Central African Economic and Monetary Community (CEMAC): Selected Issues

Selected Issues


Selected Issues

A Regional Approach to Enhancing Governance and Reducing the Potential for Corruption1

A. Introduction

1. Good governance, including the control of systemic corruption, is vital for macroeconomic stability as well as sustainable and inclusive economic growth. IMF research shows that weak governance and systemic corruption is associated with lower growth and investment and higher inequality, (IMF, 2018). Investing in good governance and reducing corruption is a largely budgetary-neutral reform to empower the private sector and expand opportunities for all. It is a step of critical importance in the CEMAC, part of the overall objective to address the root cause of the crisis it has faced following the decline in commodity prices in 2014: a largely undiversified economy over-dependent on oil, and still untapped internal regional market.

2. This note looks at some CEMAC specific regional dimensions of a possible strategy to enhance governance, which would support specific reforms in this area at the country level. The next section provides background. The following section describes the specific dimensions of governance covered in the note. A section on defining and measuring governance comes next, followed by a discussion on the impact of governance and corruption on growth. Three sections then look at governance and corruption in the areas of public financial management, anti-money laundering, and the link between the oil sector and public resources. A final section concludes. In dealing with these prominent issues, it is recognized that CEMAC faces capacity constraints in many dimensions of its macro-economic management, including because of the presence of fragile countries. The recommendations therefore require a gradual and sustained approach to yield results overtime.

B. Background

3. The CEMAC region was severely affected by a sharp decline in commodity prices after 2014, notably the reduction in oil prices. Facing a continue and rapid decline in regional reserves, the authorities decided at end-2016 to embark on a coordinated and sizeable fiscal adjustment effort by member countries, supported by the IMF and other partners and backed by adequate policies at the regional level in the monetary and financial sectors. The short-term objective is to restore external and domestic stability. In the medium term, addressing the root cause of the crisis would require reducing excessive dependency on oil and lay the foundation for a broader economic base. To unlock this potential, it will be key to address the constraints that affect governance, in particular in the management of public resources, and which feed into a strong perception of corruption.

4. This note assesses the link between governance and economic performance in the CEMAC. It highlights areas where the CEMAC’s governance is weak, based on available indicators over-time, and highlights areas for improvement. The focus of this note is on the regional dimensions of reform that can support better governance. It is recognized that the thrust of actions in this area are largely in the remit of national authorities. However, the very design of an economic and monetary union results in a set of policy and reform dimensions that have a distinct regional feature. For these, improvements require a coordinating or even steering role by regional institutions, to set a coherent framework for and maximize synergies of reforms at the country level.

5. The note focuses on three key areas where governance has a specific regional dimension. First, it examines gaps in the implementation of regional standards for public financial management. Second, it looks at standards to strengthen the framework underpinning efforts in the area of any-money laundering and combating the financing of terrorism. Finally, it assesses the framework for management and accountably of oil resources.

6. This note relies mainly on IMF-led assessment, complemented by some third-party indicators. Such assessment is complemented, where relevant, with the use of indicators of corruption (e.g.: Transparency International’s Corruption Perception Index).

  • In the area of public financial management, we rely on the Public Expenditure and Financial Accountability (PEFA)2 indicators for CEMAC countries which have gone through such assessment. Additional indicators and assessment are obtained by measuring the gap between the CEMAC PFM Regulations for Public Financial Management, and actual practices at country level.

  • In the area of AML/CFT, this note relies on indication of compliance with the international standards set by the Financial Action Task Force (FATF).

  • Governance around management of oil resources is evaluated on the basis of compliance to the EITI standards, where relevant, and the implementation of CEMAC’s own standards (mainly as derived from the CEMAC PFM regulations).

C. Scope of Governance Issues in CEMAC

7. The choice of these themes reflects key features of the CEMAC economic structure. Exports by the extractive sectors represent a dominant part of the regional economic basis and constitute the main source of foreign exchange. Consequently, good management in this sector, where the state is present directly (through its state-owned enterprises) and indirectly (through related tax- collection), is key to ensure good governance at large. Second, the role of the public sector is still a dominant source of aggregate demand, and strong governance in managing public funds directly impacts governance in the CEMAC. Lastly, CEMAC banks play a crucial role in avoiding safe havens for the proceeds of corruption, thereby directly contributing to allocating financial resources to productive ends.

8. These themes are also directly related to CEMAC’s own regional governance.

  • First, the CEMAC regulatory framework for public financial management (PFM) provides strong standards for transparency and accountability in the management of public resources. Weaknesses in this area can create the potential for resources not being collected and used according to the intended purposes. Work in this area is mainly led by the CEMAC Commission.

  • Second, a strong AML/CFT regime is a crucial tool in addressing corruption. Because the proceeds of corruption are often concealed to avoid detection or confiscation, an effective AML/CFT framework can contribute to both prosecuting and deterring corruption. The diversion of resources away from economically and socially productive uses can also negatively undermine the stability of a country’s financial system or its broader economy. Work in this area is mainly led by the COBAC.

  • Finally, the oil sector is central to the CEMAC, also given the strong presence of the state, through its SOEs, into profit sharing agreements signed with private entities. Such agreements, in turn, should be consistent with the regulatory framework set at the regional level in the area of foreign exchange. As such, the good management of these resources is essential to ensuring external stability to the monetary arrangement. Work in this area is a shared responsibility of member countries, primarily, the CEMAC Commission (in ensuring proper implementation of adequate tax codes and tracking funds which are to be covered by state’s budget), and the BEAC (in fully understanding the link between export commodity prices and volumes and accumulation of foreign exchange).

D. Background: Defining Governance and Corruption, and their Measurement

9. The word governance, which may be subject to different definitions and interpretation, needs some clarity. We rely on the recent IMF policy paper on Enhanced Framework for the Fund’s Engagement in Governance and Corruption. We define corruption as “the abuse of public office for private gain.” This definition is widely accepted in the literature and used by the Fund and other international organizations. (Box 1).

Defining Governance and Corruption

Governance refers to the broad “framework for exercising authority” while “good” governance refers to the “quality” of governance and its impact on outcomes. Broadly speaking, governance relates to the “rules of the game”, while “good” and “weak” governance reflect how the game is played and its results. The Fund has defined governance as the set of “institutions, mechanisms, and practices through which governmental power is exercised in a country, including for the management of public resources and regulation of the economy.” Similarly, the Fund refers to “good” governance as a normative concept, according to which the “quality of governance can impact its effectiveness and efficiency in achieving desired outcomes.” (IMF, 2017a).

We define corruption as “the abuse of public office for private gain.” This definition is widely accepted in the literature and used by the Fund and other international organizations. It is also consistent with the provisions of the United Nations Convention Against Corruption. As the definition suggests, corruption is typically associated with the functions of the State and some of them—e.g., public finances and government regulation—may be particularly prone to creating opportunities for corruption (e.g., IMF, 2018; Tanzi, 1998).

10. Weaknesses in the system of accountability and requirements for transparency can themselves create a fertile environment for corruption. There may be potential for corruption stemming from lack of reliable reports on the source and use of public resources, which may render the public financial management process opaque and facilitate embezzlement of resources. From this standpoint, a key area of investigation is when standards in the area of accountability and transparency are mandated at the regional level but seldom implemented at the country level.

