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Press Release No. 99/40
September 7, 1999
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA

IMF Approves Third Annual ESAF Loan for Cameroon

The International Monetary Fund (IMF) today approved the third annual loan under the Enhanced Structural Adjustment Facility (ESAF) 1 to support Cameroon’s economic and financial program. The three-year ESAF loan was approved on August 20, 1997 in an original amount of SDR 162.12 million (about US$221.24 million), of which SDR 108.08 million (about US$147.49 million) has been disbursed. Today’s decision provides Cameroon with another SDR 54.04 million (about US$73.75 million) to be disbursed during the third year of the ESAF, with SDR 18.01 million (about US$24.58 million) available immediately.

In commenting on the Executive Board’s discussion of the request by Cameroon, Stanley Fischer, First Deputy Managing Director of the IMF, made the following statement:

"Directors commended the authorities for their good record of performance in implementing the first two annual ESAF-supported programs. Despite the adverse impact of the deterioration in the terms of trade in the first half of 1998/99, economic activity remains buoyant, and inflation has declined to a low level, owing to appropriate macroeconomic polices.

"Directors noted the progress made in the past two years in strengthening public finances through a regular transfer of oil revenues to the budget, the successful introduction of the VAT, and the adoption of an action plan aimed at improving expenditure management. Directors stressed, however, the importance of further strengthening the fiscal position in the medium term. To this end, they emphasized the need to raise non-oil revenue further by broadening the tax base, strengthening the customs administration, and improving tax administration, including with respect to the forestry sector, while strengthening public expenditure management.

"Directors noted the progress made in implementing structural reforms, including the rehabilitation of the banking system, the large-scale privatization of public enterprises, and the significant actions to liberalize the energy and transport. Directors encouraged the authorities to continue implementing vigorously structural reforms, to consolidate and deepen the reform program in the public utilities, petroleum, agro-industry and transport sectors, and to liberalize trade. They stressed the need to improve transparency and fight corruption with a view to enhancing the effectiveness of government operations and stimulate private investment. In this regard, they considered the focus of the third annual arrangement on good governance, transparency and accountability in government and public sector operations to be appropriate.

"Directors urged the authorities to continue to demonstrate strong program performance, and prepare well-defined spending plans in the social sectors to ensure efficient utilization of the additional resources in the priority sectors of health, education and poverty alleviation. In sum, Directors hoped that steadfast implementation of structural reform and well-targeted spending on the social sector would make Cameroon eligible under the HIPC Initiative," said Mr. Fischer.

ANNEX

Program Summary

Cameroon’s good record of performance under the first annual ESAF program continued under the second, despite the adverse impact of a sharp deterioration in the terms of trade in the first half of 1998/99. Almost all quantitative and structural performance criteria and benchmarks for the year were met. Real GDP growth for 1998/99 was revised downward from 5 1/4% to 4 %, and the annual average national consumer price inflation was contained at 2.9 %.

The medium-term strategy under the program aims at restoring external and internal viability, bringing the economy onto a sustainable growth path, and substantially reducing poverty. Within this framework, the main macroeconomic objectives for 1999/2000 are to limit inflation to 2 % and contain the external current account deficit to 3 % of GDP. Real GDP growth is projected at 4.8%.

The medium-term growth prospects depend crucially on the success of increasing investment, including direct foreign investment; raising the domestic budgetary revenue effort; strengthening expenditure management; improving governance and accountability; rebuilding the country’s infrastructure; and implementing efficiency-enhancing structural reforms while reinforcing external competitiveness. The program2 also emphasizes the completion of reform measures already under way, thus to begin producing tangible results that benefit the population at large.

The key budgetary objectives are to achieve a primary surplus of 5.2 % of GDP and thereby reduce the overall fiscal deficit to 2.9 % of GDP, excluding grants. The authorities intend to strengthen non-oil revenue by improving the customs and tax administration, to combat fraud, to broaden the tax base, and to strengthen value-added tax (VAT) collection. At the same time, all export taxes have been eliminated except those on forestry products.

Structural reforms will focus on consolidating and deepening the ongoing reforms in agro-industry; public utilities; and the petroleum, transport, and financial sectors. These reforms are essential for creating a favorable environment for private sector activity and for safeguarding Cameroon’s external competitiveness. But there is a need to remain vigilant and bring about the successful conclusion of the privatization operations currently under way while ensuring the independence and integrity of the newly created regulatory agencies.

