The Nkafu Policy Institute at the Denis and Lenora Foretia Foundation has released the 2020 report on BEAC’s Monetary policy and its effect on Cameroon. This was during a press conference organized at the institutions’ headquarters in Yaounde Wednesday 13th January 2021. Opening the session, the Chief Operating Officer at the Denis and Lenora Foretia Foundation Fri Asanga said the operational recommendations in this report they hope will be widely disseminated in order to inspire decision-makers to propose policies and reforms that will effectively transform Cameroon’s potential for the benefit of its citizens
The event that brought together members of the civil society, journalists and policymakers had as objective to present Cameroon’s socio-economic situation before the start of the Covid-19, its economic and social repercussions as well as BEAC’s responses; conduct an analysis on the contribution of monetary policy to the resilience of the Cameroonian economy in 2020 as well as to make some monetary policy recommendations to both the sub-regional monetary authorities and the Cameroonian authorities in favor of more resilient monetary and economic policies
The Monetary Policy Report published by the Nkafu Policy Institute analyses the contribution of the monetary policy conducted by the Bank of Central African States (BEAC) to strengthening the resilience of the Cameroonian economy in 2020. More specifically, it examines whether the monetary policy decisions taken by the CPM have influenced the general price level, the average overall effective rates practiced by financial institutions and their deposit and credit operations, as well as the evolution of monetary aggregates.
According to the Nkafu Policy Institute, Cameroon has been affected by the COVID-19 pandemic since 2020, the consequences of which, at the health, economic and social levels, have forced the authorities to take a series of measures to halt the spread of the disease, including social barrier and distancing measures, as well as the cessation of activities in several sectors. In a monetary union such as the Central African Monetary Union (CAMU), where fiscal policies are decentralized to the national level, the single monetary policy would play a major role in absorbing the effects of symmetrical shocks on aggregate demand and supply. In this context, the Bank of Central African States (BEAC) through its Monetary Policy Committee (CPM) has taken a series of initiatives to limit the impact of the shock on the economies by deciding to conduct an accommodating monetary policy. The report says of the main measures taken by the issuing institution, it notes the decrease in the Bidding Interest Rate from 3.5% to 3. 25%; setting the Marginal Lending Facility Rate at 5%; setting the reserve requirement ratios at 7.00% on-demand liabilities and 4.50% on term liabilities; suspending the liquidity sterilization operations, which had started in February 2020, in favor of refinancing the banking system in order to anticipate the effects of the health crisis of the COVID-19; increasing the amount of the overall envelope that could be made available to credit institutions in CEMAC countries to 500 billion.
The report seeks is to analyze the contribution of the monetary policy conducted by the Bank of Central African States in strengthening the resilience of the Cameroonian economy in 2020. More specifically, it examines whether the monetary policy decisions taken by the Monetary Policy Committee (MPC) have influenced the general price level, the average overall effective rates practiced by financial institutions and their deposit and credit operations, as well as the contribution of monetary aggregates to growth. The study uses data from secondary sources from the databases of several national, supranational, and international institutions as well as statistical analysis tools. In terms of results, it generally appears that the actions carried out by the Issuing Institution have contributed to a limited extent to the strengthening of macroeconomic resilience in Cameroon in the context of Covid-19. The main reason the report notes is that most Cameroonian banks are excessively liquid and therefore insensitive to any expansionary monetary policy of lowering the key rate. The contributions of monetary aggregates have had very little influence on the pace of growth. The evolution of the aggregate effective rates charged by money-creating banks and the demand, time, and savings deposits of financial institutions have not kept pace with the central bank’s key rate, which penalizes consumption and increases inflationary pressures
In light of these main findings, the study makes the following recommendations
(1) The Bank of Central African States (BEAC) through the Banking Commission in Central Africa (COBAC) should multiply its efforts to encourage commercial banks to more easily grant credit to individuals and Cameroonian Small and Medium Enterprises (SMEs). The CPM, in accordance with its remit, can demand more reserves from banks that would grant less credit to economic agents and reduce the rate of remuneration of their sight and term deposits with the central bank. It may also make their intervention in the interbank market, their participation in auctions, and the granting of standing facilities conditional on strict compliance with this measure.
(2) BEAC should ensure that their lending and deposit rates from secondary banks reflect the Interest rate on Calls for Tenders(TIAO)in order to improve the functioning of the interest rate channel. Such a measure, which facilitates access to financing for SMEs, would enhance the effectiveness of the monetary policy, particularly in times of crisis.
(3) BEAC should instead consider a policy of inflation targeting to the detriment of price-level targeting. By setting expectations on price developments, inflation targeting would enable the BEAC to provide greater incentives for banks to facilitate access to credit and encourage consumers to spend while guaranteeing financial and macroeconomic stability.
Cameroon’s Monetary Policy was born out of the need to evaluate the decisions taken by the Monetary Policy Committee (MPC) of the Bank of Central African States (BEAC) on the activities of economic agents (firms, households) and the general price level. These are reflected in three main transmission mechanisms, namely: interest rates (interest rate channel), stock prices (other asset price channel), and the amount of loans offered by commercial banks (credit channel).
The objective is to analyze and evaluate the effects of the decisions of the BEAC’s monetary policy committee on access to credit, interest rates, and consumer price trends in the CEMAC zone, particularly in Cameroon. To achieve this general objective, the report focuses on assessing the contribution of BEAC’s monetary policy to the promotion of free enterprise in the Economic and Monetary Community of Central Africa (CEMAC), with frictions on the credit market to be taken seriously and also to analyzes the impact of a change in the tender interest rate (TIAO) or any other MPC decision on commercial bank interest rates and access to credit, price levels, etc.
