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Central African Economic and Monetary Community

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Central African Economic and Monetary Community © 2012 International Monetary Fund August 2012 IMF Country Report No. 12/244 Central African Economic and Monetary Community: Staff Report on Common Policies of Member Countries; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the Central African Economic and Monetary Community In the context of the 2012 Article IV consultations with the countries forming the Central African Economic and Monetary Community (CEMAC), the following documents have been released and are included in this package: The staff report on Common Policies of Member Countries of the CEMAC, prepared by a staff team of the IMF, following discussions that ended on March 29, 2012, with the officials of the CEMAC on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 1, 2012. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF. A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its June 18, 2012 discussion of the staff report. A statement by the Executive Director on the common policies of member countries in the CEMAC. The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information. Copies of this report are available to the public from International Monetary Fund Publication Services 700 19th Street, N.W. Washington, D.C. 20431 Telephone: (202) 623-7430 Telefax: (202) 623-7201 E-mail: [email protected] Internet: http://www.imf.org International Monetary Fund Washington, D.C. ©International Monetary Fund. Not for Redistribution CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY (CEMAC) STAFF REPORT ON COMMON POLICIES OF MEMBER COUNTRIES June 1, 2012 KEY ISSUES Context. Thanks to high oil-related inflows, macroeconomic performance was good in 2011 with improved fiscal balances and ambitious public investment programs, and higher reserves. However, the CEMAC is facing challenges from deep-seated structural problems, including uncoordinated fiscal policy, financial sector weaknesses, and obstacles to growth and competitiveness. Outlook and risks. In the near term, the economic recovery is expected to be sustained, supported by strong oil exports and public infrastructure programs. The foremost risk is a possible global slowdown stemming from the euro area crisis. Ensuring economic stability and sustainability. The regional surveillance framework needs to be enhanced to ensure that fiscal policies support the peg. The reform of monetary policy is needed for effective macroeconomic management. Ensuring financial stability and development. Financial stability has weakened, and financial access is among the lowest in sub-Saharan Africa. Financial sector challenges, therefore, include returning to region-wide financial stability, addressing the problems of weak banks, and deepening access and integration. Enhancing growth and competitiveness. Regional and global integration needs to be fostered by removing trade barriers, promoting labor mobility, and enhancing the business environment and governance. Strengthening common institutions. To support deeper integration, further strengthening of the CEMAC’s common institutions is urgently needed. Notably, the governance of the Bank of Central African States (BEAC) should be further enhanced, and capacities should be built up in the Central African Banking Commission (COBAC) and the CEMAC Commission. The IMF has provided extensive assistance in capacity building. ©International Monetary Fund. Not for Redistribution 2012 REPORT CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY Approved By Discussions took place in Yaoundé on March 20-29, 2012 Anne-Marie Gulde-Wolf (AFR) with the Bank of Central African States (BEAC), the Central and Dhaneshwar Ghura (SPR) African Banking Commission (COBAC), and the Central African Economic and Monetary Community (CEMAC) Commission. The staff team comprised Mr. Akitoby (head), Ms. Dieterich, Messrs. Oshima and Nxumalo (all AFR), Mr. Youm (MCM), and Mr. Kpodar (the resident representative in Yaoundé). Messrs. Bah (OED) and Koyasse (the World Bank) also joined the discussions. CEMAC members are Cameroon, Central African Republic (C.A.R.), Chad, Republic of Congo, Equatorial Guinea, and Gabon. The common currency, the CFA franc, is pegged to the euro at CFAF 655.957 per €1. CONTENTS INTRODUCTION __________________________________________________________________________________ 5 ECONOMIC CONTEXT ____________________________________________________________________________ 6 A. Recent Economic Developments ________________________________________________________________6 B. Outlook and Risks _______________________________________________________________________________7 ENSURING ECONOMIC STABILITY AND EXTERNAL SUSTAINABILITY _______________________ 15 A. Monetary Policy and Liquidity Management __________________________________________________ 15 B. Fiscal Policy Coordination _____________________________________________________________________ 17 C. External Sustainability _________________________________________________________________________ 18 ENSURING FINANCIAL STABILITY AND DEVELOPMENT _____________________________________ 22 STRENGTHENING GROWTH AND COMPETITIVENESS ________________________________________ 28 STRENGTHENING COMMON INSTITUTIONS __________________________________________________ 31 OTHER ISSUES ___________________________________________________________________________________ 34 A. Capacity Building ______________________________________________________________________________ 34 B. Data Quality ___________________________________________________________________________________ 34 STAFF APPRAISAL ______________________________________________________________________________ 35 2 INTERNATIONAL MONETARY FUND ©International Monetary Fund. Not for Redistribution CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY 2012 REPORT TABLES 1. Selected Economic and Financial Indicators, 2007–13 _________________________________________ 38 2. Millennium Development Goals, 1990 and 2010 ______________________________________________ 39 3. National Accounts, 2007–13 ___________________________________________________________________ 40 4. Nominal and Real Effective Exchange Rates, 2006–11 _________________________________________ 41 5. Balance of Payments, 2007–13 _________________________________________________________________ 42 6a. Fiscal Balances, 2007–13 ______________________________________________________________________ 43 6b. Fiscal Non-oil Balances, 2007–13 _____________________________________________________________ 44 7. Compliance with Convergence Criteria, 2007–13 ______________________________________________ 45 8. Monetary Survey, 2007–11 ____________________________________________________________________ 46 9. Summary Accounts of Central Bank, 2007–11 _________________________________________________ 47 10. Summary Accounts of Commercial Banks, 2007–11 __________________________________________ 48 11. Summary Medium-Term Projections, 2011–16 _______________________________________________ 49 12. Relative Size of CEMAC Economies and Importance of Oil Sector, 2007–12 _________________ 50 13. Violations of Main Prudential Ratios, 2009–11 _______________________________________________ 51 14. Bank Ratings, December 2011 ________________________________________________________________ 52 15. Quality of Loan Portfolio, 2010–11 ___________________________________________________________ 52 16. Summary of Stress Test Results ______________________________________________________________ 53 FIGURES 1. GDP Composition, 2011 _________________________________________________________________________5 2. Recent Economic Developments, 2008–11 ______________________________________________________9 3. Monetary Developments, 2007–11 ____________________________________________________________ 10 4. Fiscal Developments, 2000–11 _________________________________________________________________ 11 5. Medium-Term Outlook, 2011–16 ______________________________________________________________ 12 6. Real Effective Exchange Rate (2005=100), 1990–2011 _________________________________________ 19 7. Financial Depth, 2004–10 ______________________________________________________________________ 25 8. Intraregional Trade: Selected Regions _________________________________________________________ 28 BOXES 1. How Would a Weaker Global Environment Affect the CEMAC Region? _______________________ 13 2. External Stability Assessment __________________________________________________________________ 21 3. Findings from the CEMAC Banking Stress Test ________________________________________________ 24 INTERNATIONAL MONETARY FUND 3 ©International Monetary Fund. Not for Redistribution 2012 REPORT CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY APPENDIXES I. Multilateral Surveillance Framework ____________________________________________________________ 54 II. Assessing Reserve Adequacy of the Oil-Rich CEMAC Region __________________________________ 55 III. Progress in Financial Sector Reform ___________________________________________________________ 61 IV. Risk Assessment Matrix _______________________________________________________________________ 64 V. Public Information Notice _____________________________________________________________________ 71 4 INTERNATIONAL
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