IMF Executive Board Completes Fifth Review under PRGF Arrangement for Cameroon and Approves US$4.29 Million DisbursementPress Release No. 08/154
June 30, 2008
The Executive Board of the International Monetary Fund (IMF) has completed the fifth review of Cameroon's performance under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review allows for the disbursement of SDR 2.65 million (about US$4.29 million), which would bring total disbursements under the arrangement to SDR 15.9 million (about US$25.75 million).
In completing the review, the Board granted a waiver for the non-observance of a performance criterion related to domestic debt, given that the target was missed only by a small margin. The Board also decided to modify the performance criteria to account for the fiscal impact of policies adopted to address the social consequences of rising food prices; and to extend the PRGF arrangement through January 2009.
The three-year PRGF arrangement for Cameroon was approved by the Executive Board on October 24, 2005 (see Press Release No 05/236) in an amount equivalent to SDR 18.57 million (about US$30.08 million).
Following the Executive Board's discussion, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, said:
"The Cameroonian authorities are to be commended for their good fiscal performance and commitment to fiscal sustainability. Implementation of structural measures is also welcome particularly in the area of public finance management.
"The authorities are faced with the difficult challenge of finding an appropriate balance between maintaining a prudent fiscal policy, addressing the social consequences of rising food and fuel prices, and promoting growth through structural reforms and public investment. Their policy course, including the measures adopted in March in response to the social unrest, is consistent with these goals.
"Nonetheless, going forward, it would be important for fuel prices to reflect world market conditions so that consumption could adjust accordingly. Targeted support for vulnerable groups would be preferable to generalized subsidies, the latter benefiting more the rich than the poor.
"Furthermore, while the authorities' commitment to contain the budgetary impact of the March 2008 measures is welcome, cuts in spending on goods and services should not jeopardize public services. The authorities should also be vigilant with regard to institutional capacity constraints. In this regard, the authorities' commitment to continue strengthening public expenditure management, and improve project preparation and execution, is welcome.
"Prudent debt management should remain a priority in the post-debt relief period. While the risk of debt distress remains low, borrowing decisions over the medium term should continue to consider carefully project viability and concessionality issues to safeguard debt sustainability.
"Achieving faster growth would require intensified efforts on reform. Mobilizing greater nonoil revenue and reducing subsidies to public enterprises would be critical to create the needed fiscal space for increasing priority spending, including on agriculture and infrastructure. In addition, measures would need to be implemented to improve financial intermediation, trade, and the business environment. In this regard, the authorities' commitment to implement their medium-term action plan to deepen further the financial sector is welcome," Mr. Kato said.
The PRGF is the IMF's concessional facility for low-income countries. 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.