This report was written under the direction of Dr.Jean Cédric KOUAM, Economic Policy Analyst and Head of the Fiscal and Monetary Policy Subsection in the Economic Division of the Nkafu Policy Institute. He holds a Ph.D. in Economic Policy and Analysis (Monetary and Financial Macroeconomics) from the University of Dschang in Cameroon. Since graduating from the University of Yaoundé II in 2012 with a post-graduate degree in Mathematical Economics and Econometrics, he has taught courses in economics, finance, and macroeconomic modeling at several private graduate schools in Cameroon. A member of various research groups and laboratories in Cameroon and abroad, his research interests focus on the economic development of Africa, the economic resilience of states, the effectiveness of cyclical and structural policies, the policy mix of the monetary union, and sustainable development. A former French Government Fellow (doctoral research fellowship), he has been invited on several occasions to the University of Poitiers in France (Centre de Recherche sur l’Intégration Economique-CRIEF) as well as to international conferences of the Canadian Economics Society in Canada. In addition, Dr. Kouam has undertaken research stays at the Bank of Central African States (BEAC) where he is currently engaged in numerous research projects with executives. He holds two certificates from the International Monetary Fund (IMF) Institute for Capacity Building, one in debt management in low-income countries and another in financial programming and policy.
Team of investigators include the following
Ulrich D’POLA KAMDEM, Senior Economist at the Nkafu Policy Institute and Coordinator of the Nkafu Policy Institute. He joined the Institute as a contributing economic policy analyst (part-time) and then as a full-time economic policy analyst in 2018. He has more than four years of professional experience teaching subjects related to economics and quantitative finance in Cameroonian universities. He holds a Master’s degree in Applied Economics from the Postgraduate Inter university Program (PTCI) of the University of Yaoundé II. He also holds a Master’s degree in Monetary Economics from the University of Douala. Since 2017, Ulrich has been an economist-consultant for several local and international media outlets where he provides insightful and in-depth analysis on economic issues affecting African countries in English and French. In 2020, he obtained a certificate of competence on “Making the African Continental Free Trade Area (AfCFTA) work” issued by the United Nations Economic Commission for Africa -ECA (Addis Ababa, Ethiopia) and the African Institute for Economic Development and Planning -IDEP (Dakar, Senegal). Finalist of the CEDIMES 2015 Excellence Award in Paris-France, her areas of interest include financial inclusion, international economics, poverty reduction, monetary and development economics and entrepreneurship.
DINGA APOLLINARIS TAMBI , a research assistant at the Denis and Lenora Foretia Foundation. He holds a Master’s degree in International Cooperation / Decentralized Cooperation for Development (2015-2017) and a second Master’s degree in International Relations from the Department of International Economics (2017-2019) both from the Institute of International Relations of Cameroon (IRIC). He has worked as a financial officer and project developer for some private companies, volunteered as a partnership project manager for the African Science Policy and Diplomacy Network and also as a project manager for the AFUH FOUNDATION. He is passionate about international economics, socio-economic development, business development and international marketing
BALLO NGOMNA, a research intern at the Nkafu Policy Institute. He is a graduate of the Institute of International Relations of Cameroon (IRIC) where he studied international cooperation, humanitarian action and sustainable development. He has a particular interest in issues related to environmental management and sustainable development with a focus on how to initiate an African perception in the understanding of environmental problems and provide an Afro style for the implementation of sustainable development. He has more than two years of professional experience gained through volunteer work in local and international non-governmental organizations. He also holds a Bachelor of Science in Geography from the University of Buea. His areas of interest include development analysis, project management, strategic planning, environmental impact assessment, water and sanitation, corporate social responsibility and sustainability management.
TCHEGHO Maurice, a research intern at the Nkafu Policy Institute. He is an expert in decentralized cooperation for local development. He holds a Master’s degree in International Relations, with a specialization in International Cooperation, Humanitarian Action and Sustainable Development (CA2D), obtained from the Institute of International Relations of Cameroon (IRIC). He has previously worked as an intern at the National Program of Participatory Development (PNDP) and as a Civil Protection Officer at the TOUMBI SAFETY firm. Subregional financial authorities (MINEFI, BEAC, CPM, COBAC, COSUMAF, etc.) and representatives of international organizations with economic and financial expertise in Cameroon (IMF, World Bank)Private and public sector organizations (GICAM, private, public and mixed capital banks, microfinance)
Download full report here https://nkafu.org/report-on-the-effects-of-monetary-policy-in-cameroon/
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The Denis & Lenora Foretia Foundation was created to catalyze Africa’s economic transformation by focusing on social entrepreneurship, science and technology, innovation, public health, and progressive policies that create and expand economic opportunities for all. The Nkafu Policy Institute a Think Tank within the Foundation that focuses on using independent analysis to inform public debate. Its mission is to advance public policies that help all Africans prosper in free, fair, and democratic economies. The Institute has distinguished itself as a leading research center in Cameroon, committed to promoting open debate that builds consensus toward a democratic future.Cameroon: Opposite Collège Jésus-Marie Simbock PO Box 13415 -Yaoundé, Cameroon Phone number:+237 222 31 15 84 United States8005 Dancing Fox Road Atlanta, Georgia30032 +1 678 223 3746 For general information, please contact us at the following address: [email protected]