- The CEMAC economy lost momentum in 2023 due to a contraction in hydrocarbon production, while the external position weakened.
- The commitment expressed at the extraordinary Heads of State Summit in December 2024 to address macroeconomic imbalances, strengthen regional institutions, and prioritize structural reforms offers hope for a more resilient medium-term outlook.
- Implementing fiscal consolidation in line with these commitments and accelerating structural reforms will be critical to bolstering economic diversification and resilience.
Washington, DC: On February 24, 2025, the IMF Executive Board concluded the annual discussions with the Central African Economic and Monetary Community (CEMAC) on Common Policies of Member Countries and Common Policies in Support of Member Countries Reform Programs. [1]
The CEMAC economy slowed in 2023, driven by a decline in hydrocarbon production, with real GDP growth decelerating to 2.5 percent. The external position weakened as the accumulation of foreign exchange (FX) reserves slowed, leaving them below adequate levels. Economic activity is estimated to have gained some momentum in 2024, with real GDP expanding by 3.2 percent, supported by a rebound in hydrocarbon output. However, regional policy assurances on the net foreign assets (NFA) for end-June 2024 (EUR 4.5 billion) were not met, falling short by EUR 4.43 billion. Preliminary data also suggest that the end-December 2024 policy assurances on NFA are unlikely to have been met. This reflects a weakening external position due to lower oil prices and fiscal slippages. Inflation remained persistently high at 4.3 percent in September 2024, exceeding the regional convergence criterion.
While regional authorities maintained an appropriate monetary policy stance, progress on the reform agenda has slowed somewhat. At its September 2024 meeting, the Central Bank (BEAC) kept the policy rate unchanged at 5 percent and continued its weekly liquidity injections through its main refinancing window to mitigate increased volatility of liquidity conditions in the banking system. BEAC also advanced the enforcement of the FX regulations. BEAC and the Banking Commission of Central Africa (COBAC) remained engaged with banks structurally dependent on BEAC's refinancing, ensuring they submit credible refinancing plans. The CEMAC Commission has sustained its regional surveillance consultations across member States, while the Permanent Secretariat of CEMAC's Economic and Financial Reform Program (PREF-CEMAC) has continued implementing the region's structural reforms action matrix.
The outlook remains clouded by high uncertainty. Its trajectory depends on the effective implementation of corrective measures by member states, consistent with the commitment made at the extraordinary Heads of State Summit in December 2024 to address macroeconomic imbalances, strengthen regional institutions, and advance structural reforms. In the near term, real GDP growth is projected to slow to 2.8 percent in 2025, primarily due to weaker oil output. Inflation is projected to decline further to 3.1 percent by end-2025, reflecting the lagged effects of past policy tightening and lower global commodity prices. Significant downside risks remain, including delays in addressing fiscal slippages, declining commodity prices, tighter financial conditions, heightened political uncertainty amid a busy 2025 election calendar, persistent inflation, financial instability, slow structural reform progress, food insecurity, domestic conflicts, and climate-related disruptions.
In the medium term, growth is projected to strengthen to 3.6 percent by 2029, mainly owing to a rebound in the non-oil sector. Structural reforms aimed at improving governance, enhancing the business climate, and expanding access to finance are expected to bolster potential output. Member states are anticipated to implement sustained fiscal consolidation, with public debt projected to decline to 42 percent of GDP by 2029, down from 50.9 percent of GDP in 2024. The current account balance is projected to deteriorate to -2.2 percent of GDP by 2029, from about -1.2 percent of GDP in 2024, driven mainly by lower hydrocarbon export receipts and production. Member states' adjustment efforts are expected to stabilize reserve coverage at around 4.3 months of prospective imports in the medium term, slightly below staff's adequacy metrics for a resource-rich monetary union (5 months).
Executive Board Assessment [2]
Executive Directors agreed with the thrust of the staff appraisal. They noted the loss of economic momentum due to a contraction in hydrocarbon production and slower non-oil growth. Given the weakening external position, large fiscal imbalances, heightened stress in the regional debt market, and elevated uncertainty, they underscored the urgency of a well calibrated macroeconomic policy mix and sustained reform efforts to enhance resilience to shocks and preserve macroeconomic and financial stability.
Directors welcomed the commitment made at the extraordinary Heads of State Summit in December 2024 to address macroeconomic imbalances, strengthen regional institutions, and prioritize structural reforms to ensure equitable adjustment burden sharing and enhance the monetary union's external stability. They urged CEMAC authorities to swiftly implement fiscal consolidation in line with these commitments, noting the need to enhance non-oil tax revenues and improve expenditure efficiency, including completing energy subsidy reforms, while ensuring targeted social safety nets for the most vulnerable. Strengthening public financial management, reinforcing debt management, and addressing arrears will also be critical.
Directors concurred that BEAC should maintain a tightening monetary policy bias and only reduce interest rates if there is clear evidence of inflation converging toward the regional convergence criterion and diminishing risks to external stability. Considering persistent tight liquidity conditions, BEAC should sustain liquidity providing operations while continuing efforts to address fragmentation within the banking system. Continued enforcement of FX regulations also remains crucial.
Directors reiterated the need for strong collective action from national and regional authorities to preserve financial stability. Efforts should focus on strengthening COBAC's supervisory capacity, strictly enforcing regulations for noncompliance, resolutely recapitalizing or resolving weak banks, ensuring that banks adequately account for sovereign exposure, addressing new risks posed by digital payments and assets, and strengthening the AML/CFT framework.
Directors reiterated the importance of strengthening the regional surveillance framework and called for further efforts towards the adoption of the draft sanction mechanism for breaches of regional surveillance rules.
Directors stressed the importance of accelerating structural reforms to strengthen governance and regulation, human capital, climate adaptation, and regional trade and infrastructure, which would help boost potential growth, economic diversification, and resilience.
Directors regretted that BEAC did not meet the authorities' policy assurance on NFA for June 2024, and that the December 2024 target is unlikely to be met, as committed in June 2024. They assessed that the authorities undertook and committed to sufficient corrective action to address the shortfall during the December 2024 Heads of State meeting and endorsed the authorities' policy assurance on NFA accumulation for end March 2025 and end June 2025 as committed in February 2025. Directors also supported the new policy assurances on financial stability. They emphasized that implementation of these assurances is critical for the success of Fund supported programs with CEMAC member countries.
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of these bilateral Article IV consultations, staff hold separate annual discussions with the regional institutions responsible for common policies in four currency unions—the Euro Area, the Eastern Caribbean Currency Union, the Central African Economic and Monetary Union, and the West African Economic and Monetary Union. For each of the currency unions, staff teams visit the regional institutions responsible for common policies in the currency union, collects economic and financial information, and discusses with officials the currency union's economic developments and policies. On return to headquarters, staff prepares a report, which forms the basis of discussion by the Executive Board. Both staff's discussions with the regional institutions and the Board discussion of the annual staff report will be considered an integral part of the Article IV consultation with each member.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country' authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .
