1– Introduction.

I would like to thank the staff for the comprehensive report on the Central African Economic and Monetary Community (CEMAC) and for the useful discussions held with the representatives of CEMAC and the Banque des Etats de l’Afrique Centrale (BEAC). My authorities appreciate the exchange of views with the staff on recent economic and financial developments in the region. The report highlights well recent developments and the main regional policy challenges facing the CEMAC. It also indicates progress made to enhance macroeconomic convergence, improve banking intermediation and supervision, and promote intra-regional trade. The report also makes a useful contribution to the discussions on the management of oil revenues and the diversification of the production base, which are critical issues in view of the fact that almost all the member countries of the CEMAC are oil exporting countries. In this regard, it is worth noting that a workshop on macroeconomic policies and governance in Sub-Saharan African oil-exporting countries was held in Douala, Cameroon, on April 29 and 30, 2003. The workshop brought together high-level policy makers from governments, central banks, national oil companies as well as Fund and World Bank representatives. A summary of proceedings of this workshop was made available to Executive Directors.

CEMAC is an economic and monetary union whose treaty entered into force in August 1999. At present it comprises six countries namely Cameroon, Central African Republic, Republic of Congo, Equatorial Guinea, Gabon and Chad. These countries share a common currency, the CFA Franc, which is pegged at a fixed parity to the Euro since January 1999. The BEAC, common central bank, conducts the common monetary policy while a regional banking commission entitled COBAC is in charge of banking supervision.

The main objectives pursued by CEMAC include: i) monetary cooperation among member countries; ii) a single domestic market and a full fledged customs union; iii) harmonization of legal and regulatory mechanisms; iv) convergence of fiscal policies and v) common sectorial policies.

2– Recent Economic Developments.

Oil contributes to three quarters of the CEMAC countries’ export earnings and almost 50 percent of their budgetary revenues. As a result economic and financial performance is dependent on developments in the world oil market. Helped by higher oil prices, GDP of the community grew by 5.4 percent in 2001 and by a further 4.7 percent in 2002. However, this performance is uneven among member countries. Indeed, while economic growth in Equatorial Guinea, Chad and Cameroon was strongly positive, it stood at 0.8 percent in Central African and zero in Gabon. Despite these disparities, the region recorded a broadly satisfactory macroeconomic performance Inflation was moderate and the official reserves increased.

Economic prospects for 2003 have been dominated by developments in the oil sector. Real GDP growth is projected at 4.9 percent while fiscal balances are forecast to be strengthened further. The external current account is expected to improve owing to lower debt service under the HIPC initiative.

3– Strengthening Regional Surveillance.

As petroleum accounts for three quarters of the CEMAC countries’ export earnings and about half of their fiscal revenue, economic developments and prospects will depend on the evolution of oil prices. From a regional perspective, the coordination of macroeconomic policies is crucial in order to reap the full benefits of the economic and monetary community. In this regard, there is a need to strengthen regional surveillance over macroeconomic policies and conduct a prudent common monetary policy.

Moreover, to deepen regional integration, strong policy actions and initiatives are to be implemented. My authorities are determined to enhance the macroeconomic convergence in the region and improve on the management of oil resources.

4– Regional Monetary Policy.

The common monetary policy implemented by the BEAC is meant to support the fixed parity of the CFA franc to the euro. As stated by the staff, the monetary policy stance in 2002 was prudent. The regional monetary program for 2003 is in line with the regional inflation objective and the programs of member countries supported by the Fund. We understand the concern raised by the staff on the issue of central bank credit to national treasuries. With a view to improving the effectiveness of the monetary policy, my authorities agree with the staff that there is a need to develop markets for treasury bills and bonds to be issued by member countries. In this regard, they are of the view that a regional market on which securities would be traded would help achieve the objectives of the common monetary policy.

In 2002, the BEAC introduced a differentiation of reserve requirements among countries and banks in order to mop up excess liquidity. This measure is seen as an adequate instrument to strongly affect liquidity in a differentiated liquidity environment.

With regard to the issue of investment of “excess” oil revenue to be invested in foreign currency-denominated assets, my authorities have taken note of staff recommendations. The authorities are in consultation among themselves and with partners to look at the best way to deal with this issue.

5– Banking Supervision and Financial Sector.

