The CFA franc-pegged to the euro at CFAfr655.96:EUR1-will fluctuate against the US dollar in line with the euro:dollar exchange rate. Despite the prospect of imminent policy tightening by the ECB, we still expect the dollar to outperform a euro weighed down by economic and fiscal weakness within the euro zone. The euro-pegged franc ended 2010 weaker than it started the year, averaging CFAfr495:US$1 over the year, and will continue to slide to an average of CFAfr501:US$1 in 2011 and CFAfr525:US$1 in 2012.

On the external front, export growth will be driven by the further recovery of the cashew sector. We expect the cashew nut harvest, which typically accounts for 50-80% of exports, to continue to rise in response to good climatic conditions and new investment. Although the increase in the volume of exports will be partially offset by the depreciation of the CFA franc, we expect exports to grow by an average of 7% per year in 2011-12 in US-dollar terms. At the same time, the value of imports will also rise quickly, owing to higher prices and elevated demand, boosting imports from an estimated US$210m in 2010 to US$234m in 2012. We expect the current account (including official transfers) to remain in deficit during the forecast period, averaging 9.5% of GDP in 2011-12.