The BEAC held its 4th ordinary meeting on Dec 18th, 2013 and decided to leave the key rate unchanged at 3.25%.
The BEAC decided to keep its key rate unchanged at 3.25%.
Debt vs GDP / Bonds vs bills
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All Data - Gabon
|GDP (billions US$)||18.79||17.85||19.26||20.20||-||-|
|Total Outstanding Amount (Billion US$)||0.05||0.03||0.23||-||-||-|
|Outstanding Amount/GDP (%)||0.29%||0.15%||1.20%||0.00%||-||-|
Gross domestic product (GDP) grew by an estimated 5.5% in 2013, down slightly from 2012 (5.7%). Gabon enjoys macroeconomic stability and healthy finances, thanks to its membership of the franc zone, rising oil prices and its forestry and mining revenue, and supported by vigorous public and private investment. At the regional level, Gabon has been in compliance with the four convergence criteria set by the Economic and Monetary Community of Central Africa (CEMAC) as part of the multilateral oversight of the economies in the zone, namely the debt-to-GDP ratio, the fiscal deficit, payment of debt arrears and containment of inflation.
Growth prospects for 2014 and 2015 will depend on how international oil prices and manganese production and prices will evolve. Timber processing, which as yet contributes little to GDP (4% in 2013), should see a steady increase, benefiting from both sharply rising world prices and the public policy of processing raw materials domestically in three “special economic zones” (SEZs) currently being established. GDP growth should remain robust at the projected rates of 6.7% in 2014 and 7.2% in 2015, while the annual inflation rate should flatten out at about 2.5%. This strong performance will be driven by public investment, revenue from the country’s main mining resources and revenue from timber processing. In the primary sector, oil production is expected to fall off, as many existing fields are mature and no new economically viable deposits have been discovered. In developing its strategic plan for “emerging Gabon”, the Plan stratégique Gabon émergent (PSGE), the government seeks to accelerate the diversification of the national economy through a strategy based on domestic processing of raw materials and facilitation of foreign direct investment (FDI).
Gabon’s industrialisation strategy is mainly based on the timber sector. Forest covers nearly 85% of the country’s territory and offers Gabon an opportunity to reduce its dependence on oil, fight poverty and improve the living conditions of its people.
The PSGE is accompanied by a sweeping programme of reforms aimed at diversifying the economy and making the industrial and services sectors more competitive, while preserving the country’s huge environmental wealth. Since 2011, implementation of the plan has led to massive public-investment programmes and the formulation of an industrial policy involving the establishment of SEZs to attract FDI, public-private partnerships and acquisition of equity stakes in domestic subsidiaries of large international corporations. In line with this policy, Gabon issued USD 1.5 billion in Euro bonds on 5 December 2013 in order to reduce its borrowing costs and to finance infrastructure in the port, airport, road and energy sectors.
There are 9 commercial banks and one development bank, the Gabonese Development Bank, in Cameroon. The commercial banks represent 21% of the total bank assets in the CEMAC region with XAF 1640 billion.
The lending activity is low because of high interest rates and short repayments terms when companies are seeking loans from banks.
Gabon has only one company, SIAT Gabon, quoted at the Central Africa Stock Exchange (BVMAC). This quotation took place in 2013.
Gabon issued a loan of XAF 100 billion in December 2007 to a maturity of 6 years at a rate of 5.5% to reduce its external debt with 80% of that is represented by a debt with the Paris Club XAF 1000 billion.
Source: African Economic Outlook
Monetary policy & Public debt
With the National Directorate of the Central Bank, a National Monetary and Financial Committee is established in each Member State. Its role within the limits of the powers delegated and according to the instructions given by the Board of Directors and Monetary Policy Committee, is to examine the general financing needs of the economy of the Member State and to determine the means to satisfy them, as well as proposals for the coordination of policy on national economy with monetary policy.
In the CEMAC region, the debt to GDP ratio must stay under 70%. It’s the convergence criteria adopted between the CEMAC zone and the WAEMU zone.
Gabon is the country of the CEMAC, with Equatorial Guinea, with the lowest public debt. In Gabon, the domestic debt to GDP ratio was 0,15% at end of 2012 and the external debt to GDP ratio was 6,96%.
Issuers and Instruments issued
Treasury Bills (T-Bills): Maturities available are 13 weeks, 26 weeks and 52 weeks.
Treasury Bonds (T-Bonds): Maturities available are equal or greater than 2 years.
The nominal value of T-Bills is set at XAF 1 million or a multiple of this amount. The nominal value of Treasury bonds XAF 10 000 or a multiple of this amount. The T-Bills and T-Bonds have the same characteristics for all CEMAC members.
Each State issues government securities by tender. States that maintain arrears on securities issued cannot issue further until the debt related to past emissions is cleared.
The Central Bank of Central Africa States (BEAC) organizes the auctions.
Primary Dealers (PDs), who are selected among the credit institutions, are the only ones who can participate in the auctions.
Commercial banks are the most active investors in government debt instruments.
Primary & Secondary Market
Gabon hasn’t issue T-bills in 2012 and before. The first T-bills issued in Gabon was in 2013 with a 13-week and 26-week maturity for an amount of XAF 15 billion each.
The only one T-Bonds issued by Gabon is for a total of XAF 100 billion and with a 6-year maturity.
Compared to the embryonic stage of development of CEMAC securities market, the secondary market is clearly inexistent. There is a need to stimulate the secondary market. However, has been some activity on the secondary market since 2011. The T-Bills are traded OTC and the T-Bonds are traded on the DSX and the BVMAC.
Clearing, Settlement and Custody
Cellule de Regulation et de Conservation des Titres (CRCT) serves as account manager, settlement agent and central depository.
The CRCT is a structure, which receives the securities issued by the Treasuries of Member States of CEMAC, and held by Primary Dealers (PDs) who are its members exclusive. Membership is of Primary Dealer to the CRCT is mandatory.
The CRCT assumes the role of accounting issue. It debits the securities account of the government at each issuance and credit the investor account. It ensures daily system integrity by comparing the debited accounts against PDs accounts.
On the secondary market, any legal entity, wishing to acquire securities issued under this structure must have a "securities account" opened with a credit institution established in the CEMAC, an authorized Primary Dealers affiliated with the CRCT.
Protection of investors
The Commission for the Supervision of Financial Markets in Central Africa (CONSUMAF) is the regulator and controller of Financial Markets in Central Africa. As such, it aims to ensure the protection of investor information, savings invested in securities and the proper functioning of the market.
FOGADAC, a Guarantee Fund deposits in Central Africa was set up on 21 February 2011. The FOGADAC is a system of bank deposit insurance. Its main role is to repay or return deposits and other assets placed with banks, when they are finally in a position to make such repayment. The maximum amount, which may be claimed for reimbursement, for an investor eligible asset placed in a bank, is 5 million FCFA.
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|
|Moody’s||No rating||No outlook|
|Standard and Poor’s||BB-||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.