US lawmakers block IMF Central Africa Support over Oil Fund Dispute

U.S. legislators have introduced legislation to block the International Monetary Fund's (IMF) assistance for certain Central African countries. This is in order to protect billions of dollars which oil companies are required by law set aside for environmental restoration.

The bill highlights the standoff between foreign investment on one hand, and Central African monetary authority trying to tighten capital controls on extractive industry to shore up depleted reserve on the other.

The bill, introduced by U.S. Republican Reps. Bill Huizenga, and Dan Meuser is aimed at new regulations that have been imposed by Bank of Central African States, the regional central banking institution, which require international oil companies to deposit funds for environmental restoration into BEAC controlled accounts.

IOCs in the region have set aside funds estimated between 3 and 6 trillion CFA Francs (approximately 5 billion to 10 billion dollars) for future environmental cleanup once production has ended.

The member states of the Central African Economic and Monetary Community want to move funds to regional institutions in order to boost their economies and foreign exchange holdings.

Regional governments see the move as an important step to address economic fragility. It was backed by IMF and approved at a summit of CEMAC head of state heads in Yaounde, in December 2024.

According to the BEAC's March 2020 monetary policy report the implementation will take place on May 1 in accordance with the summit resolutions. Penalties of up to 1500% of the restored funds can be imposed for non-compliance.

BEAC also proposed raising the rate for repatriation of funds to the region, including operational expenditures by extractive companies, which is currently set at 35 percent.

Perenco, an independent French oil company that has significant operations in the region, announced it was currently in talks with regional stakeholders for a deal to be reached before the deadline of April 30.

A spokesperson stated that Perenco already complies with all current regulations, including the rule of 35% repatriation.

Requests for comment from other oil companies in the area were not answered.

One source said that the Finance Ministry in Equatorial Guinea has met with major operators Marathon Oil and Chevron as well as Kosmos Energy, Vaalco Energy, to discuss this issue.

DESCRIBING RESERVES

The six CEMAC member countries - Cameroon Gabon Chad Equatorial Guinea Central African Republic Republic of Congo and Republic of Congo- share a common currency, monetary policy and central bank.

The COVID-19 pandemic, and other global shocks have left them with a lack of foreign currency reserves to cover imports or debt.

Paul Biya, the president of Cameroon, warned that if the country's net external reserves continued to decline without urgent action being taken they would suffer "disastrous" consequences.

The bill's sponsors and critics alike argue that the BEAC directive could undermine billions of dollars worth of U.S. investments in oil and gas across Central Africa.

The bill stated that "by refusing to clarify the fact that these restoration funds would not count as gross foreign exchange reserves the IMF misled CEMAC member countries and put directly tens billions of dollars worth of IOCs investments in the region on the line."

The bill stated that the funds were contractually restricted, designated for future environmental rehabilitation and should therefore not be "available" or "controlled (by monetary authorities) to count as foreign exchange reserves.

According to the proposed legislation the U.S. Treasury will be prohibited from supporting IMF proposals that involve CEMAC countries, until the IMF confirms publicly that such funds cannot classified as gross foreign currency reserves.

This move could prevent the IMF from providing financial assistance to some countries that heavily rely on its support. These include Cameroon, the Republic of Congo and other African nations.

The IMF didn't immediately answer questions about the implications of the bill.

The IMF warned in a report released in March that the CEMAC economy was facing serious problems. Without corrective measures, some countries may face debt levels approaching 100% of their GDP by 2029 and diminishing reserves.

It said that this could worsen the liquidity problems and threaten the financial stability and repayment capability of the region. Reporting by Bate Felic and Wendell Roelf, Editing by Aidan Lewis

(source: Reuters)