## _cr11329 — Executive Summary ## Source details **Canonical URL:** [_cr11329 — Executive Summary](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr11329.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr11329.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr11329.pdf.json) --- ### Key findings and outlook - The CEMAC region is recovering from the global financial crisis, although economic growth has not returned to pre-crisis levels and continues to lag the sub-Saharan Africa (SSA) average. - Inflation in the region is higher than the West African Economic and Monetary Union (WAEMU) average. - International reserves declined to about 4½ months of total imports or 100 percent of broad money in 2010 due to net accumulation of assets abroad by member countries. - The fixed exchange regime will continue to anchor the region’s macroeconomic policy. - Supported by public investment and commodity exports, economic activity will remain robust, but below the SSA average. - Inflation is projected to pick up because of rising food and fuel prices. - Foremost near-term risk: a decline in commodity prices, especially oil. - Additional near-term risks: rising global food and oil prices could lead to higher inflation and demands for higher wages. - Overarching policy challenge: address widespread unemployment and poverty despite oil wealth. ### Staff views — priorities and policy guidance - External and fiscal sustainability - The union’s real effective exchange rate (REER), current account, and reserves are broadly consistent with external stability. - A longer-term downside risk arises from noncompliance with rules for repatriating export receipts to the BEAC. - To ensure fiscal and external sustainability: - Public investment needs to be embedded in a realistic multiyear investment plan. - Annual budgets should be cast within a credible medium-term macroeconomic framework. - Financial sector stability - Reform prudential and regulatory framework expeditiously. - Resolve problems of systemically important weak banks without delay. - Growth and poverty reduction - Priorities to promote non-oil growth and reduce poverty: - Strengthen quality of health and education. - Improve business climate. - Build basic infrastructure. - Facilitate access to financing for SMEs. ### Authorities’ stance - Authorities agreed with staff recommendations. - Noncompliance with full repatriation of export receipts is under discussion to safeguard external stability. - Financial sector reforms are under way; pace must be measured given institutional complexity. - Business environment reforms focus on streamlining administrative procedures and improving infrastructure. - Initiatives to facilitate access to financial services: - Increasing transparency about lending costs. - Creating credit bureaus. - Improving dispute settlement mechanisms. - Establishing a central registry of corporate balance sheets. --- ### Fiscal Position and External Stability ### Fiscal-external linkage and reserves - With the fixed exchange regime, fiscal sustainability and external stability are intertwined; swings in fiscal policy—mostly driven by public investment—tend to lead to an increase in imports rather than domestic demand. - Gross international reserves were at 4½ months of total imports and 100 percent of broad money in 2010. - Under current fiscal policies and the oil price outlook, gross international reserves are projected to stabilize at about 4 months of total imports by 2015. - Coverage of about 4½ months of total imports would allow the region to withstand a large shock (two-standard-deviation shock to the trade balance). ### Risks to external stability and staff recommendations - Longer-term risk: widespread noncompliance with the CEMAC rule requiring full repatriation of export receipts. - Low interest rates on CFA franc denominated government deposits at the BEAC discourage compliance. - Safeguards concerns at the BEAC have weakened confidence and reduced incentives to repatriate foreign currency receipts. - Staff policy advice: - Temporary deviation from long-term NOPD (derived from PIH) justified to account for large investment needs, but NOPD remains long-term anchor. - Embed public investment in realistic multiyear investment plans and medium-term macro frameworks. - Scrutinize public investment to ensure risk-adjusted real returns at least equal to the long-term real interest rate on financial assets (say, 2–3 percent). - Regular country-level public debt sustainability analyses. - Adhere to full repatriation rule; consider referral of noncompliance to the CEMAC Council of Finance Ministers. - Implement safeguards and strengthen BEAC governance to rebuild confidence. - Adopt a foreign reserves management strategy; invest excess foreign assets according to investment horizon, return objectives, and risk profile. - Strengthen reserves management capacity with technical assistance. --- ### Accelerating Non-Oil Growth ### Findings — constraints on non-oil growth - Five of the six CEMAC countries are oil producers; oil accounts for about 40 percent of regional GDP and 85 percent of total exports (source-executive summary). - CEMAC’s non-oil sector growth has been disappointing; zone outperformed WAEMU but lagged peers; non-oil growth on a downward trend, reducing employment opportunities. - Infrastructure constraints: - Non-oil sector constrained by inadequate infrastructure services and very high infrastructure costs. - Rapid scaling up of public investment risks compromising spending quality due to weak administrative capacity. - Past public investment had low returns and little impact on economic growth in the region (staff analysis). - Business environment and human capital: - World Bank’s 2011 Doing Business Indicators: CEMAC’s average ranking is 172 compared with 137 for SSA out of 183 countries. - Chad and C.A.R. have the lowest ranking in the world, closely followed by Congo. - Weaknesses: starting a business, paying taxes, enforcing contracts, trading across borders. - Poor quality health and education services have kept labor productivity low. ### Staff recommendations to sustain non-oil growth - Refocus public investment on key infrastructure that relieves major supply bottlenecks (e.g., electricity, trade-enabling roads, dams, ports). - Seek technical assistance (possibly from the World Bank) to strengthen appraisal, selection, monitoring, and budgeting of operation and maintenance costs. - Over the medium term, explore public-private partnerships while containing fiscal risks. - Pursue reforms in health and education to enhance labor productivity and generate employment. - Improve the business climate by strengthening governance and streamlining administrative procedures. - Prioritize removing regulatory hurdles affecting the infrastructure sector and addressing areas from the Doing Business survey. ### Authorities’ actions and commitments - Regional consensus (2007 conference) on priorities: preserve macro stability; adopt outward-looking policy; promote value-added activities; enhance government role as regulator/facilitator/supplier of basic infrastructure; improve business environment; develop skilled labor. - Examples of public investment prioritization and institutional actions: - Gabon: national agency for major public works; Bechtel technical expertise; World Bank service agreement. - Cameroon: plans central unit for project feasibility studies and evaluation. - Business environment reforms in progress: - Congo: improve public-private dialogue, streamline tax system, ensure investment security. - Equatorial Guinea: establishing a one-stop shop for investment. - Cameroon: reduced time to start a business from 12 to 3 days; simplified tax payments; shortened delays for construction permits. --- ### Financial Sector: Stability, Supervision, and Deepening ### Progress and remaining weaknesses - Since the 2006 FSAP: - Harmonized and increased minimum capital requirements for banks to CFAF 10 billion or US$20 million. - Strengthened corporate governance. - Established a Financial Stability Committee. - COBAC introduced a deposit insurance scheme insulating deposits up to CFAF 5 million. - Remaining weaknesses: - Principal prudential regulations (solvency, large exposures, connected lending) are out of line with international best practices and poorly enforced. - Protracted failure to resolve problems of a systemically important regional banking group reveals inadequate legal framework for banking crises and cooperation shortcomings. - Effective supervision hampered by acute shortage of qualified staff at COBAC. - Access to credit is among the lowest in Africa: - Penetration rate about 3 percent of total population. - Credit to the private sector is well below SSA average. ### Staff policy advice on financial stability and deepening - Financial stability measures: - Monitor bank compliance with minimum capital regulation and act on noncompliance. - Perform regular stress tests. - Finalize banking regulations to align with international standards (solvency ratios, risk diversification, lending to insiders, market risks, consolidated supervision). - Adopt regulation on banking crisis management as soon as possible. - Manage risks from weak banks: monitor liquidity, require full loss absorption by previous shareholders, pursue maximum loan recovery from related parties. - Increase COBAC staffing and appoint qualified commissioners. - Financial deepening measures: - Improve institutional framework: land and commercial registries, procedures for recording/enforcing guarantees, strengthen creditor rights enforcement and court governance. - Expedite launch of regional government securities market to manage excess liquidity and mobilize savings. - Create credit history centers for SMEs and implement microfinance strategies. ### Authorities’ actions and timetable - Authorities agreed with phased implementation, considering legal and institutional complexity. - COBAC remains understaffed; prioritized in BEAC’s 2011 hiring plan. - Regulations on the resolution of banking crises expected to be adopted by year-end and enter into force on January 1, 2012. - Regulations aim to allow early intervention, define responsibilities of regional and national bodies, and prohibit questionable shareholders from participating in bank restructuring. - Training and technical assistance: - Team sent to the National Bank of Belgium for stress test training. - Creation of credit bureaus with World Bank technical assistance. - Establishment of a credit rating agency and a central registry of corporate balance sheets. - Microfinance institutional strengthening: - 2002 general regulation governing microfinance activities. - 2010 chart of accounts for microfinance and IT system to collect financial data automatically. --- ### Trade Policy, Regional Integration, and Governance ### Trade barriers and integration challenges - The common external tariff (CET) is higher than in most other African regions. - Some member states impose additional surcharges and other fees on top of the CET. - Cross-country differences persist in import classification and valuation, exemptions rules, and implementation of rules of origin. - Border procedures are cumbersome; lack of coordination of customs administrations can give rise to double taxation