E. The Impact of Governance and Corruption on Economic Activity

11. Many studies have shown that corruption and bad weak governance undermine economic growth, accentuate income inequality and persistent entrench poverty3.

  • These studies find that corruption and weak governance are significantly associated with low levels of economic growth. Weak governance may affect economic outcomes through several channels, including: reducing the attractivity of an economic space and domestic and foreign investment; feeding into tax predatory behavior; resulting in poor infrastructure (through inefficient and untargeted spending); undermining human capital; generating political instability by fostering a sense of injustice.

  • The link between governance and inequality is also widely explored in the literature. With respect to income inequality and poverty, empirical evidence suggests that weak governance and corruption create distortions in resource allocation, adds to inefficient and predatory bureaucracy, and favor private interests. These studies conclude that this poor institutional quality compromises economic efficiency by misallocating scarce resources and is correlated with an elevated level of poverty.

12. These links have been confirmed by a meta-study conducted by IMF staff (IMF 2017, 2018). A meta-analysis of the impact of corruption and weak governance on growth was conducted for some of the 26 most-quoted studies (providing 149 estimates of the impact of corruption) and 17 other studies (providing 125 estimates on the impact of governance). The analysis suggests that improving governance and reducing corruption are significantly related to stronger and more inclusive growth. These results are particularly important for countries starting with relatively weak governance and corruption. The correlation between corruption/weak governance and growth is also significantly higher for low-income countries. They suggest that improvements in this area should continue to have a significant impact over time (Box 2).

The Growth Dividend of Governance—Evidence from a Meta-Analysis Conducted by IMF Staff

  • Most estimates of the impact on per capita growth from improving corruption perceptions by a quartile along the corruption index range between -0.3 and -1.1 percentage point.

  • About 90 percent of the estimates point to a negative correlation, as expected, and 80 percent of them are statistically significant.

  • Similarly, the distribution of growth impact estimates resulting from a deterioration of the governance index by a quartile is mainly distributed between -0.2 and -1.5 percentage point.

  • This finding is strong for different measures of corruption perceptions and quality of governance, estimation techniques and institutional quality controls.

13. Third party indicators on governance and corruption suggest that CEMAC countries lag their sub-Saharan African (SSA) peers. The averages of such indicators for available CEMAC countries are below averages for the full set of countries belonging to the SSA region. The latter is also below the average for the rest of the world countries covered by the survey (Figure 1).

Figure 1.
Figure 1.

CEMAC, SSA, and Rest of the World: Governance and Corruption Indicators

Citation: IMF Staff Country Reports 2019, 002; 10.5089/9781484392843.002.A001

Source: Transparency International, 2017; bars represent 95% confidence interval for SSA countries for which observations are available, based on standard deviations over the last five years of observations.

14. Improvements in the governance and corruption indicators are related with higher growth (Figure 2). Based on an SGMM model developed by staff (IMF, 2017) the elasticity of growth on improvement in the area of governance and corruption is significant, with the impact of reducing corruption in SSA much higher than the average for the rest of the countries covered in the surveys. This largely reflects the fact that the corruption index shows higher variation for the SSA, with the countries in this group with better governance posting higher growth. A simulated improvement in the governance or corruption index also shows that the estimated impact on growth would be significant for SSA. Given that governance and corruption indices are generally worst in CEMAC compared to the average of SSA, it is likely that the growth response could be higher in the case of CEMAC.

Figure 2.
Figure 2.

Estimated Impact of Improving Governance and Reducing Corruption

Citation: IMF Staff Country Reports 2019, 002; 10.5089/9781484392843.002.A001

Source: 2018, Angola Selected Issues Paper, IMF.

F. The CEMAC Framework for Public Financial Management

A strong and transparent framework for the management of public resources is the first line of defense against poor governance and potential corruption. The CEMAC has designed and adopted at the regional level the relevant regulations to build this framework and improve the efficiency in managing public resources. The challenge is to ensure proper and full implementation of these principles at the national level. This is best done by ensuring regular assessments, reporting on the implementation status, and supporting member countries in their efforts in this area.


15. The CEMAC PFM framework provides sound basis to manage public resources in a transparent and efficient manner, and address PFM vulnerabilities to corruption. The architecture underpinning the regional framework in the area of public financial management (PFM) is rooted in six CEMAC directives. Taken together, these directives form a coherent framework to direct the role and responsibilities, the processes, the reporting, and internal and external controls and audits related to the collection of taxes and management of public resources. They also provide clear guidance in the area of consultation with civil society, dissemination of data, and, importantly, the interaction between executive and legislative bodies in the budget preparation, execution, and reporting. Principles included in these directives reflect international standards and best practices to promote fiscal transparency and effective management of public funds (Table 1).

Table 1.

CEMAC: Key Directives on Public Financial Management: Scope and Issues Covered

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16. Because CEMAC standards are defined with the legal instrument of a “directive”, their provisions need to be transposed into national laws to become applicable to member states. This transposition requires that member countries submit their draft law to the CEMAC Commission for the latter’s assessment of conformity. Recommendations of the CEMAC Commission are then embedded in the finalized law which can be approved. This process is meant to ensure coherence between the regional framework and the national level. There are a set of administrative acts which then follow the approval of national legislations to ensure that processes and procedures, as well as specific obligations in the area of data reports and audits, are well defined and guide work practices in the public administration.

17. The transposition of these PFM directives is uneven, providing a potential for lack of standardization and adherence to key standards in this area. CEMAC central directives on Governance and Transparency (06/2011) and on the budget law (01/2011) have been transposed into national legislation by all CEMAC countries, except Equatorial Guinea. Implementation on all other directives is also partial, as three countries (Cameroon, Central African Republic, and Equatorial Guinea) have not transposed these into national legislations.


CEMAC: Status of Transposition of Directives on Public Financial Management

(November 2018)

Citation: IMF Staff Country Reports 2019, 002; 10.5089/9781484392843.002.A001

Note: Degree of transposition of the six PFM Directives into national legislation is reflected. “Not implemented indicates” that no initiative was taken so far by the authority to provide the CEMAC Commission with a draft national law to transpose a given CEMAC Directive. “In progress” means that a draft law was prepared by the national authorities and sent to the CEMAC Commission, but the comments of the latter have not been incoprporated as yet in a revised national law. “Enacted” indicates that the national law to transpose a given CEMAC direxctives has been approved. This last step, in itself, does not guarantee effective implementation of a Directives unless the concerned public administrations adapt their procedural approach, internal IT systems, and mode of cooperation with other public entities in accordance with the spirit of the CEMAC Directive.

18. Transposition into national legislation does not guarantee that the regional framework of these PFM directives to enhance governance and prevent corruption is effectively implemented. When a national law or regulation is enacted to transpose a CEMAC directive, there are several administrative steps that need to follow, as well as sometimes deep modification of procedures, IT systems, and work practices, for the new legislation to be effective.

