IMF Staff Completes discussions with the Central African Economic and Monetary Community

London, (Capital Markets in Africa):- A team from the International Monetary Fund (IMF), led by Mario de Zamaróczy, visited Libreville and Yaoundé during April 23–May 7, 2015 and held discussions with the institutions of the Central African Economic and Monetary Community (CEMAC¹) on common policies for member countries. Mr. Bernard Laurens, mission chief for the CEMAC Financial Sector Assessment Program, joined the mission to discuss financial sector reforms to promote stability and development.

At the conclusion of the mission, Mr. de Zamaróczy issued the following statement:

“Regional economic performance remained strong in 2014 and GDP growth is estimated to have reached 4.6 percent, driven by an increase in oil production and the continuation of public investment programs in several CEMAC countries. Although the significant fall in oil prices during the second half of 2014 did not have a significant impact in 2014, it is expected to weaken economic performance in 2015, which is projected to slow down to 2.2 percent, owing to a decline in oil production and lower public investment. Regional inflation remained subdued in 2014 and is projected to remain below 3 percent in the medium term.

“The fall in oil revenues, the continuation of public investment programs, and the response to insecurity in the Lake Chad region and in the Central African Republic widened the regional fiscal deficit to 5.2 percent of GDP in 2014. This deficit is projected to deteriorate further to 6.8 percent in 2015. In the medium term, the regional fiscal deficit could improve if the expected recovery in oil revenues and the envisaged fiscal consolidation by member states materialize. In 2014, the current account deficit is estimated to have reached 3.5 percent of GDP and could widen to more than 8.4 percent of GDP in 2015, as oil exports are expected to decline and investment-related imports remain large.

“Policy discussions focused on how to respond to the oil price shock and security concerns, and further develop the regional financial sector while protecting growth, deepening regional integration, and maintaining financial stability.

“In the face of the oil price shock, fiscal retrenchment is a priority; the mission encourages national authorities to increase tax revenue, rein in current expenditure, and prioritize public investment to reduce fiscal deficits. The mission stresses that the fall in oil revenues in the medium-term will require higher, non-oil tax revenue mobilization and that the effective implementation of CEMAC public finance management directives could support this effort. Against this backdrop, the mission invites the regional authorities to strengthen the regional fiscal surveillance framework.

“The mission encourages the authorities to accelerate the reform of the monetary policy framework to enhance the signaling effect of monetary policy, including by reinforcing the monitoring of interbank transactions; and strengthening liquidity forecasting by the BEAC.

“As the fall in oil revenues and public expenditure could undermine the health of the financial system in some countries, the mission encourages the authorities to speed up reforms supporting financial sector stability, including through the setting up of an appropriate lender-of-last-resort facility to support distressed institutions; finalizing the implementation of key prudential regulations; improving risk monitoring; and reinforcing the supervision of large microfinance institutions. In addition, the mission encourages the authorities to create an enabling environment for greater financial inclusion to promote the deepening and inclusiveness of the financial sector. In particular, the mission supports the implementation of a regional credit bureau and recommends addressing regulatory gaps that limit the diversification of banking products and services to allow mobile operators and banks to use technological progress to offer low cost services to the wider population.

“The CEMAC’s growth is undermined by weak productivity and structural barriers. The current circumstances underline the urgent need for the region to diversify its production base and reap the benefits from greater integration into global trading networks. These objectives need to be supported by a substantial improvement in the business climate and a deepening of regional integration. The mission encourages the CEMAC Commission to engage member states in coordinating infrastructure plans.

“The IMF’s Executive Board is expected to discuss the report on the 2015 regional consultation in July 2015. The mission would like to thank the authorities for their warm hospitality, excellent cooperation, and constructive dialogue.”

¹ CEMAC countries includes Cameroon, Chad, Central African Republic, Congo-Republic of, Equatorial Guinea and Gabon