Economic performance and outlook: The strongest and most diversified economy in the Central African Economic and Monetary Community (CEMAC), Cameroon has long been resilient to shocks, but its economy is showing early signs of a slowdown. GDP growth has been steady since 2010, averaging 5.8% from 2013 to 2015 before falling to 4.7% in 2016. Lagging oil and gas prices resulted in postponement of investment in exploration and production, which led to a decline in extractive activities. The recession in Nigeria, the widening crisis in CEMAC, and unrest in the country’s English-speaking regions hurt domestic and external demand. These headwinds lowered the growth rate to an estimated 3.4% in 2017. However, the outlook beyond remains positive, with growth projected at 4.1% in 2018 and 4.8% in 2019, spurred by higher exports to the European Union following an Economic Partnership Agreement (EPA) and increased energy supply due to new hydroelectric dams. Other tailwinds affecting growth include the development of forestry and agro-industrial value chains, as well as a reduction in imports in favor of local products.
Macroeconomic evolution: Cameroon has signed an economic and financial partnership agreement (the Extended Credit Facility) with the International Monetary Fund (IMF) that will stabilize the macroeconomic framework in the medium term by requiring a restrictive fiscal policy for 2017–19. Public investment is expected to drop from roughly 8% of GDP in 2016 to 6.7% in 2017 and 6.6% in 2019. Government revenues are projected to rise from 16.1% of GDP in 2016 to 17.7% in 2017 and 18.16% in 2019. The budget deficit dropped from 6.1% in 2016 to an estimated 3.6% in 2017 and is projected to remain below 3% in 2018–19. The debt ratio is below the CEMAC ceiling of 70% of GDP. However, the use of commercial loans to finance infrastructure projects caused public debt to spike to 34.1% of GDP in 2016, up from 15.6% in 2012; as a result, the risk of debt distress rose from moderate to high. Although the level of indebtedness remains viable, it needs to be managed with great care. The authorities should step up their efforts to expand the non-oil revenue base and better prioritize spending while preserving social spending. To maintain debt sustainability, new non-concessional borrowing should be reserved for projects with a high social or growth impact, in industries and sectors with clear competitive potential. Additional measures to enhance public financial and debt management are needed to improve spending efficiency and control fiscal risks.
Tailwinds: The fiscal consolidation under the Extended Credit Facility with the IMF and the structural reform agreements with financial and technical partners, including the World Bank, will allow authorities to increase the effectiveness and efficiency of public investment through a better project maturity framework. Efforts will focus on collecting higher fiscal revenues to offset the decline in oil revenues and customs duties brought about by the EPA. By refining incentives policies and improving the business climate, the government seeks to diversify the economy and spur inclusive and job-generating growth. Membership in a monetary union helps Cameroon maintain low inflation rates. But it limits its options for adjusting to negative shocks and ensuring external competitiveness. Still, Cameroon is one of the most resilient economies in Africa. It is strategically located and blessed with excellent human capital and enormous natural resources.
Headwinds: Regional security threats from Boko Haram and rebel groups in the Central African Republic make it necessary to maintain spending on security, defense, and humanitarian issues; such spending reduces the resources available for social expenditures. Despite the relative political security that Cameroon enjoys, ongoing disturbances in English-speaking regions in the northwest and southwest areas could impede economic recovery in 2018.
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 d’achat des obligations
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.