(Business in Cameroon) – CEMAC leaders reported the outcomes of an urgent meeting held yesterday to prevent an economic and financial crisis in the region. The meeting, convened in response to growing financial challenges, focused on increasing foreign currency reserves, stabilizing the banking sector, and controlling debt.
The leaders agreed on the need to boost foreign currency reserves, which are essential for financing imports across CEMAC countries. According to their analysis, the region’s reserves should cover around 4.6 months of imports in 2024 and 4.2 months in 2025. Without comprehensive reforms, this coverage could drop to about three months within five years, creating significant risks.
Currently, foreign reserves rely heavily on budgetary support from the International Monetary Fund (IMF), which provides funds to countries like Cameroon, Congo, and CAR under their respective programs. Excluding these IMF contributions, reserves would cover just 2.1 months of imports—far below the minimum threshold of four months. The planned end of IMF programs in 2025 for some countries raises concerns about the region’s financial stability.
They also encouraged the other three CEMAC countries, which are not yet under an IMF program, to join as soon as possible in order to benefit from advice and budgetary support. In the short term, the completion of the latest reviews between the IMF and Cameroon, CAR, and Congo will lead to the disbursement of new budgetary support to these countries, which should help increase the region’s current foreign currency reserves.
Regarding the increase of foreign currency reserves, the CEMAC leaders reaffirmed their commitment to the “full implementation of exchange regulations, particularly through the diligent repatriation of foreign currencies by business operators, and specifically the signing, before April 30, 2025, of escrow account agreements for funds to restore mining sites by extractive companies (oil and mining).” Indeed, the new exchange regulations, which have been in effect since March 2019, require CEMAC business operators to repatriate 70% of their export revenues to the region. However, many have been slow to comply, citing various reasons, according to authorized sources.
Operators in the extractive sector, for whom the new regulation only became applicable on January 1, 2022, due to concessions made during the implementation of the exchange rules, are also required to repatriate “at least 35%” of their export earnings to the central bank of CEMAC countries (BEAC). Again, many are delaying this process. Authorized sources at the central bank estimate that only 35% of the required export revenues will be repatriated by the end of 2024.
Furthermore, while exchange regulations require extractive companies to fully repatriate funds meant for the rehabilitation of mining sites at the end of exploitation (currently held in foreign accounts due to attractive interest rates), within three years from January 1, 2022, extractive companies managed to negotiate an extension of this deadline until April 2025 during a meeting with BEAC officials on October 23, 2024, in Washington. The resolution adopted by CEMAC heads of state at the December 16, 2024 summit in Yaoundé aims to ensure that this deadline is not further extended, so that the hundreds of millions of dollars in foreign currency expected from these funds can be effectively captured to boost the region’s foreign exchange reserves.
In addition to consolidating foreign currency reserves, the CEMAC heads of state have recommended measures to prevent further exacerbating the already fragile banking sector in the region. Indeed, in addition to rising bad debts in the CEMAC zone (+11% in Cameroon by June 2024, the largest economy in the region), and the fact that 40% of banks are not meeting the capital adequacy ratio, these banks could soon face liquidity pressures. This is due to the planned 10-year restructuring of Congo’s debt, amounting to CFA2,314 billion, contracted on the public securities market managed by BEAC. It should be noted that banks act as Primary Dealers (SVT) on this market. As such, they make investments either for their own account or on behalf of their clients. Officially, these banks currently hold up to 80% of the securities issued on this market.
To prevent worsening difficulties in the banking sector, the December 16, 2024, summit of heads of state called on “states and community institutions to take measures to manage the banks’ exposure to sovereign risks, per multilateral monitoring criteria.” This recommendation aligns with a recent decision by the Central African Banking Commission (Cobac), which instructs banks to stop applying a zero-weighting rate for government loans. Instead, the new rates will be 90% for Cameroon and Chad, 85% for the Central African Republic and Equatorial Guinea, 80% for Congo, and 100% for Gabon. This Cobac measure, which appears to be endorsed by the CEMAC heads of state, is expected to tighten borrowing conditions on the sub-regional public securities market, which has become a crucial source of financing for the six CEMAC countries.
To curb the debt spiral, with some CEMAC countries exceeding the 70% GDP threshold prescribed by community monitoring criteria, the heads of state reiterated their commitment to a prudent debt policy, favoring concessional financing. These loans are less costly than those from the sub-regional or international capital markets, where interest rates are more sensitive to market conditions.
According to Cameroon’s President Biya, all these “recovery measures must be implemented urgently.” He added, “In this particularly difficult context, our community is an asset that we must preserve and strengthen. It is only together that we can overcome the current challenges and build better economic and social prospects for our states and populations.”
