20240627-IMF-Central_African_Economic_and_Monetary_Community_Common_Policies_in_Support_of_Member_Countries_Reform_Programs-Staff_Report_and_Statement_by_the_Executive_Director_59页_1mb

CEMAC Staff Report Summary (June 10, 2024)

1. Context and Summary

The Central African Economic and Monetary Community (CEMAC) economy decelerated in 2023 amid fiscal and external imbalances, though foreign reserves remained around 4 months of imports. Growth for 2024 is projected at 3.6%, driven by high oil prices and output rebounds, but risks include fiscal slippages, inflation persistence, and climate vulnerabilities. Authorities agreed to policies targeting NFA accumulation and structural reforms under IMF-supported programs.

2. Policy Recommendations

Fiscal Policy

• Strengthen tax collection, reduce subsidies, and enhance spending efficiency.
• Accelerate implementation of regional directives (e.g., treasury single accounts, anti-corruption measures) to rebuild fiscal buffers.
• Address sovereign debt vulnerabilities through better arrears management.

Monetary Policy

• Resume liquidity injections to mitigate banking system pressures and maintain policy rates if inflation risks rise.
• Reduce systemic zero-risk weights on sovereign exposures and enforce prudential regulations.

Financial Sector

• Improve bank capitalization, address non-viable institutions, and develop a functional secondary market for government securities.
• Tackle liquidity fragmentation, enhance supervision, and resolve high sovereign exposure risks.

Structural Reforms

• Deepen reforms in AML/CFT, governance, human capital, business climate, and infrastructure to boost potential output.
• Advance climate adaptation strategies and social safety nets for vulnerable populations.

3. Key Risks

• External: Commodity price volatility, geo-economic fragmentation, and funding constraints in sovereign markets.
• Domestic: Fiscal slippages, political uncertainty, inflation persistence, and slow reform implementation.
• Financial: Banking sector fragility, high non-performing loans, and emerging crypto-asset risks.

4. Outlook

• Short-term growth is supported by oil rebound, but medium-term divergence persists in countries off-track under Fund programs.
• Inflation is expected to decline to 3% by 2026, but risks include second-round effects from subsidy reforms and global inflation shocks.
• fiscal consolidation and external stability are critical to reverse reserve accumulation trends.

5. Authorities' Commitment

• CEMAC members reaffirmed their commitment to regional monetary policy adjustments, treasury reforms, and safeguarding NFA targets.
• Collaboration with the IMF and donors is essential to meet financing needs and support integration projects.

This report underscores the urgency of fiscal discipline, banking system stability, and accelerated reforms to sustain economic resilience amid rising risks.