The regional, economic, and financial environment has remained fragile and challenging, despite fiscal consolidation by Central African Economic and Monetary Community (CEMAC) countries, rising oil prices, and restrictive monetary policy in CEMAC, which led to improved economic performance in 2018. Real GDP growth reached an estimated 3.8% in 2018, up from 3.5% in 2017. Domestic demand (consumption and investment) was the mainstay of economic growth. The fiscal deficit continued to fall to an estimated 2.6% of GDP in 2018 from 4.9% in 2017 and 6.2% in 2016.
Financing through commercial and public loans of infrastructure projects carried out as part of the country’s emergence policy led to an accumulated government debt of 34% of GDP (38% including large state enterprises) in 2018, compared with 12% of GDP in 2007. As in 2017, common monetary policy remained restrictive in 2018. Inflation was an estimated 1.1% in 2018, below the 3% community requirement. The current account balance remained in deficit, at an estimated 3.2% in 2018, up from 2.7% in 2017.
Tailwinds and headwinds
Real GDP is projected to grow by 4.4% in 2019 and 4.7% in 2020, following energy and transport production infrastructure startup, as well as rising world oil prices. The current account deficit is projected to level off at 3.1% of GDP in 2019 and 2020. Inflation is projected to remain below the 3% community requirement.
But the growth prospects have some uncertainties. Expected budget revenue in 2019 depends heavily on fluctuating world oil prices. Cameroon will also have to continue efforts to restore the fiscal balance, rebuild foreign exchange reserves, and strengthen regional currency parity.
Deterioration in the security situation in the NorthWest and South-West regions, in the throes of a persistent sociopolitical crisis, could also darken prospects for economic growth because these regions house important areas of agricultural production and the country’s largest agribusiness. If the crisis continues, it could increase expenditures for defense and security and affect the 2019 budget.
Although Cameroon’s economy remains the most resilient in Central Africa in terms of diversification, the weakness of its growth base and its great exposure to fluctuations in world prices for raw materials are significant factors of economic vulnerability.
Implementing value chain projects in the agro-sylvo-pastoral and fisheries sectors could help strengthen the country’s economic resilience. Strengthening resilience also requires improving the economy’s competitiveness, especially with greater support for facilitating transport, developing trade at the regional level, taking account of the country’s geographic location, and providing support for private sector development.
To reach economic emergence by 2035, and based on the Strategic Document for Growth and Employment (2010–2020), a 10-year strategy for the Vision 2035, the government has implemented a substantial investment program to accelerate growth, create decent jobs, and reduce poverty. The program involves implementing structuring projects in key sectors of the economy. For example, the government has already implemented a variety of power generating facilities to reduce the lack of infrastructure and increase installed capacity, which is close to 1,300 MW, and has turned the energy sector into a key export sector.
The CEMAC securities yield curve extended to 5 years with 9 benchmark points along the curve (3m-6m-1-1.5-2-3-3.5-4 and 5 years).
The issuance strategy is based solely on funding the budget. Constructing the yield curve is not taken into account in the issuance strategy. The issuance methods used are the auction method and the underwriting method.
CEMAC states may issue new lines on the financial market in Libreville or in Douala. They can also use the auction market for government securities which is organized by the Central Bank, the Banque des Etats de l’Afrique Centrale (BEAC). The states have no proper debt strategy in place.
There are 9 benchmarks maturities for government securities in local currency in the CEMAC zone: 3m-6m-1-1.5-2-3-3.5-4 and 5 years.
Yield curve calculation models
The BEAC prepared its own in-house method for computing its yield curve: the implied yield curve.
The Brandt interpolation method is used in the CEMAC region.
Yield curve managed by
The BEAC is responsible for calculating the yield curve on a monthly basis.
Challenges in building an efficient yield curve
- Illiquid and limited secondary market: buy-and-hold investors
- Narrow investor base: only banks are involved in the bond market
- Coexistence of three agencies for issuing bonds and bills: the Douala Stock Exchange (DSX) and the Bourse des Valeurs Mobilières de l’Afrique Centrale (BVMAC) are in charge of syndication. The Banque des Etats de l’Afrique Centrale (BEAC) is responsible for auctions.