of goods going to the hinterland. - Intraregional trade stands at 1½ percent of total trade, the lowest among regional trade groups in Africa. - The CEMAC Commission lacks capacity and resources; the community integration tax (CIT) is not transferred in full by member countries. ### Agreed priorities and Regional Economic Program (REP) - Agreed priorities to lower trade barriers: - Expedite intended lowering of CET to bring it in line with WAEMU CET. - Clarify rules of origin. - Coordinate customs administrations. - Strengthen capacity of the CEMAC Commission and ensure timely transfer of CIT revenues. - REP (first phase 2011–15) aims to strengthen economic integration and position the region as an emerging market by 2025; operational plan being finalized across strategic pillars including governance, infrastructure, human capital, common market and diversification. - REP first-phase specific measures include public procurement reform, increased transparency in natural resource management, and strengthening governance in regional institutions and the judicial system. ### BEAC safeguards and IMF engagement - BEAC Board adopted an action plan to improve governance and internal controls. - IMF disbursements to CEMAC countries were suspended after June 2010 due to delays and safeguards concerns; program reviews subsequently resumed reflecting progress on rolling safeguards benchmarks. - A safeguards monitoring mission identified further needs in the accounting system (Syscobeac), internal audit, and BEAC national directorates. - IMF technical assistance program covering 2011–13 to strengthen capacity at BEAC and COBAC: - Resident advisor posted to BEAC; another to be posted to COBAC. - TA covers corporate governance, controls, accounting, reserves management, monetary policy, and regional public debt market. - IMF providing technical support to prepare regional directives on public financial management to promote modernized, transparent PFM and comparability of public finance data. --- ### Empirical Analysis: Determinants of Non-Oil Growth (Appendix 4) ### Research design - Question: why has non-oil growth been lackluster in CFA zone oil-exporting countries? - Sample: 38 countries (excluding Equatorial Guinea) and 270 observations; period 1985–2008; variables measured as three-year averages. - Key regressors: initial income, investment share (total, public, private), government consumption share, terms of trade, openness, undervaluation index (UNDERVAL) and REER. ### Main empirical findings - Exchange rate and growth: - A 10 percent overvaluation is associated with a 0.25 percentage point lower growth rate (baseline interpretation). - Robustness: a 10 percent overvaluation or a 10 percent increase in REER is associated with a 0.3 percentage point lower growth rate. - Investment and growth (sample-wide): - A 1 percentage point increase in share of investment in GDP is associated with a 0.127 percentage point higher growth (baseline). - A 1 percentage point increase in government consumption share is associated with a 0.076 percentage point lower growth (baseline). - Distinctive result for CFA oil exporters: - Investment fails to spur non-oil growth in CFA oil exporters: net impact of total investment is -0.005 (not statistically significant). - Disaggregated public and private investment coefficients for CFA oil exporters are negative or small and not statistically significant (public: -0.088; private: 0.014; Wald tests show no significant impact). - For CFA non-oil exporters, public and private investment are positively associated with growth (public investment estimate in full sample: 0.19). - Selected coefficient examples (reported significance): - UNDERVAL (ln): 0.025**, 0.025**, 0.028***. - Initial income (ln): -0.078***, -0.078***, -0.081***. - Investment (total): 0.127***, 0.154***, 0.211***. - Government consumption: -0.076**, -0.095**, -0.134**. - REER (ln) (robustness): -0.027***. - Interaction coefficients (CFA oil * Investment): -0.159***, -0.215***; (CFA oil * Private Investment) -0.209**; (CFA oil * Public Investment) -0.279*. - Adjusted R2 around 0.28–0.31. ### Interpretation and policy implications - Real exchange rate overvaluation (REER appreciation) is negatively associated with non-oil growth. - Distinguishing feature: failure of public and private investment in CFA oil exporters to translate into higher non-oil growth. - Possible mechanisms: - Low efficiency of investment due to weak project selection, appraisal, implementation, and monitoring. - Public investment not reaching infrastructure threshold levels or not accompanied by enabling business environment and institutional reforms. - Institutional weaknesses and market imperfections limiting private-sector crowding-in. - Policy implications: - Improve efficiency of public investment management: strengthen appraisal, selection, implementation, monitoring, and evaluation. - Improve enabling conditions for private-sector response: ensure infrastructure reaches threshold levels, improve business environment, governance, and transparency. - Monitor REER developments and mitigate real appreciation pressures to reduce Dutch disease effects. --- ### Selected Key Statistics and Indicators (as reported) - Gross international reserves (2010): 4½ months of total imports; 100 percent of broad money. - Reserves adequacy projection: stabilize at about 4 months of total imports by 2015 (under current fiscal policies and oil price outlook). - Nominal oil GDP (percent of CEMAC): 41.6 45.3 33.6 37.5 48.1 44.0 40.1 37.9 35.5 31.9 (series reported in tables). - Fiscal oil revenue (percent of country's fiscal revenue, CEMAC): 64.9 71.9 58.0 65.3 70.2 68.7 64.5 62.0 58.9 56.0 (series reported). - Real GDP (CEMAC, annual percent change, selected years): 5.9 4.3 2.4 5.0 5.2 4.2 (2007–12 series). - Non-oil GDP (CEMAC): 11.8 5.9 6.2 5.2 6.8 5.4 (2007–12 series). - Consumer prices (average, CEMAC): 1.0 5.7 4.7 2.7 4.1 3.9 (2007–12 series). - Gross national savings (percent of GDP, CEMAC): 24.2 26.9 18.5 20.0 29.3 28.3 (2007–12). - Gross domestic investment (percent of GDP, CEMAC): 21.5 19.8 24.7 25.6 25.5 26.1 (2007–12). - Of which public (percent of GDP): 8.0 8.7 13.6 11.3 12.0 12.4 (2007–12). - Non-oil overall fiscal balance (excluding grants) (percent of Non-oil GDP, CEMAC): -17.6 -22.4 -25.5 -23.4 -23.9 -22.8 (2007–12). - Balance on goods and nonfactor services (CEMAC): 20.5 22.0 4.8 11.1 15.2 15.5 (2007–12 series). - Balance on current account (CEMAC, selected years, billions of CFAF): 1,381 2,514 -1,671 -1,091 526 1,135 (2007–12 series). - Banking sector indicators (selected): - CEMAC Gross loans: 3,184.6 3,837.0 (aggregates presented). - Non-performing loans: 258.5 318.2. - Provisions against non-performing loans: 250.9 294.9. - Share of non-performing loans (percent of gross loans): 8.1 8.3. - Rate of Provisioning (percent of non-performing loans): 97.1 92.7. - Trade and competitiveness: - Intraregional trade: 1½ percent of total trade. - World Bank Doing Business ranking (2011): CEMAC average 172; SSA average 137 (out of 183 countries). - Trading across borders (2009): Time to export (days): CEMAC 40, WAEMU 31, SACU 31; Cost per exports (US$ per container): CEMAC 268, WAEMU 1836, SACU 2057. --- *Source: IMF staff summary of the Executive Summary and selected chapters/appendices (Content unit: _cr11329).* ### Executive Summary ...................................................................................................... ### _cr11329 - Executive Summary ### Executive Summary — Key findings and outlook - The CEMAC region is recovering from the global financial crisis, although economic growth has not returned to pre-crisis levels and continues to lag the sub-Saharan Africa (SSA) average. - Inflation in the region is higher than the West African Economic and Monetary Union (WAEMU) average. - High commodity prices and healthy export demand improved the current account and fiscal balances, but international reserves declined to about 4½ months of total imports or 100 percent of broad money in 2010 due to net accumulation of assets abroad by member countries. - The fixed exchange regime will continue to anchor the region’s macroeconomic policy. - Supported by public investment and commodity exports, economic activity will remain robust, but below the SSA average. - Inflation is projected to pick up because of rising food and fuel prices. - Foremost near-term risk: a decline in commodity prices, especially oil. Additional risks: rising global food and oil prices could lead to higher inflation and demands for higher wages. - Overarching policy challenge: address widespread unemployment and poverty despite oil wealth. ### Staff views — external and fiscal sustainability; financial sector; growth priorities - The union’s real effective exchange rate, current account, and reserves are broadly consistent with external stability, but a longer-term downside risk stems from noncompliance with rules for repatriating export receipts to the Bank of Central African States (BEAC). - To ensure fiscal and external sustainability: - Public investment needs to be embedded in a realistic multiyear investment plan. - Annual budgets should be cast within a credible medium-term macroeconomic framework. - To safeguard financial sector stability: - The prudential and regulatory framework should be reformed expeditiously. - Problems of systemically important weak banks should be resolved without delay. - To reduce high rates of poverty and promote non-oil growth, priorities include: - Strengthening the quality of health and education. - Improving the business climate. - Building basic infrastructure. - Facilitating access to financing for small and medium-sized enterprises (SMEs). ### Authorities’ views — implementation stance - Authorities agreed with staff recommendations. - The issue of noncompliance with full repatriation of export receipts is under discussion to safeguard external stability over the longer term. - Financial sector stability is being strengthened through reform of prudential and regulatory norms, though the pace of reform must be measured given institutional complexity. - Plans to improve the business environment are in place in most CEMAC countries, focusing on streamlining administrative procedures and improving infrastructure. - Initiatives to facilitate access to financial services include: - Increasing transparency about lending costs. - Creating credit bureaus. - Improving disputes settlement mechanisms. - Establishing a central registry of corporate balance sheets. ### I. Context — structural features and development challenges - Five of the six CEMAC countries are oil producers; oil accounts for about 40 percent of regional GDP and 85 percent of total exports. - Oil revenue is the main driver of economic activity; volatile oil prices and procyclical fiscal policy have caused boom-and-bust cycles, exacerbated by rapidly rising and downwardly inflexible wages in a fixed exchange rate regime. - Spending out of oil wealth has not led to more inclusive growth; high inequality means poverty and unemployment remain widespread. - It is unlikely the region will meet the Millennium Development Goals (MDGs) by 2015. - The overriding challenge: use oil wealth to increase substantially non-oil growth and achieve significant and durable