(Business in Cameroon) - Between August 7 and 11, 2023, BEAC, the central bank of CEMAC countries, carried out a liquidity absorption operation. The operation aimed to absorb CFAF400 billion of liquidity from the banking circuit but, CFAF300 billion was transferred by commercial banks.  

By stepping up its liquidity absorption operations, which now consist in making a recovery offer of CFAF200 billion every week, BEAC intends to further tighten access to bank credit in the Cemac region. This restrictive monetary policy –suspension of liquidity injection operations, intensification of liquidity absorption operations, and multiple increments of the central bank’s key rates– aims at curbing rampant inflation, the central bank explains. 

The intensification of the liquidity absorption comes as no surprise. At the second session of its Monetary Policy Committee (MPC), held on June 26, 2023, Abbas Mahamat Tolli, governor of the BEAC, clearly envisaged this hypothesis, to curb inflation projected at 6.1% in 2023 (twice the tolerance threshold of 3% accepted in the Cemac), due to the international situation marked in particular by the persistence of the war between Russia and Ukraine.

Imported inflation

As Abbas Mahamat Tolli explained during the press conference that marked the CPM meeting of June 26, 2023, despite the tightening of monetary policy in recent months, interbank transactions in the Cemac zone have increased. In other words, as the conditions to get financing from the central bank were getting more restrictive, commercial banks have upped their recourse to interbank financing.  This enabled them to continue to finance economic agents despite the central bank’s restrictive monetary policies. 

The intensification of the liquidity absorption operations aims primarily to reduce the liquidity available in the interbank market.  With that measure, the central bank hopes to impact the share (20%) of global inflation that is of monetary origin (according to  Abbas Mahamat Tolli).

With  Abbas Mahamat Tolli explaining that 20% of the overall inflation is from monetary origin, it becomes clear why the forecasted inflation is still way above the 3% community threshold despite the restrictive monetary policies being applied by the central bank for months now. Indeed, those measures do not influence the remaining 80% of inflation, which is not of monetary origin,  but rather imported due to the sluggish international market.

Brice R. Mbodiam