Improving transparency and fighting corruption are indispensable in enhancing the effectiveness of government operations and in stimulating private investment. The government is aware of the fact that it is critical to proceed vigorously to tackle issues of economic governance and transparency as a core component of the reform program. Thus the promotion of good governance is at the center of many of the reforms being undertaken by the government, particularly in the areas of public expenditure management, the privatization of public enterprises, the liberalization of markets, and the introduction of transparency and accountability into public sector activities.

Social Issues

Cameroon’s objectives in the social area, in general, and in poverty alleviation, in particular, are to be achieved through higher economic growth combined with improvements in quality and volume of spending in the primary health and education sectors, and through policies to ensure access to safe water and to generic drugs. These policies would reverse the worsening trend of recent years in education indicators, and more broadly, raise the low level of social indicators. The strategies for the health and education sectors, which are to be elaborated next year will form a critical element in the government’s fight against poverty and will concentrate on establishing greater regional equality and greater accountability in the distribution and use of resources. In addition, the rural poor are to benefit from investment in roads and the measures to reduce transport costs, which should also enhance competitiveness and thus help to expand agricultural production and exports.

The Challenge Ahead

Cameroon’s performance during the first two annual ESAF-supported programs marks a major departure from the past record of performance and economic decline. This record of performance notwithstanding, more will be required over the next few years for Cameroon to rebuild its physical and institutional infrastructure and to create the conditions for sustainable, private-sector-led growth and durable poverty alleviation, while asserting its leading role in the subregion. To that end, the continued effort of the donor community in providing concessional financing and debt alleviation will be crucial.

Cameroon joined the IMF on July 10, 1963, and its quota3 is SDR 185.70 million (about US$253.41 million). Its outstanding use of IMF financing currently totals SDR 128.17 million (about US$174.91 million).


Cameroon: Selected Economic and Financial Indicators, 1995/96-2001/02 1/

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

2001/02

Revised

Est.

Prog.

Projections

Est.

program

(Annual percentage changes, unless otherwise indicated)

National income and prices

GDP at constant prices

5.0

5.1

5.0

4.4

4.4

4.8

5.3

5.5

Of which: non-oil GDP

5.5

5.0

5.0

4.4

4.4

5.5

5.7

5.7

GDP deflator

5.4

2.7

1.1

-1.2

-1.2

2.1

2.0

2.0

Consumer prices (12-month average) 2/

3.6

4.1

3.9

2.0

2.9

2.0

2.0

2.0

Consumer prices (end of period) 2/

4.6

7.0

2.2

2.0

2.2

2.0

2.0

2.0

Nominal GDP (in billions of CFA francs)

4,571

4,932

5,240

5,406

5,406

5,785

6,215

6,688

Oil output (thousands of barrels a day)

101

108

115

119

119

108

105

104

External trade

Exports (in SDRs)

7.5

19.4

-6.3

-6.5

-6.0

7.6

7.0

8.9

Of which: crude oil

-0.8

36.0

-16.7

-16.3

-10.4

15.6

-7.7

0.0

Imports (in SDRs)

13.1

16.5

13.4

8.6

4.2

4.7

7.0

7.2

Export volume

7.4

13.8

11.1

6.5

8.2

2.3

5.0

5.7

Of which: non-oil sector

18.7

15.4

16.5

4.4

5.8

8.3

8.4

8.2

Import volume

13.2

19.5

14.5

1.9

1.2

6.1

5.9

7.2

Average oil export price (U.S. dollars per barrel)

16.7

19.7

15.5

11.0

12.2

15.2

14.9

15.1

Nominal effective exchange rate

6.5

-2.4

1.5

...

...

...

...

...

Real effective exchange rate

6.4

-1.8

-7.7

...

...

...

...

...

Average exchange rate (CFA francs per SDR)

743

767

815

...

...

...

...

...

Terms of trade

-8.6

5.1

-4.5

-16.5

-15.9

7.0

0.9

3.1

Non-oil export price index (in CFA francs)

-21.5

-4.4

9.2

-13.4

-12.6

2.5

4.2

4.0

Money and credit (end of period) 3/

Net domestic assets 4/

-3.4

-5.8

12.7

10.1

7.2

6.8

4.3

1.1

Net credit to the public sector 4/

-3.0

0.0

1.8

2.9

2.0

0.0

-2.3

-2.5

Credit to the private sector

5.0

3.3

30.3

16.9

10.8

10.4

11.8

6.5

Broad money (M2)

-5.1

13.8

7.8

11.6

10.2

12.5

13.5

10.5

Velocity (GDP/average M2)

6.4

8.1

7.6

7.2

7.2

6.9

6.6

6.4

Discount rate (end of period; in percent)

8.0

7.5

7.0

...