poverty reduction. - Policy levers emphasized: - Ensure productive public investment. - Improve the business climate to strengthen competitiveness and stimulate private investment. - Increase labor market flexibility. - Improve quality of education and health spending and generate more employment opportunities in the non-oil sector. - Implementation of prior Fund advice: - Non-oil balance adopted as a supplementary convergence criterion, but little progress embedding capital budgets in a credible medium-term macro framework. - Government cash holdings largely centralized at the regional central bank; statutory advances being phased out. - Work to establish a regional government securities market is well advanced. - BEAC has made progress on safeguards but risks remain elevated in core functions and governance. - Principal prudential regulations remain out of line with international best practices and are poorly enforced. - More trade reform is needed to remove barriers to internal and external trade. ### II. Recent Developments and Outlook — performance and risks - Economic recovery is underway but heterogeneous across countries. - Inflation has been contained largely because higher international oil prices were not passed through to domestic prices; good harvests in Chad and the C.A.R. helped contain inflation. - International reserves: 4½ months of total imports and 100 percent of broad money in 2010. - Convergence progress (2010): all CEMAC countries observed criteria on public debt and nonaccumulation of arrears; only two met requirement of a nonnegative basic fiscal balance; Congo and Equatorial Guinea missed the inflation threshold. Total criteria violations fell from 9 in 2009 to 6 in 2010. - Policy response to food and fuel price shocks: - First best: allow pass-through of international prices to domestic prices and then counteract second-round effects. - BEAC has limited independent monetary policy under the fixed exchange rate but may need to tighten liquidity if second-round effects occur. - Where public finances and external assistance allow, increase spending on social transfer schemes to cushion vulnerable groups. - If identification of neediest households is not possible, consider temporary lowering of import taxes on essential staple foods or subsidizing food items primarily consumed by the poorest households. ### III. Policy Discussions — three priority macroeconomic challenges - Focus areas agreed by staff and authorities: 1. Ensuring fiscal and external sustainability. 2. Fostering stronger non-oil growth. 3. Reforming the financial sector. A. Ensuring Fiscal Sustainability and External Competitiveness — summary - The regional non-oil primary deficit (NOPD) has widened, driven by public investment. - NOPD is projected to move closer to the sustainable level of about 5 percent of non-oil GDP (derived from the Permanent Income Hypothesis, PIH) as investment tapers in the medium term. - Caveat on PIH: for a natural resource producer investing in domestic physical capital, the PIH model is only relevant as a long-term benchmark because it does not distinguish capital from current expenditure. - Fiscal sustainability condition: public investment decisions need to ensure a rate of return at least equal to the rate on financial assets after allowing for risk-profile differences. - Governments’ physical assets should yield, in risk-adjusted terms, at least the long-term real interest rate of investing in international financial assets (say, 2–3 percent) or an equivalent flow of social benefits to warrant consideration. - Investment quality is critical given governance weaknesses and weak planning, implementation, monitoring, and maintenance of public investment projects. ### IV. Staff Appraisal — principal conclusions - Embed public investment within realistic multiyear investment plans and credible medium-term macro frameworks to ensure fiscal and external sustainability. - Reform prudential and regulatory frameworks expeditiously and resolve weak systemically important banks promptly to safeguard financial stability. - Promote and diversify non-oil growth, focusing on: - Health and education quality improvements. - Business climate reforms. - Basic infrastructure development. - Access to finance for SMEs. *Source: IMF staff summary of the Executive Summary (Content unit: _cr11329 - Executive Summary).* ### 11. The fiscal position has important implications for external stability. With the ### _cr11329 - 11. The fiscal position has important implications for external stability. With the ### Fiscal position and external stability - With the fixed exchange regime, fiscal sustainability and external stability are intertwined; swings in fiscal policy—mostly driven by public investment—tend to lead to an increase in imports rather than domestic demand. - Methodologies for assessing real exchange rates in oil exporting countries indicate that the real effective exchange rate (REER) and the external position are broadly in line with fundamentals, although the range of uncertainty around the assessment is large. - Nonprice structural factors are a major constraint on non-commodity competitiveness. ### Reserves adequacy and risks to external stability - Gross international reserves were at 4½ months of total imports and 100 percent of broad money. - Under current fiscal policies and the oil price outlook, gross international reserves are projected to stabilize at about 4 months of total imports by 2015. - Analyses of reserves adequacy in the CEMAC show that coverage of about 4½ months of total imports would allow the region to withstand a large shock (two-standard-deviation shock to the trade balance). - A longer-term risk is widespread noncompliance with the CEMAC rule requiring full repatriation of export receipts. - Low interest rates on CFA franc denominated government deposits at the BEAC discourage compliance. - Recent safeguards concerns have weakened member states’ confidence in the BEAC, reducing incentives to repatriate foreign currency receipts. - The BEAC is making efforts, with assistance from the IMF, to address safeguards and governance issues. ### Staff policy advice on fiscal and external management - Temporary deviation from the long-term NOPD derived from the PIH model is justifiable to account for large investment needs in economic and social infrastructure. - The NOPD remains the long-term fiscal anchor. - Public investment needs should be embedded in a realistic multiyear investment plan and annual budgets within a medium-term macroeconomic framework consistent with fiscal and external sustainability. - Public investment plans and execution should be scrutinized to ensure they yield, in risk-adjusted terms, a real return at least equal to the long-term real interest rate on financial assets. - Regular country-level public debt sustainability analyses are critical. - The external position and the REER are broadly consistent with external stability. - The issue of noncompliance with full repatriation of export earnings could be referred to the CEMAC Council of Finance Ministers for discussion. - All CEMAC countries should adhere to the rule of full repatriation of foreign exchange earnings. - Implement decisively safeguards measures and strengthen governance at the BEAC to build confidence in the central bank and reinforce incentives for member states to entrust the BEAC with export earnings. - Adopt a foreign reserves management strategy based on desired international reserves to support the peg. - The BEAC could invest excess foreign assets (above desired reserves) in investment portfolios reflecting countries’ investment horizon, return objectives, and risk profile. - Strengthen reserves management capacity, drawing on technical assistance. ### Authorities’ views on fiscal stance and repatriation - Authorities agreed with staff’s assessment of fiscal sustainability and external competitiveness. - The temporary surge in public investment to address development needs explains the short-term deviation from the long-run sustainable fiscal balance. - CEMAC’s NOPD will come down in the medium term once key projects are completed. - Work is ongoing to anchor public investment in a credible medium-term fiscal strategy (examples: Congo integrated public investment into the 2010 budget through an MTEF; Gabon preparing a medium-term framework). - Authorities recognized the need to address noncompliance with the repatriation rule. - At the CFA franc zone meeting in N’Djamena in April 2011, finance ministers and governors discussed centralizing foreign reserves in the central bank and ensuring compliance with full repatriation. - Continued progress on safeguards measures is expected to bolster incentives to repatriate foreign currency. ### Accelerating non-oil growth — findings - CEMAC’s non-oil sector growth has been disappointing: zone outperformed WAEMU but lagged peers; non-oil growth on a downward trend, reducing employment opportunities. - Infrastructure constraints: - Available evidence suggests the non-oil sector is constrained by inadequate infrastructure services. - Infrastructure costs are very high because of insufficient and low-quality infrastructure and regulatory hurdles. - Oil-producing CEMAC countries embarked on ambitious investment programs, but weak administrative capacity makes rapid scaling up likely to compromise spending quality. - Staff analysis suggests past public investment had low returns and little impact on economic growth in the region. - Business environment and human capital: - World Bank’s 2011 Doing Business Indicators: CEMAC’s average ranking is 172 compared with 137 for SSA out of 183 countries. - Chad and C.A.R. have the lowest ranking in the world, closely followed by Congo. - Areas of weakness: starting a business, paying taxes, enforcing contracts, trading across borders. - Poor quality health and education services have kept labor productivity low and limited progress on human development indicators. ### Staff policy advice to sustain non-oil growth - Refocus public investment on key infrastructure that relieves major supply bottlenecks (e.g., electricity, trade-enabling roads, dams, ports). - Authorities may seek technical assistance (possibly from the World Bank) to strengthen appraisal, selection, and monitoring of investment projects and budgeting of operation and maintenance costs. - Over the medium term, explore public-private partnerships to complement public investment while containing risks to public finances. - Pursue reforms in health and education to enhance labor productivity, generate employment, and alleviate poverty over time. - Improve the business climate by strengthening governance and streamlining administrative procedures. - Prioritize removing regulatory hurdles affecting the infrastructure sector and addressing areas highlighted by the World Bank’s Doing Business survey. ### Authorities’ actions and views on non-oil growth - Authorities emphasized commitment to promoting non-oil sector growth to support employment and reduce poverty. - The 2007 regional conference generated consensus on priority measures: preserve macroeconomic stability; adopt an outward-looking policy; promote value-added activities (e.g., timber processing); enhance government role as regulator/facilitator/supplier of basic