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Yaoundé - 13 August 2020 -
Finance

CEMAC: BEAC plans to buyback XAF600 bln of members’ debt

CEMAC: BEAC plans to buyback XAF600 bln of members’ debt
  • Comments   -   Thursday, 23 July 2020 11:41

(Business in Cameroon) - During its July 22 videoconference presided by Abbas Mahamat Tolli, the BEAC’s Monetary Policy Committee (MPC) authorized a punctual targeted bond buyback program aimed at purchasing (on the secondary debt market) public securities issued by CEMAC countries.  

According to the committee, this program falls within the framework of the complementary and exceptional monetary policies proposed by the BEAC’s management to help CEMAC countries deal with the economic consequences of the coronavirus health crisis.

Public securities are certificates of indebtedness issued by countries to those who lend them money. Each of these certificates has a deadline (maturity period) at the end of which the borrowing country starts paying its debt. Nevertheless, when the holder of the certificate needs cash, he/she can sell it to someone who can wait for that deadline. This decision by the MPC, which is somehow a way to buyback member countries’ debts and get paid later, thus authorizes the BEAC to buy the securities from holders who currently need money due notably to the economic impacts of the coronavirus.

Overall, the volume of securities to be repurchased is capped at XAF600 billion and the maximum maturity period of public securities to be considered is 10 years. In short, securities that would mature after the coming ten years are not considered in this operation.

For the time being, there is no indication of when this program would be launched, but it is set to last six months, extensible by additional six months depending on the needs and the 2021 economic outlook.

During its lifetime, the program will make public securities attractive since investors are assured that they would sell their assets to the BEAC when they have one-off cash needs. It should also relax financing conditions for countries, which are struggling because of the coronavirus pandemic.

To benefit from the program, public treasuries are invited to revise their provisional timetable in collaboration with the primary dealers of their respective networks. These revisions must be the latest finance bills adopted by each country and budget support plans in the framework of economic and financial programs with the IMF, the committee informs.  

Sylvain Andzongo

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