In May 2018, the IMF’s Management approved a 7-month Staff-Monitored Program (SMP), covering the period January 1–July 31, 2018. The main fiscal objectives of the SMP are to (i) reduce the budget deficit through non-hydrocarbon revenue mobilization and expenditure reduction while protecting social spending and (ii) address critical weaknesses in public financial management. The program also contains measures to improve the business climate, foster economic diversification, and lay the basis for improving governance and transparency. In addition, the program is providing a framework for bolstering capacity and helping build an adequate track record of performance as the basis for discussions on a potential Fund-supported program later this year.
This paper discusses the common policies of the member countries of the Central African Economic and Monetary Community (CEMAC). CEMAC’s medium-term outlook remains challenging. It foresees a gradual improvement in the economic and financial situation in the region, assuming full implementation of policy commitments by CEMAC member states and regional institutions. Policies to diversify the economies by improving the business environment, including through enhanced governance and transparency, would support higher growth in the medium term. The monetary policy stance would be kept tight as needed to support external stability and reserves accumulation.
This 2016 Article IV Consultation highlights that Equatorial Guinea’s overall real GDP growth has been weak in recent years averaging –0.5 percent from 2010–14, largely owing to a trend decline of the dominant hydrocarbon sector. Economic performance deteriorated substantially in the wake of the 2014 oil-price shock. In 2015, the pace of the contraction intensified, and economic activity declined by 7.4 percent. The near-term outlook is very challenging, given prospects for depressed energy prices and a continued decline in hydrocarbon production. Weak oil revenues and limited buffers will require further cuts to public investment, leading to a deep contraction of the large construction sector and public administration.
This Selected Issues paper compares the growth performance of Central African Economic and Monetary Community (CEMAC) countries with that of comparative countries. During the last two decades, the average growth of CEMAC countries has been slower than the sub-Saharan African average. The results of the analysis show that convergence of CEMAC countries toward emerging market levels has stalled, while some lower-income, faster-growing economies have been catching up. Decomposing growth by contributing factors reveals that the total factor productivity has had a negative impact on CEMAC’s growth.
The global boom in hydrocarbon, metal and mineral prices since the year 2000 created huge
economic rents - rents which, once invested, were widely expected to promote productivity
growth in other parts of the booming economies, creating a lasting legacy of the boom years.
This paper asks whether this has happened. To properly address this question the empirical
strategy must look behind the veil of the booming sector because that, by definition, will
boom in a boom. So the paper considers new data on GDP per person outside of the resource
sector. Despite having vast sums to invest, GDP growth per-capita outside of the booming
sectors appears on average to have been no faster during the boom years than before. The
paper finds no country in which (non-resource) growth per-person has been statisticallysignificantly
higher during the boom years. In some Gulf states, oil rents have financed a
migration-facilitated economic expansion with small or negative productivity gains. Overall,
there is little evidence the booms have left behind the anticipated productivity transformation
in the domestic economies. It appears that current policies are, overall, prooving insufficient
to spur lasting development outside resource intensive sectors.
Mr. Adrian Alter, Matteo Ghilardi, and Ms. Dalia S Hakura
This paper analyzes the tradeoffs between savings, debt and public investment in the Republic of
Congo, a developing country with looming oil exhaustibility concerns. Our results highlight the
risks to fiscal and capital sustainability of oil exporting countries from large scaling-up in public
investment and oil price volatility in view of a projected decline in the oil revenue to GDP ratio.
However, structural reforms that improve the efficiency of public investment can allow for a
relatively faster buildup of sustainable public capital and sustain higher non-oil growth without
adversely affecting the debt ratio or savings. Moreover, we show that even if a government
pursues prudent fiscal policy that preserves resource wealth and debt sustainability in the face of
exhaustible and volatile resource revenues, low public investment quality in the form of a
misallocation of resources can hinder attainment of sustainable public capital and positive non-oil
This paper discusses common policies of the member countries of the Central African Economic and Monetary Community (CEMAC). Medium-term prospects for CEMAC are uncertain. Despite their recent stabilization, oil prices are projected to remain well below pre-shock levels in the medium term. In addition, oil production is projected to start falling after 2017. The Executive Directors have encouraged the authorities to accelerate the reform of the monetary policy framework to improve transmission channels and better manage systemic liquidity. They have also stressed the importance of full compliance with the pooling of foreign exchange earnings with the regional central bank, and called for stepped-up efforts to implement outstanding safeguards recommendations.
Mr. Christian H Ebeke and Mr. Constant A Lonkeng Ngouana
This paper shows that high energy subsidies and low public social spending can emerge as an
equilibrium outcome of a political game between the elite and the middle-class when the provision
of public goods is subject to bottlenecks, reflecting weak domestic institutions. We test this and
other predictions of our model using a large cross-section of emerging markets and low-income
countries. The main empirical challenge is that subsidies and social spending could be jointly
determined (e.g., at the time of the budget), leading to a simultaneity bias in OLS estimates. To
address this concern, we adopt an identification strategy whereby subsidies in a given country are
instrumented by the level of subsidies in neighboring countries. Our Instrumental Variable (IV)
estimations suggest that public expenditures in education and health were on average lower by
0.6 percentage point of GDP in countries where energy subsidies were 1 percentage point of GDP
higher. Moreover, we find that the crowding-out was stronger in the presence of weak domestic
institutions, narrow fiscal space, and among the net oil importers.