infrastructure; improve business environment and develop skilled labor. - Public investment prioritization: - Regional Economic Program expected to contribute. - Examples: Gabon established a national agency for major public works with Bechtel providing technical expertise and a World Bank service agreement; Cameroon plans a central unit for project feasibility studies and evaluation. - Business environment reforms in progress: - Congolese plan: improve public-private dialogue, streamline tax system, ensure investment security. - Equatorial Guinea: work underway to establish a one-stop shop for investment. - Cameroon: reduced time to start a business from 12 to 3 days; simplified tax payment procedures; shortened delays for construction permits. ### Reforming the financial sector — stability and supervision - Progress since the 2006 FSAP: - Harmonized and increased minimum capital requirements for banks to CFAF 10 billion or US$20 million. - Strengthened corporate governance. - Established a Financial Stability Committee. - COBAC introduced in 2009 a deposit insurance scheme insulating deposits up to CFAF 5 million. - Remaining weaknesses: - Principal prudential regulations (solvency, large exposures, connected lending) are out of line with international best practices and poorly enforced, encouraging excessive credit concentration and credit risk. - Protracted failure to resolve problems of a systemically important regional banking group reveals an inadequate legal framework for banking crises and shortcomings in cooperation of regional finance ministries. - Effective supervision hampered by an acute shortage of qualified staff at COBAC. ### Staff policy advice on financial stability - Closely monitor bank compliance with the new minimum capital regulation and take necessary steps for noncompliance. - Perform regular stress tests to detect risks and vulnerabilities. - Finalize banking regulations to align with international standards, including amendments on: - solvency ratios and risk diversification; - lending to shareholders, partners, executives, and directors; - market risks; - consolidated supervision. - Adopt regulation on banking crisis management as soon as possible. - Manage risks arising from weak banks by: - closely monitoring liquidity to avoid suspension of payments; - requiring full loss absorption by previous shareholders; - pursuing maximum recovery of loans owed by related parties. - Increase COBAC’s staffing significantly and appoint qualified commissioners. ### Authorities’ views on financial sector reforms - Authorities agreed with phased implementation, taking account of legal and institutional complexity. - COBAC remains understaffed; it will be prioritized in BEAC’s 2011 hiring plan. - Regulations on the resolution of banking crises expected to be adopted by year-end and enter into force on January 1, 2012; these regulations aim to: - allow early intervention to resolve banking crises; - define responsibilities of regional and national bodies and scope of judicial review; - prohibit questionable shareholders from participating in bank restructuring. - A team was sent to the National Bank of Belgium for stress test training. ### Financial sector deepening — findings and advice - Access to credit is among the lowest in Africa: - Penetration rate about 3 percent of total population. - Credit to the private sector is well below SSA average. - Structural constraints: high operating costs (low population density), lack of credit information, weak institutional and legal framework; SMEs face difficulty obtaining credit. - Regional government securities market launch delayed but expected soon; technical prerequisites met (regulatory and institutional framework, agreements signed, Securities Settlement and Custody Unit established). - Staff advice: - Improve institutional framework: operations of land and commercial registries; streamline procedures for recording/enforcing guarantees; strengthen creditor rights enforcement and court governance. - Expedite launch of regional government securities market to manage excess liquidity and mobilize/distribute savings. - Create credit history centers for SMEs and implement microfinance strategies quickly. ### Authorities’ actions on financial deepening - Measures taken or in progress: - Regular publication of lending costs and related fees to promote transparency, competition, and consumer protection. - Creation of a regional deposit insurance fund. - Creation of credit bureaus with World Bank technical assistance. - Establishment of a credit rating agency and a central registry of corporate balance sheets. - Microfinance institutional environment strengthened: - 2002 general regulation governing microfinance activities introduced. - Supervision enhanced by a 2010 chart of accounts for microfinance and an IT system to collect financial data automatically. ### Trade policy and regional integration - CEMAC trade patterns have shifted toward emerging markets (BRIC), displacing the European Union. - Intraregional trade stands at 1½ percent of total trade, the lowest among regional trade groups in Africa. *Source: IMF staff report content (chapter/section supplied).* ### 32. Trade barriers remain a ### _cr11329 - 32. Trade barriers remain a ### Trade barriers: findings - The common external tariff (CET) is higher than in most other African regions. - Some member states impose additional surcharges and other fees on top of the CET. - Cross-country differences persist in: - import classification and valuation; - exemptions rules; - implementation of rules of origins. - Border procedures are cumbersome. - Lack of coordination of customs administrations can give rise to double taxation of goods going to the hinterland. - The CEMAC Commission lacks capacity and resources, hampering enforcement of trade reforms and community rules. - The community integration tax (CIT), the commission’s main source of financing, is not transferred in full by the member countries. ### Agreed priorities to lower trade barriers - Expedite the intended lowering of the CET to bring it in line with the WAEMU CET. - Clarify the rules of origin. - Coordinate the customs administrations. - Strengthen the capacity of the CEMAC Commission, especially through the timely transfer of the CIT revenues. ### Regional Economic Program (REP) - Staff welcomed the REP and encouraged embedding related infrastructure projects in a credible medium-term investment plan. - The REP intends to strengthen economic integration and position the region as an emerging market by 2025. - To implement the first phase (2011–15), an operational plan is being finalized describing actions across strategic pillars: - shared vision; - good governance and the business environment; - economic infrastructure and land development; - human capital; - the common market and economic diversification. - REP first-phase specific measures include: - reform of public procurement practices; - increasing transparency in the management of natural resources; - strengthening governance in regional institutions and the judicial system. - The REP’s recognition of governance and transparency is highlighted as particularly welcome. ### BEAC safeguards measures - The BEAC Board adopted an action plan aimed at improving governance and internal controls. - Due to delays in implementation and additional safeguards concerns in the first special audit report, IMF disbursements to CEMAC countries were suspended after June 2010. - Program reviews subsequently resumed, reflecting progress in meeting rolling benchmarks on safeguards measures. - A recent safeguards monitoring mission identified further needs to address vulnerabilities in: - the accounting system (Syscobeac); - the internal audit; - BEAC national directorates. - The mission noted that actions must be supported by strengthening governance and oversight bodies. - Progress will continue to be monitored on the basis of rolling benchmarks on safeguards measures (see Staff Note issued in June 2011 for the Board’s information). ### Capacity building and technical assistance - An IMF technical assistance program covering 2011–13 has been put in place to strengthen capacity at the BEAC and the COBAC (the regional banking supervisor). - A resident advisor has already been posted to the BEAC and another one will soon be posted to COBAC. - The technical assistance program will cover: - corporate governance of BEAC and COBAC; - internal and external control systems; - management, accounting, and budget supervision; - reserves management; - monetary policy; - the regional public debt market. - The IMF is providing technical support to the CEMAC Commission for preparation of regional directives on public financial management with two main objectives: - promote modernized, effective, and transparent public financial management in all member states; - enable comparability of public finance data for effective multilateral surveillance of national budgetary policies. ### Data quality - Data provision is generally adequate for surveillance, but staff analysis is hampered by shortcomings in data timeliness. - Shortcomings are most evident in public finance, balance of payments, national accounts, and financial sector data. - Authorities recognize the need to improve data collection and dissemination and are taking steps with technical assistance from the Fund. - The data provided to the IMF are generally adequate for surveillance, but improvements are needed in balance of payments statistics and timeliness of fiscal, monetary, and financial data. ### Staff appraisal: macroeconomic outlook and policy recommendations - After being hit hard by the global economic crisis, the CEMAC region is recovering quickly. - Near-term growth is projected to rise, supported by public investment and commodity exports. - Inflation is forecast to pick up because of rising food and fuel prices. - The foremost near-term risk is a decline in commodity prices. - Policy mix recommendations: - Liquidity may need to be tightened to counteract possible second-round effects of food and fuel price shocks. - Spending should be reallocated towards measures that mitigate the adverse impact on the most vulnerable groups. - Public investment: - High-quality public investment is vital to long-term growth, fiscal sustainability, and external competitiveness. - Capital budgets should be anchored in a realistic multiyear investment plan and a credible medium-term fiscal strategy. - Annual budgets need to be linked to longer-term policies and progress toward fiscal sustainability. - Public investment should yield, in risk-adjusted terms, a real return at least equal to the long-term real interest rate on financial assets. - Governance and accountability: - Good governance and accountability are critical to ensure efficient use of public resources and realization of the long-term growth dividend from public investment. - Better public financial management is needed to improve spending quality and release resources for growth-enhancing spending and human development. - Accelerate reforms to refocus public investment on key infrastructure and social projects and to strengthen appraisal, selection, and monitoring of projects. - Implement stringent mechanisms to ensure transparency and accountability in the management of