19. A key role is played by the foundational CEMAC regulation 06/11 on Transparency and Good Governance (Table 2). This regulation serves as the general framework for all the other directives, and sets the ground in terms of (1) attribution and responsibilities of each public institution, (2) the economic context in which the policy decision in the area fiscal policies are embedded, (3) the elaboration and presentation of the budget law, (4) the activities related to revenue collection and expenditure, and (5) the information to be provided to the public, and (6) a participative process, with involvement by the civil society, in defining key policy decisions. By design, this regulation provides a strong basis in terms of governance. It also provides clear-cut responsibilities and strong requirement of transparency, which are critical to support an environment that limits the potential for corruption.

Table 2.

CEMAC: Selected Provisions of Directive CEMAC 06/2011 on Transparency and Good Governance

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20. The actual implementation of this key directive remains problematic (Table 3). First, regional coverage is partial as Equatorial Guinea, a top oil producer in the region, has not transposed this central directive. In addition, some crucial principles of this directive are not actually implemented in countries that have adopted it. Fiscal reporting on natural resources management provides an emblematic example. While the directive requires the publication of financial operations concluded by the public sector, contracts with the oil sector are not made available to the public in a full and transparent manner. Public procurement is another example. The directive stresses that regulations on public procurement must comply with international standards. Based on these standards, open competition should be used as the preferred or default method of procurement and complaints review mechanism should be in place, which is not systematically observed in practice and creates vulnerabilities to corruption in public investment management.

Table 3.

CEMAC: Selected Problems Encountered in the Full Implementation of the CEMAC Directive on Transparency and Governance 1/

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Source: Evaluations based on regional and bilateral surveillance, and technical assistance, by staff of the African and Fiscal Affairs Department of the IMF.

The term “full implementation” refers to the actual translation of the directive into the full set of administrative regulations and reforms, including their impact on the work practices and flow of information between all entities involved in the management of public resources.

21. The limited implementation of the CEMAC directive on the Budget Law increases also risks of exposure to corruption in several PFM areas (Table 4). First, transactions to and from the State-owned enterprises (SOEs), including SOEs which are part of profit sharing agreements in the extractive sector, are not systematically covered by central governments’ fiscal reporting. This weakens the scope of internal and external controls in this key area. It also adds to the difficulty to track the flow of foreign exchange back to the CEMAC related to this sector, which is a key pillar to support external stability. Second, tax exemptions and tax expenditures are rarely detailed and assessed in the budget documentation or are maintained for several years without clear legal basis and economic justification. This may create governance problems and even provide undue ground for favoritism. Third, the consolidation and the full operationalization of the Treasury Single Account (TSA) still need to be completed. The TSA is not used extensively, in particular with regards to the domiciliation of the state’s share in the extractive industry as well as in some external financing. In such cases, holdings related to the central government are even kept in foreign accounts. While the directive prohibits the deposit of public funds in commercial banks, maintaining fragmented banking arrangements outside of the TSA reduces the ministry of finance/treasury oversight of all government cash flows and weakens budget control and monitoring. This practice directly creates potential for weak governance.

Table 4.

CEMAC: Selected Problems Encountered in the Full Implementation of the CEMAC Directive on Budget Law 1/

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Source: Evaluations based on regional and bilateral surveillance, and technical assistance, by staff of the IMF.

The term “full implementation” refers to the actual translation of the directive into the full set of administrative regulations and reforms, including their impact on the work practices and flow of information between all entities involved in the management of public resources.

22. Finally, the implementation of the CEMAC Directive on Public accounting also needs to be completed to strengthen expenditure controls and reduce fiscal risks (Table 5). Challenges in this area are of two types. First, expenditure controls are not effective and, in the practices, not streamlined in most CEMAC countries, and exceptions to the regular expenditure procedure defined by the directive have multiplied in practice. This creates incentives for expenses that are executed outside the normal spending chain, delinking budget execution from the resource envelop available and approved in the budget law. In turn, this explains the emergence of large stock of arrears that plague the region, in particular when the resource envelope is reduced by a decline in world commodity prices. Ex-post, it also severely weakens the legislative input to budget orientation and fiscal policy.

Table 5.

CEMAC: Selected Problems Encountered in the Full Implementation of the CEMAC Directive on Public Accounting 1/

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Sources: Evaluations based on regional and bilateral surveillance, and technical assistance, by staff of the IMF.

The term “full implementation” refers to the actual translation of the directive into the full set of administrative regulations and reforms, including their impact on the work practices and flow of information between all entities involved in the management of public resources.

23. Assessment of governance in the management of public funds based on an analysis of the status of implementation of CEMAC directives closely match PEFA-based assessment and highlights several governance problems (Table 6). Regular work is conducted, including by the IMF, to assess public financial management performance, as part of the Public Expenditure and Financial Accountability (PEFA) framework4. It identifies 94 characteristics (dimensions) across 31 key components of public financial management (indicators) in 7 broad areas of activity (pillars). Based on a selection of specific indicators more closely related to measures of governance in the management of public resources, the CEMAC countries (Gabon, Cameroon, Congo, and Central African Republic) are in most cases below the average for sub-Saharan countries, and these two groups are below the average for the rest of the world. Such assessment is consistent whether one look at the more recent or the pre-2013 PEFA indicators.

Table 6.

CEMAC: Country Compliance with the United Nations Convention Against Corruption

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Source: United Nations Office for Drug and Crime (www.unodc.org).


24. The CEMAC Commission is working on several fronts to address weaknesses in PFM. First, its core mandate to oversee the full and effective implementation of CEMAC directives translates into ongoing interaction with member countries to facilitate full transposition into national legislation and assess how work practices comply with the directives. A specific area is the gradual implementation of budget by program classification (e.g. Gabon and Cameroon; and, partially, Congo and Chad), which benefit from guidance from the CEMAC Commission. Second, the CEMAC regional surveillance framework provides a basis to relate outcomes in budget execution with the degree of implementation of CEMAC directives

Figure 3.
Figure 3.

CEMAC and Selected Regions: PEFA Scores

Citation: IMF Staff Country Reports 2019, 002; 10.5089/9781484392843.002.A001

25. However, strengthening PFM remains an imperative to enhance governance and reduce the potential for corruption in the CEMAC. Progress in this area requires steps on different fronts:

  • Strengthen capacity of the CEMAC Commission to monitor and ensure the proper implementation of the CEMAC directives. The CEMAC Commission faces a daunting task in covering a wide array of issues ranging from internal market regulation, to international treaties, and harmonized budget preparation and execution. It would be critical to assign dedicated resources to a CEMAC Commission unit tasked to assess on a regular basis progress in the PFM area. Ideally, such unit would issue a periodic report on the status of implementation, describing gaps and actions in countries.5

  • Ensure the communication of petroleum contracts to a centralized unit within the CEMAC Commission. Such contracts are often kept confidential to regional institutions. The specific tax agreements embedded in these contracts are known to be often in derogation of the CEMAC framework, thereby reducing the tax basis. Moreover, the exact terms of the benefit to the state from participating to profit sharing agreement (via SoEs) or concession are not known, as they result from complex formula described in confidential contracts dependent of oil volume, prices, and the cycle of investments. As a welcome step to strengthen governance in this area, the CEMAC Commission will request national authorities to share such contracts and use this information to enhance understanding of the revenue accruing from them.

