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Business and Economics > Banks and Banking

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Cover IMF Working Papers
Sub-Saharan Africa’s Risk Perception Premium: In the Search of Missing Factors
William Gbohoui
,
Rasmané Ouedraogo
, and
Yirbehogre Modeste Some
Policymakers from the sub-Saharan Africa (SSA) region often flag a mispricing of their sovereign debt presumably originating from a perception risk by international investors that lead to "unjustifiably" high borrowing costs. Against this background, this paper explores the extent to which a potential SSA premium exists in the financial markets following a broader two-fold approach. Firstly, using a sample of 1592 international primary sovereign fixed coupon bonds issued between 2003-2021 from Bond Radar by 89 countries, we find that SSA countries pay significantly higher coupon at issuance compared to their peers from other regions. Secondly, we assess whether there is any bias against SSA countries in the secondary market that would result in higher refinancing cost. Based on an unbalanced panel of quarterly data covering 107 countries over 1990 – 2022, we find that SSA countries pay higher refinancing costs in the secondary market. The paper further explores whether there are other factors overlooked by the literature that matter for the risk pricing by international investors. In that respect, we explore the sensitivity of spreads to some structural dimensions where SSA countries face acute challenges―the transparency of budget process, the importance of the informal sector, the level of financial development, and the quality of public institutions. The results show that the excess premium estimated for SSA countries vanishes when these structural factors are accounted for in the regressions.
Keywords:
perception premium; SSA country; policymakers from the sub-Saharan Africa; SSA premium; IMF WP 23/130; c. robustness; Return on investment; Sovereign bonds; Yield curve; Bonds; Sub-Saharan Africa; Global; Africa
Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Staff Report on the Common Policies of Member Countries, and Common Policies in Support of Member Countries Reform Programs-Press Release; Staff Report; and Statement by the Executive Director for the Central African Economic and Monetary Community
International Monetary Fund. African Dept.
The economic shock associated with the COVID-19 pandemic is set to have long-lasting effects on the economic outlook for CEMAC. The pandemic itself seems to be now broadly under control in the region, and the policy response from national and regional authorities, supported by significant emergency financing by the Fund, helped mitigate the initial economic fallout. With lower medium-term oil prices, the outlook projects that CEMAC’s fiscal and external adjustments will be slower than previously envisaged, entailing large external financing needs (around €6.6 billion for 2021–23). Gross international reserves will now reach the equivalent of 5 months of imports by 2025 vs. 2022 pre-pandemic, while net foreign assets (NFA) will be below previous expectations. Public debt would remain at elevated levels, albeit on a declining trend after the increase in 2020. This outlook is highly uncertain and contingent on the evolution of the pandemic and its impact on oil prices. Other significant risks include: delayed implementation of the ongoing or a second phase of new Fund-supported programs, difficulties in filling large external financing needs, and a deterioration in the security situation.
Keywords:
ISCR; CR; CEMAC authorities; CEMAC government; BEAC's monetary policy stance; IMF article; BEAC governor; Policy support
Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Staff Report on the Common Policies of Member Countries, and Common Policies in Support of Member Countries Reform Programs-Press Release; Staff Report; and Statement by the Executive Director for the Central African Economic and Monetary Community
International Monetary Fund. African Dept.
The economic shock associated with the COVID-19 pandemic is set to have long-lasting effects on the economic outlook for CEMAC. The pandemic itself seems to be now broadly under control in the region, and the policy response from national and regional authorities, supported by significant emergency financing by the Fund, helped mitigate the initial economic fallout. With lower medium-term oil prices, the outlook projects that CEMAC’s fiscal and external adjustments will be slower than previously envisaged, entailing large external financing needs (around €6.6 billion for 2021–23). Gross international reserves will now reach the equivalent of 5 months of imports by 2025 vs. 2022 pre-pandemic, while net foreign assets (NFA) will be below previous expectations. Public debt would remain at elevated levels, albeit on a declining trend after the increase in 2020. This outlook is highly uncertain and contingent on the evolution of the pandemic and its impact on oil prices. Other significant risks include: delayed implementation of the ongoing or a second phase of new Fund-supported programs, difficulties in filling large external financing needs, and a deterioration in the security situation.
Keywords:
ISCR; CR; CEMAC authorities; CEMAC government; BEAC's monetary policy stance; IMF article; BEAC governor; Policy support; CEMAC Economic; COVID-19; Fiscal stance; Oil; gas and mining taxes; Oil prices; Global; Central Africa; Sub-Saharan Africa; Policy recommendation; IMF's transparency policy; Foreign exchange regulations
Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Staff Report on the Common Policies in Support of Member Countries Reform Programs-Press Release, Staff Report, and Statement by the Executive Director
International Monetary Fund. African Dept.
Tighter macroeconomic and financial policies helped to avert a deeper crisis, and gross external reserves increased more rapidly in recent months, largely exceeding the mid-2019 target. However, reserves are still below the level appropriate for commodityexporting economies (5 months of imports) to absorb terms of trade shocks. Fiscal consolidation has been tilted towards cuts in public investment. This, together with a lack of significant progress in structural reforms, has weighed on growth which remains too low. The outlook for 2019 and beyond foresees further improvement in regional reserves assuming CEMAC countries remain committed to their program objectives and new programs with CAR and Equatorial Guinea could start around end-2019. This outlook is subject to potentially significant risks, including: a significant slowdown in global growth and associated decline in oil prices; a deterioration in the security situation in some countries; and weaker implementation of IMF-supported programs.
Keywords:
ISCR; CR; CEMAC authorities; CEMAC PFM; CEMAC Commission; MCM; FAD CEMAC
Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Staff Report on the Common Policies in Support of Member Countries Reform Programs-Press Release, Staff Report, and Statement by the Executive Director
International Monetary Fund. African Dept.
