IMF Executive Board Concludes Annual Discussions on CEMAC Countries’ Common Policies
IMF News, July 26, 2016
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- Published: July 26, 2016
Overview
- Executive Board concluded annual discussions on Common Policies and Challenges of Member Countries with the Central African Economic and Monetary Community (CEMAC) on July 13, 2016.
- Press Release date: July 26, 2016.
- Context: discussions form part of Article IV consultations with members in the currency union framework.
Economic performance and projections
- 2015 growth slowed to 1.6 percent, from 4.9 percent in 2014, due to reduced public investment and lower oil production.
- Growth projected at 1.9 percent in 2016 as oil production and investment remain sluggish.
- From 2017 onward, growth expected to reach 3½ percent a year, as oil prices gradually recover, about one percentage point below the average growth level of the past decade of high oil prices.
- Oil GDP annual changes: -0.3 (2012), -8.0 (2013), 3.0 (2014), -0.4 (2015), -1.5 (2016), 0.2 (2017).
- Non-oil GDP annual changes: 5.9 (2012), 4.6 (2013), 5.0 (2014), 2.6 (2015), 2.7 (2016), 4.1 (2017).
- Consumer prices (period average) reported as: 3.9 (2012), 2.3 (2013), 2.0 (2014). Consumer prices (end of period) shown as: 3.2 (2012), 2.4 (2013).
Fiscal and external balances
- Regional fiscal and current account deficits grew to 6 and 9 percent of GDP in 2015, respectively, as oil export proceeds fell by 32 percent.
- Continued low oil prices and high public expenditure expected to maintain deficits at about 6 and 8 percent of GDP in 2016, respectively.
- Gradual recovery in oil prices and expected moderate fiscal consolidation should narrow regional fiscal and current account deficits to 3 percent by 2021.
- Government financial operations (percent of GDP):
- Total revenue, excluding grants: 27.6 (2012), 26.8 (2013), 25.0 (2014), 19.0 (2015), 18.8 (2016).
- Government expenditure: 29.2 (2012), 30.3 (2013), 29.6 (2014), 26.6 (2015), 25.9 (2016), 23.8 (2017).
- Primary fiscal basic balance2: -0.6 (2012), -1.6 (2013), -2.5 (2014), -4.4 (2015), -2.9 (2016), -1.2 (2017).
- Basic fiscal balance3: -1.3 (2012), -3.1 (2013), -5.2 (2014), -4.1 (2015), -2.4 (2016).
- Overall fiscal balance, excluding grants: -3.5 (2012), -4.6 (2013), -6.4 (2014), -6.8 (2015), -5.0 (2016).
- Non-oil overall fiscal balance, excluding grants4: -31.0 (2012), -29.1 (2013), -25.9 (2014), -18.0 (2015), -15.9 (2016), -13.6 (2017).
- Non-oil primary fiscal balance, including grants4: -28.9 (2012), -27.3 (2013), -24.0 (2014), -16.3 (2015), -13.4 (2016), -11.2 (2017).
- External sector indicators:
- Exports of goods and nonfactor services (% of GDP): 57.0 (2012), 53.7 (2013), 50.8 (2014), 41.5 (2015), 36.3 (2016), 37.0 (2017).
- Imports of goods and nonfactor services (% of GDP): 42.4 (2012), 41.0 (2013), 43.0 (2014), 42.3 (2015), 36.9 (2016), 34.8 (2017).
- Balance on goods and nonfactor services (% of GDP): 14.6 (2012), 12.7 (2013), -0.8 (2014), 2.2 (2015).
- Current account, including grants (% of GDP): 2.9 (2012), -9.4 (2013), -7.7 (2014).
- External public debt (% of GDP): 13.1 (2012), 15.5 (2013), 18.5 (2014), 23.4 (2015), 25.6 (2016), 25.8 (2017).
- Gross official reserves (end of period, Millions of U.S. dollars): 17,531 (2012), 18,222 (2013), 15,309 (2014), 10,139 (2015), 7,866 (2016), 7,634 (2017).
- Months of imports of goods and services (less intra-regional imports): 5.7 (2012), 5.6 (2013), 6.1 (2014), 3.4 (2015).
- Reserves as percent of broad money: 88.7 (2012), 83.7 (2013), 64.3 (2014), 52.0 (2015), 38.5 (2016), 34.5 (2017).
- Memorandum items:
- Nominal GDP (billions of CFA francs): 45,877 (2012), 45,572 (2013), 46,702 (2014), 43,369 (2015), 43,423 (2016), 47,019 (2017).
- CFA francs per U.S. dollar, average: 511 (2012), 494 (2013), 591 (2014).
- Oil prices (US dollars per barrel): 105.0 (2012), 104 (2013), 96 (2014), 51 (2015), 44 (2016).
Monetary and financial sector
- Growth of money and credit to the economy turned negative in 2015 for the first time in a decade, contributing to keeping inflation low.
- Monetary financing has been the primary response tool to the oil-price shock.
- Directors urged authorities to:
- Freeze statutory advances to national governments and avoid indirect monetary financing.
- Accelerate reforms to the monetary policy framework to improve effectiveness, including greater central bank independence.
- Rebuild low level of reserves as an urgent priority and improve pooling of reserves across members.
- Implement remaining safeguards assessment recommendations.
- Financial sector resilience noted; Directors encouraged development of a sound macroprudential framework.
- Progress welcomed following 2015 FSAP recommendations; implementation of remaining recommendations and measures to broaden financial inclusion and strengthen the AML/CFT framework were urged.
Policy recommendations and priorities
- Fiscal:
- Pursue timely and decisive fiscal adjustment to ensure debt and external sustainability.
- Rebuild foreign reserves buffers.
- Expand the non-oil tax base and rationalize and improve the quality of spending to maximize economic returns and social protection.
- Pursue prudent borrowing and debt management policies; borrow on concessional terms to the extent possible.
- Strengthen fiscal policy coordination among members and enforce fiscal discipline.
- Consider a lower debt ceiling and stronger monitoring mechanisms under the new regional convergence framework.
- Structural and real-economy reforms:
- Implement region-wide structural reforms to diversify the economy and improve investment prospects.
- Focus on improving the business climate and boosting private investment.
- Strengthen regional institutions to enhance collaboration, regional integration, policy coherence, and compliance.
- Monetary and financial:
- Exercise prudence in further monetary policy easing given limited scope.
- Develop macroprudential framework to safeguard financial stability.
- Implement remaining FSAP recommendations and strengthen AML/CFT framework.
- External support:
- Directors called for enhanced support from the Fund and other international partners to help authorities address current economic difficulties.
Risks and medium-term challenges
- Key risks identified:
- Weaker-than-expected oil price recovery.
- Relapse in security conditions in the Lake Chad region undermining macroeconomic stability and private investment.
- Lower growth in China dampening commodity prices—especially oil—lowering demand, and reducing financing.
- Medium-term prospects described as challenging; stronger regional institutions necessary for promoting regional integration and supporting regional economic growth.
Executive Board assessment
- Directors expressed concern about deteriorating economic prospects from multiple shocks: oil price decline, challenging security environment, and insufficient policy response.
- Strong encouragement to authorities to:
- Take timely and decisive actions on fiscal adjustment, debt and external sustainability, reserve rebuilding, and structural reforms.
- Strengthen regional institutions for better policy coherence and compliance.
- Views to form part of Article IV consultation discussions on individual CEMAC members until the next Board discussion of CEMAC common policies.
IMF Press Release No. 16/361, IMF Communications Department