  • Require CEMAC member countries to finalize their convergence report. These reports would describe the convergence path over three years with regards to those convergence criteria not met. They are, therefore, a potentially useful instrument to relate full implementation of CEMAC Directives (e.g. in the area of tax regime) to the expected flow of resources, thereby enhancing accountability and scrutiny on the adoption of sustainable fiscal policy. To date, these reports have not been completed.

  • Coordinate with BEAC to develop and operationalize treasury single account (TSA) in CEMAC member countries. Both BEAC and national treasuries need to interact and to develop shared practices and procedures to maintain the TSA in an operational manner. Developing TSAs requires adapting institutional arrangements between BEAC and treasuries to clearly define responsibilities, policies, including on the rates of interest paid on the TSA balance, and requirements of information exchange. Upgrades of IT systems and procedures used by the BEAC are also a prerequisite to ensure active and timely cash management.

  • In all areas of the governance agenda, enhancing transparency is essential. As seen above, there is a serious lack of transparency in terms of disclosure of contracts in the extractive sectors, proper recording in budget documents of transaction at subnational level and with regards to state owned enterprises. Budget documents are often incomplete, for instance as regards to providing information of tax exemption, their economic rational, and their estimated costs. From this standpoint, a significantly enhanced transparency will be key. This could initially start with a regular report, disseminated to the public, on the

  • various budget documents and background reports which are expected, by CEMAC regulation, to be made available to the public, and are not at the moment.

G. The CEMAC Framework for Anti-Money Laundering and Combating the Finance of Terrorism (AML/CFT)

26. The AML/CFT regime can be a powerful tool in supporting efforts to prevent, detect, investigate and prosecute acts of corruption. The Financial Action Task Force (FATF), the international standard setter for AML/CFT, calls for the mobilization of the AML framework to help detect and trace the laundering of proceeds of corruption, and assist in the investigation and prosecution of bribery6. Specific elements of the AML/CFT framework are particularly relevant: implementation of enhanced due diligence requirements for domestic politically-exposed persons (PEPs), including the identification of PEPs that are the beneficial owners behind legal persons, and reporting to the authorities by financial institutions of transactions when they suspect or have reason to suspect that the funds are the proceeds of criminal activity, including corruption.

27. The regionalization of the AML/CFT framework within the CEMAC is a much welcome effort in creating economies of scale and ensuring a level playing field within the Community. An AML/CFT regulation was adopted in 2003 and was subsequently revised in 2010 and replaced in 2016. The current CEMAC regulation is of direct and immediate application in all the member countries. Other steps have also been taken at the regional institutional level with the establishment of the Groupe d’Action contre le Blanchiment d’Argent en Afrique Centrale (GABAC)7 and the creation of an AML/CFT supervisory function within the COBAC. Notwithstanding the regionalization effort, some important functions, such as law enforcement and financial intelligence responsibilities, remain at the national level.

28. While the regional AML/CFT framework has been strengthened with the adoption of the 2016 CEMAC regulation, there remains significant scope to improve the compliance with the Financial Action Task Force (FATF) standards and its effectiveness. Assessment of the CEMAC member countries’ compliance with the 2003 FATF recommendations found strategic weaknesses in the 2003 and 2010 CEMAC regulation, with most assessment criteria being evaluated as non-compliant or partially compliant in areas related (Box 3). The 2012 FATF standard introduced new recommendations, including with respect to anti-corruption measures, and an emphasis on the effectiveness of the regime. The first assessment of CEMAC countries against this revised standard is ongoing and is scheduled to be completed by 2025. These assessments will highlight pending shortcomings of the 2016 CEMAC regulation and deficiencies in the implementation and effectiveness of both the national and regional frameworks.

Overview of the Assessments of CEMAC Members Against the 40+9 FATF Recommendations

The GABAC is an FATF-Style Regional Body (FSRB) of which all CEMAC countries are members. The GABAC was established in 2000 by the Conference of the Chiefs of States of the CEMAC as an organ of the CEMAC. It has been mandated to combat ML/TF, assess the compliance of its members against the FATF Standards, provide technical assistance to its member States, and facilitate international co-operation. GABAC became an observer organization of the FATF in February 2012. It then worked with the FATF to meet the requirements of a FATF-Style Regional Body (FSRB). It was recognized as such in October 2015 and admitted as an associated member of the FATF.

The World Bank and the GABAC assessed all CEMAC member countries against the 40+9 FATF recommendations. The assessments were carried out between 2008 and 2015. The 2003 and 2010 CEMAC AML/CFT regulations as well as other related regional and national legal and regulatory instruments were assessed against the prevailing standards.

Overall, CEMAC countries were found to be not compliant or partially-compliant with most of the FATF recommendations. The assessment reports highlighted that the legal and regulatory frameworks were not aligned with the international standards. In particular, it found strategic deficiencies with preventive measures obligations for financial institutions relevant in the fight against corruption, namely provisions related to the identification of customers, politically-exposed persons, reporting of suspicious transactions, and transparency and beneficial ownership of legal persons.


CEMAC: Overview of Results of CEMAC Countries’ Assessments Against the 40+9 FATF Recommendations

Citation: IMF Staff Country Reports 2019, 002; 10.5089/9781484392843.002.A001

They also stressed the need to issue guidelines to the private sector to help improve the implementation of the AML/CFT obligations.

In relation to the regional and national institutional structure, strategic weaknesses and low level of implementation were noted. The assessments revealed that in most countries, mechanisms for the supervision of money transfer and money exchange businesses had not yet been established and that resources and technical expertise for the supervision of supervised entities, including financial institutions, had to be mobilized to increase the number and scope of evaluations. They noted that while the frameworks for sanctions in case of breach of AML/CFT obligations were formally established, implementation was difficult to assess. The assessments also noted that most financial intelligence units had to strengthen their structure and capacity to assert their independence and put in place an effective financial intelligence in ML/TF investigations and prosecutions framework.

29. AML/CFT banking supervision, a key component of the AML/CFT regime is under COBAC’s responsibility. While the onus of meeting the international AML/CFT standards remains with national authorities, individual CEMAC countries depend, in some respect, on regional bodies’ actions and efforts. In particular, the COBAC has taken the responsibility of ensuring the strength of the regulatory framework and the proper implementation of preventive measures by credit institutions. The COBAC has carried out offsite and onsite examinations of credit institutions and has issued formal warnings and imposed administrative sanctions on institutions and their directors when important breaches were uncovered. The COBAC is in the process of introducing a risk-based approach to its overall supervision function and strengthening its capacity. To deepen its understanding of risks and better inform its supervision work, the COBAC is conducting an analysis of AML/CFT risks, the results of which it intends to publish in an advisory note by end-2018.

30. Ensuring that the AML/CFT regime is effectively implemented through effective risk-based supervision by the COBAC will help support anti-corruption efforts across the CEMAC. The COBAC supervisory role is critical in ensuring that credit institutions appropriately implement AML/CFT obligations to prevent and detect the laundering of proceeds of corruption. This would also support national AML and anti-corruption efforts, notably by ensuring that financial intelligence units receive useful suspicious transaction reports from credit institutions, which could trigger investigations for acts of corruption and the laundering of their proceeds.