This paper highlights annual discussions on Central African Economic and Monetary Community’s (CEMAC) Common Policies in Support of Member Countries Reform Programs. Tighter macroeconomic and financial policies helped to avert a deeper crisis, and gross external reserves increased more rapidly in recent months, also helped by a stronger implementation of CEMAC foreign exchange regulations. Reforms to support a more diversified and inclusive growth, including by improving governance and the business climate, should gain momentum to make current efforts to buttress the external position of the region sustainable. The outlook for 2019 and beyond foresees further improvement in regional reserves assuming CEMAC countries remain committed to their program objectives and new programs with Cameroon, Central African Republic and Equatorial Guinea could start around end-2019.
Keywords:
ISCR; CR; CEMAC authorities; CEMAC PFM; CEMAC Commission; MCM; FAD CEMAC
Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Common Policies in Support of Member Countries Reform Programs
International Monetary Fund. African Dept.
The regional strategy has helped stabilize the regional economic position thanks to large fiscal consolidation efforts, a tighter monetary policy, and external financial assistance. The external position improved, and external reserves picked up. However, the region remains dependent on oil revenues, with little progress in economic diversification, under-performing budget non-oil revenues and weaknesses in the financial sector. The policy assurances included in BEAC’s letter of December 2018 were implemented as planned and the CEMAC authorities reiterated their full commitment to the strategy and their readiness to implement additional corrective measures if needed. Progress was made towards new IMF-supported program in Congo and Equatorial Guinea.
Keywords:
ISCR; CR; CEMAC Commission; CEMAC authorities; BEAC; bank; CEMAC country
Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Common Policies in Support of Member Countries Reform Programs
International Monetary Fund. African Dept.
The regional strategy has helped stabilize the regional economic position thanks to large fiscal consolidation efforts, a tighter monetary policy, and external financial assistance. The external position improved, and external reserves picked up. However, the region remains dependent on oil revenues, with little progress in economic diversification, under-performing budget non-oil revenues and weaknesses in the financial sector. The policy assurances included in BEAC’s letter of December 2018 were implemented as planned and the CEMAC authorities reiterated their full commitment to the strategy and their readiness to implement additional corrective measures if needed. Progress was made towards new IMF-supported program in Congo and Equatorial Guinea.
Keywords:
ISCR; CR; CEMAC Commission; CEMAC authorities; BEAC; bank; CEMAC country; liquidity-stressed bank; IMF staff estimate; policy assurance; Fiscal stance; Oil prices; Liquidity; Excess liquidity; Central Africa
Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Common Policies of Member Countries, and Common Policies in Support of Member Countries Reform Programs-Press Release; Staff Report; and Statement by the Executive Director
International Monetary Fund. African Dept.
The regional strategy has helped to avert an immediate crisis but continues to face headwinds: two countries have yet to enter financing arrangements with the Fund: regional reserves have underperformed despite higher-than-projected oil prices; the projected recovery of non-oil growth has still to materialize; and the security, social, and political context remains challenging. Consistent with the policy assurances it had provided, the BEAC has taken corrective actions, including an increase in its policy rate, to address the NFA underperformance and has made substantial progress toward finalizing by end-year the modernization of the monetary policy operational framework and the drafting of new foreign exchange regulations. A follow-up letter of support provides updated policy assurances on the NFA path. The medium-term outlook continues to see a gradual improvement in the economic and financial situation but is subject to substantial downside risks, including further delays in the approval of financial arrangements with Congo and Equatorial Guinea, lower oil prices, and tighter global financial conditions. The region continues to face daunting challenges to diversify its economy, with a poor business environment and high perception of corruption.
Keywords:
ISCR; CR; CEMAC Commission; policy; BEAC; CEMAC authorities; country
Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Common Policies of Member Countries, and Common Policies in Support of Member Countries Reform Programs-Press Release; Staff Report; and Statement by the Executive Director
International Monetary Fund. African Dept.
The regional strategy has helped to avert an immediate crisis but continues to face headwinds: two countries have yet to enter financing arrangements with the Fund: regional reserves have underperformed despite higher-than-projected oil prices; the projected recovery of non-oil growth has still to materialize; and the security, social, and political context remains challenging. Consistent with the policy assurances it had provided, the BEAC has taken corrective actions, including an increase in its policy rate, to address the NFA underperformance and has made substantial progress toward finalizing by end-year the modernization of the monetary policy operational framework and the drafting of new foreign exchange regulations. A follow-up letter of support provides updated policy assurances on the NFA path. The medium-term outlook continues to see a gradual improvement in the economic and financial situation but is subject to substantial downside risks, including further delays in the approval of financial arrangements with Congo and Equatorial Guinea, lower oil prices, and tighter global financial conditions. The region continues to face daunting challenges to diversify its economy, with a poor business environment and high perception of corruption.
Keywords:
ISCR; CR; CEMAC Commission; policy; BEAC; CEMAC authorities; country; CEMAC member states; consultation discussion; CEMAC country; policy commitment; CEMAC region; Fiscal stance; Foreign exchange regulations; Foreign assets; Credit; Central Africa; Global
Cover Departmental Papers
Central African Economic and Monetary Community: A New Medium-Term Approach
Mr. Mario de Zamaroczy
,
Mr. Vincent Fleuriet
, and
Mr. Jose G Gijon
This paper discusses possible reserve management approaches in the Central African Economic and Monetary Community (CEMAC). The paper looks beyond the region’s current oil crisis and proposes a new approach to international reserve management in the medium term.
Keywords:
DPPP; DP; BEAC; reserve; Total CEMAC; excess reserves; foreign exchange