oil wealth. - External stability and BEAC confidence: - The union’s real effective exchange rate, current account, and reserves are broadly consistent with external stability. - A downside risk to the fixed exchange rate regime over the longer term stems from noncompliance with rules for repatriating export receipts to BEAC. - Implementation of safeguards measures will help build confidence in the BEAC and strengthen incentives for country members to entrust the BEAC with their export earnings. - Poverty and diversification: - High rates of poverty need to be addressed by promoting and diversifying non-oil growth. - Priorities include building key infrastructure to relieve bottlenecks; pursuing reforms in health and education to enhance labor productivity and generate employment; and improving the business climate by strengthening governance and streamlining administrative procedures. - Removing barriers to internal and external trade will contribute to improving regional growth and alleviating poverty over time. - Financial sector reforms: - Efforts to reform the financial sector should be accelerated. - Prudential and regulatory framework needs expeditious reform and rigorous enforcement. - The situation of financially weak banks needs urgent attention, including closely monitoring liquidity conditions, requiring full loss absorption by previous shareholders, and maximizing loan recovery from related parties to minimize fiscal costs. - Adopt the regulation on banking crisis management as soon as possible and increase staff resources for COBAC. - To increase access to financial services, priority should be given to improving the institutional and regulatory environment, in particular for SMEs. *Source: IMF staff report excerpt* ### 46. Staff proposes that regional discussions with the CEMAC authorities remain on ### _cr11329 - 46. Staff proposes that regional discussions with the CEMAC authorities remain on ### Recommendation on Consultation Cycle - Staff proposes that regional discussions with the CEMAC authorities remain on the standard 12-month consultation cycle. ### Millennium Development Goals – Key Indicators (Table 1) - Employment to population ratio, 15+, total (%)64 64 65 64 - Employment to population ratio, ages 15–24, total (%)49 50 47 49 - GDP per person employed (constant 1990 PPP $)... 2,493 ... - Malnutrition prevalence, weight for age (% of children under 5)18.....25 - Poverty headcount ratio at $1.25 a day (PPP) (% of population)...58...51 - Literacy rate, youth female (% of females ages 15–24)35587467 - Literacy rate, youth male (% of males ages 15–24)63738277 - Persistence to last grade of primary, total (% of cohort)....5868 - Primary completion rate, total (% of relevant age group)44515364 - Total enrollment, primary (% net)65..7776 - Proportion of seats held by women in national parliaments (%)12..1118 - Ratio of female to male primary enrollment (%)77848391 - Ratio of female to male secondary enrollment (%)52766179 - Ratio of female to male tertiary enrollment (%)18..4368 - Immunization, measles (% of children ages 12–23 months)68575768 - Mortality rate, infant (per 1,000 live births)9710992 81 - Mortality rate, under-5 (per 1,000)153181146130 - Adolescent fertility rate (births per 1,000 women ages 15–19)....119116 - Births attended by skilled health staff (% of total)58..4444 - Contraceptive prevalence (% of women ages 15–49)...15...21 - Maternal mortality ratio (modeled estimate, per 100,000 live births)763870628650 - Pregnant women receiving prenatal care (%)....6971 - Unmet need for contraception (% of married women ages 15–49)....1324 - Children with fever receiving antimalarial drugs (% of children under age 5 with fever)....5434 - Condom use, population ages 15–24, female (% of females ages 15–24)....1419 - Condom use, population ages 15–24, male (% of males ages 15–24)....3536 - Incidence of tuberculosis (per 100,000 people)126180298350 - Prevalence of HIV, female (% ages 15–24)....43 - Prevalence of HIV, male (% ages 15–24)....11 - Prevalence of HIV, total (% of population ages 15–49)2255 - Tuberculosis case detection rate (all forms)51456046 - CO2 emissions (kg per PPP $ of GDP)0100 - CO2 emissions (metric tons per capita)1111 - Forest area (% of land area)53294926 - Improved sanitation facilities (% of population with access)21273131 - Improved water source (% of population with access)49 497060 - Marine protected areas (% of total surface area)....20 - Terrestrial protected areas (% of total surface area)....1412 - Net ODA received per capita (current US$)94355849 - Debt service (PPG and IMF only, % of exports, excluding workers' remittances)..2 - Internet users (per 100 people)0037 - Mobile cellular subscriptions (per 100 people)004133 - Telephone lines (per 100 people)1112 - Fertility rate, total (births per woman)6655 - GNI per capita, Atlas method (current US$)6655771,6351,126 - GNI, Atlas method (current US$) (billions)2029758946 - Gross capital formation (% of GDP)15182621 - Life expectancy at birth, total (years)54505252 - Literacy rate, adult total (% of people ages 15 and above)34536962 - Population, total (billions)...1...1 - Trade (% of GDP)67 52 88 62 ### Selected Economic and Financial Indicators, 2007–12 (Table 2) — National Income and Prices - GDP at constant prices5.94.32.45.05.24.2 - Oil GDP3.73.5-4.9-2.41.73.8 - Non-oil GDP11.85.96.25.26.85.4 - Consumer prices (average)1 1.05.74.72.74.13.9 - Consumer prices (end of period)1 3.07.12.92.93.53.0 - Nominal effective exchange rate1 3.13.2-0.1-4.1.... - Real effective exchange rate1 0.95.12.9-3.9.... - Net foreign assets35.630.3-13.5-13.2...... - Net domestic assets-23.3-12.319.528.0...... - Broad money 13.918.412.218.4...... - Gross national savings24.226.918.520.029.328.3 - Gross domestic investment21.519.824.725.625.526.1 - Of which public8.08.713.611.312.012.4 - Total revenue, excluding grants27.830.626.025.529.329.4 - Government expenditure19.520.326.923.323.123.8 - Primary basic fiscal balance2 10.411.70.93.69.38.9 - Basic fiscal balance3 9.310.70.13.08.48.3 - Overall fiscal balance, excluding grants8.410.3-0.92.26.25.5 - Non-oil overall fiscal balance, excluding grants (percent of Non-oil GDP)-17.6-22.4-25.5-23.4-23.9-22.8 - Overall fiscal balance, including grants8.710.4-0.62.57.67.5 - Exports of goods and nonfactor services55.757.247.353.055.853.7 - Imports of goods and nonfactor services35.235.242.541.840.538.3 - Balance on goods and nonfactor services20.522.04.811.115.215.5 - Current account, including grants4.77.2-5.5-2.80.72.0 - External Public debt18.711.510.36.05.96.2 - Gross official reserves (end of period) In millions of U.S. dollars11,93715,66214,35413,658.... - Gross official reserves (end of period) In months of imports of goods and services5.26.95.74.5.... - Gross official reserves (end of period) In percent of broad money120.3124.5112.4101.1.... - Nominal GDP (in billions of CFA francs)29535.5 35294.0 30220.835934.941658.4 43503.3 - CFA francs per U.S. dollar, average479.3447.8472.2495.3479.2481.6 - Oil prices (in US$ per barrel)71.197.061.879.0107.2108.0 ### National Accounts and Growth Rates, 2007–12 (Table 3) - Real GDP (CEMAC)5.94.32.45.05.24.2 - Real GDP by country (selected): Cameroon3.42.62.03.23.84.5; Central African Republic3.72.01.73.34.15.0; Chad0.21.7-1.213.04.73.9; Congo, Republic of-1.65.67.58.86.35.3; Equatorial Guinea21.410.75.7-0.87.24.0; Gabon5.62.3-1.45.75.63.3 - Nominal GDP (CEMAC)7.419.5-14.418.915.94.4 - Real non-oil GDP (CEMAC)11.85.96.25.26.85.4 - Consumer price inflation (average) (CEMAC)1.05.74.72.74.13.9 - Gross national saving (CEMAC)24.226.918.520.029.328.3 - Gross domestic investment (CEMAC)21.519.824.725.625.526.1 ### Exchange Rates and Effective Rates, 2005–10 (Table 4) - CEMAC nominal effective exchange rate index (2005=100)100.099.8102.8106.1106.0101.6 - CEMAC real effective exchange rate index (2005=100)100.0101.4102.0107.2110.3106.0 - Annual percent changes reported for countries and CEMAC (various values, e.g., CEMAC 0.31.40.95.12.9-3.9) ### Balance of Payments, 2007–12 (Table 5) — Selected Lines (Billion CFAF) - Balance on current account1,3812,514-1,671-1,0915261,135 - Balance on goods and services6,0687,7501,4464,0036,6147,063 - Exports of goods15,40619,04313,06317,72622,71422,958 - Exports of services1,0581,1371,2271,3061,4991,580 - Imports of goods-6,004-7,517-8,021-9,538-11,294-11,142 - Imports of services-4,249-4,912-4,823-5,492-6,304-6,334 - Income, net-5,102-5,622-3,520-5,404-6,379-6,295 - Income credits110159201222253376 - Income debits-5,851-5,780-3,758-5,592-6,608-6,626 - Investment income, debit-1,029-1,154-827-1,138-1,540-1,610 - Interest paid on public debt-129-118-69-62-68-85 - Interest paid on nonpublic debt-82-68-22-12-12-20 - Current transfers, net415385403311290368 - Private current transfers, net264214268216147157 - Official current transfers, net15117113595144211 - Balance on capital and financial account-1,276-1,955640706-526-1,135 - Balance on capital account (incl. capital transfers)1263185001,405176259 - Balance on financial account (incl. reserves)-1,402-2,273140-699-702-1,394 - Direct investment, net2,3131,6252,2782,9863,2702,949 - Portfolio investment, net449512200 - Other investment, net-3,090-2,657-2,376-3,700215-780 - Reserve assets (accumulation -)-1,073-1,29323613-4,188-3,563 - Errors and omissions, net-105-5591,03138500 - Gross official reserves (end of period) In billions of CFAF5721701467786764...... - Gross official reserves (end of period) In millions of U.S. dollars11,93715,66214,35413,658...... - Gross official reserves (end of period) In months of imports of goods and services5.26.95.74.5...... ### Fiscal Balances and Public Finance, 2007–12 (Tables 6a, 6b) - Overall fiscal balance (CEMAC)8.410.3-0.92.26.25.5 (excluding grants) - Overall fiscal balance (including grants)8.710.4-0.62.57.67.5 (CEMAC) - Basic balance (CEMAC)9.310.70.13.08.48.3 - Primary fiscal balance (including grants) (CEMAC)10.311.40.03.08.27.7 - Government revenue (excluding grants) (CEMAC)27.830.626.025.529.329.4 - Government expenditure (CEMAC)19.520.326.923.323.123.8 - Non-oil overall balance (excluding grants) (CEMAC)-17.6-22.4-25.5-23.4-23.9-22.8 - Non-oil fiscal balance (including grants) (CEMAC) -16.6-21.4-24.4-22.7-23.0-21.8 - Basic balance (CEMAC)16.019.50.25.014.313.6 (in percent of Non-oil GDP, Table 6b) - CEMAC (Excluding public investment)-0.5-3.0-2.2-3.8-1.4-0.4 ### Convergence Criteria Compliance (Table 7) - Basic fiscal balance (≥ 0) — country values: Cameroon4.02.4-0.2-0.70.21.7; Central African Republic-2.8-4.0-4.5-5.0-4.3-5.1; Chad8.95.0-10.2-5.67.23.7; Congo, Republic of7.921.34.012.627.928.7; Equatorial Guinea19.315.4-3.8-4.0-2.4-2.6; Gabon9.412.28.47.17.98.6 - Consumer price inflation (≤ 3%) — number of countries violating165233 - Level of public debt (≤ 70% GDP) — number of countries violating210000 - Net change in government arrears (≤ 0) — number of countries violating000000 - Total number of criteria violations489655 - Notes: 1 Overall budget balance, excluding grants and foreign-financed investment. 