What is CEMAC’s Policy on Currency and Foreign Exchange Reserve?

Introduction

Exchange rate policy refers to the set of measures and rules that monetary authorities implement to manage the value of the national currency in foreign currencies. It aims to achieve economic objectives such as price stability, export competitiveness, and balance of payments equilibrium (BEAC, 2020). In the CEMAC zone, the determinants of exchange rate policy include the economic structure of member countries, their dependence on commodity exports, and commitments to the franc zone. The Bank of Central African States (BEAC) regulates the money supply to maintain inflation targeted at 3% while coping with external economic shocks that affect monetary stability (BEAC, 2024; Kouam, 2020). This policy brief will analyze currency and foreign exchange reserve policy in the CEMAC zone, the enhanced role of the central bank, and recommendations for improving currency management in the CEMAC zone.

1. What is the currency and foreign exchange reserve policy in the CEMAC zone?
1.1. The common legislative framework

The common legislative framework for currency and foreign exchange reserves in the CEMAC zone is based primarily on Regulation N°02/00/CEMAC/UMAC/CM of April 29, 2000, which harmonizes foreign exchange regulations for all member states, including Cameroon. This framework aims to guarantee monetary and financial stability by regulating capital movements, current transactions, and the repatriation of export earnings.

Key provisions include the compulsory declaration of foreign investments and loans exceeding this threshold to the financial authorities. In addition, foreign currency imports are subject to specific duties, and manual foreign exchange transactions must be carried out by authorized intermediaries. Transfers of funds abroad require strict compliance with administrative requirements, reinforcing the transparency and traceability of financial flows. This framework aims to prevent uncontrolled capital outflows, ensure optimum management of BEAC’s foreign exchange reserves, and preserve the balance of payments of member countries.

1.2. Liberalization of Payments

Foreign exchange and foreign reserves policy in the CEMAC zone is based on the principles of control and gradual liberalization to guarantee economic stability. Governed by the Bank of Central African States (BEAC), this policy is designed to strengthen the economic resilience of the six member countries. Current regulations are based on Regulation n°02/18/CEMAC/UMAC/CM, which defines the rules governing foreign exchange and capital movements. Current transactions, such as imports and exports, are free, but capital movements, including investments abroad, remain regulated. This approach is designed to prevent capital flight and preserve the foreign exchange reserves centralized at the BEAC.

The BEAC has also modernized its financial infrastructure, notably via the Automated Large Value Transfer System (SYGMA) and the Central African Teleclearing System (SYSTAC), facilitating regional and international transactions. These reforms support economic integration and financial inclusion. Despite this progress, the CEMAC zone maintains strict regulation of capital movements to prevent the risk of destabilization. This framework reflects a balance between liberalization and control, adapted to the economic and monetary context of member countries.

1.3. Currency control and management mechanisms

The Communauté Économique et Monétaire de l’Afrique Centrale (CEMAC) has put in place rigorous currency management and control mechanisms, aimed at ensuring the region’s monetary and financial stability.
Under Regulation n°02/18/CEMAC/UMAC/CM, residents are required to repatriate export earnings in foreign currency and transfer them to the Banque des États de l’Afrique Centrale (BEAC) within 30 days of receipt. This measure is designed to centralize foreign exchange reserves and strengthen BEAC’s ability to maintain monetary stability.

The Commission Bancaire de l’Afrique Centrale (COBAC) ensures compliance with solvency, liquidity, and internal control standards. It ensures that authorized intermediaries comply with foreign exchange regulations. To prevent money laundering and the financing of terrorism, travelers entering or leaving the CEMAC zone must declare at customs any currency, securities, or valuables equal to or exceeding a set threshold.

2. The enhanced role of the central bank.
2.1. Management of BEAC foreign exchange reserves

Foreign exchange activity and the management of foreign exchange reserves are governed in the CEMAC sub-region by Regulation n°02/18/CEMAC/UMAC/CM of December 21, 2018, which “defines the organization, as well as the terms and conditions for carrying out foreign exchange operations in CEMAC member, states”. Article 3 specifies its scope, which encompasses the payment and settlement of current or capital transactions to or from abroad, as well as manual foreign exchange operations by all economic agents, whether resident or not. The BEAC is therefore fully equipped to carry out one of its functions, which is to hold and manage the foreign exchange reserves of each member state and to promote its financial stability (Article 1 of the BEAC statutes).

All the more so since, as the Central Bank of the Central African Monetary Union (UMAC), it enjoys independence both in the pursuit of its objectives and the exercise of its missions and functions (article 5.2 of the BEAC statutes). The BEAC’s currency management is governed by the Monetary Cooperation Agreement between the UMAC member states and France, which defines the fixed parity between the CFA Franc XAF and the Euro, and establishes the principle of convertibility of the CFA Franc guaranteed by the French Republic.

2.2. Extractive Industries Foreign Exchange Management Act

The regulatory framework for foreign exchange reserve management has been extended to the activities of companies operating in the mining sector. This is the essence of Regulation N°1/CEMAC/UMAC/CM on the implementation of certain provisions of the foreign exchange regulations by resident extractive companies. The first article sets out the purpose of the text, which is to define the rules governing the implementation of the obligation to repatriate foreign currency assets held outside the CEMAC zone, as well as those relating to the declaration and domiciliation of both imports and exports by resident extractive companies.

It also establishes the normative framework for determining the rules under which companies subject to the law will set up funds to rehabilitate sites at the end of their operations. Based on foreign exchange regulations, Article 2 sets out the principle: “Resident extractive companies are subject to the obligation to repatriate foreign currency held, for whatever reason, outside CEMAC in the course of their activities”. However, sanctions are provided for indelicate operators in this business sector. For example, a fine of 150% of the amount of funds not domiciled or repatriated to a State by a non-compliant extractive company has been introduced (Article 8 of Regulation N°1/CEMAC/UMAC/CM).

Policy recommendations

  • Adaptation of macroeconomic frameworks: This includes the implementation of strict budgetary rules to manage oil revenues and limit their volatility.
  • Strengthening common reserves: This would require a proportional contribution from member states, ensuring greater resilience to external economic shocks.
  • Private-sector-led growth: We recommend suspending the payment of taxes for newly registered companies for 3-5 years (after consulting the largest group of companies in Cameroon and the sub-region). Suspension of import duties for machinery destined for the agricultural, energy, manufacturing, and transport sectors.
  • Subsidies must be linked to production: All companies receiving government subsidies should increase their production by 20-30% each year, and at least 10% of their production should be sold in the sub-region. If the government intervenes, it has an interest in stimulating exports.

Conclusion

Exchange rate policy and foreign exchange reserve management in the CEMAC zone play an important role in the sub-region’s economic and monetary stability. Although legislative and regulatory frameworks have made it possible to control capital flows, regulate current transactions, and centralize foreign exchange reserves, challenges remain, particularly about the volatility of oil revenues and external economic shocks. Thanks to its reforms and independence, the BEAC remains a key player in monetary management, notably through the modernization of financial infrastructures and rigorous capital controls. To further improve economic resilience, structural reforms and policies favoring the private sector, economic diversification, and better management of extractive resources are essential.

List of references

1. Règlement n°02/18/CEMAC/UMAC/CM portant Réglementation des changes dans la CEMAC. https://www.beac.int/wp-content/uploads/2019/03/REGLEMENT-02_18_CEMAC_UMAC_CM-compressé.pdf
2. Règlement N°02/00/CEMAC/UMAC/CM du 29 avril 2000 portant harmonisation de la Réglementation des Changes dans les Etats membres de la CEMAC. https://www.juriafrica.com/lex/reglement-02-00-cemac-umac-cm-29-avril-2000-13581.htm
3. Règlement N°1/CEMAC/UMAC/CM portant modalités de mise en œuvre de certaines dispositions de la réglementation des changes par les entreprises extractives résidentes. https://www.beac.int/wp-content/uploads/2022/05/Reglement-01-CEMAC-UMAC.pdf
4. BEAC, (2020). Présentation générale de la Politique de Change. https://www.beac.int/p-des-changes/presentation_generale_de_la_politique_de_change/
5. BEAC, (2020). Réforme des systèmes et moyens de paiement de la CEMAC. https://www.beac.int/systemes-paiement/presentation-generale/
6. Kouam Tamto H. (2020). Bi-Directionality in FX Reserves and Domestic Exchange Rates in the CEMAC Region, Journal of applied economics and business. http://www.aebjournal.org/articles/0802/080201.pdf

AUTHORS

Dang Attouh
Research Fellow
&
Haiwang Djamo
Research Analyst
&
Henri Kouam
Economist & Executive Director

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