The Monetary Policy Committee (MPC) of the Bank of the Central African States (BEAC) met during its fourth ordinary session in Yaoundé, December 20 2016. Top of the agenda of this meeting was a vivid analysis of the macroeconomic situation of the Central African Economic Monetary Community (CEMAC). This meeting held a few days before the Extraordinary Summit of four Heads of States on the Central African Sub region, slatted for December 23 2016.
The outcome of the MPC meeting revealed that the growth rate of CEMAC states which was projected at 1.7 per cent a few months earlier dropped to 1 per cent. According to experts and analysts, two main reasons are to blame for the precarious economic atmosphere in the CEMAC zone. The first reason is the negative impact of the drop in oil prices in the world market. In 2015, the growth rate in the sub region stood at 2.8 per cent. Inflation was at 3 per cent as initially projected. In 2016, the key rate in the CEMAC zone remained unchanged at 2.45 per cent, while budgetary deficit hovered around 4.2 per cent of the sub region’s Gross Domestic Product (GDP). Current external deficit has slightly dropped from 11.4 per cent of the GDP as external monetary coverage dropped from 71.1 per cent last year to 50 per cent.
There is no gainsaying that the economic atmosphere in the Central Africa Sub region is unstable and calls for member states to make important fiscal and economic policy readjustments. Coupled with the economic and fiscal challenges, member states such as Cameroon and Chad are faced with terrorists attacks from the terrorists group Boko Haram. The Central African Republic is still faced with serious security concerns.
A major mistake that member states of the Central African Sub region especially countries like Cameroon and Equatorial Guinea made as far back as 2014 was to depend a lot on oil and neglect other sectors like the agriculture and the tourism industries. According to analysts, though the oil sector is a very lucrative one, it remains a very unpredictable sector. Despite recent stabilisation, oil prices were expected to remain well below pre shock levels in the medium term as production was feared to start falling in the long run.
CEMAC countries have been therefore forced to rethink through their developmental priorities with respect to the new economic context overshadowed by falling oil prices. Countries like Gabon, Equatorial Guinea and Cameroon have decided to scale back their spending plans by reducing public investment and limiting current expenditure. All of the countries in the sub region have also sought advances from the regional central bank. The consequences of these and other debt related developments is that regional public debt is instead on the rise.
Reducing public investment and limiting current expenditure is definitely not the way to go for CEMAC member states. Depending equally on loans from the regional central bank will only make CEMAC member states highly indebted. One of the ways CEMAC member states may overcome such a financial quagmire is by boosting the private sector and focusing more on other sources of revenue. The agricultural sector in most CEMAC countries remains grossly unexploited. There is need for CEMAC member states to improve and mechanise their agricultural sector.
CEMAC member states need to ensure macroeconomic sustainability by boosting non oil revenue, curbing on public spending and encouraging serious competition in the non-oil sectors like tourism and agriculture. There is equally a need for unnecessary trade barriers to be dismantled and/or curbed so as enable fluid business transactions between member states. A drop in imports related to the public investment programmes will contribute in improving current accounts. Because of the magnitude of the necessitated adjustments, maintaining this course of action will be a challenge. Additionally, the degradation of the security situation in the sub region especially with the conflict in the Central African Republic and terrorist attacks in the North of Cameroon, could weaken an already complex business environment and hamper further efforts to invest in regional infrastructure, a major element for non oil growth. CEMEC member states thus have a serious challenge to embark on a very ambitious but realistic reform agenda to enhance macroeconomic stability as well as encourage inclusive and sustainable growth. Domestic and regional institutions need to play a major role in such efforts.
Chofor Che is co-founder and Chair at the Central African Centre for Libertarian Thought and Action Cameroon, an affiliate of the Washington DC based Atlas Network. He is also an associate of Africanliberty.org and LibreAfrique.org.