2 External debt only. 3 External and domestic arrears. ### Monetary Aggregates and Central Bank Accounts (Tables 8–10) - Broad money (annual change)19.113.918.47.110.9 - Net foreign assets (percent change)52.835.630.3-13.5-13.2 - Net domestic assets-33.7-23.3-12.319.528.0 - Credit to government-6.8-11.90.07.03.9 - Credit to the private sector4.84.511.43.06.0 - Broad Money/GDP15.216.116.014.515.4 - Private bank Deposits/GDP10.110.810.79.510.9 - Credit to the private sector/GDP6.46.67.06.46.9 - Summary accounts of central bank (base money and reserves) Base money2,3682,7883,2723,4574,146; Reserves1,1651,4971,7151,8452,521 (2006–10, Table 9) - Summary accounts of commercial banks (reserves, deposits, credit to the economy) Reserves1,1651,4971,7151,8452,521; Deposits2,9433,3683,9594,2445,123; Credit to the economy1,7581,9442,4872,6573,017 (2006–10, Table 10) ### Medium-Term Projections and Structure of the Economy (Tables 11–12) - Summary medium-term projections (CEMAC), selected lines: - Real GDP5.94.32.45.05.24.24.63.93.02.7 (2007–16) - Oil (Real)3.73.5-4.9-2.41.73.8-0.10.4-5.0-10.0 - Non-oil (Real)11.85.96.25.26.85.47.55.74.95.7 - Consumer prices (average)1.05.74.72.74.13.93.73.53.53.4 - Overall balance, including grants8.710.4-0.62.57.67.57.06.66.05.3 - Current account balance, including grants4.77.2-5.5-2.80.72.01.40.90.1-1.2 - Non-oil overall balance-16.6-21.4-24.4-22.7-23.0-21.8-18.8-17.1-15.4-13.8 - Relative size of CEMAC economies (nominal GDP shares) and importance of oil sector: - CEMAC (In percent of CEMAC'S nominal GDP)100.0100.0100.0100.0100.0100.0100.0100.0100.0100.0 - Nominal oil GDP (percent of CEMAC)41.645.333.637.548.144.040.137.935.531.9 - Fiscal oil revenue (In percent of country's fiscal revenue) CEMAC64.971.958.065.370.268.764.562.058.956.0 ### Banking Sector Indicators and Prudential Ratios (Tables 13–15) - Violations of main prudential ratios, 2008–10 (number of banks by country and ratio categories) — CEMAC (41/46 banks referenced) summary: CEMAC (46)42203121 13 (Table 13) - Bank ratings, December 2010 (ratings scale 1–4B) — sample listing by country and counts (Table 14) - Quality of loan portfolio, 2009–10 (Table 15) — selected aggregates (In billions of CFA francs ; Unless otherwise indicated): - CEMAC Gross loans3184.6 3837.0 - Non-performing loans258.5 318.2 - Provisions against non-performing loans250.9 294.9 - Share of non-performing loans (In percent of gross loans)8.1 8.3 - Rate of Provisioning (In percent of non-performing loans)97.1 92.7 *Source: IMF staff compilation and tables extracted from World Development Indicators, BEAC, COBAC, and IMF World Economic Outlook database as presented in the source content.* ### APPENDIX 1. CEMAC: External Stability Assessment ### APPENDIX 1. CEMAC: External Stability Assessment ### Staff assessment — summary - Under current policies, the external position and the real effective exchange rate (REER) are broadly consistent with equilibrium. - Poor export performance and weak structural policies underline the need to improve competitiveness. ### Developments in the REER - The REER has appreciated, eroding the competitiveness gained after the devaluation of 1994. - Despite the dominant oil sector in the CEMAC, the REER appreciation closely tracked that of the WAEMU, where the oil sector is marginal. - REER index series (2005=100) presented for CEMAC and WAEMU (1990–2010). ### Model-based assessment of the REER (Bems and Carvalho 2009 approach) - Method: Bems and Carvalho (2009) model calling for smoothing intertemporal consumption from oil wealth; derive a current account norm under two allocation rules and compare to underlying 2015 current account (influenced by temporarily high public investment). - The assessment is described as a very stringent test because the norm presumes investment should be smoothed across generations. - Key quantitative results (CEMAC exchange rate assessments, 2015; IMF staff estimates): - External sustainability scenarios (table headings preserved): - Constant real consumption - Constant real per capita consumption - MT Current account Norm values: 1.80 4.10 1.22 - Underlying Current account: 0.07 0.07 0.07 - Current account elasticity: 0.37 0.37 0.37 - Overvaluation: 4.69 10.90 3.13 - Interpretation: - Comparing the norm to the underlying (medium-term) current account deficit yields an overvaluation of about 4 to 11 percent. - Allowing for temporarily higher public investment, the current account could be judged to be broadly consistent with equilibrium. - Caveats: - High degree of uncertainty and data limitations; analysis complemented by reserve adequacy discussion. ### External sustainability approach - Approach based on stabilizing the NFA at the 2010 level points to an overvaluation below 4 percent, which is stated to be well within margins of error. ### Reserves adequacy and fixed exchange rate regime risks - Current gross international reserves: - About 4.5 months of total imports (including investment and oil imports). - About 100 percent of broad money. - Adequacy assessment: - Coverage of about 4.5 months of total imports would allow the region to withstand a two-standard-deviation shock to the trade balance. - Projections under current fiscal policies: - Gross international reserves projected to stabilize at about 4 months of total imports by 2015. - Projections are highly sensitive to oil price projections. - Longer-term risks to reserves and fixed exchange rate regime: - Possible widespread noncompliance with full repatriation of export receipts. - Low interest rates on CFAF-denominated government deposits at the BEAC discourage full repatriation of export receipts. - Recent safeguards concerns at the BEAC have weakened member states’ confidence in the BEAC, reducing incentive for repatriating foreign currency receipts. - Overall conclusion: - The union’s REER, current account, and reserves are broadly consistent with external stability. - A downside risk to the fixed exchange rate regime over the longer term stems from noncompliance with the rule for full repatriation of export receipts to the BEAC. ### Non-oil export performance and competitiveness - Non-oil export performance: - CEMAC’s non-oil exports stagnated at about 0.05 percent of world exports. - Total exports of goods (1995–2010, in percent of total world exports): 0.12 0.23 0.24 - Oil exports (1995–2010, in percent of total world exports): 1.27 1.72 1.60 - Non-oil exports (1995–2010, in percent of total world exports): 0.05 0.04 0.04 - Growth comparison: - CEMAC’s non-commodity exports growth between 2000 and 2008: 4.5 percent. - Sub-Saharan Africa (SSA) non-commodity exports growth between 2000 and 2008: 14.2 percent. - Trading across borders indicators (2009; World Bank Doing Business Report; US$ per container): - Time to export (days): CEMAC 40, WAEMU 31, SACU 31 - Cost per exports (US$ per container): CEMAC 268, WAEMU 1836, SACU 2057 - Note: the table formatting in source shows these numbers aligned under headings; preserved here as reported. ### Structural factors constraining competitiveness - World Bank’s 2011 Doing Business Indicators: - CEMAC average ranking: 172 out of 183 countries. - SSA average ranking: 137 out of 183 countries. - CEMAC countries ranked very low, with Chad and the C.A.R. having the lowest ranking in the world, closely followed by Congo. - Areas of weakness: - Starting business, paying taxes, enforcing contracts, and trading across borders. - Complementary indicators: - Similar conclusions from World Economic Forum’s competitiveness index and World Bank’s CPIA rating for business regulatory environment. *Source: APPENDIX 1. CEMAC: External Stability Assessment (IMF staff estimates and cited sources in the provided content).* ### APPENDIX 4. Determinants of Non-Oil Growth in the CFA-Zone Oil-Producing Countries ### APPENDIX 4. Determinants of Non-Oil Growth in the CFA-Zone Oil-Producing Countries ### Introduction - Research question: why has non-oil growth been lackluster in CFA zone oil-exporting countries despite natural resource wealth. - Hypothesized channels (resource curse): real effective exchange rate appreciation (Dutch disease); high volatility of oil- and mineral-related revenues; institutional weaknesses (governance and transparency). - Empirical approach: test determinants of non-oil growth for CFA oil exporters versus comparable low-income countries (LICs) using panel estimation with country and time fixed effects. ### Data and empirical specification - Sample composition: - Total sample: 38 countries (excluding Equatorial Guinea) and 270 observations. - CFA oil exporters: Cameroon, Chad, Congo (Republic of), Cote d’Ivoire, and Gabon. - CFA non-oil exporters: Benin, Burkina Faso, Central African Republic, Guinea-Bissau, Mali, Niger, Senegal, and Togo. - LICs: Burundi, Comoros, Ethiopia, Gambia, Ghana, Guinea, Kenya, Madagascar, Malawi, Mauritania, Mozambique, Rwanda, Sierra Leone, Tanzania, Uganda, Zambia, Bangladesh, Cambodia, Lao P.D.R., Vietnam, Tajikistan, Uzbekistan, and Haiti. - Period covered: 1985–2008. - Frequency: variables measured as three-year averages. - Dependent variable: real non-oil GDP growth (log difference). - Key regressors: initial income (log real GDP per capita, 2000 US$), investment share of GDP (total; and disaggregated into public and private), government consumption share of GDP, terms of trade, openness ((Exports + Imports)/GDP). - Exchange rate measures: - Undervaluation index (UNDERVAL): deviation of actual real exchange rate from PPP value adjusted for per capita income; estimated as residual from a regression of the log of market exchange rate to PPP conversion factor on log per capita GDP. - Real effective exchange rate (REER, log) used as robustness check. ### Main estimation results (summary of empirical findings) - General exchange rate and growth result: - A 10 percent overvaluation is associated with a 0.25 percentage point lower growth rate (baseline interpretation). - Robustness: a 10 percent overvaluation or a 10 percent increase in REER is associated with a 0.3 percentage point lower growth rate (robustness check). - Investment and growth (sample-wide): - A 1 percentage point increase in the share of investment in total GDP is associated with a 0.127 percentage point higher growth (baseline Table 1, column 1). - A 1 percentage point increase in the share of government consumption in total GDP is associated with a 0.076 percentage point lower growth (baseline Table 1, column 1). - Differences for CFA oil-exporting countries: - Investment fails to spur non-oil growth in CFA oil exporters: the net impact of total investment for the CFA oil exporters is -0.005 (not statistically significant; Table 1 interpretation). - When controlling separately for CFA non-oil countries, the net effect of investment for CFA oil exporters is -0.004 (not statistically significant). - For CFA non-oil exporters, the net effect of investment is positive and significant at the 1 percent level but with a magnitude 0.07 in one specification (noted as much lower than the average LIC effect). - Public vs private investment (Table 3 summary): - For the full sample, both public and private investment are positively associated with growth. - For CFA oil exporters: - Net coefficient on public investment: -0.088 (not statistically significant). - Net coefficient on private investment: 0.014 (not statistically significant). - Wald tests indicate neither public nor private investment has a statistically significant impact on non-oil growth for CFA oil exporters. - For CFA non-oil exporters, the relation between public investment and growth does