ABSTRACT This article analyzes the effect of the structure of bank credit on the balance of payments in the WAEMU over the period 1997–2023. By using an error correction model estimated through the Pooled Mean Group method, the study distinguishes between short‐ and long‐term effects. The results show that, in the short term, the structure of bank credit has no significant effect on the balance of payments. In contrast, in the long term, an increase in credit granted to the primary, secondary, or tertiary sectors contributes to a deficit in the balance of payments, reflecting the strong dependence of the region's economies on imports, even when credit finances productive sectors. These findings indicate that the structure of bank credit influences the external balance. From a policy standpoint, the issue is not to increase the overall volume of credit, but rather to promote a more strategic allocation. Monetary authorities and banks should prioritize activities with strong local content, capable of reducing import needs and diversifying exports, particularly agro‐industrial value chains, light manufacturing industries, and renewable energies, thus transforming bank credit into a lever for external competitiveness and the sustainable reduction of external imbalances.
Naba et al. (Tue,) studied this question.