(Business in Cameroon) - In 2019, the foreign exchange assets CEMAC countries kept in the operations accounts opened at the French Treasury generated about XAF13 billion of interests. This is revealed by the operations account’s management report published by CEMAC countries’ central bank BEAC.

Year over year, this represents a 35% increase. In addition, this is the second consecutive year the assets are generating interest after the XAF9.5 billion they generated in 2018.

This performance is spurred by two factors. The first is a significant improvement in the percentage of the foreign reserves the countries should centralize in the operations account. The second is the interest rate, which has been stable compared with that applied in the market.

Under the operations account agreement between the Beac and the French Treasury, CEMAC countries must centralize 50% of their foreign reserves in this account. This money is remunerated at a fixed rate of 0.75% when European Central Bank (ECB) rates are below this level and 1% when the rates are above it.

During the period under review, the ECB lowered its rates to almost 0.25% but the stability close (0.75% interest rate when below) proved to be an asset. In addition, the BEAC managed to centralize close to 107% of its member countries’ foreign exchange reserves in that account.  

Debates

The public is widely divided about this rule asking CEMAC and WAEMU countries to centralize part of their foreign exchange reserves in operations accounts opened with the French Treasury. According to dissidents, this is a neo-colonial agreement being used by France to rob its former colonies. Unorthodox and non-transparent management practices in the Beac reinforced that view.

However, looking at the figures contained in the management report, it appears that the mechanism currently in place benefits the sub-region. All foreign currency assets centralized by the Beac are already converted into local currency (FCFA) for the benefit of their various beneficiaries. Even if there is a time lag between the time the interest rates are determined and the time when they are settled, they are similar to profits made on investments.  

In a European capital market, where the main key borrowing rates are below zero, it is rather a positive alternative for the Beac to have its reserves in this operations account. Critics of this choice, however, believe that the loss of opportunity is significant. According to them, the Beac could invest its foreign exchange reserves in investments that would yield much more than 0.75% returns.

On the other hand, the debate that has never been held is that of the fate of the other 50% of foreign currency assets left to the management of the States. Neither the CEMAC countries nor their West African counterparts are sufficiently transparent on this issue. According to data from the Bank for International Settlements, the assets held by international banks on CEMAC's counterparties (States, Enterprises, Banks, Households and others) amounted to $5.1 billion (XAF3060 billion) as of end December 2019. With the banks’ shares deducted, this will remain $4.6 billion (XAF2760 billion).

Idriss Linge