Financial System
The financing of the economy was done in a context marked by the continuation of the reform implementation process initiated as part of the Economic and Financial Program concluded with the IMF on June 2017, on one hand and on the other hand, the popularization and application of the new exchange regulations and the CEMAC’s new regulations on microfinance establishments activities. The financing of the economy was characterized by monetary growth in 2019 by (+7.4%). Concerning monetary and financial areas, this aimed at strengthening the resilience of the financial sector and implementing a restrictive policy.
This growth is as a result of the increase of money counterpart supply that are: net foreign assets (+14.4%) net claims on the state (+60.3%), and loans to the economy (+0.2%).
Monetary Policy: Consisting in putting at the disposal of the economy the means of payment in sufficient and necessary quantity to favor growth, one of CEMAC member states is defined and implemented by BEAC. The latter issues currency guarantees its stability and supports economic policies. The CFA franc has a fixed parity with the Euro. Monetary stability is achieved by controlling inflation and keeping the rate of currency hedging above 20% to carry out its tasks, BEAC has two instruments: The refinancing policy and the required reserve policy.
In the first half of 2020, as part of the program concluded with the IMF and taking into consideration the economic and financial effects of the COVID – 19 pandemic, an accommodative monetary policy aimed at supporting currency stability through refinancing and minimum reserves was implemented by the BEAC.
Refinancing Policy: The refinancing policy implemented through the market, has two components: a component based on quantities (banks refinancing objectives) and the component based on prices (handling of interest.
The refinancing policy remained unchanged in 2019 and was characterized by: the retention of the key BEAC interest rates, the injections of liquidity for the banks by tender and, the financing of the treasury needs of the state by the issuance of government securities in the money market.
During the first half of 2020, the BEAC had to change its monetary policy orientation through the easing resulting in the lowering of its key interest rates, the suspension of liquidity absorbing operations, the expansion of the range of private financial instruments accepted as collateral for monetary transactions.
Money Market Transactions: They cover conventional money market transactions, other money transactions, interbanking transactions, Conventional money market transactions are the traditional refinancing instruments of banks used by the Central bank. They also include the conditions of remuneration of bank deposits as the Central Bank.
In 2019, the amounts served by the BEAC for credit institutions are declining. They represent 48.7% of the supplies made by banks, on 73.3% in 2018. In absolute terms, weekly amounts served are averagely 100 billion in 2019, against 152 billion in 2018, in connection with the number of participating banks that move averagely from 15 in 2018 to 8 in 2019.
In the half of 2020, the amounts tendered for the auction by the BEAC for financial institutions are on the rise. Because of the adverse economic consequences of the COVID – 19, the bids expressed by the banks have entirely satisfied as from Mach, on an average of 30% in the first quarter of 2020.
Economy’s Financing Strategy: The medium-term governments for debt (SEMT 2017-2019) aims at providing financing needs while minimizing costs and risks and promoting the development of the domestic financial market. Since the beginning of the fiscal year 2017, debt policy has undergone an adjustment aimed at slowing the pace of new external debt commitment, with a focus on concessional loans and public-private partnership financing PPP, to avoid over-indebtedness. The strategy implemented by the government in 2017, focuses on the discharge of outstanding debts to strengthen the resilience of the banking and financial sector to better finance the economy. It focuses among other things, on developing a framework conducive to greater selectivity in the distribution of credit. It also aims at improving people’s access to financial services by strengthening microfinance and facilitating the development of “mobile banking”.