(Ecofin Agency) - At the opening of an urgent CEMAC summit Monday in Yaoundé, Cameroon’s President Paul Biya called on his regional counterparts to take immediate steps to revive their economies. The summit, attended by leaders from the community addressed growing concerns about a looming economic and financial crisis.

“I am confident that during this summit, we will make the necessary and urgent decisions to get our economies back on track and protect ourselves from a potential economic and financial crisis,” said President Biya.

He continued, “In these challenging times, we need more solidarity, commitment, and determination to overcome the situation. We have the means to do so. Let’s use this opportunity to adopt concrete measures that will strengthen our economies and stabilize our public finances. I am certain that in this difficult period, we can count on our development partners, who have always supported us when we needed their help.”

The summit, attended by officials from the IMF, World Bank, African Development Bank (AfDB), and the French Finance Minister, comes as CEMAC countries face increasing economic difficulties.

Falling Reserves and Banking Sector Challenges

One major concern is the sharp decline in foreign currency reserves. According to official data, reserves now cover only 2.1 months of imports, far below the minimum threshold of 4 months. This worrying trend adds to instability in the region’s banking sector.

In Cameroon, CEMAC’s largest economy, the rate of overdue bank loans rose by 11% as of June 2024. At the same time, Congo’s plan to restructure its CFA2.3 trillion debt over 10 years on the CEMAC public securities market is raising alarms.

CEMAC banks hold around 80% of public securities issued by member states. If Congo struggles to manage its debt repayment plan, it could hurt bank liquidity and trigger financial losses. Analyst Viviane Ondoa Biwolé, an economist at the University of Yaoundé II, explained: “If the debt restructuring is not handled properly, Congo may accumulate payment arrears, leading to penalties and higher interest rates. This could harm the country’s reputation among investors and creditors, making it harder to secure future funding.”

Ondoa Biwolé also noted that banks holding a significant share of public debt could face serious financial risks. Delays or poor management of debt repayment could weaken these banks, affecting their ability to provide loans and maintain financial stability.

S&P Downgrades Congo’s Credit Rating

The American rating agency Standard & Poor’s (S&P) has already reacted to Congo’s debt restructuring plan. In October 2024, S&P downgraded Congo’s credit rating from “B-” to “CC,” just two levels above default.

S&P warned that Congo might struggle to attract investors for its restructuring plan and could end up having to repay CFA1.5 trillion by the end of 2026. This would worsen the country’s cash flow problems, given that it already spends over 60% of its domestic revenue on debt repayments. By the end of 2024, Congo’s debt is expected to reach 94.5% of its GDP, far above the CEMAC limit of 70%, according to IMF projections.

Urgent Regional Reforms Needed

To address the crisis, the Yaoundé summit is expected to deliver a strong regional commitment from CEMAC leaders. Experts like Viviane Ondoa Biwolé stress that reforms are needed to stabilize foreign reserves and reduce risks to the banking sector. These measures are seen as critical for restoring macroeconomic stability in the region.