- Lack of issuance strategy in CEMAC states
- Lack of reliable data
- Lack of long-term maturity
- Two countries had never issued on the domestic market as of end-2015
Guide to Buying Bonds
Procedures for market participation
The BEAC organizes the auction on behalf of the states. The auction takes place at the asking price. Orders are served retained interest rates or the price offered by the bidders within the maximum interest rate or maximum price decided by the government.
At the end of the auction, the general information, including the amount of bids expressed the amounts used and the rate and limit price selected are disseminated through the press.
The methods of creating, presenting and counting of the tenders shall be determined by agreements on the one hand, between BEAC and National Treasuries, and secondly, between the BEAC and the Primary Dealers (PD). Subscriptions to government securities are firm and irrevocable. They are paid in a single payment by debiting the account of the PDs at the BEAC and credited to a special Treasury account opened for this purpose.
Given that the debt market is under developed, the optimal schedule has been adopted as part of regular program. The six National Treasures issue in turn, at regular intervals. Each National Treasury will issue T-Bills weekly on Wednesday. The amounts are generally low to allow all states to issue at the same time, resulting in each State having fifty-two issues of T-Bills per year. Each National Treasury can issue T-Bonds monthly.
The auctions are scheduled to take place every Wednesday. However, given the nature of the instrument and the expected volume of transactions in relation to the needs for public investment, treasuries are not able to issue on the set day.
A shift schedule was developed for planned Wednesday auction sessions:
- Cameroon: 1st Wednesday of the month
- Central Africa - Congo: 2nd Wednesday of the month
- Gabon: 3rd Wednesday of the month
- Equatorial Guinea-Chad: 4th Wednesday of the month
These emissions will occur at regular time intervals and are publicly known.
The total amount of the twelve issuances will be released in the Finance Act each year.
For each fiscal year, this amount will be communicated to the market by the Minister of Finance no later than November 30th of the previous year. This communication from the Minister responsible for finance may take the form of a conference, briefing or a press release. The amount of the issuance will not be announced at this time.
However, the amount to be raised for each auction is specified in the auction announcement in accordance with National Treasury issuance calendar.
On the secondary market, the T-Bills are traded OTC and the T-Bonds are traded on the DSX and the BVMAC.
The settlement of transactions takes place at T+3.
The level of taxation pursuant to Regulation No. 14/07 - UEAC-175-CM-15 instituting a specific tax regime applicable to the transactions listed on the Securities of Central Africa (BVMAC) "are exempt from income Tax Securities (IRVM) or any other taxes or levies of a similar nature, interest obligations of States for residents of the CEMAC." Subscribers residing outside the CEMAC zone must comply with income tax laws of their country of residence. The Issuer shall levy any withholding tax on loan repayments.
|Rating Agency||Current rating||Outlook|
|Moody’s||No rating||No outlook|
|Standard and Poor’s||B||Stable|
Auctions of Government securities are exclusively reserved for Primary Dealers. Each CEMAC state has its own network of Primary Dealers. However, a credit institution, which meets the eligibility requirements, may be a Primary dealer only for the country they belong to or upon request, all the states. The Ministers of Finance, select Primary Dealers from all the credit institutions in CEMAC that meet specifications adopted by the Committee of Ministers, after consulting the Monetary Policy Committee.
Openness to international investors
Foreign investors can access the debt market under the same terms as nationals of the zone. There are no rules that discriminate foreign participants in the market.
This is no restriction on foreign ownership in the CEMAC zone.
Restrictions on FX and profit repatriation
There are no restrictions on obtaining foreign exchange.
The regional central bank, the BEAC, issues CFA for circulation among the members of the CEMAC. Although the Central African franc is at par with the West African CFA franc, the two currencies are not usually accepted for payment in each other’s zones.
Foreign investors have the right to repatriate earnings and the profits from sales of financial instruments. There are no restrictions on converting or transferring funds associated with investments, including remittances of investment capital, earnings, loan repayments, and lease payments.