiness, Electricity, Mining, Oil and Gas, Comms and Laws. Ecofin Agency is also creating and management specialized medias, in paper and on the web/social networks, for institutions or African publishers.

AGENCE ECOFIN

Mediamania Sarl
Rue du Léman, 6
1201 Genève
Tél: +41 22 301 96 11

REDACTION
redaction@agenceecofin.com

Public management
Aaron AKINOCHO
Borgia KOBRI
Moutiou ADJIBI

Finance
Idriss LINGE
Walid KEFI
Chamberline MOKO

Agribusiness
Espoir OLODO

Electricity
Gwladys JOHNSON

Oil and Gas
Olivier DE SOUZA

Mining
Louis-Nino KANSOUN

ITC 
Muriel EDJO

Comms
Servan AHOUGNON

Cameroon
Brice R. MBODIAM
Sylvain ANDZONGO
Monique MAY
Julienne Rose SENDE

Togo
Fiacre E. KAKPO
Waliyullah TAJUDEEN
Séna AKODA

Niger
Sandrine GAINGNE

Gabon
Stephane BILLE
Pierre-Celestin ATANGANA

Desk
Stéphane ALIDJINOU
Souha TOURE
Vahid CODJIA
Diane ZODEHOUGAN
Hikmatu BILALI

Translation
Schadrac AKINOCHO
Mouka MEZONLIN
Firmine AÏZAN



Digital
Omar SOKHNA
Mamadou DIOP
Bacary MANE
Abdel Razak MOULIOM

Digital Marketing
Jérémie FLAUX
Geraud ACHI
Jean Christian BERNARD
Franck FOUTE

Web publishing
Bakoly RAHARISOA
Rina RAMANANDRAISOA
Hasina RAJEMISON

Development
Dominique FLAUX

 


 
REGIE COMMERCIALE
AGENCE ECOFIN
Rue du Léman, 6
1201 Genève
Tél: +41 22 301 96 11
Fax: +41 22 301 96 10

Benjamin FLAUX
bf@agenceecofin.com 
Tél: +41 22 301 96 11 
Mob: +41 78 699 13 72

Voir page 
Nos services
 

 










 



Ecofin Agency is a news agency for economic and sectorial information. It was created in 2010 and it website was launched in June 2011.

Please publish modules in offcanvas position.