Central African Economic and Monetary Community: Selected Issues

Central African Economic and Monetary Community: Selected Issues

Abstract

Central African Economic and Monetary Community: Selected Issues

Cemac—Implementation of the Harmonized Public Financial Framework

Under the treaty of March 16, 1994 creating the Central African Economic and Monetary Community (CEMAC) and Article 54 of the Convention governing the Central African Economic Union (UEAC), the CEMAC member states committed to strengthening regional integration through increased harmonization of their fiscal policies and legislation. This paper reviews the implementation of that commitment and the challenges of the harmonized public financial management framework.,1

A. Introduction

1. The CEMAC directives on the harmonized public financial management framework (hereinafter “the directives”) constitute the principal instrument for monitoring fiscal policies from the perspective of convergence of the member states’ public policies. They contribute to the process of regional integration and improvement of the public financial management of the member states by more closely aligning them with the international standards.

2. The first harmonized public financial framework of 2008 quickly became obsolete and was updated in 2011. In 2008, five directives harmonizing the member states’ legal, accounting, and government finance statistics framework were adopted by the CEMAC Council of Ministers (budget laws, general public accounting regulations, government budget classification, government chart of accounts, and government flow-of-funds table). However, the 2008 financial market crisis, the necessity of improving coordination of the member states’ fiscal policies with the common monetary policy, the weaknesses observed in the directives, and the introduction of new public financial management methods led the CEMAC Council of Ministers to adopt a seven-pillar action plan to update the harmonized framework. The objective of this action plan was to increase the reliability of the multilateral surveillance exercised by the CEMAC Commission. The seven pillars were the following:

  • rewriting of the directives;

  • dissemination of the directives;

  • capacity building for reform stakeholders;

  • transposition of the directives into national legislation;

  • monitoring and assessment;

  • upgrading the member states’ information systems;

  • support for the implementation of reforms in the member states.

3. The harmonized framework updated in 2011 is aimed at strengthening regional integration and modernizing management. It ensures greater transparency in public financial governance in the member states, by aligning it with international rules and standards to facilitate multilateral surveillance by the Commission. In keeping with this objective, a sixth directive on the Code of Transparency and Good Governance was added to the initial framework.

4. The six directives updating the harmonized public financial framework of the CEMAC member states were approved on December 19, 2011, at the conclusion of a dynamic participatory process, led by experts from the member states as well as representatives of the Commission and the technical and financial partners. Figure 1 below details the structure of the harmonized public financial management framework, including a directive on the Code of Transparency and Good Government that serves as the general framework for all the other directives, a legal component composed of directives on budget laws and general public accounting regulations, and a technical component defining the accounting and statistical framework (government budget classification, government chart of accounts, and government flow-of-funds table).

Figure 1.
Figure 1.

Architecture of the Public Financial Management Framework

Citation: IMF Staff Country Reports 2016, 290; 10.5089/9781475535464.002.A004

5. Initially, the national laws and regulations transposed from the directives were to be harmonized with the new framework by January 1, 2014. The transposition was to take place within the twenty-four months following their adoption, but with a gradual, differentiated implementation to take account of the capacities of the member states. Indeed, the implementation of certain innovative legal provisions (program budgeting, for example) could be postponed until 2021, or even 2023 in the case of the provisions on general accounting. Progress in the implementation of reforms was thus left to the judgment of the member states.

B. Status of the Transposition of the Directives

6. Given the lack of progress in transposing the directives at end-2013, the initial transposition deadline was extended twice by the CEMAC Council of Ministers. The first extension moved the transposition deadline to end-2014, and then a second extension was granted until end-2017 (CEMAC Council of Ministers meeting of December 22, 2014).

7. Despite these successive extensions, the rate of transposition of the directives remains low at 30 percent. This rate bears comparison with that of the West African Economic and Monetary Union (WAEMU), which is 83 percent under a harmonized framework adopted in 2009. To date, the directives have been transposed in all but two of the member states (Figures 23).

Figure 2.
Figure 2.

CEMAC: Transposition of the Six Directives, May 2016

Citation: IMF Staff Country Reports 2016, 290; 10.5089/9781475535464.002.A004

Source: CEMAC authorities.
Figure 3.
Figure 3.

WAEMU: Transposition of the Six Directives, May 2016

Citation: IMF Staff Country Reports 2016, 290; 10.5089/9781475535464.002.A004

Source: WAEMU authorities.