The Commission Bancaire de l’Afrique Centrale (COBAC) is the organ in charge of the financial supervision within the community. Over the last year, COBAC has pursued the strengthening of banking with more banks complying with prudential norms. Measures have been taken towards the banking institutions in non compliance with norms and in critical financial situation. For the latter, those measures include, among others, the capital restructuring and privatization. In this regard, it is important to note that this action has been implemented in five of six countries. The regional development bank (BDEAC) has also been restructured under new management. The authorities have also adopted new regulations for the micro finance sector development.

6– Trade Policy and External Competitiveness.

We are of the view that the exchange rate is not the only instrument to asses the competitiveness of the region as a unified market. Other factors should also be taken into account. In the case of CEMAC, my authorities are aware of the need to accelerate structural reforms, widen and reinforce the basic infrastructure together with adopting common sectorial policies aimed at diversifying the regional economy, thus reducing its dependence on the crude oil production and export.

With regard to intra regional trade, my authorities are fully determined to implement measures adopted by the community with the objective of increasing the trade of goods and services between member countries. In this area progress has been made through consultations with the World Trade Organization (WTO). These consultations are to ensure that practices applied by member countries are in line with WTO rules. In this regard, recommendations made by staff are welcomed and well noted by my authorities.

7– Statistical Issues.

In spite of progress made on the statistical front, there is still a need for CEMAC member countries to enhance their statistical capacities in order to improve the quality, harmonization and dissemination of economic, financial and social data. We are hopeful that CEMAC and its member countries will continue to benefit from technical assistance from the Fund in this particular area.

The CEMAC authorities have consented to publishing the convergence report. They have already published the report for the year 002 and for the half of 2003 on the central bank’s web site (www.beac.int)

8– Money Laundering and Combating Terrorist Activities.

As regards AML/CFT, a regional law on the prevention and the repression of money laundering and financing of terrorism was adopted in March 2003. This law, that is applicable in all the six countries of the community, enables the freezing of suspicious resources and requires that the banking institutions report any suspicious capital. This law also creates in each country a national agency of financial investigation (ANIF). As regards the latter, a model of draft decree on the organization and the functioning of the ANIF to be passed in each country has been attached in the fore mentioned law.

In addition, the Permanent Secretary and the Manager of the Groupe Anti-Blanchiment en Afrique Centrale (GABAC) have been appointed, The official responsible for Intelligence is about to be appointed by the ministerial committee of the CEMAC. The inaugural meeting of the GABAC will be held later this year and at that time, its articles of agreements, that are already drafted, will be adopted. My CEMAC authorities would like to recall that they returned duly filled the questionnaire on AML/CFT-related policies and institutions.

My CEMAC authorities will continue to monitor closely the implementation by the members of the directives adopted regionally on that issue.

9– Transparency and Governance

On transparency and governance, my CEMAC authorities have been taking a number of measures to improve the transparency on oil resources management, as well as the management of other resources. These measures have been in place prior to the Seminar on Oil Resource Management held in Douala last year. In this regard, coordinated efforts among the membership have been put in place, and steps have been taken to publish on a regular basis the Communiqués of Ministerial meetings as part of a peer review process among CEMACs member states. The Seminar on oil management in Douala and the forthcoming one in Libreville will reinforce the process already in place, in particular the appropriation process. It will be attended by senior government officials, representatives of oil companies and other stakeholders.

Moreover, the BEAC’s website has been publishing regularly the evolution of the main economic and financial indicators of the region. In the context of multilateral surveillance, Cameroon, Chad, Gabon, Equatorial Guinea and the Republic of Congo are making available information on oil activities, which in the past were classified as confidential, and more recently some of these countries have welcomed the British Initiative regarding extractive industry. However, we think that the efforts of the CEMAC members will need to be supported by the international community through adequate technical assistance to help them build the institutions and capacity needed to deal with the important challenges faced by the region, including the enormous resources, as noted by the staff.

10– Conclusion

My CEMAC authorities remain strongly committed to regional integration. Despite adverse exogenous factors, significant progress has been made in this area. In this respect, they are convinced that the common central bank has served them well. In view of the size of oil resources, which are depletable resources, my authorities are forging ahead with structural measures in order to develop and diversify the productive base in the non oil sector, and putting in place measures to reduce poverty.