Moody's: West African countries' exit from regional bloc could hinder growth

The decision of Burkina Faso, Mali and Niger to exit the Economic Community of West African States (ECOWAS) could hinder the bloc's economic growth, Moody's ratings agency said on Wednesday. It would be much more detrimental if they also decided to leave the West African Economic and Monetary Union (WAEMU), though that was not expected, the agency added.

The decision of Burkina Faso, Mali and Niger to exit the Economic Community of West African States (ECOWAS) could hinder the bloc's economic growth, Moody's ratings agency said on Wednesday.

It would be much more detrimental if they also decided to leave the West African Economic and Monetary Union (WAEMU), though that was not expected, the agency added. The three junta-led countries announced on Sunday that they were planning to leave ECOWAS, the region's main economic and political bloc. Their position on also leaving the monetary union has not been made clear.

"The three countries' departures would disrupt the economic integration that is ECOWAS' raison d'etre and weigh on business confidence, potentially hindering the bloc's economic growth," said Moody's in a statement. "While not our baseline expectation, an exit from WAEMU would be much more detrimental to sovereigns leaving the monetary union because of the credit support that WAEMU membership provides in terms of macroeconomic stability and reduced external vulnerability," it added.

Mali's foreign minister on Wednesday told Reuters that Mali would remain a member of the eight-nation monetary union, which uses the West Africa CFA franc currency pegged to the euro. However, in an interview shared by the three Sahel states information service on Wednesday, Burkina Faso's military leader Ibrahim Traore said that they would "probably" leave the currency zone.

Such an exit would be credit negative for the West African Development Bank, the monetary union's development bank, because Burkina Faso, Mali and Niger accounted for 17% of its paid-in capital and 35% of its loan portfolio at the end of 2022, said Moody's.

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