31. Another key international standard to guide reforms to reduce corruption (hence contributing to AML) is the UN Convention Against Corruption. The United Nations Convention against Corruption is the only legally binding universal anti-corruption instrument. The Convention’s far-reaching approach and the mandatory character of many of its provisions make it a unique tool for developing a comprehensive response to a global problem. The Convention covers five principal areas: preventive measures, criminalization and law enforcement, international cooperation, asset recovery, and technical assistance and information exchange8. The Convention covers many different forms of corruption, such as bribery, trading in influence, abuse of functions, and various acts of corruption in the private sector. It has 186 states parties. The states parties submit to a voluntary peer review process. The first cycle of the review process has been completed for nearly the entire membership. It is not completed for three CEMAC member countries (Chad, Equatorial Guinea, and Congo).


  • Continue to strengthen the regional AML/CFT framework, in particular for measures relevant in the fight against corruption. The adoption of the 2016 CEMAC regulation is a positive step in bringing the regional framework in closer line with the 2012 FATF standards. The CEMAC should address the pending shortcomings to be identified in the upcoming assessments by the GIABA. The COBAC should also swiftly revise its 2005 regulation to implement the 2016 CEMAC regulation.

  • Implement a risk-based approach to supervision will help focus the limited resources of the COBAC in the areas representing the most risks. As called for by the 2012 FATF standard, jurisdictions should deepen their understanding of ML/TF risks and vulnerabilities and allocate more resources to high-risk areas. Hence, the COBAC should take steps to develop a risk-based onsite and offsite supervisory tool for credit institutions, notably by enhancing its understanding of the risks faced by the financial sector, developing risk profiles of supervised credit institutions to inform inspections and adapt the overall supervision strategy to residual risks. This should take into account the particular risks related to the laundering of proceeds of corruption.

  • Strengthen COBAC’s efforts in ensuring that AML/CFT preventive measures of high relevance for the prevention and detection of the laundering of proceeds of corruption are properly implemented by credit institutions. The 2016 CEMAC regulation establishes preventive measures requirements in relation to the identification of customers and specific measures in relation to politically-exposed persons and beneficial ownership structures. However, implementation by the private sector is a challenge and national financial intelligence units continue to receive low levels of suspicious transaction reports. To address these shortcomings, the COBAC and domestic financial intelligence units should, amongst others, publish guidance to the private sector, conduct training and carry out more targeted supervision efforts.

  • Ensure that dissuasive and proportionate sanctions are imposed on credit institutions in case of AML/CFT breaches and reinforce the cooperation with national authorities to ensure the effectiveness of the AML/CFT regionalized regime. As per the 2016 CEMAC regulation, the COBAC should communicate any administrative or disciplinary sanction imposed on credit institutions to the national financial intelligence unit and Prosecutor. Establishing effective channels of communication and exchange of information mechanisms between the regional and national levels will be key in strengthening the understanding of risks and following-up on institutions whose implementation of AML/CFT measures has been found as deficient.

  • CEMAC should also encourage its members to comply with the anti-corruption review UNCAC standard peer-process, as part of a broader accountability infrastructure. The peer review process inter alia identifies gaps in the national legislative system in the implementation of the standards. Some of these gaps are directly relevant to CEMAC on matters related to AML/CFT or procurement.

H. The CEMAC Framework for Governance in the Extractive Sectors


32. Oil extraction and export plays a major role in the economy of most CEMAC countries. Oil accounts for about 20 percent of GDP and covers roughly 75 percent of the region’s exports of goods. Tax and nontax revenues related to oil contribute to more than 40 percent of total revenues. Given the size of this sector and the importance in commanding public resources, good management in the oil sector is key to ensure governance in the rest of the economy.

33. Oil sector is very complex, by nature, and pushes capacity of public administrations to their limits. (Box 4.) The industry is organized basically around two typical arrangements. In a Profit Sharing Agreement (PSA) the state (normally through a state-owned enterprise-SOE), and a foreign private company (normally through a resident subsidiary), set up a partnership for the extraction and export of oil, and agree on a profit sharing scheme. In such scheme, a certain amount of oil (cost-oil) is used to pay the costs incurred in the exploration and extraction. The next part (profit-oil) is shared between the two parties according to an agreed formula. This agreement takes into consideration the investment cycle and depreciation of the fixed investment as a cost factor. In the concession scheme, the operator typically pays a royalty and an income tax for the right to extract and export oil. Sometimes a concession scheme includes sector-specific taxes, such as resource rent or additional profit taxes. The fiscal terms of concession systems are typically specified in legislation, rather than negotiated on a project-by-project basis.

34. When countries enter into contractually agreed fiscal terms, it is good practice to set these out initially in model contracts (for example, for a production agreement). The model PSA contract should specify which fiscal terms are biddable or subject to negotiation; best practice is to keep the number of fiscal parameters that can vary to a minimum. The general legislative framework for the petroleum sector can either be incorporated in the income tax legislation or in stand-alone legislation for more specialized taxes for extractives (petroleum code and mining code). The latter is the model mostly used in the CEMAC.

35. In both cases-but particularly in the PSA-the quantification of the actual share of the oil transaction which will go to the state requires complex calculations, which depends on the exact amount of oil produced and exported, its selling price, and the imputation of various costs factor. It must be noted that an important share of oil production is sold on future markets. As a result of the ever-growing complexity of this sector, in practice it takes time and steadfast investments for the state to build full capacity to manage and control such contracts and properly calculate (or audit) its share.

Production Sharing Agreements Versus Concession Systems

The main fiscal regime types for the petroleum upstream sector are (i) concessional tax-royalty regimes; and (ii) contractual production sharing arrangements. Some countries combine a production sharing regime with tax-royalty instruments making this a hybrid fiscal regime. Moreover, both regimes can also include some form of state equity participation.

The tax-royalty regime combines a royalty providing early revenue from the start of production with one or more profit-based taxes capturing economic rent. Under this regime, the government issues a license or concession to the investor to explore for and extract natural resources within a specific license area. The licensee takes ownership of any resources that are extracted, with the government collecting revenue based on the assessment of royalty and taxes.

The production sharing fiscal regime is common for petroleum. Under this fiscal regime, the government or a government appointee (such as the national oil company) enters into a contract with one or more companies. The contractor explores for and extracts petroleum discoveries within a production license area in return for a share of the petroleum extracted from the development. Under this fiscal regime, the company only takes ownership of part of the petroleum resources. Another contractual type of fiscal regime is a risk service contract where a company is contracted to develop and produce petroleum in return for an agreed remuneration.

Direct state participation is very common. At one end of the spectrum are countries that have a national oil company, which may enter into joint venture arrangements with private sector companies. Other forms of state participation include the government having an equity position in a petroleum project with different options available for the government to finance its participation ranging from free equity, carried interest, to fully-paid equity.

While the various fiscal regime types look different, their economic and fiscal impact can be very similar. This leads us to a general insight about fiscal equivalency. Simply put, the fiscal parameters under either a tax-royalty or a production sharing fiscal regime can be chosen to give the same government take or revenue profile over time.

36. An analysis of available data and studies suggest that oil export data in official statistics are sometime prone to miscalculation.

  • First, an analysis of CEMAC balance of payments data suggest a strong correlation between recorded oil export and recorded capital outflows. In other words, the higher is the total value of recorded oil export, the higher is the estimated capital outflows. This is probably an indication that part of the counterpart to oil export is not repatriated into the exporting country and is recorded as capital outflow.

