14, July 2017
The Governor of the Bank of Central African State, BEAC – Abbas Mahamat Tolli has assured the population that the current economic situation in the CEMAC zone does not warrant a devaluation of the CFA Franc. Abbas made a comparative analysis of the economic situation that prevailed in 1993, before the January 1994 devaluation with the current 2017 situation and observed that the Central Africa sub region is not on the edge of an abyss.
During a press conference at the Central Bank’s headquarters in Yaoundé, Governor Abbas Mahamat Tolli, pointed out that recent rumour about a possible devaluation of the CFA franc are unfounded. He said in 1993, the growth rate of the sub region was -0.3% far below the 2017 growth forecast estimated at 0.4%.
The investment rate is also expected to reach 23.5% by the end of 2017 as against 18.8% of Gross Domestic Product, GDP before the previous devaluation. Budgetary deficit from commitments, excluding grants stand at 3.5% in 2017 as against 9.7% of GDP in 1993. The rate of external coverage of the currency is stabilized to about 60% in 2017 against 14.8% before the devaluation of 1994. From the estimations of the Central Bank, the absolute value of official reserves is equivalent to 2,800 billion CFA F, representing 2.1 months of imports of goods and services.
The reserves are much more significant compared to the 165 billion in 1993, which barely covered one month of imports. BEAC’s operating account with the French Treasury would be in excess of 2,600 billion francs, whereas at the end of 1993 it had a deficit of 78.6 billion francs. The strong points advanced to dispel rumour of devaluation did not however minimize the current dismal economic and financial performance of the sub region. In the presence of members of the Monetary Policy Committee of BEAC, the Governor acknowledged that the zone has been suffering from deceleration of growth since 2014 which has significantly affected the economic and financial situation.
He however noted that there are glimmers of hope in the horizon as corrective measures have begun bearing fruit. The immediate visible impact is the reduction of public spending from an estimated 7000 billion in 2014 to about 3000 billion in 2017 following the implemented budgetary adjustments programmes by member countries. He added four of the six CEMAC countries have already finalised negotiations with the International Momentary Fund to enforce economic reform programs and financial frameworks that will favour mobilization of external resources with international donors.
Abbas Mahamat Tolli stated emphatically that no objective factor necessitates a monetary adjustment in the CEMAC zone at present. The IMF however has made economic prescriptions in order to stay afloat. According to an IMF statement published on the website, much effort is needed from the CFA franc zone countries to reduce poverty and increase the living standards of their people.
According to the IMF, priority areas include essential public and improve infrastructure, health care, education and job training. Each country needs to uphold good governance by tackling corruption, inefficiency and encouraging accountability. Regional integration within the CFA franc zone countries should be based on mutually beneficial economic ties.
Some African leaders now question the CFA parity with the Euro arguing that it does not allow Africa to develop. Many critics consider that the CFA franc, pegged to a strong euro, hampers the competitiveness exports of raw materials, quoted in dollars or pounds sterling on the main financial centres of New York or London.