## A Common Cause for Sustainable Growth and Stability in Central Africa

_IMF Blog, August 1, 2017_

## Source details

**Canonical URL:** [A Common Cause for Sustainable Growth and Stability in Central Africa](https://www.imf.org/en/blogs/articles/2017/08/01/a-common-cause-for-sustainable-growth-and-stability-in-central-africa)

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- [Markdown version](/en/blogs/articles/2017/08/01/a-common-cause-for-sustainable-growth-and-stability-in-central-africa/index.md)
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## Bibliographic details
- Authors: Abebe Aemro Selassie
- Published: August 1, 2017

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### Expenditure, context, and shocks
- Six countries in the Central African Economic and Monetary Community: Gabon, Cameroon, Chad, the Central African Republic, the Republic of Congo, and Equatorial Guinea.
- Share a common currency—the CFA franc—pegged to the euro, and a common central bank that holds the region’s pool of foreign exchange reserves.
- Oil accounts for about 60 percent of the region’s exports.
- Oil price collapse in 2014 cut government revenues from oil exports in half between 2014 and 2016.
- Current account deficit widened from 3.9 percent of GDP in 2014 to 9.3 percent in 2016.
- Public debt rose from 29 percent of GDP in 2014 to 47 percent of GDP in 2016, despite some cuts in public spending.
- By end-2016, foreign exchange reserves had dropped by US$10 billion, reaching the equivalent of about two months of imports.
- Security threats compounded economic difficulties: Boko Haram in the Lake Chad region and civil conflict in the Central African Republic.

### Regional strategy and the united front
- Summit in Yaoundé: leaders decided to preserve the current exchange rate peg and take coordinated actions to address collective problems.
- Overall reform emphasis on four areas:
  - Raise non-oil revenues through fiscal reforms, better prioritize expenditures, and strengthen transparency and efficiency of public spending.
  - Protect social spending and introduce new social protection programs to ease the impact on the poor.
  - Strengthen the financial sector to promote stability and inclusion.
  - Improve the business environment and promote economic diversification away from overreliance on oil.
- Rationale: coordinated implementation across countries is critical to prevent free rider problems and enable regional recovery.

### IMF support: financing, policy advice, and technical assistance
- IMF actions:
  - Approved new Fund-supported programs for Gabon, Cameroon, and Chad, and an increase in funding for the Central African Republic.
  - Discussions ongoing with the Republic of Congo and Equatorial Guinea.
- Financing:
  - Provided in conjunction with other development partners to allow a more gradual correction of imbalances and more time to implement reforms.
- Three critical areas of policy advice and technical assistance:
  - Policy coordination among countries and with regional institutions:
    - Consistent implementation of reform programs to prevent free rider problems.
    - Regional central bank commitment to support country programs and raise interest rates as needed to help rebuild external reserves and support the exchange rate peg.
    - Strengthen the financial sector, including enhancing the bank supervision framework and its implementation.
  - Growth-friendly and inclusive fiscal reforms:
    - Mitigate effects of spending cuts by improving efficiency of public spending and protecting the poor.
    - Emphasize fair distribution of fiscal adjustment to increase public support for reforms.
  - Combating corruption and increasing transparency in public resource use:
    - Corruption is a significant drain on scarce public resources and a drag on growth.
    - Encourage concrete steps such as joining the Extractive Industries Transparency Initiative to support disclosure of commodity revenue information.
- Final note: ultimate success depends on how well countries implement reforms and respond to future shocks; the IMF stands ready to support their efforts.

### Key features of country programs
- Cameroon:
  - Maintain sustainability of public debt by aligning borrowing plans with capacity to execute investment projects and prioritizing infrastructure projects that will contribute to the development of the country.
  - Increase non-oil revenue by broadening the coverage of the land tax and rationalizing tax exemptions.
  - Support private-sector led growth by addressing high non-performing loans and resolving insolvent banks, and removing administrative obstacles to private sector development.
  - Target 3.5 percent of GDP for spending for health and education, and expand the coverage of social protection programs.

- Gabon:
  - Contain public spending to stabilize public debt and place it on a downward path over the medium term.
  - Increase transparency and efficiency of public spending through public finance management reforms, including improving the process for public purchases to ensure better value for money.
  - Protect critical social programs from fiscal adjustment by ensuring they remain adequately funded, maintain financial stability, and adopt policies to foster economic diversification.
  - Simplify procedures and reduce the time it takes to start a business, deal with construction permits, register property, pay taxes, and enforce contracts to support private sector investment and job creation.

- Chad:
  - Reestablish debt sustainability by restructuring external commercial debt.
  - Boost non-oil revenue mobilization, improve public financial management, and pursue economic diversification efforts, while strengthening the stability of the banking sector.
  - Reallocate resources to public investment, clearance of domestic arrears, and social spending, including a target to gradually increase the latter starting in 2017, to reach 4.2 percent of GDP.

- Central African Republic:
  - Accelerate payments of domestic arrears and increase social expenditure to support social cohesion and growth.
  - Raise domestic revenues by almost 3 percent of GDP by 2020 to create room in the budget for social services and critical infrastructure projects.
  - Improve transparency and efficiency of public spending through regular publication of budget execution reports.

*Source: A Common Cause for Sustainable Growth and Stability in Central Africa, Abebe Aemro Selassie, August 1, 2017.*

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## Content in this bundle

- **Uma Causa Comum para o Crescimento Sustentável e a Estabilidade na África Central**
  - [Uma Causa Comum para o Crescimento Sustentável e a Estabilidade na África Central (Markdown version)](/external/lang/portuguese/np/blog/2017/080117p.pdf.md){rel="alternate" type="text/markdown"}
  - [Uma Causa Comum para o Crescimento Sustentável e a Estabilidade na África Central (PDF)](/external/lang/portuguese/np/blog/2017/080117p.pdf){rel="external" type="application/pdf"}

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## References

- [https://www.imf.org/wp-content/uploads/2017/07/BLOG-1024x600-CAMEROON-Bafut-women-with-crops-Heiner-Heine_imageBroker_Newscom.ibpremium494795.jpg](https://www.imf.org/wp-content/uploads/2017/07/BLOG-1024x600-CAMEROON-Bafut-women-with-crops-Heiner-Heine_imageBroker_Newscom.ibpremium494795.jpg)
- [Gabon](http://www.imf.org/external/country/GAB/index.htm)
- [Cameroon](http://www.imf.org/external/country/CMR/index.htm)
- [Chad](http://www.imf.org/external/country/TCD/index.htm)
- [Central African Republic](http://www.imf.org/external/country/CAF/index.htm)
- [Republic of Congo](http://www.imf.org/external/country/COG/index.htm)
- [Equatorial Guinea](http://www.imf.org/external/country/GNQ/index.htm)
- [Corruption](https://blogs.imf.org/2017/05/18/beheading-the-hydra-how-the-imf-fights-corruption/)

_Source: https://www.imf.org/en/blogs/articles/2017/08/01/a-common-cause-for-sustainable-growth-and-stability-in-central-africa_