Opening Remarks by Deputy Managing Director, Kenji Okamura: Panel Discussion at the Institute of Statistics and Applied Economics (ISSEA)
March 16, 2023
Introduction
Thank you Dr. Dobele-Kpoka for that kind introduction.
Let me begin by acknowledging the significance of today’s date: March 16th, or CEMAC Day, commemorates the founding of the Central African Economic and Monetary Community in 1994. As we reflect on these past twenty-nine years, we must celebrate the many achievements of the CEMAC Commission and its institutions, including this institute of education. And as his mandate draws to a close, I want to congratulate Dr. Libengue on the incredible progress of ISSEA under his leadership.
Today is also an opportunity to look ahead to the next twenty-nine years and beyond, and to discuss the future of the CEMAC.
So, it is a pleasure to join you on this special day, especially the students. You are the key stakeholders of the reforms we will discuss.
To frame that discussion, I will briefly highlight recent economic developments and the policy challenges facing the region.
Context
A year ago, Russia’s invasion of Ukraine brought another shock to the global economy just when it was recovering from the COVID-19 pandemic. The scars are evident. Global growth is projected to fall from 3.4 percent in 2022 to 2.9 percent in 2023. And while global inflation is expected to fall from 8.8 percent to 6.6 percent, it remains at historically elevated levels. Global financing conditions remain tight.
There are bright spots. As in 2022, we expect the Central African Economic and Monetary Community region to broadly benefit from a positive terms of trade shock. Although global energy and food price pressures are impacting domestic prices, regional inflation is expected to decline from 5.6 percent at the end of 2022 to 4.4 percent in 2023—so long as tighter monetary policy, with support from fiscal policy, continues to anchor inflation expectations.
But those prospects are uncertain.
Risks and Challenges
The region faces a potentially less forgiving environment.
Global financing conditions could get tighter, increasing debt vulnerabilities. Risks also include a further possible decline in global oil prices and intensified security challenges in some countries. Responding to the materialization of these risks would be difficult because of the limited fiscal space. What’s more, millions of people face food insecurity and a cost-of-living crisis. All of this amplifies longstanding policy challenges facing CEMAC.
Policy priorities
Against the background of this uncertain global environment, how can we tackle these policy challenges to create a more thriving and resilient CEMAC?
First, maintain macroeconomic stability and resilience. Let me highlight the importance of following through with the commitment to fiscal and external sustainability and the reform progress under domestic and regional economic programs. Now it is time to seize the unique opportunity offered by high oil prices to rebuild fiscal savings, bolster external reserves and strengthen external stability. A transparent and consistent implementation of foreign exchange regulations remains pivotal to ensure appropriate currency repatriation.
Second, invest in human capital. This can lay the ground for job creation and is essential to reduce poverty, increase productivity, improve living standards, foster inclusive growth, and ensure social cohesion.
Just think, recent World Bank estimates suggest that a child born today in CEMAC’s growing population will only be 37 percent as productive as he or she could be.
CEMAC’s dynamic youth, including the students in this room, is one of the region’s strongest assets. Together with the 34 million young people projected to enter the job market in the next two decades (source: UN)—they deserve the education, training, and skills that underpin success in modern economies, together with well-targeted social safety nets to support vulnerable people through difficulties. So—to realize the demographic dividend of a young population, expenditures on health and education should be prioritized.
But these expenditures require new resources. This brings me to the third priority: grow the tax base, including through economic diversification and regional trade.
CEMAC countries should start with renewed efforts to step up transparency in oil revenue collection, such as through better oversight of national oil companies and participation in the Extractive Industry Transparency Initiative. Governments should also clamp down on widespread tax exemptions, special regimes, and discretionary tax incentives.
But an over reliance on commodities is unsustainable. The on-going efforts to strengthen the anti-corruption frameworks are also critical for strengthening the business climate. Despite sharing the same currency, CEMAC countries have little trade with each other, partly due to raw materials making up the bulk of exports. This can put pressure on the region’s external position, and underlines why it’s vital to move away from a reliance on commodity extraction—for example by increasing value-added processing in the agricultural sector.
Trade itself can also promote diversification. But this requires resolute steps to tackle structural bottlenecks—such as improving transport infrastructure and removing tariff and non-tariff barriers. I’m very pleased to know that this sensible goal is already a priority under the CEMAC development strategy.
The fourth priority is to accelerate financial sector development, balancing innovation with regulation.
Financial inclusion in the region ranks among the lowest in Sub-Saharan Africa: in the CEMAC, 19 percent of adults have a bank account, compared to over 30 percent in the rest of the region. Given the growing interest in financial innovation, including mobile money and central bank digital currency, the region should continue to spearhead innovation initiatives—as the BEAC has done. Such efforts should include a regulatory framework in the service of financial inclusion, while protecting consumers and preserving financial stability.
Enhancing governance – an overarching theme
Finally, let me emphasize the importance of enhancing the governance of public funds.
Good governance brings a multitude of benefits. Not only is it critical for strengthening the business climate, but it’s also the key to spending efficiency. In other words, we must get more for each franc of spending. Think of value for money, stronger growth and inclusion, and ensuring that the debt burden of future generations is matched by growth-enhancing investments.
Conclusion
The reform agenda is ambitious, as it should be for this young and dynamic region. Delivering on these promises will be key to supporting social cohesion and trust.
And we are standing by your side, ready to support you as needed.
Thank you.