The International Monetary Fund (IMF) said on Wednesday the economic situation of the Central African Economic and Monetary Community (CEMAC) has improved but remains fragile, adding that reforms to support a more diversified and inclusive growth, including by improving governance and the business climate, were needed to sustain the current trajectory.
In a statement sent to TODAY NEWS AFRICA in Washington DC, the global fund said tighter macroeconomic and financial policies helped to avert a deeper crisis while gross external reserves increased more rapidly in recent months, helped by a stronger implementation of CEMAC foreign exchange regulations.
IMF’s assessment of the regional economy was made public after its Executive Board concluded the annual discussions with CEMAC on Common Policies of Member Countries and Common Policies in Support of Member Countries Reform Programs.
“CEMAC’s economic and financial situation has improved but remains fragile. Economic activity has remained well below pre-crisis levels. Non-oil growth slowed down to below 2 percent in 2018, reflecting the effect of fiscal consolidation, the legacy of domestic arrears and a volatile security situation in some regions,” IMF said, adding that “Overall regional growth was slightly higher at 2.5 percent, supported by an increase in the oil sector. In 2019, overall regional growth would remain at the same level, with a slight pick-up in non-oil growth offsetting a slowdown in oil production growth”.
It said tighter policies helped to reduce external imbalances and external reserves increased more rapidly during the first half of 2019.
“The external current account and the overall balance of payments deficits in 2019 would remain at their improved levels of 2018 (of 2.5 and 0.4 percent of GDP, respectively), reflecting stable oil exports, a moderate increase in imports, and overall stable capital flows.
“With the impact of stricter implementation of the foreign exchange regulations on private flows and repatriation of banks’ foreign assets, in addition to continued external budget support and some debt relief, the increase in external reserves was stronger than projected in the first half of 2019. As a result, the June 2019 objective for regional net foreign assets was exceeded by more than €800 million”.
According to the IMF, the medium-term outlook foresees further improvement in regional reserves, assuming CEMAC countries remain committed to their program objectives, and new programs with Equatorial Guinea and CAR start soon.
“Overall growth is projected to increase to 3.5 percent in 2020, mainly driven by the non-oil sector which would be supported by the implementation of the governments’ strategies to clear arrears.
“Oil sector growth would remain stable in 2020 before declining in following years along past trends. Beyond 2020, non-oil growth is projected to increase gradually, as reforms to improve governance and the business climate are assumed to slowly take hold. Inflation is projected to stay at around 2.5 percent over the medium term, below the regional convergence criterion, as monetary policy would remain appropriately tight”.
According to the IMF, further fiscal consolidation efforts, mainly based on expected enhancement in non-oil revenue collection, would reduce the regional non-oil budget deficit by an additional 1 percentage point of non-oil GDP in 2020, which would then continue to decline gradually thereafter.
“Overall, the public debt-to-GDP ratio is expected to decline further to 47 percent of GDP in 2020 and to less than 40 percent by 2023. The external current account deficit would slightly worsen to 2.8 percent of GDP in 2020, as oil exports receipts would slightly decline, and imports of goods and services would pick up along with non-oil GDP growth. Stronger enforcement of foreign exchange regulations and already granted debt relief should improve the capital account. As a result, regional NFAs are projected to increase steadily over the medium term and reserves would reach the equivalent of 5 months of imports of goods and services by 2022,” IMF said.