During the 15th Ordinary Session of the Conference of Heads of State of the Central African Economic and Monetary Community (CEMAC), held on March 17, 2023 in Yaoundé, His Excellency Paul BIYA, the outgoing Chairman of the said Conference and President of the Republic of Cameroon, in his opening and closing speeches, stressed on the importance of ensuring the continuation of the CEMAC Economic and Financial Reforms Program (PREF-CEMAC). This program was established in Malabo, Equatorial Guinea, during the extraordinary session of the CEMAC Heads of State Conference on July 30, 2016. The overall objective being to “design and implement rapid, vigorous and coordinated actions, both at the national and sub-regional levels, for the stabilization of the macroeconomic framework of CEMAC, and a structural and profound transformation of the economies of the sub-region, in order to strengthen their resilience and place them on the path to emergence” (Article 2 decision no. 02/16-CEMAC-CSE-SE of July 30, 2016).
Under the dedicated chairmanship of His Excellency Denis SASSOU N’GUESSO, President of the Republic of Congo, the PREF-CEMAC is today perceived by CEMAC leaders as a solution to counter the effects of macroeconomic shocks that regularly affect their economies. Indeed, these countries, in addition to having small open economies, have very poorly diversified production structures and remain highly dependent on commodity prices, particularly oil. Consequently, any fluctuation in commodity prices in the world markets has a significant impact on the macroeconomic balances of these countries.
The implementation of the reforms undertaken by the latter, within the framework of the PREF-CEMAC aims to improve the business climate, diversify the economy in order to increase the sub-region’s economic growth potential and facilitate sub regional integration. The reforms contained in this program are based on five main pillars, namely: strengthening fiscal policies (pillar 1), enhancing the effectiveness of monetary policy and the financial system (pillar 2), accelerating structural reforms (pillar 3), facilitating regional integration (pillar 4) and international cooperation (pillar 5). In all, 21 measures were adopted by the CEMAC Heads of State to curb the negative trends affecting their economies.
Although the objective of the PREF-CEMAC is clear and laudable, it is not very compatible with the economic agenda of several countries in the sub-region. Indeed, this program is based on strengthening the resilience of CEMAC economies to the asymmetric shocks they face, whereas this resilience is practically nonexistent in some countries, which are very vulnerable to the shocks that occur. In other words, there are very strong economic and structural heterogeneities among the different countries. In addition to the deterioration in the terms of trade due to the prolonged and persistent weakness in the prices of the main export products, some CEMAC countries are facing other security, socio-political, humanitarian and health crises, which further weaken their macroeconomic balances.
In addition, within the framework of the PREF-CEMAC, the States have agreed to achieve the following by 2025: a growth rate in real terms of 5% on average, a strong recovery of the external accounts with a positive trade balance, a more resilient financial system, completed structural reforms giving a greater place to the development of the private sector, and greater integration in terms of trade in goods and services and mobility of factors of production. However, to achieve this, it is necessary to succeed in ensuring the convergence of the different economies towards a common growth path. For these economies to converge, policymakers must not only ensure price stability, but also clean up public finances and make them sustainable. This is because in the CEMAC zone, monetary policy, whose primary objective is to ensure price stability, is centralized at the level of the Bank of Central African States (BEAC), while fiscal policy is decentralized at the level of member states.
In the absence of economic convergence, any economic and financial reform implemented by CEMAC states will not achieve the desired results. On the other hand, if CEMAC policymakers manage to put in place effective mechanisms to ensure the convergence of their economies toward a common growth path and thus promote the approximation of living standards between countries, they would inevitably place their economies in a framework that would give greater credibility to the PREF-CEMAC.
Another challenge for CEMAC High Authorities is to facilitate economic catch-up. As the world has become a global village, the PREF-CEMAC will only have a strong impact if the countries of the community manage to bridge the large economic gap that separates them from the other economies of the world. This economic catch-up is to a large extent conditioned by the level of physical and human capital at the outset. Because of the differences in starting conditions, there are of course risks of poverty traps, that is, the risk that some countries will never achieve economic development, that is, a lasting improvement in the living conditions of the population through sustainable growth.
Jean Cedric Kouam is the Senior Policy Analyst, Deputy Director-Economics Affairs Division and the Head of Fiscal and Monetary Policy Sub-section at the Nkafu policy Institute. He holds a doctorate in economic policy and analysis (monetary and financial macroeconomics) from the University of Dschang in Cameroon. Since obtaining the Diploma of Advanced Studies in Mathematical Economics and Econometrics at the University of Yaoundé II in 2012, he has provided courses in economics, finance, and macroeconomic modeling in several private higher schools in Cameroon.