(Ecofin Agency) - The Central Bank of Central Africa is easing its monetary policy to support the recovery, despite IMF warnings about macroeconomic fragility and ongoing imbalances in the CEMAC region.
The Bank of Central African States (BEAC) has lowered its key interest rates for the first time since 2023, signaling a shift toward looser monetary policy in the CEMAC region. Meeting in Malabo on Monday, March 24, 2025, BEAC announced it was cutting its main policy rate from 5.00% to 4.50%. It also lowered the marginal lending facility rate from 6.75% to 6.00%, while keeping the deposit rate at 0.00% and leaving reserve requirements unchanged.
This move comes at a time when inflation in the region is easing and foreign exchange reserves are showing signs of improvement. BEAC explained that the rate cut is based on a more stable macroeconomic environment. Inflation is expected to drop to around 2.9% in 2025, down from over 4% last year bringing it below the regional threshold of 3%. Foreign reserves currently stand at CFA7,584.9 billion (about $12.48 billion), enough to cover nearly 4.8 months of imports, up from 4.6 months in 2024.
But the timing of this policy shift is raising eyebrows. Just last month, the International Monetary Fund (IMF) called for more caution. In its latest assessment, the IMF described the region’s macroeconomic situation as “fragile.” Economic growth slowed in 2023, held back by falling oil production, with real GDP growing only 2.5%. Although a slight recovery was noted in 2024 and is expected to continue in 2025, growth remains modest, with forecasts at 2.8%.
The IMF also flagged concerns about the region’s worsening external position and its struggle to meet targets for net foreign assets. The goals set for the end of 2024 were not reached. The Fund urged governments to step up budget discipline, improve tax collection outside the oil sector, cut back on energy subsidies, and strengthen debt management.
What Does This Mean for the Market?
Despite these warnings, BEAC appears to be betting on a gentle push for growth. For member states, lower interest rates could ease financing costs. Several CEMAC countries have increased their borrowing on regional markets in recent years, and this move could lead to a gradual drop in bond yields offering some fiscal relief.
Still, investors, especially those holding sovereign debt from the region, will be watching closely. BEAC’s message is clear: it wants to support growth, but the path forward is uncertain. There’s also the risk of pressure on the CFA franc if the looser monetary stance weakens the currency.
While BEAC’s West African counterpart, the BCEAO, is holding steady with a more cautious approach, BEAC is taking a bolder step. Whether this change will be backed by deeper reforms remains to be seen. Leaders from the six CEMAC countries Cameroon, Central African Republic, Congo, Gabon, Equatorial Guinea, and Chad pledged to implement reforms during a special summit in December 2024. But the IMF says progress has been slow so far.