{
  "title": "CEMAC: A Stronger Community for Stronger and More Inclusive Growth",
  "publication": "IMF News, January 8, 2016",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp010816",
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  "summary": "Yaoundé",
  "authors": [
    "Christine Lagarde"
  ],
  "publishDate": "2016-01-08",
  "sections": [
    {
      "heading": "Introduction and context",
      "content": "- Speech by Christine Lagarde, Managing Director, International Monetary Fund, Yaoundé, January 8, 2016 (As prepared for delivery).\n- Purpose: assess implications of prolonged low oil prices and security shocks for CEMAC; take stock of infrastructure financing since March 2014; identify policies to sustain infrastructure investment while preserving fiscal viability and debt sustainability."
    },
    {
      "heading": "Global economy — modest and uneven growth",
      "content": "- Global expansion in 2015 estimated at about 3.1 percent.\n- Three significant transitions shaping 2016 prospects:\n  - Divergence in monetary policy in major advanced economies; U.S. Federal Reserve raised rates for the first time in nine years with gradual normalization dependent on firmer wage or price pressures.\n  - China’s historic rebalancing and moderating activity, feeding into lower demand for commodities and requiring clarity on policies, especially exchange rate policy.\n  - Turn in the commodity super cycle, most relevant to CEMAC:\n    - Oil prices have dropped by close to 70 percent since June 2014 — from a peak of US$120 per barrel to US$32 today.\n    - Futures markets point to only a modest recovery of prices to about US$60 by 2019.\n    - Supply factors: advent of shale oil, change in OPEC’s strategic behavior, projected increase in Iranian exports.\n    - Demand factors: secular decline in oil consumption in the United States and general weakness in activity, especially in emerging market economies."
    },
    {
      "heading": "CEMAC outlook — adjusting to twin shocks and a new global reality",
      "content": "- Oil dependence and past windfalls:\n  - Oil represents about 70 percent of CEMAC’s exports and more than a third of its fiscal revenues.\n  - Examples of past windfall use:\n    - Gabon reduced its debt by 50 percent in 2008 and rebuilt reserves — from US$10 million in 2001 to US$1.3 billion in 2014.\n    - Chad increased expenditure on education; primary school enrolment rose from 68 percent in 2000 to near universal enrollment in 2012.\n    - Republic of Congo launched an ambitious National Development Plan to address social and infrastructure gaps.\n- Security shock: Boko Haram attacks in Cameroon’s extreme north and parts of Chad have disrupted activity and increased military spending, crowding out education and health.\n- Macroeconomic outcomes and projections:\n  - Growth in CEMAC estimated to have slowed to about 2 percent in 2015, with wide variation across members (Equatorial Guinea contracted severely; Cameroon posted robust growth projected to carry over to 2016).\n  - Combined fiscal deficit for CEMAC estimated to have widened to 6.5 percent of regional GDP in 2015, with only a modest improvement projected for this year.\n  - Activity in CEMAC projected to rebound to about 3.5 percent this year, conditional on sound policies that safeguard macroeconomic stability and remove growth drags."
