CI-NEWS

BEAC dispels FCFA devaluation allegations.

2020-05-31

No: 498

BEAC dispels FCFA devaluation allegations.

Contrary to speculations by some economists, the Bank of Central African States (BEAC) has announced that its foreign reserves are stable and represent five months of importation. The announcement dismisses fears that the FCFA might face devaluation. In a statement, the bank indicates that the reserves, as at May 10, 2020 stand at FCFA 5, 348.8 billion, up from FCFA 4, 113 billion reserved at this same time last year. The increase of over FCFA 1, 000 billion represents some a 30 per cent growth in the foreign reserves.

The bank has attributed this performance to the effective implementation of foreign exchange regulations. The rigorous measures taken to cushion the impact of the Covid-19 pandemic in the economies have also played a crucial rule. Support from development partners like the African Development Bank, AfDB, the World Bank and the international Monetary Fund have contributed in rendering the Sub region more resilient.

Denying the allegations, the bank said the pandemic had not impacted its currency reserves, which remain “comfortable”.

The speculations were sparked some three weeks ago, when the Bank of Central African States, BEAC, published the monetary policy report that inspired the steps it rolled out to fight the Covid-19.

The report indicated that the bank found itself in a dilemma as it needed funding to deal with the impact of the new pandemic, in addition to its normal drive to preserve the uniformity between the FCFA and the Euro.

The drastic and sustained drop in oil prices in the last few years caused a sharp drop in external reserves. It was in response to the imminent challenges associated with this that CEMAC member countries opted for a budgetary adjustment with the assistance of the international Monetary Fund when they met at an extra-ordinary summit in 2016. “The level of foreign exchange reserves in the zone stood at 3.2 months 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, knowing that 5 months are required for countries exporting raw materials like those of CEMAC”, part of the report indicated.

Firm directives were given and the results have become evident. The foreign reserves have grown from 3.2 to five months of total imports. “If CEMAC countries harmonise the fight against Covid-19 its economic and financial consequences, the macroeconomic situation would be stabilized sooner”, BEAC cautioned at the beginning of 2020.

Culled from Cameroon Insider

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BEAC dispels FCFA devaluation allegations.