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By Nkafu Policy Institute (pdf version)

Executive Summary

The objective of this report is to analyze the contribution of the Bank of Central African states monetary policy in strengthening the resilience of Cameroonian economy in 2020. More specifically, it examines whether the monetary policy decisions taken by the Monetary Policy Committee (CPM) have influenced the general price level, the average overall effective rates charged by financial institutions and their deposit and lending operations, as well as the contribution of monetary aggregates to growth. The study uses secondary data from the databases of several national, supranational, and international institutions as well as statistical analysis tools. In terms of results, it appears globally that the actions carried out by the issuing institute have indeed contributed to the strengthening of macroeconomic resilience in Cameroon in the context of Covid-19 but weak. The main reason is that most Cameroonian banks are over liquid and therefore insensitive to any expansionary monetary policy of lowering the key rate. The contributions of monetary aggregates have had very little influence on the pace of growth; the evolution of the overall effective rates charged by money-creating banks as well as the demand, time, and savings deposits of financial institutions have not evolved at the same pace as the key rate of the central bank, which penalizes consumption and accentuates inflationary pressures. In view of these main findings, the study proposes the following recommendations:

  1. BEAC through COBAC should multiply efforts to encourage commercial banks to more easily grant credit to Cameroonian individuals and SMEs. The monetary policy committee (CPM), in accordance with its remit, can demand more reserves to banks that would grant less credit to economic agents; reduce the rate of remuneration of their sight and time deposits with the central bank. It may also make their intervention in the interbank market, their participation in auctions, and the granting of standing facilities conditional on strict compliance with this measure.
  2. BEAC should ensure that their lending and deposit rates from secondary banks reflect the Interest rate on Calls for Tenders (TIAO) in order to improve the functioning of the interest rate channel. Such a measure, which facilitates access to finance for SMEs, would enhance the effectiveness of the monetary policy, particularly in times of crisis.
  3. BEAC should instead consider a policy of inflation targeting to the detriment of price-level targeting. By setting expectations on price developments, inflation targeting would make it easier for the BEAC to compel banks to facilitate access to credit and encourage consumers to spend while guaranteeing financial and macroeconomic stability.


With an estimated population of about 26,709,663 in 2020, Cameroon is a Central African country bordering Nigeria, Chad, Central African Republic (CAR), Republic of Congo, Gabon, Equatorial Guinea, and the Gulf of Guinea. The country has 10 Regions, 58 Divisions and is populated by 283 ethnic groups. Because of its great climatological, mining, geographical, cultural, and human diversity, Cameroon is described as Africa in miniature. The economy of Cameroon accounts for more than 40% of CEMAC’s GDP and is the most diversified in the region. It is essentially based on the exploitation of various export products – oil, tropical woods, Arabica and Robusta coffee, cocoa, rubber, cotton, bananas, aluminum, palm oil, etc. Oil revenues represent, on an annual average, about 12% of the country’s total revenues (LFR, 2020).

However, since 2009, the country has been facing a major security crisis caused by incursions by the Boko Haram terrorist sect in the Far North. They have also been facing socio-political unrest in the English-speaking regions of the North West and South West, whose security situation has deteriorated since the end of 2016. The situation remains volatile in these regions despite the holding of the first-ever regional elections. After a deceleration phase following the 2014 commodity crisis, growth in the economy of Cameroon slightly strengthened in 2018 (4.1 percent compared to 3.5 percent in 2017) before decreasing in 2019 (3.7 percent).

In addition to these major security crises, the economy of Cameroon has been suffering for several months, the effects of the pandemic related to the spread of the new coronavirus (COVID-19). The economic and social impacts recorded since the outbreak of the pandemic in March 2020 include, among others the slowdown in economic activity due to the containment measures put in place to curb the spread of the disease, the drop in internal and external demand, the depreciation of the US dollar by 2.1% to 573.8 FCFA/dollar, the collapse of prices on the commodities market, particularly crude oil ($41.69 per barrel, compared to $61.39 per barrel in 2019, a drop of 32.1%), the consequent drop in export and tax revenues (sharp deterioration in the terms of trade of nearly 22.4%), the revision of the state budget (set at 4,409 billion CFA francs as of June 3, 2020, compared to 4,951.7 billion CFA francs in the Finance Law adopted on December 24, 2019, a decrease of 542.7 billion CFA francs), the revision of growth forecasts from 3.8% to -3.5% in 2020 by the IMF (2020), the budget deficit to 4.5% according to the Amending Finance Law adopted on June 3, 2020, against 1.5% initially forecast), the balance of payments deficit at 5.7%, not to mention the increase in public debt (estimated at CFAF 10164 billion, or 45.8% of GDP against CFAF 8,384 billion, or 37.4% of GDP in 2019). The government had presented a socio-economic response plan estimated at FCFA 479 billion over three years, including FCFA 180 billion in 2020.

With a similar impact on aggregate demand and/or aggregate supply in the various countries of the Economic and Monetary Community of Central African (CEMAC), the health crisis linked to the coronavirus pandemic is similar to asymmetrical shock. In a monetary union such as the Monetary Union of Central African (CAMU), the stabilization of this type of shock is the responsibility of the monetary policy, which is unique and implemented by the Bank of Central African States (BEAC). However, the effectiveness of the monetary policy decisions taken by the central bank should be reinforced by the states’ orientations in terms of fiscal policy. In this case, better coordination of fiscal policies would make it possible to internalize the externality and place the aggregate deficit of the zone at an optimal level, taking into account the endogenous response of the interest rate.