IMF Executive Board Completes First Review

Under Cameroon's PRGF Arrangement and Approves US$3.9 million Disbursement

Press Release No. 06/84
April 28, 2006

The Executive Board of the International Monetary Fund (IMF) has completed the first review under Cameroon's Poverty Reduction and Growth Facility arrangement (PRGF) and has approved a disbursement in an amount equivalent to SDR 2.65 million (about US$3.9 million) to support the government's economic reform and poverty reduction program. This brings total disbursements under the PRGF arrangement to an amount equivalent to SDR 5.3 million (about US$7.8 million).

The three-year PRGF for Cameroon was approved in October 2005 (see Press Release No. 05/236) in an amount equivalent to SDR 18.57 million (about US$27.3 million).

Following the Executive Board's discussion of Cameroon's economic performance, Deputy Managing Director and Acting Chair, Agustín Carstens, stated:

"Strong fiscal performance as well as the satisfactory implementation of structural reforms under the PRGF-supported program contributed to maintaining macroeconomic stability. In 2005, inflation remained low, and a rise in the terms of trade led to an improvement in the external current account balance, accompanied by strong capital inflows. Nonetheless, there was a slowdown in real GDP growth, reflecting a contraction of oil, agro-industry, and forestry output.

"Cameroon's encouraging and substantial fiscal improvement in 2005, which was realized against a backdrop of budgetary slippages in 2004, reflected increased revenues and better expenditure control. Over the medium term, measures to further mobilize non-oil revenue and to offset the declining trend in oil production and revenue, the containment of current spending, and a gradual increase in capital and poverty-reducing expenditure, would contribute to the continued strengthening of the country's fiscal position, and would further enhance conditions for growth and poverty reduction.

"Important structural measures were taken in 2005, including timely presentation of the government budget to parliament, publication of coherent budget data, and strengthening of the microfinance sector. Looking ahead, the prompt implementation of structural reforms would further enhance the conditions for boosting growth. In this regard, of particular importance will be the expeditious completion of the privatization of the national airline company (CAMAIR), offering for sale of the national telecommunications company (CAMTEL), and limiting the losses of the national oil refinery (SONARA) through a combination of increases in fuel prices and programmed subsidy payments, to accommodate an appropriate safety net.

"The authorities view financial sector development as critical for economic growth and reducing poverty. In this regard, the completion of the licensing for microfinance institutions is a welcome step, reflecting Cameroon's commitment to deepen financial intermediation. Looking forward, it will be important to step up efforts to restructure the national postal savings system by fulfilling the conditions required for establishing a financial subsidiary.

"A number of important steps have been taken towards enhancing governance and eliminating corruption, including the adoption of an updated National Governance Program and an accompanying priority action plan with emphasis on delivering results. In order to make further durable progress on governance, the authorities will need to apply anticorruption laws systematically, and to take steps to strengthen the judiciary, including through the provision of sufficient budget allocations and the recruitment and training of more personnel. Implementation of the Extractive Industry Transparency Initiative principles in the oil sector will also be important," Mr. Carstens said.

The PRGF is the IMF's lower-cost loan facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments.



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