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IMF Country Report No. 22/208

CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY (CEMAC)

CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY—COMMON POLICIES IN SUPPORT OF MEMBER COUNTRIES REFORM PROGRAMS—STAFF REPORT, AND STATEMENT BY THE EXECUTIVE DIRECTOR

July 2022

In the context of the common policies of member countries, and common policies in support of member countries reform programs, the following documents have been released and are included in this package:

• The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 22, 2022, following discussions with regional institutions that ended on May 17, 2022. Based on information available at the time of these discussions, the staff report was completed on June 10, 2022.

• A Statement by the Executive Director. The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

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International Monetary Fund

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© 2022 International Monetary Fund

Title page

CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY (CEMAC)

STAFF REPORT ON COMMON POLICIES IN SUPPORT OF MEMBER COUNTRIES REFORM PROGRAMS

June 10, 2022

KEY ISSUES

Context and risks. CEMAC ended 2021 in a fragile external position, with gross reserves at only 2.7 months of prospective imports and net foreign assets (NFA) at their lowest level in decades, despite the availability of Fund financing, the SDR allocation, and monetary policy tightening. The terms of trade shock this year is expected to be broadly positive for CEMAC. This more favorable outlook is, however, subject to heightened external uncertainties associated with the fallout from the war in Ukraine (notably global inflation pressure, global growth uncertainties, and high oil price volatility), faster-than-anticipated global financial tightening, possible emergence of new COVID strains and risks from cryptoassets. Current high oil prices, if sustained, will help rebuild fiscal and external buffers, provided fiscal policies remain prudent. Shielding vulnerable populations from soaring energy and food prices adds to the complexity of navigating this uncertain environment, given CEMAC’s already limited policy options.

Policy Recommendations:

Seize the opportunity offered by high oil prices to rebuild both fiscal and external buffers. Social safety nets should be strengthened to protect vulnerable populations from the effects of soaring energy, food, and fertilizer prices.

Maintain the prudent monetary policy stance and continue strengthening the liquidity management framework, including by tackling liquidity-stressed banks. Continue to implement the forex (FX) regulations to ensure larger FX repatriations.

Normalize the prudential framework by end-June 2022 as planned and ensure that banks account for sovereign risk adequately.

COBAC’s May 6 decision to prohibit their use by banks contributes to mitigating risks from cryptoassets. Ultimately, addressing the risks stemming from the unilateral adoption of cryptoassets, and the bitcoin in particular, as legal tender in the Central African Republic will require a collective political solution.

Intensify non-oil revenue collection and accelerate structural reforms implementation, including to strengthen PFM systems, upgrade public infrastructure quality, improve governance and financial integrity, and diversify the region’s economies away from fossil fuel.

Approved By

Vitaliy Kramarenko (AFR) and Gavin Gray (SPR)

Contents

• BACKGROUND AND RECENT DEVELOPMENTS

• A. Background

• B. Recent Economic Developments

• OUTLOOK AND RISKS

• TAKING ADVANTAGE OF HIGH OIL PRICES TO REBUILD BUFFERS

• A. Managing the Oil Windfall Prudently to Strengthen External Stability

• B. Maintaining a Prudent Monetary Policy

• C. Thwarting Risks from Cryptoassets

• D. Strengthening Financial Sector Policies

• E. Moving Forward with the Regional Surveillance Framework

• REKINDLING THE REFORM MOMENTUM FOR STRONGER AND INCLUSIVE GROWTH MONITORING OF REGIONAL POLICY ASSURANCES

• STAFF APPRAISAL

• BOX

• 1. Possible Spillover Channels of the War in Ukraine on CEMAC

• FIGURES

• 1. Selected Economic Indicators, 2001–22

• 2. Selected Economic Indicators, 2006–25

• 3. Recent Monetary Developments

• TABLES

• 1. Selected Economic and Financial Indicators, 2016–26

• 2. National Accounts, 2016–26

• 3a. Balance of Payments, 2016–26 (Billions of CFA francs)

• 3b. Balance of Payments, 2016–26 (Percent of GDP)

• 4a. Fiscal Indicators, 2016–26 (Percent of GDP)

• 4b. Fiscal Indicators, 2016–26 (Percent of Non-oil GDP)

• 5. Compliance with Convergence Criteria, 2016–26

• 6. Monetary Survey, 2016–26

• 7. Summary Accounts of the Central Bank, 2016–26

• 8. Net Foreign Assets of the Central Bank, 2016–26

• 9. Financial Soundness Indicators, 2015–22

• 10. External Financing Sources, 2017–22

• ANNEX

• I. Cryptoassets as a Legal Tender: Risks and Policy Response

• APPENDIX

• I. Follow-up to the Letter of Support to the Recovery and Reform Programs Undertaken by the CEMAC Member Countries