Capital Gains Reforms to Support Financial Markets Development

Introduction

Cameroon’s 2026 Finance Bill introduced a new tax reform: the extension of the exemption from the Tax on Income from Movable Capital (IRCM) to government securities issued not only by the Cameroonian state but also by other countries in the Central African Economic and Monetary Community (CEMAC). Specifically, starting in 2026, profits realized by investors, whether local or international, on government securities issued by CEMAC member states will be exempt from the 16.5% IRCM (including 1.5% additional municipal levies). This measure represents a significant evolution of the existing tax framework and is part of a strategy to stimulate investment and regional economic integration.

1. This reform will make government bonds even more attractive.

Traditionally, government securities—Treasury bills (BTAs) and Treasury bonds (OTAs)—have been an essential instrument for CEMAC member states to raise funds on money and financial markets. These securities are used to cover cash flow needs and finance investment projects. As of the end of July 2025, the total outstanding amount of government securities in the zone had reached 9,086.6 billion FCFA, representing an increase of more than 31% compared to the previous period, demonstrating the growing importance of this market for Member States.

‘‘Before 2026, the IRCM exemption applied primarily to securities issued by the Cameroonian government on domestic money and financial markets. With the extension of this measure to all public securities issued by all CEMAC members, the objective is to enhance the attractiveness of sub-regional government securities for investorsby increasing the net return on investments without capital gains tax.

• Why this measure is a lever for investment

From a financial perspective, the exemption from the IRCM (Income Tax on Capital Gains) on income from government securities directly enhances the attractiveness of sovereign debt instruments. Without taxation, investors—individuals, financial institutions, insurance companies, pension funds, or international investors—recover all of their generated interest, thereby increasing the effective return on their portfolios. This is particularly relevant given the rising borrowing costs of CEMAC states. For example, at the end of July 2025, the weighted average yield on Treasury Bills (BTAs) had increased from 6.52% to nearly 6.92%, while that of OTAs reached approximately 9.48%, indicating that states must offer attractive returns to capture regional savings.

By eliminating taxes on realized profits, Cameroon offers a direct premium to investors who choose to place their capital in government securities within the sub-region. This premium can reduce gross return requirements, ease the pressure on borrowing costs for governments, and improve liquidity in the government securities market. Higher liquidity is a sign of a mature financial market, which can attract more foreign and domestic capital.

• Strengthening Cameroon’s Role in the Sub-Regional Market

This reform is also part of a strategy to develop Cameroon’s economic role in the CEMAC zone. By the end of February 2025, Cameroonian investors already held more than 50% of the total debt contracted by CEMAC states on the sub-regional market, according to data from the Bank of Central African States (BEAC). This dominant position shows that investors based in Cameroon are key players in public financing in the sub-region. Through this beneficial measure, the government is not only attracting more investment to its own market but is also facilitating the flow of capital regionally and encouraging investors to diversify their sub-regional portfolios without tax penalties. This dynamic contributes to the consolidation of an integrated regional financial market, essential for mobilizing local savings and reducing dependence on external financing.

• A measure that supports macroeconomic objectives

The reform comes at a time when Cameroon is seeking to achieve more sustained growth. According to the country’s budget forecasts for 2026, economic growth is expected to accelerate to around 4.3%, driven by the non-oil sector, agriculture, telecommunications, and financial services. This positive trend is also linked to controlled inflation (projected at 3.0% in 2026), a sign of a more stable macroeconomic environment. In this context, facilitating investment in government securities not only encourages the mobilization of resources to finance infrastructure development but also strengthens investor confidence in the stability and predictability of the economic framework.

“At a time when CEMAC states are facing considerable financing needs, a dynamic and fiscally incentivizing public securities market is becoming a strategic element of development.”

• A Subregional Financial Integration Mechanism

The exemption from the IRCM (Income Tax on Capital Gains) on government securities also aligns with the logic of financial integration among CEMAC member states. By harmonizing the tax treatment of income from government securities, the measure helps eliminate a source of distortion between national markets, a classic obstacle to capital market integration in Africa. Lowering tax barriers fosters a more fluid and competitive regional market. A truly integrated financial architecture would allow CEMAC economies to pool their resources, share risks, and respond more effectively to long-term investment needs, particularly in infrastructure, energy, and transportation. Furthermore, an integrated market can attract international investors seeking investment opportunities with high net returns and low tax costs.

• What are the potential risks?

Despite its many advantages, this measure is not without its challenges. Extensive tax exemptions can temporarily reduce public revenue if not offset by an increase in the issuance of government securities. Furthermore, excessive tax exemptions can lead to lost revenue for national budgets and limit states’ ability to finance social or infrastructure spending. This has been highlighted inother countries in the region where widespread tax exemptions have led to significant revenue losses.

“This reform must therefore be accompanied by good fiscal governance and a clear strategy for growing the public securities market to ensure that the exemption does not result in greater pressure on other sources of revenue. Transparency and efficiency in securities issuance are essential to attracting investors without compromising fiscal sustainability.”

Conclusion

The extension of the IRCM exemption on public securities in the 2026 Finance Law is a measure that can play a central role in mobilizing local and international savings, in boosting financial markets, and in sub-regional economic integration. To fully realize this potential, close coordination between the fiscal, monetary, and financial authorities of the CEMAC region is essential to ensure a stable fiscal framework, prudent debt management, and gradual market integration. If these conditions are met, the IRCM exemption can become a key driver of inclusive growth and the financial sovereignty of the sub-region.

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