Economic performance and outlook: The economy is expected to contract further in 2017 in response to the continued decline in oil prices, the country’s main source of export revenues, and weak response from nonoil sectors. Real GDP declined an estimated 4% in 2017, following a contraction of 2.8% in 2016. The decline in international oil prices, compounded by dependence on oil revenues, continues to undermine Congo’s efforts to diversify its economy and increase its resilience. The economy is projected to expand 3.1% in 2018 and 2.1% in 2019, driven by higher oil production, following the exploitation of the Moho-Nord oil field, which accounts for 19.3% of the country’s production.
Macroeconomic evolution: Weak economic growth prospects and lower oil revenues continue to dampen the budget balance. However, as the result of controlled government spending measures, the budget deficit was estimated at 4.4% of GDP in 2017, down from 12.9% in 2016. The budget is projected to turn a surplus of 2.8% of GDP in 2018 and 4.2% in 2019. Monetary policy is managed by the BEAC following the fixed parity between the CFA franc and the euro. Inflation was an estimated 1.6% in 2017, down from 3.6% in 2016, which was above the ceiling of 3% authorized in the Central African Economic and Monetary Community. External public debt, particularly from Chinese creditors, reached 110% of GDP in 2016 and is projected to further rise. This increased borrowing has raised the risk of debt distress and presents a serious threat to the government’s plans to improve resilience. Unemployment remains a major challenge; approximately 30% of the workforce ages 15–24 has no job.
Tailwinds: Congo continues to grapple with low oil prices and lack of structural reforms to boost its untapped potential. However, weaker oil prices offer the opportunity to build the foundations for diversification. Reviving industries and construction will be key growth drivers. In addition to abundant natural resources in oil, forestry, and minerals, Congo can leverage its strategic position in Central Africa and its 170 km coast to boost its economy. Development projects to renovate and modernize the international airports in Brazzaville, Ollombo, and Pointe-Noire will support foreign investment. In transport, progress has been made on key economic corridors, existing highways have been modernized, and new ones have been constructed. Finally, the government has launched ambitious reforms, such as The March toward Development, to improve the quality of life over the next five years.
Headwinds: Although great strides have been made, Congo lags behind other African countries at a similar level of development. Heavy dependence on oil commodities exacerbates the already fragile external position. An onerous business environment impedes competition and investment and discourages potential investors. Congo fell two places in the rankings of the World Bank’s 2018 Doing Business report, from 177 to 179 out of 190 countries. Congo’s Human Development Index value was 0.592 in 2016, ranking it 135 out of 188 countries. The poverty rate, which fell from 50.2% in 2005 to 36.9% in 2011, remains one of the highest in Africa. With a Gini inequality coefficient of 0.489 in 2011, Congo’s inequality is the second highest in Africa, after South Africa. Slow economic growth in developed countries or other economic partners could hurt demand for commodity exports.
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 emission 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|
|Fitch||No rating||No outlook|
|Standard and Poor’s||No rating||No outlook|
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.