Central Africa: Beac is trying to catch its blunder on the risk of devaluation of the CFA franc
"Contrary to information disseminated by certain media, suggesting a possible devaluation of the CFA franc, the evolution of the Covid-19 pandemic in the emission zone has not negatively influenced the level of foreign exchange reserves, which remains comfortable", Said the Governor of the Bank of Central African States (Beac) in a press release made public on May 12, 2020.
According to Abbas Mahamat Tolly (photo), “at May 10, 2020, Beac's foreign exchange reserves stood at CFAF 5 billion, representing almost 348,8 months of imports of goods and services, for an external currency coverage rate of 5%".
This speech is the opposite of that contained in the March monetary policy report. It was this document, made public on April 27, that served as the basis for media articles indexed by the governor of the central bank. "The level of foreign exchange reserves in the zone stood at 3,2 of imports of goods and services at the end of December 2019, a level barely above the minimum threshold of 3 months of imports of goods and services ”, notes Beac in this document.
"A rapid and large-scale spread of the Covid-19 crisis (…) would translate into a real threat to the external stability of the currency, thus underlining the fact that in the absence of budgetary adjustment and consequent mobilization of external financing, Beac would again be subject to the same risks on the parity of its currency only at the end of 2016She warns later in this report.
"This subliminal message on devaluation is a big communication error", had entrusted to Investir in Cameroon, a former Beac executive asked to comment on the document. Within the issuing institution, we admit indeed that the statement on the risk on the currency parity should not have been found in the report. "We missed it during the proofreadingConfesses an internal source. The governor's press release of May 12 tends to confirm this.
According to his collaborators, Abbas Mahamat Tolly wishes to avoid this alert again fueling rumors about the devaluation of the CFA franc. "These rumors can negatively affect economic activity in Cemac [Economic and Monetary Community of Central African States] and cause economic agents and investors to postpone their investment decisions or make fraudulent currency outflowsHas always worried the Chadian since his arrival at the head of the central bank in February 2017.
In addition, the reference to risks on parity contained in the monetary policy report for the month of March is contrary to the doctrine in the Cemac zone. This regional economic community has chosen to favor a budgetary adjustment to respond to economic shocks. An option reaffirmed by the heads of state of Cemac at the extraordinary summit in December 2016, held in Yaoundé.
Furthermore, Abbas Mahamat Tolly knows that questions relating to the modification of the parity between the CFA franc and the euro “come under political power" It is therefore unwelcome for Beac to venture there, although its mission is to "guarantee currency stability" Article 2, paragraph 12, of the Monetary Cooperation Agreement between the Cemac States and France states that parity "may be modified after consultation between the signatory States, taking into account the requirements of the economic and financial situation of the Member States».
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