Central African Economic and Monetary Community (CEMAC): Common Policies of Member Countries, and Common Policies in Support of Member Countries Reform Programs-Press Release; Staff Report; and Statement by the Executive Director

IMF Staff Country Reports, January 3, 2019

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Canonical URL: Central African Economic and Monetary Community (CEMAC): Common Policies of Member Countries, and Common Policies in Support of Member Countries Reform Programs-Press Release; Staff Report; and Statement by the Executive Director

The regional strategy "has helped to avert an immediate crisis but continues to face headwinds."
Outstanding implementation issues:
- Two countries have yet to enter financing arrangements with the Fund.
- Regional reserves "have underperformed despite higher-than-projected oil prices."
- "The projected recovery of non-oil growth has still to materialize."
- The security, social, and political context "remains challenging."
Medium-term outlook: "continues to see a gradual improvement in the economic and financial situation but is subject to substantial downside risks," including:
- further delays in the approval of financial arrangements with Congo and Equatorial Guinea,
- lower oil prices,
- tighter global financial conditions.
Structural challenge: "The region continues to face daunting challenges to diversify its economy, with a poor business environment and high perception of corruption."

The BEAC has taken corrective actions consistent with prior policy assurances:
- an increase in its policy rate to address NFA underperformance.
- substantial progress toward finalizing by end-year the modernization of the monetary policy operational framework.
- drafting of new foreign exchange regulations.
A follow-up letter of support provides updated policy assurances on the NFA path.
Key topical subjects in the report include: Banking, Credit, External position, Fiscal policy, Fiscal stance, Foreign assets, Foreign exchange, Foreign exchange regulations, Money, Public debt.

Primary downside risks listed:
- Delays in approval of financial arrangements with Congo and Equatorial Guinea.
- Lower oil prices relative to projections.
- Tighter global financial conditions.
Other vulnerabilities:
- Underperforming regional reserves despite favorable oil price developments.
- Lack of realized recovery in non-oil growth.
- Security, social, and political fragility.
- Structural impediments to diversification: poor business environment and high perception of corruption.

Maintain and monitor corrective monetary actions by the BEAC, including the increased policy rate and modernization of the operational framework.
Finalize and implement new foreign exchange regulations as drafted.
Secure and accelerate approval of financing arrangements for remaining member countries (Congo and Equatorial Guinea) to reduce regional vulnerability.
Address structural constraints to diversification through improvements in the business environment and anti-corruption measures.