Cameroon: IMF chief sues for strong business climate, regional integration in Africa

Yaoundé,  Cameroon (PANA) - With oil prices projected to remain low for long and oil reserves depleting, macroeconomic stability of the Central African Economic and Monetary Community (CEMAC) member countries will hinge on smart fiscal policies and determined structural reforms to strengthen the business climate and regional integration, International Monetary Fund (IMF) Managing Director, Christine Lagarde, said here Friday.

She told a meeting of Ministers of Finance and Economy of CEMAC that structural reform would require the region to open up to its neighbours and tap into their markets to regain momentum.

Currently, oil represents about 70 percent of CEMAC’s exports and more than a third of its fiscal revenues.

According to Ms. Lagarde, "the slump in oil prices poses a big challenge" to the region.

She observed that over the past few years the region saw robust growth and macroeconomic stability while the high tide of oil prices boosted activity and supported a surge in much-needed infrastructure investment.

"Today that tide has receded, and may stay out for a prolonged period," Ms. Lagarde cautioned, pointing out that oil prices have dropped by close to 70 percent since June 2014 – from a peak of US$120 per barrel to US$32 today.

Futures markets point to only a modest recovery of prices to about US$60 by 2019.

"Not surprisingly, this turnaround is making itself felt in this part of Africa: activity is down and fiscal pressures are rising," she said.

According to the IMF chief, there are three priorities which require the CEMAC region to chart a new path for its prosperity by spending better, collecting more, and making member countries to work together.

On the first priority -- spend better -- Ms Lagarde suggested that the right set of complementary infrastructure projects is clearly a pre-requisite for sustainable and inclusive growth.

"That may mean scaling back some plans. Selectivity in infrastructure development – based on economic merit and cost efficiency – can help guide this effort," she said. "Equally important is a more judicious approach to external financing."

Ms. Lagarde stated that for several CEMAC  members, the window of sustainable external financial support on non-concessional terms was narrowing because of the build-up in commercial debt.

On that account, she suggested that concessional sources of financing should be tapped to ensure that medium-term debt sustainability is preserved.

Turning to the second priority—collect more, she said alleviating fiscal pressures also required better mobilization of domestic resources, with determined action on the non-oil revenue base.

"The good news is that non-oil revenue in CEMAC improved last year to about 13 percent of regional GDP. Yet there is scope to reach the regional indicative level of 17 percent," she hinted.

On the third priority, work together, she pointed out that of all formal trade conducted by CEMAC countries, less than 5 percent involved intra-CEMAC commerce. "There is scope to do more. There are obvious synergies to be reaped from working together," she emphasised.

"By leveraging new infrastructure projects, such as the deep-sea port and hydroelectric dams in Cameroon, the boundaries of the Community could expand well beyond its national limits.

The big consumer markets in Nigeria and East Africa could be tapped, providing a significant impetus for private sector development and economic diversification," she said, urging action on two fronts: the business climate and regional integration.

"CEMAC members are confronting a new reality. Low oil prices for long necessitate policy adjustment to preserve macroeconomic stability and create new sources of growth. Once again, the IMF can help through policy advice, capacity building and financial support if needed," Ms. Lagarde added.
-0- PANA AR/VAO 8Jan2016

08 january 2016 19:26:41

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