ARTICLE AD BOX
(Business in Cameroon) - Foreign exchange reserves within the Economic Community of Central African States (Cemac) stood at CFA6,771.3 billion (€10.3 billion) as of January 31, 2023, the Beac revealed in its monetary policy report issued last month. Compared to the same period last year, when the amount was CFA4,690 billion (€7.1 billion), this makes an increase of CFA2,081.3 billion (+43%).
According to the document, these foreign currency and gold assets give the Cemac economies 3.9 months' coverage of imports of goods and services and a currency coverage rate of 73.1% compared with 64.0% a year earlier.
"Reserves improved mainly thanks to higher crude oil prices and efforts to repatriate export revenues, as well as a sharp increase in foreign exchange on-lending by primary banks on behalf of their extractive sector clients authorized to hold foreign exchange accounts, and for the management of site rehabilitation funds," the report said.
As a reminder, oil and mining companies have, since early 2022, been required to comply with new exchange regulations. The immediate consequence was an increase of CFA557 billion in the volume of foreign exchange retrocession to the central bank. The funds repatriated by companies in the extractive sector have been placed in nearly 500 escrow accounts approved by the Beac, as part of the relief measures granted by the monetary authority to this category of companies under the new regulations.
Forex buffers could further grow
The new exchange regulations, which have been in force since 2019, prohibit economic agents from holding accounts in offshore or onshore currencies (within CEMAC credit institutions), except for a special waiver. Operators are also required to repatriate 70% of their export earnings to the region. The rate is 35% for oil and mining companies. The first year of implementation of these regulations has allowed to bring the volume of foreign exchange retrocessions from CFA8,200 billion in 2021 to nearly CFA12,000 billion in 2022, according to Beac.
The central bank expects forex retrocessions from the extractive sector to significantly improve this year, leading to a sharp increase in forex reserve within the Cemac region. In detail, Beac forecasts the volume of foreign exchange reserves to grow by 11.5% to 7,6391.9 billion by the end of this year.
Foreign exchange repatriation is good for the external position of the Cemac region, but large outflows for the purchase of goods and services are somewhat detrimental to this dynamic. In an internal memo, Beac reported that more than CFA10,000 billion exited the region through outgoing transfers in 2012. In January 2023 alone, more than CFA1,204 billion in foreign currency was sent out by economic agents, compared to only CFA788 billion in repatriations, making a deficit of 34%.
Cédrick Jiongo
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