The Permanent Secretariat of the Economic and Financial Reform Programme called on member countries of the Central African Economic and Monetary Community (CEMAC) to urgently review their public spending priorities in relation to the coronavirus pandemic.
Cameroon, Chad, the Central African Republic, Equatorial Guinea, and Gabon are invited to adopt, as soon as possible, Amending Finance Laws 2020 and to put in place a support package for companies hit by the Covid-19 crisis.
In a study entitled “Economic and financial impact of Covid-19 on CEMAC economies and outlines of solutions,” copied to APA on Thursday, this African region must also take a one-year moratorium on the application of multilateral surveillance criteria that could affect the use of public offerings by States, and to enter into negotiations with major bilateral and multilateral partners to reschedule the current maturities of external debt.
The other measures advocated are aimed at reaching monetary and financial system stability, as well as strengthening the medium-term resilience of the countries of the subregion in the face of future crises.
“It is therefore the place to note that if the CEMAC countries do not effectively fight against the Covid-19 pandemic to limit its economic and financial consequences, the macroeconomic situation would become unsustainable,” the Permanent Secretariat warned.
The economic and financial consequences of the Covid-19 on sub-regional economies are indeed of several kinds, according to the study which already expects a significant drop in budget revenues, a significant deterioration in macroeconomic accounts, a decline in external financing, disruption of intra-community trade, the weakening of external and financial stability and a risk of rising inflationary pressures.
The transmission channels of the current crisis on the subregional economies are characterized by the decline of trade, which would fall by 28.6 percent in one year, supply constraints that would increase transaction costs and financial conditions, more directly disrupting trade, tourism, transport and migrant remittances. Demand constraints resulting from increased uncertainty and instability in financial flows and markets are also expected.
In the event of a transitory and rapidly controlled Covid-19 crisis, growth would fall by 3.3 percent in the real sector, the overall budget balance, including grants, would become a deficit of 0.9 percent of gross domestic product (GDP) on public finances.
In addition, the current external deficit, including public transfers, would worsen by 4.7 percent of GDP on the external sector, and the monetary situation would deteriorate significantly through the fall in net external assets, credits to the economy and the money supply.
Meanwhile, government cash flow difficulties are expected to deteriorate the relative quality of banks’ credit portfolios and their profitability, through the foreseeable increase in outstanding claims and the provisioning of bank claims.
If the coronavirus crisis spreads rapidly and widely, growth would fall by 3.3 percent in the real sector, the overall budget balance of the CEMAC, including grants, would widen to -6.6 percent of GDP, against a surplus of 0.9 percent of GDP in the initial baseline scenario, the current external deficit, including public transfers, would widen to 10.3 percent of GDP, against -1.7 percent of GDP in the previous projections.
The Permanent Secretariat of the Economic and Financial Reform Programme also fears that the monetary situation will deteriorate further through the decline in net external assets, credit to the economy and the money supply, with financial stability leading to major bank failures.
FCEB/cgd/lb/Dng/APA