  • Second, other studies suggest that oil export sector is plagued by the phenomenon of under-invoicing. This phenomenon relates to the fact that oil export as recorded by the exporting countries in several cases are lower than the partner data as recorded by the import countries, as seen in some cases for the total of exports.9

  • Third, there is also evidence of very large deposit by CEMAC resident in foreign countries, which are likely not in total compliance with CEMAC foreign exchange regulation. Such regulation requires that holdings by CEMAC resident in foreign banks are kept only in limited amount and for justifiable reasons, such us to finance anticipated imports or to cover short-term debt service. Data from the BIS suggest that the stock of CEMAC’s resident holdings with foreign banks (about USD 5 billion as of end 2017) are above such notional allowed amount. If this conclusion holds, and given the importance of oil as primary source for foreign exchange earnings (and evidence included above from the balance of payments), it is possible that part of such holdings is related to unrecorded oil export earnings proceeds.

  • Fourth, there has been some concerns that the increase in oil prices through 2018 has not translated into higher oil tax revenue (and NFA accumulation). In fact, at their extraordinary meeting in November 2018, CEMAC’s Head of States have called for stepping-up efforts to repatriate export proceeds, in particular by state-owned enterprises part of PSA, to help strengthening this link.


CEMAC: Oil Export and Capital Outflow

(1997–2017; Data in CFAF BN)

Citation: IMF Staff Country Reports 2019, 002; 10.5089/9781484392843.002.A001

Source: IMF Staff data and calculation based on countries’ balance of payments statistics. The concept of capital flow is defied as sum of recorded short-term capital outflose and errors and omissions.

Total Value of Oil Exports by Cameroon and Congo (2014)


Citation: IMF Staff Country Reports 2019, 002; 10.5089/9781484392843.002.A001

Source: COMTRADE statistics, and staff calculations

CEMAC: Deposit Abroad by the CEMAC Non-Bank Institutional Sector

(Outstanding, Millions of U.S. Dollars)

Citation: IMF Staff Country Reports 2019, 002; 10.5089/9781484392843.002.A001

37. The complexity of this sector and the vital importance that its governance plays in the CEMAC economic and monetary union calls for strong capacity to assess and monitor the link between oil prices/volumes and oil revenues. It is possible to use spreadsheet modeling techniques to forecast the tax revenue and foreign exchange implications of alternative economic scenarios. Such models require information on the fiscal terms contained in a PSA, as well as projections of the costs of production and the quantity of production from the time of inception of a given petroleum project. This type of analysis is feasible for a limited number of oil fields, where such detailed data may be available. The outcome of a project-by-project analysis of the major petroleum projects in a country cannot be readily extrapolated to the national petroleum sector as a whole, but it may give useful indications of the order of magnitude of the effects of various economic shocks and it could help to identify potential problems in revenue collection and amounts of foreign exchange.

38. The oil exporting countries can refer to the Extractive Industry Transparency Initiative, an international standard widely used to enhance and report on governance in this area10. The EITI sets ambitious standards for strong governance and full accountability in the extractive industry. There is no formal relation between the CEMAC Commission (or other regional institutions) and the EITI as membership is by countries only. However, there is a strong synergy between the (voluntary) EITI requirements and the CEMAC guidelines for PFM (setting specific requirements for CEMAC countries).

39. In fact, four of the CEMAC countries have a form of engagement with the EITI (Table 7). Full membership is effective for Cameroon, Chad, and Congo. CAR was a member but was suspended. Gabon and Equatorial Guinea have committed to submit their EITI application as part of their engagement under IMF- and staff-monitored programs, respectively. It is interesting to note that among the corrective actions asked by Cameroon and Congo as part of the regular validation to address serious deficiencies are those related to contract transparency, license registration, state-participation, and (transparency and reporting on) SOEs transactions.

Table 7.

CEMAC: EITI Membership and Compliance

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40. However, possible membership to the EITI needs to be part of a wider effort to enhance governance in the oil sector. By design, the EITI does not guarantee that the commercial part of the oil (the initial physical transaction) is covered in a timely manner. It deals mainly (and above all) with the use of recognized resources. In fact, there have been instances of inefficient governance and even corruption related to the oil trade, even in countries formally part of the EITI (e.g. Congo). Opaque practices can even result from barter transactions (private companies working for oil) or commercial financing (leading to the prior commitment of oil exporters to repay their debt through credits provided by large foreign financial institutions). This complicates the challenge of reconciliation, as part of transactions may be in form of barter.

41. As a result, CEMAC Member States must be proactive in ensuring good governance in such a complex sector. The CEMAC legislation provides sound ground to ensure progress in this area (Box 5).

  • The first problem is to ensure that customs are and remain scrupulously at the center of the declaration of export transactions and that this information is shared with the tax institutions (national level) and those charged with the governance of the monetary union (BEAC). The framework of the CEMAC in the field of customs legislation is very clear: nothing can leave the region without prior declaration to the customs and without authorization of customs.

  • The customs legislation also establishes the specific obligation to provide any additional information that the customs authorities may need to verify the plausibility of the customs declaration.

  • The customs law and the foreign exchange law also oblige CEMAC residents (including oil companies) to always include the invoice in the customs declaration (as part of this declaration) and to provide information on the expected timing and domiciliation of the oil exports. This is also necessary to comply with specific obligations related to the foreign exchange law.

42. In fact, CEMAC customs have a weak capacity to cope with this complex sector and have often not proactively applied these regulations (Box 5). Customs declarations are often incomplete or incorrect. The strict monitoring capacity of oil transactions is limited. It is often assumed that, given the presence of the state in several benefit-sharing agreements, customs should not impose an additional burden.


43. First, the CEMAC Commission should work to ensure full implementation of regional legal framework in this area, including through enhancing capacity the CEMAC Commission in this area. Given the lack of concrete implementation in many areas, an option could be explored: Member States should submit an annual report to CEMAC on the status of implementation of the guidelines of the CEMAC which would be consistent with the sound functioning of a customs union.

44. Membership in the EITI can help inform some of the data that should be published to fully implement the CEMAC directives (in particular on governance). It is important to note that the CEMAC guidelines and the EITI standards both require full disclosure and transparency in the disclosure of contracts and activity related to the extractive sector and its share in the state.

45. A second aspect relates to the full implementation of the foreign exchange law. The issue of repatriation highlights an important difficulty that regional authorities need to consider in greater detail: the rule of law when individual members do not respect the regional legal framework. In particular, improvements could cover the banks’ responsibilities in this area and the nature of (mostly ex-post) customs verifications and sanctions of non-compliance. This would need to cover oil traders, and perhaps extend to banks involved in settling the transactions.

46. Given the complexity of extractive sectors, but also the importance of good governance to ensure its contribution to the budget, specific capacity should be built. In particular, it will be important to establish a capacity at the regional level (ideally the BEAC) to assess the link between oil prices and volumes and expected tax revenues. This will be essential in determining whether the tax revenues that enter (and therefore the gross NFA inflows) are justified by the level of prices and output or if other policies are needed to strengthen external stability (including monetary policy at the CEMAC level, or fiscal policies at the country level). Discussions with regional institutions suggested that one step in this direction would be revisiting the adequacy of the documentation model to be provided by petroleum companies to the customs and the reporting system envisaged with the BEAC.