not differ from the average LIC (public investment estimate in the sample: 0.19). - Selected coefficient estimates (representative values from reported tables): - UNDERVAL (ln): 0.025**, 0.025**, 0.028*** (Table 1 columns). - Initial income (ln): -0.078***, -0.078***, -0.081***. - Investment (total): 0.127***, 0.154***, 0.211***. - Government consumption: -0.076**, -0.095**, -0.134**. - REER (ln) (robustness): -0.027*** (Table 2). - Private Investment (when disaggregated): 0.129**, 0.223**. - Public Investment (when disaggregated): 0.117*, 0.191*. - Interaction coefficients (CFA oil * Investment): -0.159***, -0.215*** (Table 1); (CFA oil * Private Investment) -0.209**; (CFA oil * Public Investment) -0.279* (Table 3 specification). - Adjusted R2 reported around 0.28–0.31 across specifications. - Robustness checks: - Results are robust to use of REER versus PPP-based undervaluation index. - Including interaction terms with exchange rate measures shows no statistically significant difference in how the real exchange rate is associated with GDP growth across the three country groups. ### Interpretation and mechanisms - Key empirical regularity: real exchange rate overvaluation (or REER appreciation) is negatively associated with non-oil growth across countries. - Distinguishing feature of CFA oil exporters: failure of both public and private investment to translate into higher non-oil growth. - Possible explanations for low investment effectiveness in CFA oil exporters: - Low efficiency of investment due to weaknesses in project selection, appraisal, implementation, and monitoring. - Public investment may not be creating the necessary conditions (infrastructure above threshold, enabling business environment, strong institutions and governance) for crowding in private sector activity. - Institutional weaknesses and market imperfections limit the growth-enhancing effect of public goods, consistent with the theoretical model. ### Policy implications and recommendations (inferred from findings and discussion) - Prioritize improving the efficiency of public investment management: - Strengthen project appraisal, selection, implementation, and evaluation processes. - Address capacity constraints in public investment management. - Improve enabling conditions for private-sector response to public investment: - Ensure infrastructure investment reaches threshold levels that support private activity. - Improve the business environment and governance/transparency to enhance investment payoff. - Monitor real exchange rate developments and mitigate real appreciation pressures to reduce Dutch disease effects on non-oil tradable sectors. *Source: APPENDIX 4. Determinants of Non-Oil Growth in the CFA-Zone Oil-Producing Countries (A. Tabova and C. Baker).* ### APPENDIX 5. Relations of CEMAC Member Countries and the Fund ### APPENDIX 5. Relations of CEMAC Member Countries and the Fund ### I. Membership Status - Cameroon, Central African Republic, Chad, Republic of Congo, and Gabon joined the IMF in 1963. - Equatorial Guinea joined in 1969. - The region accepted Article VIII on June 1, 1996. ### II. Relations of the CEMAC Member Countries and the Fund - Cameroon: - On July 14, the Board concluded the 2010 Article IV consultation. - The Board also discussed the Second Poverty Reduction Strategy Paper (PRSP) and the Joint IDA-IMF Staff Advisory Note. - The 2011 Article IV consultation discussion by the Board is scheduled for June 24. - Cameroon is on a 12-month consultation cycle. - Central African Republic (C.A.R.): - The Executive Board approved a three-year PRGF arrangement on December 22, 2006 in an amount equivalent to SDR 36.2 million (about US$58.4 million). - The second review was completed on June 18, 2008, and access was increased by SDR 8.355 million (about US$13.5 million). - Access was again increased by SDR 25.065 million, to a total of 125 percent of quota, in the fourth review on June 29, 2009. - On June 29, 2009, C.A.R. also reached the completion point under the enhanced HIPC initiative. - The last Article IV consultation was on December 4, 2009, together with the fifth PRGF review, and the sixth and last review was concluded on August 25, 2010. - The authorities have expressed their interest in a successor arrangement under the Extended Credit Facility (ECF). - Chad: - The last financial arrangement, a PRGF, expired in May 2008 with no review completed. - A 2009 Staff-Monitored Program (SMP) went off-track due to sizeable overruns on security spending and investment projects. - The authorities have expressed interest in discussing an SMP covering the latter half of 2011. - The last Article IV consultation was completed on June 17, 2010. - Chad is on a 12-month consultation cycle. - Congo: - The Executive Board approved a three-year PRGF arrangement for Congo in an amount equivalent to SDR 8.5 million (about US$13.4 million) in December 2008. - The country reached the Decision Point under the enhanced HIPC initiative on March 8, 2006. - The last Article IV consultation and Fourth review under the ECF were concluded on January 19, 2011. - Congo is on a 24-month consultation cycle. - Equatorial Guinea: - The last financial arrangement, an ESAF, expired in 1996. - Equatorial Guinea is not expected to seek Fund financial assistance over the next few years. - The country is not eligible for assistance under the HIPC initiative. - The last Article IV consultation was concluded on April 22, 2011. - Equatorial Guinea is on a 12-month consultation cycle. - Gabon: - The three-year SBA for about US$118 million expired in May 2010, with only the first three reviews completed. - Recurrent fiscal slippages made it difficult to sustain the Fund-supported program. - Gabon is not eligible for assistance under the HIPC initiative. - The last Article IV consultation was concluded on February 18, 2011. - Gabon is on a 12-month consultation cycle. ### III. Safeguards Assessments - The Bank of the Central African States (BEAC) is the regional central bank of the Central African States. - The most recent safeguards assessment of the BEAC was completed on July 6, 2009. - The assessment findings indicated: - Implementation of previous safeguards recommendations on financial reporting, internal audit, and internal control was limited. - The changing risk profile of the BEAC foreign exchange holdings required further actions to strengthen safeguards at the BEAC. - Subsequent to revelation of Paris office fraud, a series of initial measures and longer term reforms was agreed between the IMF and BEAC in order to continue with country programs. - BEAC adopted an action plan for 2010 with the aim of reforming its own governance, and strengthening key safeguards. - Implementation delays and additional safeguard concerns raised in the first special audit triggered a suspension of Fund disbursements to CEMAC countries from June through early August 2010, after which they resumed. - A recent safeguards monitoring mission has identified a new series of rolling benchmarks to address outstanding safeguards concerns going forward. ### IV. Exchange System - The regional currency is the CFA franc. - From 1948 to 1999, it was pegged to the French franc. - Since the euro was introduced in 1999, it has been pegged to the euro at the rate of CFAF 655.957 per euro. ### V. Article IV Consultation - Following an Executive Board decision in January 2006, discussions with monetary unions have been formalized and are part of the Article IV consultations with member countries. - The discussions reported here are in relation with Article IV consultations with the six CEMAC member countries. - The Executive Board concluded the last Article IV consultation with the CEMAC on November 13, 2009. - Such consultations are held on a 12-month cycle. ### VI. FSAP Participation and ROSCs - (No substantive text provided in the source.) *IMF staff report excerpt: APPENDIX 5. Relations of CEMAC Member Countries and the Fund* ### 11. The first regional Financial Sector Assessment Program (FSAP) was carried out January- ### 11. The first regional Financial Sector Assessment Program (FSAP) was carried out January- ### Technical assistance to BEAC - Since May 2011: MCM resident general advisor to the Governor of the BEAC, Didier Casier, on governance, accounting and internal controls. - March, April, May 2011: MCM experts visits on accounting, reserve management and banking supervision. - January 2011: MCM TA mission to discuss MCM TA in the areas of governance, internal audit and accounting, monetary policy and research, reserve management, and banking supervision with BEAC and COBAC management and senior staff. - October-November 2010: MCM TA mission to discuss TA program to strengthen BEAC and COBAC. - July 2009: MCM mission with two experts on regional public debt market development. - December 2008: MCM mission with three experts (including resident advisor from Afritac-Central) on reserve management, research, and regional public debt market. - Since November 2008: MCM resident advisor, Mr. Emmanuel Rocher (on secondment from the Bank of France), in public debt management. - April, June, September, and November 2009: Visits by short-term expert Mr. Daniel Trimoulla (formerly from the Bank of France) and by Mr. Bernard Sivan (formerly from the Bank of France; September visit) in banking supervision. - December 2007: STA participation in BEAC’s workshop on monetary statistics. - July 2007: Visit by MCM experts on issues regarding the BEAC’s management of its foreign assets. - 2006-March 2007: Continuation of visits by MCM experts on banking supervision, payments and settlements systems, and internal audit and accounting. - 2000–2005: Visits by MFD experts on banking supervision, payments and settlements systems and internal audit. - 2001–2004: Two MFD expert visits and one mission on payments systems. - 2002–present: Visits by MFD foreign exchange reserve management experts. - 2004: MFD AMLT and CFT advisor. - 2005: MFD mission on internal audit. - 2002: STA participation in BEAC’s workshop in monetary statistics. - 2001, 2004: IMF safeguards assessments. - 2001: STA mission on monetary and financial statistics (preparation of the IFS page for CEMAC). ### Background and recent economic context - The CEMAC has earned significant revenues from oil production in past decades; five of the six CEMAC countries are oil producers. - Oil accounts for about 45 percent of regional gross domestic product (GDP) and 90 percent of total exports. - Oil revenue, channeled through government spending, is the main driver of economic activity; volatile oil prices and procyclical fiscal policy have caused boom and bust cycles. - Spending out of oil wealth has not led to more inclusive growth; high inequality, poverty and unemployment remain widespread. - The region is unlikely to meet the Millennium Development Goals by 2015. - The CEMAC is recovering from the global financial crisis, although growth has not returned to pre-crisis levels and continues to lag the average in Sub-saharan Africa. - Inflation has been contained largely because higher international oil prices have not been passed through to domestic prices; good harvests in some CEMAC countries also helped contain inflation. - High commodity prices and healthy export demand have improved the current account and