IMF Executive Board Concludes Annual Discussions on CEMAC Common Policies

The economic shock associated with the COVID-19 pandemic led to a sharp deterioration of fiscal and external balances in 2020 and is set to have long lasting effects on the regional economic outlook, with fiscal and external adjustments slower than previously anticipated.

  • Reforms to support a more diversified and inclusive growth, including by improving governance and the business climate, are critical to external sustainability and should gain momentum.
  • Washington, DC: On January 12, 2021, the IMF Executive Board concluded the annual discussions with the Central African Economic and Monetary Community (CEMAC) on Common Policies of Member Countries and Common Policies in Support of Member Countries Reform Programs [1] .

    The economic shock associated with the COVID-19 pandemic struck when the economic outlook for the region was improving. Tight regional policies helped maintain an improved external position in 2019. The current account deficit shrank to 2.5% of GDP, and external reserves increased. Fiscal balances remained broadly unchanged from 2018 at -0.3 percent of GDP, bringing public debt to 52 percent of GDP. Overall regional growth was 1.9 percent in 2019.

    While the pandemic seems to be under control in the region at the moment, the related oil price shock led to a sharp deterioration of fiscal and external balances in 2020. CEMAC is expected to experience a 3 percent recession in 2020. The current account deficit is expected to worsen to 6.5 percent of GDP, and external reserve coverage to remain at 3.5 months of imports of goods and services. The fiscal deficit would deteriorate to 3.8 percent of GDP, and public debt increase to 57 percent of GDP.

    The policy response from national and regional authorities helped mitigate the economic fallout in 2020. CEMAC governments announced various support measures to firms and households in their revised budget laws. BEAC quickly eased monetary policy and introduced accommodative measures to ensure adequate liquidity in the banking system and stroke the right balance between supporting internal and external stability. COBAC eased prudential regulations to help banks delay pandemic-related losses. The Fund supported this response with significant emergency financing for the region while three programs expired in 2020.

    The shock is set to have long-lasting effects on the economic outlook for the CEMAC. With lower medium-term oil prices, the outlook projects that CEMAC’s fiscal and external adjustments will be slower than previously envisaged, and risks are tilted to the downside. Growth is expected to rebound in 2021 to 2.7 percent and continue to pick up gradually to around 3.5 percent in the medium term, as reforms to improve governance and the business climate are assumed to slowly take hold. Balanced fiscal consolidation efforts would increase non-oil revenues and contain expenditure. Reserves are projected to be re-built at a slower pace than previously envisaged but should reach the equivalent of 5 months of imports by 2025. Inflation is projected to stay at around 2.5 percent over the medium term, below the regional convergence criterion, as monetary policy would remain appropriately tight. This outlook is highly uncertain and contingent on the evolution of the pandemic and its impact on oil prices. It also assumes a continuation of IMF-supported programs with Congo, CAR and Equatorial Guinea, some additional IMF emergency assistance for the region, and approval of three new IMF-supported programs (Cameroon, Chad, and Gabon) in 2021. The region is at a critical juncture, as the second phase of the regional strategy is about to begin. CEMAC’s regional institutions and the national authorities should aim to radically transform the region by implementing governance, transparency and business climate reforms that will lay the basis for a diversified, inclusive and sustainable growth.

    Executive Board Assessment [2]

    Executive Directors agreed with the thrust of the staff appraisal. They noted that the crisis associated with the COVID-19 pandemic struck when the economic outlook for the CEMAC was improving. The crisis is expected to have long lasting effects and CEMAC’s fiscal and external adjustments will be slower than envisaged previously.

    Directors recognized that the regional authorities’ policy response to mitigate the immediate economic impact of the COVID-19 pandemic has been pro-active and appropriate. They welcomed BEAC’s actions to loosen monetary policy and quickly ease bank liquidity provision. Directors also viewed steps taken by COBAC to strengthen banks’ capital and monitor financial stability following the easing of prudential regulations as appropriate.

    Directors considered that BEAC’s monetary policy stance continues to strike the right balance between preserving internal and external stability. They stressed that BEAC should stand ready to tighten monetary policy if the external reserves position deteriorated further. Directors welcomed BEAC’s resolve to continue to refrain from extending any type of direct monetary financing to its member states. They encouraged BEAC to continue effective implementation of the foreign exchange regulation. In this context, Directors supported a dialogue with oil and mining companies to effectively enforce the regulation to these sectors by end-2021 while taking account of their specificities.

    Directors urged the SG-COBAC to accelerate implementation of its strategic plan for moving towards risk-based supervision as banks’ compliance with prudential standards remains weak and resolution of problem banks has been slow. They emphasized the need to reduce currently high non-performing loans and continue efforts to limit a further increase in banks’ sovereign exposure. Further efforts to strengthen AML/CFT implementation are also needed. Directors noted that reinforcing SG-COBAC’s human resources would be key to meeting these objectives.

    Directors stressed that the CEMAC is at a crossroads and should aim at a profound transformation. The second phase of the regional strategy must decisively focus on implementing structural, transparency and governance reforms to lay the basis for diversified, inclusive and sustainable growth while aiming at rebuilding fiscal and external buffers.

    Directors noted that BEAC was unable to fully implement the policy assurance on NFA accumulation at end-December 2019 and end-June 2020 provided in the December 2019 Follow‑up Letter of Policy Support due to a shortfall in external financing during the second half of 2019 and fiscal deficit over-runs. They considered that BEAC has taken satisfactory corrective measures to address the underperformance, including limited monetary policy accommodation in response to the COVID-19 shock. Directors endorsed the updated policy assurance outlined in the December 2020 Follow‑up Letter from the BEAC Governor on achieving the NFA accumulation for end-December 2020 and end-June 2021. This assurance is based on BEAC’s commitment to implement an adequately tight monetary policy together with commitments by member states to implement adjustment policies in the context of IMF‑supported programs. Directors emphasized that implementation of this assurance will be critical for the success of IMF‑supported programs with CEMAC member countries.

    The views expressed by Directors will form part of the Article IV consultation discussions on individual members of the CEMAC that take place until the next Board discussion of common policies. It is expected that the next discussion of CEMAC common policies will be held on the standard 12-month cycle.


    [1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of these bilateral Article IV consultation discussion, staff hold separate annual discussions with the regional institutions responsible for common policies in four currency unions – the Euro Area, the Eastern Caribbean Currency Union, the Central African Economic and Monetary Union, and the West African Economic and Monetary Union. For each of the currency unions, staff teams visit the regional institutions responsible for common policies in the currency union, collects economic and financial information, and discusses with officials the currency union’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis of discussion by the Executive Board. Both staff’s discussions with the regional institutions and the Board discussion of the annual staff report will be considered an integral part of the Article IV consultation with each member.

    [2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: https://www.IMF.org/external/np/sec/misc/qualifiers.htm .

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