• WAEMU’s foreign exchange reserves rose 42% in 2024 to reach CFA13.5 trillion
• The jump was driven by stronger export earnings, rising gold prices, and a better external environment
• The boost could give the regional central bank room to loosen monetary policy in 2025

Foreign reserves across the West African Economic and Monetary Union (WAEMU) reached a record CFA13.514 trillion ($23.4 billion) by the end of 2024, up 42% from the previous year. The rise, driven by stronger export revenues and higher gold prices, significantly strengthened the region’s financial safety net.

The Central Bank of West African States (BCEAO) had long cited fragile reserves to justify its tight monetary policy. But with this new windfall, the argument lost weight. Backed by robust export receipts in euros and dollars, and favorable conditions in the gold market, the BCEAO closed the year with a sharp increase in its foreign assets.

Most of the growth came from the foreign currency portfolio. Holdings in dollars and euros rose by 48%, jumping from CFA5.761 trillion to CFA8.54 trillion (about €13 billion). The central bank boosted its placements in short-term dollar deposits and institutional investments, worth CFA4.45 trillion, as well as euro-denominated bonds, which stood at CFA3.54 trillion.

A large share of the reserves was placed through the Bank for International Settlements (BIS) and the World Bank’s RAMP program, both offering safe short-term returns. Short-term placements more than doubled from 2023 to reach CFA4.454 trillion (€6.8 billion). The bond portfolio, by contrast, remained stable at CFA4.045 trillion, a cautious choice given uncertain interest rates.

The improved external environment also played a key role. WAEMU’s current account balance swung into a surplus of CFA3.0139 trillion (€4.6 billion) in 2024, after recording a deficit of over CFA3.5 trillion the year before. The rebound was largely thanks to higher global prices for key exports like cocoa, vegetable oils, and rubber.

Gold was another strong pillar. Although the BCEAO’s gold stock remained unchanged at 1.52 million ounces, its market value rose 38% to CFA2.53 trillion (€3.9 billion), up from CFA1.83 trillion a year earlier. This jump reflected the rise in global gold prices, with the value of an ounce climbing from CFA1.2 million to CFA1.67 million. These unrealized gains, while not part of the bank’s net income, helped boost its overall equity.

The BCEAO’s holdings of Special Drawing Rights (SDRs) at the IMF also grew to CFA2.235 trillion (€3.4 billion), from CFA1.697 trillion in 2023. The increase was due to a favorable exchange rate—up from 799 to 823 CFA per SDR—and the gradual rebuilding of its stock after post-COVID drawdowns.

Thanks to all these factors, the BCEAO’s net profit doubled to CFA685.9 billion (€1.05 billion) in 2024. Better returns from its liquidity management contributed to the gains.

This reserve cushion gives the BCEAO more than just breathing space. It strengthens its capacity to shield the region from external shocks and reinforces confidence in the fixed peg between the CFA franc and the euro. This is especially important as several WAEMU countries continue to face pressure on public finances.

With higher reserves, the central bank also gains flexibility to manage regional liquidity and external obligations. But the picture is not without risks. Much of the improvement is tied to market valuations. If global interest rates fall or gold prices drop, reserves could shrink just as quickly. And if import demand rises or export revenues weaken, the BCEAO may need to dip into its reserves as early as 2025.

For now, the central bank is cautious. But many in the market believe this financial buffer could open the door to lower interest rates in 2025. Inflation remains within target, and some analysts say the time is right for the BCEAO to shift focus.

“I hope the central bank will use this opportunity to support regional economic financing, rather than sticking only to inflation control,” said Dally Gotta, Chief Investment Officer at SOAGA, an asset management firm with offices in Cotonou and Abidjan.