fiscal balances; the non-oil primary fiscal deficit has widened reflecting a scaling up of public investment. - Outlook: activity expected to remain robust, supported by public investment and commodity exports. - Foremost downside risk: a decline in commodity prices, especially oil. ### Executive Board assessment and recommendations - Directors welcomed the region’s economic recovery and overall positive outlook, but noted: - Recovery uneven across member countries. - Inflation is on the rise due to high international food and fuel prices. - Continued high levels of unemployment and poverty. - Remaining impediments to stronger and sustained growth. - Directors emphasized need for stepped-up efforts on structural reforms and infrastructure investment to foster broad-based long-term growth and poverty reduction. - Short-term policy guidance: - Adopt an appropriate policy mix to contain inflationary pressures. - Be vigilant to possible second-round effects of food and fuel price shocks. - Reallocate spending toward measures aimed at mitigating adverse impact of shocks on the most vulnerable. - Public investment and fiscal management: - Improve quality of social and infrastructure spending through proper selection and implementation of investment projects. - Anchor capital budgets in realistic multi-year investment plans and formulate annual budgets in context of medium-term fiscal strategies. - Give priority to investments in infrastructure and the health and education sectors. - Further strengthen transparency and accountability in the use of oil and other public resources. - Structural and financial sector reforms: - Strengthen institutions and streamline administrative procedures to improve the business environment. - Broaden access to credit and remove barriers to regional trade. - Accelerate financial sector reform to address weak banks, strengthen the regulatory framework, increase capacity of the regional banking supervisor (Central African Banking Commission, COBAC), and further develop the sector. - External stability and compliance: - Staff assessment: real effective exchange rate, current account positions, and reserves are broadly consistent with external stability. - Directors stressed importance of compliance with the rule for repatriating export receipts to the Bank of Central African States and encouraged further strengthening of compliance with union rules. ### CEMAC authorities’ statement and priorities - Authorities expressed appreciation for IMF policy advice and technical assistance; committed to deepening economic regional integration to create a strong and single market for goods, services and labor. - Authorities noted progress from Fund technical assistance in financial reforms including safeguard measures, governance and accountability of BEAC and COBAC. - Authorities supportive of strengthened cooperation with the Fund and other development partners. - Authorities intent on addressing risks from heavy dependence on oil and volatility of global food prices with appropriate macroeconomic and structural policies. ### Policies and structural reforms in 2011 (authorities’ view) - Fiscal sustainability: - Authorities embarked on a vast public investment program that widened the non-oil primary deficit. - This deficit is projected to stabilize at a sustainable level of about 5 percent of non-oil GDP. - Authorities committed to anchor public investment in a credible medium-term fiscal strategy. - In context of fixed exchange regime, need to further enhance positive fiscal position given linkage between fiscal sustainability and external stability. - External sustainability: - Fixed exchange regime has served CEMAC member economies well. - In 2010, gross international reserves reached a comfortable level in terms of imports and broad money covers. - Authorities reflecting on issue of noncompliance with the rule of repatriation of all export receipts and will maintain close dialogue with the CFA franc zone and the Fund. - Safeguards measures related to the regional central bank have been strengthened; the recent move on the euro interest rate will be helpful. - Authorities agree on need to implement an adequate foreign reserves management strategy to meet desired international reserves sustaining the exchange rate peg to the euro; intend to enhance BEAC institutional and human capacities with Fund technical assistance. - Structural reforms and non-oil growth: - Authorities determined to fill gaps in infrastructure services and improve the business environment while increasing quality of health and education services. - Plan to implement measures adopted by the 2007 regional conference on non-oil growth and economic diversification. ### Key statistics (CEMAC: Selected Economic and Financial Indicators, 2007–12) - GDP at constant prices (annual percent change): 2007: 5.9; 2008: 4.3; 2009: 2.4; 2010: 5.0; 2011: 5.2; 2012: 4.2. - Oil GDP: 2007: 3.7; 2008: 3.5; 2009: -4.9; 2010: -2.4; 2011: 1.7; 2012: 3.8. - Non-oil GDP: 2007: 11.8; 2008: 5.9; 2009: 6.2; 2010: 5.2; 2011: 6.8; 2012: 5.4. - Consumer prices (average): 2007: 1.0; 2008: 5.7; 2009: 4.7; 2010: 2.7; 2011: 4.1; 2012: 3.9. - Consumer prices (end of period): 2007: 3.0; 2008: 7.1; 2009: 2.9; 2010: 2.9; 2011: 3.5; 2012: 3.0. - Net foreign assets (annual changes in percent of beginning-of-period broad money): 2007: 35.6; 2008: 30.3; 2009: -13.5; 2010: -13.2. - Net domestic assets (annual changes in percent of beginning-of-period broad money): 2007: -23.3; 2008: -12.3; 2009: 19.5; 2010: 28.0. - Broad money (annual change): 2007: 13.9; 2008: 18.4; 2009: 12.2; 2010: 18.4. - Gross national savings (percent of GDP): 2007: 24.2; 2008: 26.9; 2009: 18.5; 2010: 20.0; 2011: 29.3; 2012: 28.3. - Gross domestic investment (percent of GDP): 2007: 21.5; 2008: 19.8; 2009: 24.7; 2010: 25.6; 2011: 25.5; 2012: 26.1. - Of which public (percent of GDP): 2007: 8.0; 2008: 8.7; 2009: 13.6; 2010: 11.3; 2011: 12.0; 2012: 12.4. - Total revenue, excluding grants (percent of GDP): 2010: 25.5; 2011: 29.3; 2012: 29.4 (table shows additional values for earlier years). - Government expenditure (percent of GDP): 2007: 19.5; 2008: 20.3; 2009: 26.9; 2010: 23.3; 2011: 23.1; 2012: 23.8. - Primary basic fiscal balance (excluding grants and foreign-financed investment and interest payments, percent of GDP): 2007: 10.4; 2008: 11.7; 2009: 0.9; 2010: 3.6; 2011: 9.3; 2012: 8.9. - Basic fiscal balance (excluding grants and foreign-financed investment, percent of GDP): 2007: 9.3; 2008: 10.7; 2009: 0.1; 2010: 3.0; 2011: 8.4; 2012: 8.3. - Overall fiscal balance, excluding grants (percent of GDP): 2007: 8.4; 2008: 10.3; 2009: -0.9; 2010: 2.2; 2011: 6.2; 2012: 5.5. - Non-oil overall fiscal balance, excluding grants (percent of non-oil GDP): 2007: -17.6; 2008: -22.4; 2009: -25.5; 2010: -23.4; 2011: -23.9; 2012: -22.8. - Overall fiscal balance, including grants (percent of GDP): 2007: 8.7; 2008: 10.4; 2009: -0.6; 2010: 2.5; 2011: 7.6; 2012: 7.5. - Exports of goods and nonfactor services (percent of GDP or table series): 2009: 47.3; 2010: 53.0; 2011: 55.8; 2012: 53.7. - Imports of goods and nonfactor services: 2009: 42.5; 2010: 41.8; 2011: 40.5; 2012: 38.3. - Balance on goods and nonfactor services: 2009: 4.8; 2010: 11.1; 2011: 15.2; 2012: 15.5. - Current account, including grants (percent of GDP): 2007: 4.7; 2008: 7.2; 2009: -5.5; 2010: -2.8; 2011: 0.7; 2012: 2.0. - External public debt (percent of GDP): 2007: 18.7; 2008: 11.5; 2009: 10.3; 2010: 6.0; 2011: 5.9; 2012: 6.2. - Gross official reserves (end of period, millions of U.S. dollars): 2007: 11,937; 2008: 15,662; 2009: 14,354; 2010: 13,658. - Gross official reserves (end of period, in months of imports of goods and services): 2007: 5.2; 2008: 6.9; 2009: 5.7; 2010: 4.5. - Gross official reserves (end of period, in percent of broad money): 2007: 120.3; 2008: 124.5; 2009: 112.4; 2010: 101.1. - Nominal GDP (in billions of CFA francs): 2007: 29535.5; 2008: 35294.0; 2009: 30220.8; 2010: 35934.9; 2011: 41658.4; 2012: 43503.3. - CFA francs per U.S. dollar, average: 2007: 479.3; 2008: 447.8; 2009: 472.2; 2010: 495.3; 2011: 479.2; 2012: 481.6. - Oil prices (in US$ per barrel): 2008: 71.1; 2009: 97.0; 2010: 61.8; 2011: 79.0; 2012: 107.2; 2012 (memorandum): 108.0. *Prepared from the IMF staff report and Public Information Notice material included in the supplied content.* ### Appendix 4 of the staff report, capacity, management and institutional constraints continue to ### Appendix 4 of the staff report, capacity, management and institutional constraints continue to impede the effectiveness of public and private investment. ### Capacity, management, and regional integration - "capacity, management and institutional constraints continue to impede the effectiveness of public and private investment." - Authorities "hope that they can count on the increased support of development partners to help them tackle those constraints." - Authorities "intend to pursue the process of regional integration notably by lifting barriers to internal trade." - Continued support from the Fund and other partners is viewed as "key to accelerating the implementation of CEMAC’s reform agenda and enhancing its institutional and human capacities." ### BEAC safeguards measures and governance - "CEMAC authorities have made significant progress in implementing the BEAC action plan aimed at improving governance and internal controls." - Authorities "share the recommendations made by the recent safeguards monitoring mission to address vulnerabilities identified in the accounting system, internal audit and BEAC national directories." - With "adequate Fund technical assistance," authorities will "intensify their efforts to continue monitoring progress on the basis of rolling benchmarks on safeguards measures." ### Financial sector reform, stability, and access - "Strengthening financial stability and broadening access to financial services remain key priorities" for building "a strong and sound financial sector for the region." - The "2006 FSAP continues to guide policy dialogue" on financial sector matters. - Authorities "share the view on the need to align the principal prudential regulations with international best practices and further strengthen their enforcement." - In view of CEMAC’s legal and institutional architecture, authorities are determined to: - "increase COBAC staffing," - "adopt by year-end the regulations on the resolution of banking crises," - "carry out stress tests on the regional banking system." - Efforts will also focus on "improving the institutional environment for the financial sector including the microfinance." - Authorities "see merit in furthering efforts to create credit history centers to improve creditor information and the access to financial services for SMEs and households." ### Conclusion and policy implications - Authorities "will intensify their efforts to pursue and strengthen efforts towards greater regional integration." - They are "appreciative of the support they benefit from the Fund, in the form of policy advice and technical assistance." - "Continued support of the Fund and other partners will be key to accelerating the implementation of CEMAC’s reform agenda and enhancing its institutional and human capacities." *Source: Appendix 4 of the staff report* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr11329.pdf_