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IMF says regional economic growth in Africa affected by low oil price, mounting insecurity

Xinhua, January 9, 2016 Adjust font size:

Economic growth rate in the six-nation Economic and Monetary Community of Central Africa (CEMAC), the sub-region of African continent, dropped to 2 percent down from an estimated 4 percent in 2015, visiting Managing Director of the International Monetary Fund (IMF) Christine Lagarde said here on Friday.

According to her, tighter public spending, economic diversification and greater regional trade are needed to spur growth in the sub-region that has been hampered by plunging oil prices and security threats.

"Growth in the resources-rich CEMAC bloc including Cameroon, Central African Republic, Chad, Congo-Brazzaville, Equatorial Guinea and Gabon slowed in 2015 to around 2 percent and will increase only slightly this year. The prolonged slump in oil prices presents a new reality for CEMAC," she said while meeting with officials from the Cameroonian government and CEMAC.

"An adjustment in large scale investment plans may be necessary in the short run, to preserve fiscal viability and debt sustainability in the medium term," she said.

In fact, global oil price dropped from over 100 U.S. dollars a barrel since June 2014 due to over-supply worldwide, to around 30 U.S. dollars a barrel this week, which provides a major challenge for countries in Central Africa whose economies rely largely on exports of oil. Oil is produced in five of the six countries of the sub-region, including Cameroon, Chad, Congo-Brazzaville, Equatorial Guinea and Gabon.

Some countries have been hit harder than others. "Equatorial Guinea experienced a severe contraction, while Cameroon saw some robust growth," Lagarde said.

The IMF Managing Director added that the economies have also been hit by security concerns, particularly on attacks by the Islamist Boko Haram terrorist group of north-eastern Nigeria which has carried out many attacks in the Far-North Region of Cameron as well as other countries bordering Lake Chad, including Chad, Niger and Nigeria, thus disrupting economic activity and diverting spending from social programs to the defence forces.

An ambitious reform agenda will therefore be needed to bolster growth rate which stood at 2 percent in 2015, down from an earlier estimate of over 4 percent, she said, adding that the CEMAC sub-region's fiscal deficit is seen to be 6.5 percent of GDP in 2015, with only modest improvement expected in 2016.

CEMAC sub-region growth is expected to hit 3.5 percent in 2016, still far below the growth of previous years. Thus Lagarde urged member-states to invest more in infrastructure projects so as to reduce deficits during tough times and also increase intra-regional trade. Endit