Why do CEMAC countries struggle to overcome the economic deadlock despite IMF interventions?

Introduction

The heads of state and government of the Central African Economic and Monetary Community (CEMAC) convened in Yaoundé for an extraordinary meeting on December 16, 2024. The purpose of the meeting was to evaluate the economic, monetary, and financial situation, as well as the outlook for the sub-region, while proposing measures to enhance resilience against potential shocks.

The meeting occurred amid ongoing economic and financial challenges, despite decades of recommendations and support from the International Monetary Fund (IMF). Although these IMF-supported programs are designed to stabilize the economies of the subregion and promote sustainable growth, the region remains ensnared in macroeconomic imbalances.

The recent conference of CEMAC heads of state highlighted several recurring challenges: declining foreign exchange reserves, excessive reliance on raw materials, and inadequate implementation of structural reforms. Why are the anticipated results taking so long to materialize? Are IMF programs too stringent or ill-suited to the CEMAC context? This article analyzes the situation and offers concrete recommendations for overcoming the crisis.

Overview of CEMAC and Macroeconomic Challenges

CEMAC, which consists of six countries—Cameroon, Gabon, Congo, Equatorial Guinea, Chad, and the Central African Republic—utilizes a common currency, the CFA franc, which is pegged to the euro. This monetary framework is intended to ensure price stability and foster economic integration. However, the economic performance of the region continues to fall significantly short of expectations.

Among the macroeconomic indicators, foreign exchange reserves are particularly concerning. Although they improved between 2016 and 2023, increasing from 2.3 to 4.6 months’ worth of imports, a downward trend began in 2024, dropping to 2.1 months. This situation has been exacerbated by uncoordinated practices, such as Gabon’s decision to repurchase part of its euro bond using local currency, which undermines collective reserves.

On the fiscal front, the CEMAC convergence criteria—budget balance, public debt, and inflation—are not being met by any of the member states. The latest multilateral surveillance report indicates that all member countries are experiencing budget deficits that exceed the established norms. Public debt, frequently incurred on non-concessional terms, poses a significant threat to economic viability. Additionally, the government bond market, saturated with repeated public debt issuances, raises concerns among lenders.

The banking sector, while essential for financing development, is also susceptible to vulnerabilities. Banks’ exposure to sovereign risk—stemming from their reliance on government bonds—poses a significant threat to financial stability. Furthermore, economic diversification remains elusive, as the region continues to be highly vulnerable to fluctuations in commodity prices.

Analysis of the Situation: Why is CEMAC Struggling?

The diagnosis of CEMAC’s economic challenges uncovers several underlying factors that hinder the effectiveness of IMF programs and community policies.

• Lack of Adoption of Reforms: IMF programs impose budgetary, structural, and institutional reforms that, while relevant on paper, do not always consider the socio-political realities of member states. For instance, the fiscal consolidation required often conflicts with essential social spending in countries affected by poverty.
• Poor governance and weak institutions: CEMAC countries experience high levels of corruption, inadequate budget transparency, and inefficient management of public resources. These deficiencies hinder the ability of governments to implement essential reforms.
• Excessive Dependence on Raw Materials: The region’s economic structure remains heavily reliant on hydrocarbons and extractive products. This singular dependence undermines resilience in the face of external shocks.
• Insufficient Coordination: Member states have frequently implemented uncoordinated economic policies, as demonstrated by the management of sovereign bonds and foreign exchange reserves. This fragmentation undermines the coherence of community initiatives.

The complex global context, characterized by geopolitical tensions and a slowdown in the global economy, is constraining the opportunities for expansion in developing countries, thereby complicating their efforts to achieve growth and stability objectives.

Three Recommendations for Breaking the Deadlock

To initiate a sustainable economic recovery, it is essential to realign the strategies of the CEMAC states and enhance coordination with international partners. Here are three priority recommendations:

• Strengthen Economic Governance and Transparency:
• Governments must commit to enhancing the management of public finances, particularly by producing and publishing reliable and comprehensive economic data. This transparency will bolster the confidence of financial partners and investors.
• It is essential to enhance the capabilities of community institutions, such as BEAC and COBAC, to more effectively regulate financial flows and maintain the stability of the banking system.
• Accelerate economic diversification and reduce dependence on raw materials.
• States should invest in high-value-added sectors such as agriculture, manufacturing, and services. These initiatives can be bolstered by public-private partnerships and tax incentives for both local and foreign investors. Additionally, greater integration of intra-EU trade is essential.
• Adopt an active debt management strategy that emphasizes the sustainability and quality of financing.
• Borrowing should be prioritized for strategic economic infrastructure, such as roads, energy, and telecommunications, which can support economic diversification and industrialization. The projects financed must undergo rigorous assessments to ensure their viability and long-term impact.
• The BEAC and the CEMAC regional institutions should take a more central role in monitoring the borrowing activities of Member States to prevent saturation of the public bond markets. A harmonized regional debt management strategy among countries could also enhance fiscal discipline and mitigate uncoordinated behavior.

Conclusion

The economic situation in the Central African Economic and Monetary Community (CEMAC) serves as a significant test case for economic integration and monetary stabilization models in Africa. While the International Monetary Fund (IMF) programs bear some responsibility, the persistent challenges are largely attributed to structural weaknesses within the Member States. A more inclusive approach—rooted in enhanced governance, economic diversification, and improved community coordination—is essential for relaunching growth in a sustainable manner. The region possesses immense potential, but only a collective and sustained effort can transform ambitions into reality.