## IMF Executive Board Concludes Annual Discussions on CEMAC Common Policies, and Common Policies in Support of Member Countries Reform Programs _IMF News, December 16, 2021_ ## Source details **Canonical URL:** [IMF Executive Board Concludes Annual Discussions on CEMAC Common Policies, and Common Policies in Support of Member Countries Reform Programs](https://www.imf.org/en/news/articles/2021/12/16/pr21380-imf-executive-board-concludes-annual-discussions-on-cemac-in-support-of-member-countries) ## Other formats - [Markdown version](/en/news/articles/2021/12/16/pr21380-imf-executive-board-concludes-annual-discussions-on-cemac-in-support-of-member-countries/index.md) - [Structured JSON version](/en/news/articles/2021/12/16/pr21380-imf-executive-board-concludes-annual-discussions-on-cemac-in-support-of-member-countries/index.json) - [Bundle manifest](/en/news/articles/2021/12/16/pr21380-imf-executive-board-concludes-annual-discussions-on-cemac-in-support-of-member-countries/bundle-manifest.json) ## Bibliographic details - Published: December 16, 2021 --- ### Economic performance and outlook - CEMAC experienced a smaller-than-anticipated economic contraction in 2020 as non-oil activity recovered in late 2020. - Growth: - "A progressive recovery is expected to have started in 2021 with growth reaching 1.9 percent of GDP in 2021." - "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." - Inflation: - "Inflation is projected to stay below the regional convergence criterion of 3 percent" as monetary policy remains appropriately tight. - Reserves and external balances: - "CEMAC is ending 2021 in a fragile external position with external reserves just slightly above three months of prospective imports." - "After a sharp deterioration in 2020, the external current account deficit is expected to improve ... and reach 2.1 percent of GDP in 2021." - "Reserves are projected to reach the equivalent of five months of imports by 2026." ### Fiscal and debt dynamics - Fiscal deficit and public debt: - "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." - "Public debt would decline by 3.8 percentage points, to 56.2 percent of GDP in 2021." - Drivers of improvement: - Higher oil prices, strong global growth, and significant fiscal adjustment are expected to strengthen external balances and support foreign reserves accumulation in 2022. - The recovery in oil prices coupled with stronger revenue mobilization efforts should help narrow fiscal deficits and curb debt levels significantly by 2024. ### Monetary, banking, and regional central bank measures - BEAC actions in 2021: - Strengthened liquidity management framework and resumed liquidity absorption operations. - Unwound relaxation of the collateral framework for government securities, bringing haircuts back to pre-pandemic levels. - Phased out the government securities purchase program at end-August 2021 as planned. - 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. - Prudential regulation: capital requirement increased by 50 basis points in August 2021. - Directors' monetary recommendations: - Welcome recent monetary policy tightening; further tightening "would be needed if international reserves continued falling." - Recommend returning to the pre-crisis liquidity management framework and restricting normal liquidity operations to solvent banks. - Welcome BEAC commitment to not extend direct monetary financing to its member states. - Note implementation of foreign exchange regulation would support foreign reserve accumulation. ### Financial sector soundness and supervision - Directors' views: - Support planned withdrawal of temporary relaxation of prudential regulations. - 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. ### Structural, governance, and transparency reforms - Momentum and expectations: - Heads of States renewed commitments to accelerate structural, transparency and governance reforms. - Directors "called on the authorities to accelerate the implementation of structural, transparency, and governance reforms." - Specific emphasis on "ensuring full transparency in public finances and the hydrocarbon sector" and strengthening the regional surveillance framework. - Expected medium-term impact: - Reforms are assumed to slowly take hold and contribute to non-oil sector growth and improved competitiveness, supporting the projected medium-term growth path. ### IMF programs, assumptions, and conditionalities - Outlook assumptions: - "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)." - Resumption and prospects: - 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. ### Executive Board assessment and policy recommendations - Overall assessment: - 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." - Welcomed the resumption of Fund-supported programs in the region. - Macro policy mix: - 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." - Fiscal policy recommendations: - "A carefully calibrated fiscal consolidation is needed to bolster fiscal and external sustainability while safeguarding growth." - Recommended mobilizing non-oil revenues and increasing expenditure efficiency to finance targeted social spending and growth-friendly investments. - Called for prudent use of SDR allocations and the fiscal space provided by restructured statutory advances. - Monetary and external policy recommendations: - Support for recent monetary tightening; further tightening if reserves fall. - Endorsement of implementation of foreign exchange regulation to support reserve accumulation. - Regional supervision and program implementation: - 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. - Directors considered BEAC has "taken the necessary corrective actions to address the underperformance." - 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. - Emphasized that implementation of this assurance is critical for the success of Fund-supported programs with CEMAC member countries. *Press Release No. 21380, IMF Communications Department, December 16, 2021.* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2021/12/16/pr21380-imf-executive-board-concludes-annual-discussions-on-cemac-in-support-of-member-countries_