    },
    {
      "heading": "Priorities for stronger, more inclusive growth — “Spend better, collect more, and make the region work for you”",
      "content": "- Overarching strategy:\n  - With oil prices expected to remain low for long and oil reserves depleting, prioritize smart fiscal policies and structural reforms to strengthen the business climate and regional integration.\n  - Open up to neighbors and tap their markets to regain momentum.\n- First priority — Spend better:\n  - Selectivity in infrastructure development; scale back some plans where necessary to preserve fiscal viability and debt sustainability.\n  - Prioritize projects based on economic merit and cost efficiency.\n  - Use concessional sources of financing where possible as the window for sustainable non-concessional external support narrows because of the buildup in commercial debt.\n- Second priority — Collect more (domestic resource mobilization):\n  - Non-oil revenue in CEMAC improved last year to about 13 percent of regional GDP; scope to reach the regional indicative level of 17 percent.\n  - Reduce widespread use of discretionary tax and customs exemptions that undermine revenues and weaken governance.\n  - Improve inter-governmental cooperation and coordination on tax policies; many Directives in the tax area published by the Commission have not been incorporated into national legislation and implemented.\n  - Address international tax issues that affect the extractive revenue base, including indirect, offshore transfers of interest on assets located in developing economies to avoid base erosion and profit shifting.\n  - IMF technical assistance and training examples:\n    - Technical assistance in Chad and the Republic of Congo focused on enhancing customs revenue administration to expand the non-oil revenue base.\n    - IMF stands ready to assist on various aspects of domestic revenue mobilization going forward.\n- Third priority — Make the region work for you (business climate and regional integration):\n  - Intra-CEMAC formal trade is less than 5 percent — significant scope to increase internal commerce.\n  - Leverage new infrastructure (e.g., deep-sea port and hydroelectric dams in Cameroon) to expand regional boundaries and access big consumer markets in Nigeria and East Africa for private sector development and diversification.\n  - Business climate indicators and bottlenecks:\n    - Facilitating tax payments and intra-CEMAC trade would significantly improve the business climate.\n    - On average, it takes 572 hours per year in CEMAC versus 304 in other African countries to pay business taxes.\n    - Waiting time for clearing goods: 40 days for exports and 50 days for imports.\n    - Reforms in these areas would yield the highest benefits.\n  - Governance and institutional reforms:\n    - Streamline decision-making in the existing governance framework to make it more effective.\n    - Consider fiscal rules that set regionally consistent frameworks for scaling up investments.\n    - IMF stands ready to provide technical assistance in these areas.\n  - Cameroon’s role: as the largest, most diversified, and least affected economy in CEMAC, Cameroon is well placed to sustain and reinforce integration momentum."
    },
    {
      "heading": "Conclusion and IMF role",
      "content": "- Low oil prices for long necessitate policy adjustment to preserve macroeconomic stability and create new sources of growth.\n- The IMF can assist through policy advice, capacity building, and financial support if needed.\n- Closing thought: “If you dream of moving mountains tomorrow, you must start by lifting small stones today.” Emphasizes strength in diversity and success in unity through deeper integration.\n\nSource: By Christine Lagarde, Managing Director, International Monetary Fund, Yaoundé, January 8, 2016 (As prepared for delivery).\n\n---\n\n\n References\n\n- Cameroon and the IMF\n- Chad and the IMF\n- Republic of Congo and the IMF\n- Republic of Equatorial Guinea and the IMF\n- Central African Republic and the IMF\n- Gabon and the IMF\n- Technical Assistance -- A Factsheet\n- Speeches\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp010816"
    }
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    "Authors: Christine Lagarde",
    "Published: January 8, 2016",
    "Speech by Christine Lagarde, Managing Director, International Monetary Fund, Yaoundé, January 8, 2016 (As prepared for delivery).",
    "Purpose: assess implications of prolonged low oil prices and security shocks for CEMAC; take stock of infrastructure financing since March 2014; identify policies to sustain infrastructure investment while preserving fiscal viability and debt sustainability.",
    "Global expansion in 2015 estimated at about 3.1 percent.",
    "Three significant transitions shaping 2016 prospects:",
    "Oil dependence and past windfalls:",
    "Security shock: Boko Haram attacks in Cameroon’s extreme north and parts of Chad have disrupted activity and increased military spending, crowding out education and health.",
    "Macroeconomic outcomes and projections:",
    "Overarching strategy:",
    "First priority — Spend better:",
    "Second priority — Collect more (domestic resource mobilization):",
    "Third priority — Make the region work for you (business climate and regional integration):",
    "Low oil prices for long necessitate policy adjustment to preserve macroeconomic stability and create new sources of growth.",
    "The IMF can assist through policy advice, capacity building, and financial support if needed.",
    "Closing thought: “If you dream of moving mountains tomorrow, you must start by lifting small stones today.” Emphasizes strength in diversity and success in unity through deeper integration.",
    "[Cameroon and the IMF](http://www.imf.org/external/country/CMR/index.htm)",
    "[Chad and the IMF](http://www.imf.org/external/country/TCD/index.htm)",
    "[Republic of Congo and the IMF](http://www.imf.org/external/country/COG/index.htm)",
    "[Republic of Equatorial Guinea and the IMF](http://www.imf.org/external/country/GNQ/index.htm)",
    "[Central African Republic and the IMF](http://www.imf.org/external/country/CAF/index.htm)",
    "[Gabon and the IMF](http://www.imf.org/external/country/GAB/index.htm)",
    "[Technical Assistance -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-capacity-development)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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