BEAC lowers liquidity offer to CFA300bn for Cemac Banks ⁰

On October 22, the Bank of Central African States (BEAC) launched a new liquidity injection operation for commercial banks. Unlike the previous two operations, where BEAC offered CFA340 billion, the offer on October 22 was reduced to CFA300 billion.

This reduction seems more in line with the current needs of the banks, based on recent results. Despite the gradual increase in liquidity offers by the central bank since resuming operations in June 2024, the volumes requested and actually taken up by the banks in the last two operations barely exceeded CFA270 billion. This is far from the CFA400-500 billion demands expressed by banks between June and September 2024.

The surge in liquidity needs during this period can be explained by the austerity imposed on credit institutions from late 2021 to May 2024 by the central bank. This period saw the implementation of measures aimed at draining banks’ coffers, including raising key interest rates, intensifying liquidity withdrawal operations, and suspending liquidity injections. These actions were officially intended to combat inflation by restricting access to credit.

BEAC notes that 20% of inflation in the Cemac region is of monetary origin. The central bank explains that injecting large volumes of liquidity into the economic system, particularly through bank financing, contributes to inflation, especially in Cemac countries where most goods and services are imported.

However, with the easing of inflationary pressures in Cemac markets since the start of 2024, BEAC has loosened its grip on bank liquidity. Consequently, the central bank resumed its liquidity injection operations in June 2024, after more than a year of suspension.

Source: Business in Cameroon