Cemac: Beac tries to withdraw 50 billion CFA francs from the banking system
The Central African Economic and Monetary Community (CEMAC) has been witnessing significant monetary policy manoeuvres by the Bank of Central African States (BEAC), particularly with its recent attempts to withdraw a substantial amount of liquidity from the banking system. This move is part of a broader strategy to stabilize the financial environment within the six nations that constitute CEMAC: Cameroon, the Central African Republic, Chad, Equatorial Guinea, Gabon, and the Republic of Congo.
The BEAC’s initiative to withdraw 50 billion CFA francs through the issuance of securities is a response to the inflationary pressures that have been affecting the region. The central bank has been actively working to combat inflation, which has been attributed to monetary factors, by tightening the liquidity available to banks. This policy aims to regulate the amount of money circulating in the economy, thereby curbing inflation and stabilizing the currency.
The recent securities issuances are part of a series of operations by the BEAC, with the first issuance amounting to 50 billion CFA francs at a 3.5% yield for 28 days. The subsequent issuances are scheduled with the same amount but at a reduced yield of 2.5% and a shorter maturity of 14 days. These measures are indicative of the central bank’s commitment to a restrictive monetary policy that has been in place since the end of 2021.
The banks’ response to these operations has been mixed. Previous attempts to withdraw liquidity have seen varying levels of success, with some operations not achieving the desired subscription rates from credit institutions. This reflects the complex dynamics between the central bank’s policy objectives and the banks’ liquidity needs.
The BEAC’s actions are not without context. Since February 2023, the central bank has suspended liquidity injections into the banking system and introduced BEAC bonds to absorb excess liquidity. These steps were taken to address the high inflation rate, which stood at 20% and was deemed to have a monetary origin. With inflationary pressures easing in recent months, the BEAC has begun to adjust its approach, resuming liquidity injections and progressively increasing the volumes.
The impact of these monetary policies on the CEMAC region’s economy is profound. They influence the availability of credit, the cost of borrowing, and the overall financial stability of the member countries. The central bank’s strategy reflects a delicate balance between controlling inflation and ensuring that banks have sufficient liquidity to support economic growth.
As the BEAC continues with its liquidity withdrawal operations, the financial markets and the economies of the CEMAC region will be closely monitoring the outcomes. The success of these measures will play a crucial role in shaping the economic future of Central Africa.
From August 15 to 29, the Bank of Central African States (Beac) will attempt to collect 50 billion CFA francs from the safes of banks operating in the Cemac (Central African Economic and Monetary Community) zone. This issue of Beac bonds is characterized by a maturity of 14 days, remunerated at a nominal interest rate of 2.5%. Thus, the issuing institution of the Cemac countries (Cameroon, Congo, Gabon, Equatorial Guinea, Chad and CAR) intends, through this umpteenth levy operation, to accelerate the absorption of excess bank liquidity in the very short term, and better monitor its evolution.
Indeed, to combat galloping inflation in the Cemac zone, the central bank has intensified liquidity recoveries since the beginning of the current financial year. One of the actions consists of increasingly increasing the amounts sought through its bond issues. In a context already marked by the maintenance of its key rates at a relatively high level, the Beac’s manoeuvres contribute to limiting access to credit for economic agents, which access to credit would promote inflation, the forecasts of which in the Cemac zone are not very bright for certain countries. Indeed, according to the IMF, Cameroon would break the inflation record in the Cemac zone during the year 2024 with a rate of 5.9%. The leading power in the zone would be followed by the CAR (4.7%), Equatorial Guinea (4.4%), Congo (3.6%), Chad (3.1%) and Gabon (3%).
Balance between inflation and growth
However, while the monetary austerity policy implemented by the Central Bank suggests that liquidity drain operations are gradually bearing fruit, it has not lost sight of its ambition to have strong economic growth, which is forecast to increase to 3.3% in 2024 compared to 2.3% a year earlier. In this regard, during an exchange with the press on March 25, at the end of a session of the Monetary Policy Committee (MPC), Governor Yvon Sana Bangui revealed that the central bank was studying several options aimed at “changing the conditionalities to make this instrument [the BEAC bonds, Editor’s note] more flexible to the needs of credit institutions while remaining in line with its objective of reducing excess bank liquidity.”
Read also: Cemac: Beac oxygenates the banks again after more than a year of famine
Thus, in this balancing act, Beac resolved to oxygenate the banks again last July, after more than a year of scarcity. Indeed, between July 2 and 30, 2024, the central bank of the six CEMAC countries injected a total of 470 billion CFA francs of liquidity into the banking circuit of this community area. According to Beac figures, these liquidity offers, respectively 165 billion CFA francs on July 2, 185 billion CFA francs on July 23 and 120 billion CFA francs on July 30, were all oversubscribed by more than 200%, with a peak of 425% subscription rate for the operation of July 30, 2024 (a similar operation on June 18 had recorded a subscription rate of 449%).