8. CEMAC states have progressed differently in transposing the directives (Figure 4).

  • Gabon and Chad have made the most progress in transposing the texts of the harmonized public financial framework into national legislation. Gabon has transposed all six directives and Chad has transposed five. Both Gabon and Chad have an organic law on the transposed budget law.

  • Despite the security crisis that erupted in 2013, the Central African Republic has submitted five draft texts to the CEMAC Commission, including the draft organic law on the budget law and the draft law on the Code of Transparency and Good Governance.

  • Equatorial Guinea recently started the task of transposition with the directives on the technical framework (budget classification).

  • The organic law on the fiscal regime adopted by Congo in September 2012 has not been submitted for notice of compliance from CEMAC and is inconsistent with the Directive.2

  • In 2007 Cameroon adopted a modernized law on the fiscal régime,3 already containing some of the reforms called for in the 2011 Directive on the Budget Law (program budgeting, accrual basis accounting). Formal transposition of the directives began in 2015 with the preparation of the draft law amending the 2007 law on the fiscal regime, which is expected to be submitted shortly for notice of compliance from CEMAC. Nevertheless, Cameroon remains the only country that has not yet submitted a draft transposition to the CEMAC Commission.

Figure 4.
Figure 4.

CEMAC: Transposition of Directives: Status at end-May 2016

Citation: IMF Staff Country Reports 2016, 290; 10.5089/9781475535464.002.A004

C. Difficulties Transposing the Directives

9. The Commission’s global approach to adoption of the directives on the harmonized public financial framework has not been followed by the member states. The CEMAC authorities decided on a global approach consisting of preparing and adopting the six 2011 directives as a consistent and indivisible whole. The member states have not chosen that approach for transposing the directives. No state has transposed the directives comprehensively or in a logical sequence of directives that must be transposed legislatively (transparency code and budget laws) and those that must be transposed in the form of regulations (government budget classification, general public accounting regulations, government chart of accounts, government flow-of-funds table).

10. The piecemeal approach to transposition leads to difficulties in terms of the consistency of the texts and diminishes the expected impact of the implementation of the reforms. The directives are transposed on a case-by-case basis, which results in numerous discrepancies and even contradictions, between the principles adopted in the directives and the transposed texts, or between the texts on the legal framework and the transposed implementing regulations of the technical framework. This situation hinders implementation of the planned reforms, particularly those aimed at transparency and improvement of financial governance.

11. Some member states still lack a plan or timetable for transposition of the directives. In general, ad hoc committees were formed in the CEMAC countries, bringing together those concerned with transposition of the various texts, most often under the authority of the unit piloting the program budgeting reform. These committees tackle the directives one by one and still do not have firm deadlines for submission of the draft texts.

12. Political support for the transposition of the harmonized public financial framework in the member states needs to be strengthened. The information sessions organized by the CEMAC Commission in 2013 and 2014 in all the member states (with the exception of Equatorial Guinea) with the support of technical and financial partners (particularly the World Bank, the International Monetary Fund, Central AFRITAC, and the UNDP Office in Dakar) failed to fully convince the national authorities that transposing the directives should be given priority. The units responsible for transposing the directives in most of the member states lack the authority needed to accomplish this task. Most of time, the fact that these are technical units prevents the adoption of a complete reform plan incorporating all aspects of the reform and all the institutional stakeholders involved. The reform plans developed by the member states often do not address all the reforms contained in the directives. The units are frequently created within directorates responsible for the budget, in order to prepare for the implementation of program budgeting. The reforms specified in the directives, however, require a larger context necessarily incorporating accounting and government finance statistics, in particular.

13. Ownership of the reforms called for in the directives is often insufficient, owing to confusion between the steering and implementation functions. Despite the above-mentioned dissemination and capacity building efforts, ownership of the reforms specified in the directives is lacking because of the resistance to change exhibited by the units responsible for implementing them.

14. The CEMAC Commission finds it difficult to provide the technical support needed for transposition of the directives. The CEMAC Public Finance Directorate created in 2013 within the Economic, Monetary, and Financial Policies Department is nonoperational. The move of the Commission’s headquarters in 2013, the dispersion of its personnel, and the inadequacy of the operational resources needed to provide such support further complicate the implementation of technical support activities. Support from the European Union’s Trade and Economic Integration Support Program (PACIE) is aimed at revitalizing implementation of the CEMAC Commission’s plan of action for transposition of the directives. Since 2015, with other partners, capacity building efforts for national experts have focused in particular on the last three pillars of the Commission’s action plan: adoption and implementation of the monitoring and assessment mechanism, upgrading the member states’ information systems, and implementation of the directives.