7.6

...

...

...

Central government operations

Total revenue

22.4

10.9

17.1

-1.9

-1.2

14.8

12.1

6.5

Of which: non-oil revenue

19.8

1.9

23.8

9.3

9.5

10.6

12.4

12.7

Total expenditure

10.2

7.7

18.2

9.7

9.2

10.5

9.8

5.5

Current expenditure

10.6

2.7

10.6

4.3

5.8

2.0

9.2

4.4

Capital expenditure 5/

38.1

51.1

41.7

39.9

12.7

69.8

11.7

4.2

(In percent of GDP; unless otherwise indicated)

Gross national savings

11.2

13.4

15.7

14.7

14.4

16.6

17.1

18.1

Gross domestic investment

15.4

16.2

18.4

19.1

18.8

19.8

20.1

20.5

Central government operations

Central government revenue

14.3

15.1

16.2

15.4

15.5

16.6

17.3

17.2

Of which: non-oil revenue

11.2

11.0

12.3

13.0

13.0

13.5

14.1

14.8

Central government expenditure

16.1

16.1

17.9

19.0

18.9

19.6

20.0

19.6

Overall fiscal deficit (excl. grants)

-1.8

-1.0

-1.7

-3.6

-3.4

-2.9

-2.6

-2.4

Overall fiscal deficit (incl. grants)

-1.5

-1.0

-1.4

-3.3

-3.2

-2.6

-2.6

-2.3

 

Primary balance 5/

5.4

5.8

5.9

4.5

4.6

5.2

5.4

5.4

Of which: non-oil sector

2.3

1.7

2.0

2.1

2.1

2.0

2.1

3.0

Noninterest expenditure 5/

8.9

9.3

10.3

11.1

11.0

11.6

12.1

11.8

Domestic public debt (before audit)

32.6

28.5

25.5

23.4

23.3

20.3

16.7

14.1

External sector

Current account balance (including grants)

-4.1

-2.8

-2.7

-4.4

-4.4

-3.2

-3.0

-2.4

External public debt 7/

89.0

83.5

87.8

87.7

87.9

78.7

75.9

70.0

(In percent of exports of goods and services, unless otherwise indicated)

Net present value (NPV) of external public debt 8/

332.8

271.1

210.0

274.1

274.6

203.0

212.0

201.0

Scheduled external debt service

59.5

44.3

40.4

46.1

45.4

9.9

11.0

8.3

Scheduled external debt service 9/

93.4

74.1

66.2

71.7

71.2

15.5

16.5

13.0

Actual external debt service

24.9

19.6

16.1

...

...

...

...

...

Actual external debt service 9/

39.0

32.8

26.4

...

...

...

...

...

(In millions of SDRs)

Current account balance

-151

-36

-173

-315

-304

-228

-227

-197

Overall balance of payments

-438

-336

-249

-395

-381

-337

-205

-88

Net international reserves (end of period)

-409

-286

-312

-313

-286

-228

-129

-14

Sources: Cameroonian authorities; and IMF staff estimates and projections.

1/ Fiscal year begins in July.

2/ Starting in 1994/95, inflation reflects an updated basket of goods and services in the calculation of the consumer price index.

3/ Starting in 1996/97, data are rebased to exclude information on two banks liquidated in 1996/1997.

4/ In percent of broad money at the beginning of the period.

5/ Excluding foreign-financed investment. In addition, the primary expenditure excludes restructuring expenditure.

6/ In percent of non-oil GDP.

7/ External stocks at the end of 1997/98 have been revised upward to reflect new drawings and the conclusion of some Paris Club V bilateral agreements.

8/ Based on the preliminary results of the baseline scenario of the update of the debt sustainability analysis.

9/ In percent of government revenue.


1 The ESAF is a concessionnal IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and to improve their growth prospects. ESAF loans carry an interest rate of 0.5% a year and are repayable over 10 years with a 5 -year grace period.
2 Details on the program will be available on the IMF's website: http://www.imf.org.external/np/loi/mempub.asp.
3 A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share in the allocation of SDRs.

 


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