{
  "title": "IMF Executive Board Concludes Annual Discussions on CEMAC Common Policies, and Common Policies in Support of Member Countries Reform Programs",
  "publication": "IMF News, December 16, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/12/16/pr21380-imf-executive-board-concludes-annual-discussions-on-cemac-in-support-of-member-countries",
  "canonical": "https://www.imf.org/en/news/articles/2021/12/16/pr21380-imf-executive-board-concludes-annual-discussions-on-cemac-in-support-of-member-countries",
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  "summary": "CEMAC experienced a smaller-than-anticipated economic contraction in 2020 as non-oil activity recovered in late 2020.",
  "publishDate": "2021-12-16",
  "sections": [
    {
      "heading": "Economic performance and outlook",
      "content": "- CEMAC experienced a smaller-than-anticipated economic contraction in 2020 as non-oil activity recovered in late 2020.\n- Growth:\n  - \"A progressive recovery is expected to have started in 2021 with growth reaching 1.9 percent of GDP in 2021.\"\n  - \"Growth is expected to rebound to 2.8 percent in 2022 and continue to pick up gradually to around 4.1 percent in the medium term.\"\n- Inflation:\n  - \"Inflation is projected to stay below the regional convergence criterion of 3 percent\" as monetary policy remains appropriately tight.\n- Reserves and external balances:\n  - \"CEMAC is ending 2021 in a fragile external position with external reserves just slightly above three months of prospective imports.\"\n  - \"After a sharp deterioration in 2020, the external current account deficit is expected to improve ... and reach 2.1 percent of GDP in 2021.\"\n  - \"Reserves are projected to reach the equivalent of five months of imports by 2026.\""
    },
    {
      "heading": "Fiscal and debt dynamics",
      "content": "- Fiscal deficit and public debt:\n  - \"The overall fiscal deficit (excluding grants) is projected to narrow by 0.5 percentage points to 2.7 percent of GDP in 2021 compared to 2020.\"\n  - \"Public debt would decline by 3.8 percentage points, to 56.2 percent of GDP in 2021.\"\n- Drivers of improvement:\n  - Higher oil prices, strong global growth, and significant fiscal adjustment are expected to strengthen external balances and support foreign reserves accumulation in 2022.\n  - The recovery in oil prices coupled with stronger revenue mobilization efforts should help narrow fiscal deficits and curb debt levels significantly by 2024."
    },
    {
      "heading": "Monetary, banking, and regional central bank measures",
      "content": "- BEAC actions in 2021:\n  - Strengthened liquidity management framework and resumed liquidity absorption operations.\n  - Unwound relaxation of the collateral framework for government securities, bringing haircuts back to pre-pandemic levels.\n  - Phased out the government securities purchase program at end-August 2021 as planned.\n  - In November 2021, BEAC \"tightened monetary policy, increasing the policy rate by 25 basis points,\" and raised the rate of its liquidity absorption window in December.\n  - Prudential regulation: capital requirement increased by 50 basis points in August 2021.\n- Directors' monetary recommendations:\n  - Welcome recent monetary policy tightening; further tightening \"would be needed if international reserves continued falling.\"\n  - Recommend returning to the pre-crisis liquidity management framework and restricting normal liquidity operations to solvent banks.\n  - Welcome BEAC commitment to not extend direct monetary financing to its member states.\n  - Note implementation of foreign exchange regulation would support foreign reserve accumulation."
    },
    {
      "heading": "Financial sector soundness and supervision",
      "content": "- Directors' views:\n  - Support planned withdrawal of temporary relaxation of prudential regulations.\n  - Call to move towards risk-based supervision, contain risks from banks’ sovereign exposure, address high non-performing loans, strengthen regulatory compliance, and accelerate bank resolution."
    },
    {
      "heading": "Structural, governance, and transparency reforms",
      "content": "- Momentum and expectations:\n  - Heads of States renewed commitments to accelerate structural, transparency and governance reforms.\n  - Directors \"called on the authorities to accelerate the implementation of structural, transparency, and governance reforms.\"\n  - Specific emphasis on \"ensuring full transparency in public finances and the hydrocarbon sector\" and strengthening the regional surveillance framework.\n- Expected medium-term impact:\n  - Reforms are assumed to slowly take hold and contribute to non-oil sector growth and improved competitiveness, supporting the projected medium-term growth path."
    },
    {
      "heading": "IMF programs, assumptions, and conditionalities",
      "content": "- Outlook assumptions:\n  - \"This outlook assumes the continuation of IMF-supported programs with Cameroon, Gabon, the Central African Republic and Equatorial Guinea, and approval of two IMF-supported programs with Chad (2021) and Congo (2022).\"\n- Resumption and prospects:\n  - Resumption of Fund-supported programs with Cameroon and Gabon and prospects for new programs with Chad and Congo helped secure commitments to fiscal consolidation and broader reforms."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Overall assessment:\n  - Directors agreed with the thrust of the staff appraisal and noted that \"despite a more favorable external environment and unprecedented Fund financial support, CEMAC’s external position remains fragile.\"\n  - Welcomed the resumption of Fund-supported programs in the region.\n- Macro policy mix:\n  - Emphasized that \"a tight macroeconomic policy mix and strong structural reforms that enhance competitiveness are critical to bolster the external position and enable diversified, inclusive, and sustainable growth.\"\n- Fiscal policy recommendations:\n  - \"A carefully calibrated fiscal consolidation is needed to bolster fiscal and external sustainability while safeguarding growth.\"\n  - Recommended mobilizing non-oil revenues and increasing expenditure efficiency to finance targeted social spending and growth-friendly investments.\n  - Called for prudent use of SDR allocations and the fiscal space provided by restructured statutory advances.\n- Monetary and external policy recommendations:\n  - Support for recent monetary tightening; further tightening if reserves fall.\n  - Endorsement of implementation of foreign exchange regulation to support reserve accumulation.\n- Regional supervision and program implementation:\n  - Noted BEAC was unable to fully implement the policy assurance on accumulation of net foreign assets (NFA) at end-June 2021 due to a shortfall in external financing.\n  - Directors considered BEAC has \"taken the necessary corrective actions to address the underperformance.\"\n  - Directors endorsed the updated policy assurance on NFA accumulation for \"end-December 2021 and end-June 2022\" as outlined in the November 2021 Follow-Up Letter from the BEAC Governor.\n  - Emphasized that implementation of this assurance is critical for the success of Fund-supported programs with CEMAC member countries.\n\nPress Release No. 21380, IMF Communications Department, December 16, 2021.\n\n---\n\n\n References\n\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/12/16/pr21380-imf-executive-board-concludes-annual-discussions-on-cemac-in-support-of-member-countries"
    }
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    "Published: December 16, 2021",
    "CEMAC experienced a smaller-than-anticipated economic contraction in 2020 as non-oil activity recovered in late 2020.",
    "Growth:",
    "Inflation:",
    "Reserves and external balances:",
    "Fiscal deficit and public debt:",
    "Drivers of improvement:",
    "BEAC actions in 2021:",
    "Directors' monetary recommendations:",
    "Directors' views:",
    "Momentum and expectations:",
    "Expected medium-term impact:",
    "Outlook assumptions:",
    "Resumption and prospects:",
    "Overall assessment:",
    "Macro policy mix:",
    "Fiscal policy recommendations:",
    "Monetary and external policy recommendations:",
    "Regional supervision and program implementation:",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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