D. Implementation of the Reforms Initiated by the Directives

15. Gabon has made the most progress in implementing the reforms initiated under the harmonized public financial framework. Since 2015, Gabon’s budget is prepared and executed in “program mode.” The concerned departments are currently finalizing the first budget review law (2015) in program mode, along with annexes related to performance. The work of preparing for the transition to accrual basis accounting has also begun. To make a success of this reform, Gabon organized a team of approximately 40 well-trained individuals dedicated exclusively to implementing the program budgeting reform. The team was assigned to the new directorate responsible for assessing the performance of the fiscal policies formulated by the Directorate General of the Budget and Public Finance in January 2015, in order to continue implementation of the fiscal reform.

16. Despite not transposing the directives, Cameroon was the first member state to implement the program budgeting reform, in 2013. This reform is based on the 2007 law on the fiscal regime, which set the deadline for the switch to program mode in 2013. On this same legal basis, major preparations are under way for the transition to accrual basis accounting. A fiscal reform directorate was created within the Directorate General of the Budget to monitor budgeting by program objective.

17. In Chad, insufficient capacities and the lack of an integrated public financial management system are obstacles to reform. Despite the existence of a project entitled Action Plan for the Modernization of Public Finances (PAMFIP) to marshal donor support for public finance reforms, the transposition of five of the six directives has not as yet led to significant progress in the area of reforms, the authorities’ efforts notwithstanding. With the support of partners, particularly Central AFRITAC, these efforts are focused on the development of a new budget classification and meeting prerequisites in the field of public accounting.

18. In Congo, technical work on budgeting in program mode is well advanced. However, the lack of strategic support, the inadequacy of the reform monitoring units, and the resistance to change exhibited by certain government agencies affected by the reform are slowing implementation of the 2012 Organic Law on the fiscal regime. In the field of public accounting and cash management, the technical prerequisites for implementing the reforms have not been met, indicating a continuing need for capacity building.

19. In the Central African Republic, pending adoption of the transposed draft texts submitted to the CEMAC Commission, the priority is to rebuild the bases of public financial management in the areas of budget management, public accounting, and cash management.

20. In Equatorial Guinea, the current public financial management system is especially weak. Consequently, transposition of the directives cannot truly begin until prior actions aimed at improving the system and capacity building in the field of budgetary and general accounting have been taken. Table 1 summarizes the degree of implementation of the reforms called for in the directives on the harmonized public financial framework.

Table 1.

Implementation of the Reforms Called for in the Directives on the Harmonized Public Financial Framework

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E. Recommendations for Expediting the Transposition of the Directives

21. Expedite the member states’ transposition of the directives into national law by promoting the global transposition approach. What this involves for each member state is preparing the program for the transposition of all the directives, including fixed deadlines, and monitoring their successful transposition and implementation in consultation with the CEMAC Commission.

22. Strengthen the CEMAC monitoring mechanism, based on the experience of the WAEMU. The first priority is to build the operational capacities of the Directorate of Public Finance, following the example of the WAEMU Commission. The CEMAC Commission should strengthen its relationships with the authorities of the member states, including at the political level, to expedite the implementation of public finance reforms and ensure transposition of the directives before the deadline of December 31, 2017. In particular, the monitoring and assessment mechanism approved by the member states in 2015 should be implemented in the latter half of 2016, and the sharing of experiences between CEMAC and the WAEMU regarding the implementation of public finance reforms should be increased.

23. Step up capacity building in the member states to facilitate the implementation of public finance reforms. The establishment or reinforcement of departments/units responsible for guiding these reforms is an essential condition for their implementation. Communication of the reform programs prepared by the member states to the CEMAC Commission would also allow for enhanced monitoring by the regional institution, including with regard to capacity building for national stakeholders.

1

Prepared by Marie-Christine Uguen.

2

Transposition: incorporation of directives harmonizing CEMAC’s public financial management framework into a country member’s legal framework. Compliant transposition: the draft national legislation has been assessed as compliant with CEMAC regional regulations by the CEMAC Commission.

3

In Cameroon, pursuant to the Constitution, the budget law is an ordinary law.

Central African Economic and Monetary Community: Selected Issues
Author: International Monetary Fund. African Dept.