47. It will be also vital to establish in the customs administration of the largest oil exporters a dedicated unit endowed with specialty knowledge of the oil sector (national level). Such unit would have intelligence and risk analysis capabilities and would play a central role in directing, supporting, and monitoring overall customs control activities. In particular, it would define the exact information it will ask oil exporter to fill in order to monitor and respond to emerging governance risk (for instance when otherwise available information on oil prices and production do not match with the customs declaration). In other words, the dedicated unit would need to establish a cartography of the risks for mis- or non-reporting, so to direct controls to these risks. The dedicated unit would benefit from having representatives of the state-owned oil companies, as SOEs may be in an ideal position to obtain critical data for the analysis of oil and gas contracts.

48. The CEMAC Commission needs also to strengthen the implementation of the transparency provision included in the CEMAC Directive on Transparency and Governance (06/2013). In particular, it needs to urge member countries to provide a complete reconciliation of oil production and export data with the oil tax revenues included in the budget documents. Doing this would lay the ground for participation to the EITI membership, which should be encouraged.

Customs: An Assessment of Standards 1/

Customs’ role is important in controlling the oil and gas sector. Customs’ existing mandate to control exports should be effectively carried out to assist CEMAC with the management of this sector, enhancing governance, and receiving the due amount of revenues from natural resources.

The CEMAC Regulatory Framework

The customs authorities of CEMAC Member States have the unconditioned right and obligation to control introduction in and exit of goods from the Community and authorize these operations only after compulsory import and export formalities have been accomplished. Regulation 05/01–UEAC-097–CM-06 of August 3, 2001 establishing the revised Customs Code (CC) of the CEMAC provides that exported goods shall be reported to Customs (Art. 94), subject to a customs declaration (Art. 110–1) even if no customs duty is applicable (Art. 110–3) and can be inspected (Art. 127–1). Customs shall authorize boarding of exported goods on ships (combined Art. 84–2 and 145) and exit of goods from the territory is only possible when customs formalities have been completed (Art. 146). The Customs Code is directly applicable by Member States.

There is no exception, based on the law, to the fact that all resident economic agents exporting goods are subject to the obligations mentioned above. To oppose the exercise of customs functions is an offense (Art. 62 of the CC). Article 2 of the CC provides that Customs laws and regulations must be applied without regard to the quality of the persons; and goods imported or exported by the State are not subject to any immunity or derogations. As a result, there is no suspension of customs obligations in any way when the economic entity exporting consists of a partnership between a private entity (e.g., an oil company, through its resident arm) and an SOE.

Trade Data Collection, Sharing and Analysis

Customs declarations must contain all information required for the establishment of external trade statistics (Art. 120 of CC). Given the strategic importance of the oil and gas sector in CEMAC, a regional framework should be implemented for the sharing of customs-collected oil and gas export data with the Commission and the Central Bank, data-matching of physical flows with capital and revenue flows and economic indicators and conducting gaps analysis. A CEMAC directive should be adopted to establish such framework.

Moving to an Efficient, Risk-Based Customs Control Model

Customs administrations should make sure that the content of export declarations is correct, including nature and volume of products, export value, and payment arrangements. Modern techniques adjusted to challenges presented by oil and gas transactions should be used. An illustrative list includes:

  • Strong intelligence and analysis capabilities to detect compliance risks;

  • Receiving details of approved places of loading,

  • Product flow measurement through properly located, installed and calibrated equipment, sending stream data to Customs;

  • A well-designed electronic declarative procedure that prevents unreported transactions and facilitate unannounced risk-based inspection and quality testing;

  • Extensive use of Article 76–1 of CC to obtain further documentation from any party involved in the transaction;

  • A post-clearance audit program (which may cover three past years, Art. 76–2 of CC);

  • Enforcement of Customs Code sanctions (Title XII, Chapter VI) for non-compliance with formalities and control or misdeclaration (even if no customs duty has been compromised).

Building Customs Capacity

To ensure effectiveness and credibility of customs’ interventions in the oil and gas sector, and their input into the proposed control framework, Member States customs administrations need to significantly strengthen their capacity. Focus should be on: (1) setting up their dedicated oil and gas unit; (2) specialist training for the unit staff combined with an adequate HR management policy; and (3) providing them with adequate IT, communications, inspection, testing, and transportation equipment to carry out their functions. Control oil and gas export should be elevated as a core customs mission (even though customs revenue is not directly collected), and this should be reflected in specific performance indicators and incentives.

The IMF may mobilize TA resources to help with building capacity in the national customs administrations and developing the regional framework.

1/ Prepared with guidance from Gilles Montagnat-Rentier, from the Fiscal Affairs Department.

I. Conclusion: Enhancing Growth Through Better Governance

49. The analysis included in this note has underscored that there is great potential to enhance governance in the CEMAC and make this an engine for sustained and inclusive growth. There are two common themes to the set of recommendations included here.

  • First, there needs to be a “transparency shock” in the regular production and sharing of basic documentation related to public resource management. This step is an absolute priority, well inscribed in CEMAC’s own institutional set-up, in particular the key directive on transparency and governance.

  • Second, and relatedly, there needs to be a continuous focus to turn the CEMAC regional framework, which is overall well designed, into consistent procedures and work practices within public institutions.

50. As this note suggest, there are specific lines of actions. First, there need to be an ongoing effort to translate the CEMAC directives related to PFM into work practices that are fully consistent with the premises and vision of the very directives. This translates into giving absolute priority to ensuring more transparency, full disclosures, ongoing reconciliation, and internal and external audit of transactions of the public sector. Second, efforts to enhance the AML/CFT framework, reflecting the CEMAC’s directive in this area, need to deepen. Finally, the full system of check and balances already provided for by the CEMAC legislation institutional design needs to be forcefully implemented in the extractive sector. This covers, critically, the full disclosure and regular reconciliation of contracts and transactions in the oil sector. It also covers the rigorous implementation of a stronger networks of CEMAC customs, with better governance and more capacity (in particular, in complex sectors such as oil).

51. The CEMAC regional institutions will have to play a central role to lead progress in these areas, and support member countries’ own efforts. Because such actions result in giving a coherent framework to actions conducted at the country level, the synergic dimension can spur a virtuous circle, key to earn the benefit of an economic and monetary union. The success of the regional strategy that CEMAC member countries and regional institutions are implementing to exit the severe crisis they are facing depends critically on creating the conditions for laying the ground for a diversified economy, within a well-functioning regional market and an environment that provides opportunities for all and where public resources are geared to most productive use. The single most important element in this effort is good governance of public resources and reducing the perception of wide-spread corruption. The CEMAC regional institutions can play an important role in achieving this, in support of member countries’ own effort.


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Prepared by Sabrina Lando, Samuele Rosa, and Gwenaelle Suc.


Public Expenditure and Financial Accountability (PEFA). Public Expenditure and Financial Accountability (PEFA) is a tool for assessing the status of public financial management. A PEFA assessment provides a thorough, consistent and evidence-based analysis of PFM performance at a specific point in time. For more information at https://pefa.org/.


Sanjeev Gupta and others-2003; and Aidt and others, 2008.


For background information on the survey methodology, concepts, and definitions please refer to https://pefa.org/.


Such an approach has been implemented successfully in the WAEMU. In principle, it is advisable that the entity in charge of overseeing the treaty establishing an economic union (“Commission” in the EU, CEMAC, and WAEMU case) be provided clear jurisdiction to determine whether national law is compliant with community directives. Moreover, ideally this verification process needs should be formalized: annual, peer review based.


See FATF publication: Best Practices Paper: The Use of the FATF Recommendations to Combat Corruption


The GABAC is a specialized organ of the CEMAC which mission is to assist its members in the fight against ML/TF. The GABAC became recognized as an FATF-style regional body in 2015.


Data from the COMTRADE database, based on Congo and Cameroon, suggests that the statistical discrepancy between recorded vale of export and mirror data on import from the trading partners accounts can be very large (up to 60% in this example). The larger contributor is lower export volume data compared with partner data (discrepancy at about 43%) and to a smaller extent lower (implied) unit prices. If these data are indicative of a wider problem, they would suggest that what is called miss-invoicing is in fact under-reporting of actual export volumes. Since COMTRADE data are initially collected by customs, this would indicate that issues related to capacity and governance in this complex sector rests primarily with ineffective management at the customs level.


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Prepared by Sébastien Leduc, Édouard Martin, and Mathilde Périnet.


Gaspar, Jaramillo and Wingender (2016a, 2016b) show that once the tax-to-GDP level reaches around 13 percent, real GDP per capita increases sharply and in a sustained manner over the following decade.

The authors suggest that the existence of tipping points epitomizes the presence of enabling political conditions to support the building of state and tax capacity, namely constitutive institutions, inclusive politics and credible leadership.


Recent IMF research found that once the tax ratio reaches about 13 percent, the growth of real GDP per capita increases sharply. As a general rule of thumb, countries should thus aim to remain comfortably above this tipping point. For details, see Gaspar & al. (2016a).


Congo’s relatively high non-oil revenue to non-oil GDP ratio may be explained by the large size of its oil sector and the fact that its non-oil revenue inevitably includes some incidental revenue from oil-related activities (such as the wages and profits of sub-contractors).


CEMAC’s relatively low non-oil revenue is consistent with the findings of Crivelli and Gupta (2014a), who found a statistically significant negative relationship between resource revenues and total domestic (non-resource) revenues, amounting to a reduction in domestic (non-resource) revenues of about 0.3 percentage points of GDP for each additional percentage point of GDP in resource revenues.


Variables include GDP per capita, trade openness, the value added of the agriculture sector as a percentage of GDP, the level of education, the Gini coefficient, a dummy for oil exporters, a dummy for general government tax revenues, and a corruption index.


Directive n°07/11-UEAC-028-CM-22.


Cameroon and Chad do not have a reduced rate. While it conforms to best international standards, this, combined with high standard rates, may complicate the removal of exemptions in these countries.


Special problems arise in trying to apply a standard invoice-credit VAT to margin-based financial services and life insurance. Other financial services, such as fee-based services and property and casualty insurance, do not pose the same difficulties and should, in principle, be subject to VAT under a broad base approach to taxing final domestic consumption.


A new CEMAC excise tax directive, which, consistent with advice from the IMF’s Fiscal Affairs Department, does not impose any ceiling, is currently awaiting member states’ review and approval.


As per the World Health Organization, average beer consumption exceeds world average in Gabon, Congo, and Cameroun.


Directive n°02/01/UEAC-050-CM-06. CEMAC states are generally at the lower end of this bound, using rates of either 25 or 30 percent. Most countries use multiple rates, either to lessen taxation for agriculture (e.g., CAR and Congo) or to capture possible rents in others (e.g., Gabon for oil and mining).


Cameroon attempts to mitigate this problem by adopting blunt anti-abusive provisions, such as a cap on the deductibility of some royalty and service payments. Similar rules have also been adopted by others, including Congo and Chad.


UNCTAD STAT data. Excludes Equatorial Guinea for which information is not available.


For example, as of September 2017, it is estimated that Chad had signed 150 to 250 bilateral tax conventions. The mere fact that the exact number is unknown, and that the range is so large, is indicative of the opacity of these agreements, whose discretionary nature is conducive to abuse and possibly even corruption.


Directive n°01/04-UEAC-177.


These categories are: 1) commercial, industrial and craftmanship profits; 2) non-commercial profits; 3) agriculture profits; 4) real property income; 5) wage, pension and annuity income; 6) mobile capital income; and 7) capital gains.


The value of an income tax deduction is a function of an individual’s marginal tax rate.


If such deductions cannot be eliminated or replaced by an income tax credit, the benefit they confer should at a minimum be capped.


The poor security situation in some border regions (notably in Central African Republic and in Cameroon) has also hampered the collection of trade taxes. In Cameroon, these have also been eroded by its Economic Partnership Agreement with the European Union, which reduces or eliminates tariffs on a number of imported goods.


For example, there are over 50 such agencies in CAR alone. A process to bring revenues of these agencies into the general budget is under way.


For example, it is estimated that 46 percent of the total revenue foregone because of VAT exemptions on foodstuffs in Chad benefit individuals in the top-two deciles, while only 7 percent benefit the bottom-two deciles.


In Côte d’Ivoire, for example, 12 percent of VAT collected at customs is sent to a dedicated account at the BCEAO.


Most—if not all—informal enterprises are not registered to the VAT, and hence incur unrecoverable VAT on their business purchases.


Further, an increase in excise tax rates may also be consistent with greater progressivity in the tax system. While consumption taxes are generally viewed as regressive, increasing excise taxes may be progressive if low- income individuals have a greater price-elasticity than high-income individuals (which is generally assumed to be true).


Options for low income countries’ effective and efficient use of tax incentives for investment”, Report to the G-20 development working group by the IMF, OECD, UN and World Bank, October 2015.


Regulation n°17/99/CEMAC-20-CM-03.


For instance, property taxes in South Africa raise only about 1 percent of GDP in revenues. While the revenue potential may be limited, property taxation can also be desirable insofar as it serves the purpose of providing a reliable source of funding for sub-national jurisdictions.


For additional details on tax policy units, see Grote (2017).


This increase is estimated at 0.4 percent of GDP for middle-income countries.

Central African Economic and Monetary Community (CEMAC): Selected Issues
Author: International Monetary Fund. African Dept.
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    CEMAC, SSA, and Rest of the World: Governance and Corruption Indicators

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    Estimated Impact of Improving Governance and Reducing Corruption

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    CEMAC: Status of Transposition of Directives on Public Financial Management

    (November 2018)

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    CEMAC and Selected Regions: PEFA Scores

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    CEMAC: Overview of Results of CEMAC Countries’ Assessments Against the 40+9 FATF Recommendations

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    CEMAC: Oil Export and Capital Outflow

    (1997–2017; Data in CFAF BN)

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    Total Value of Oil Exports by Cameroon and Congo (2014)

    (USD BN)

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    CEMAC: Deposit Abroad by the CEMAC Non-Bank Institutional Sector

    (Outstanding, Millions of U.S. Dollars)