Press Release No. 09/250

Press Release No. 09/250
July 2, 2009

The Executive Board of the International Monetary Fund (IMF) today approved an SDR 92.85 million (about US$144.1 million) disbursement under the rapid access component of the Exogenous Shocks Facility (ESF) to help Cameroon weather the effects of the global shocks on its balance of payments. The approval enables the disbursement of the full amount immediately.

The IMF financial assistance will help contain the decline in Cameroon’s foreign reserves and ensure that priority outlays (investment, health, and education) are protected.

The ESF is designed to provide policy support and financial assistance to low-income countries facing exogenous but temporary shocks. It is available to countries eligible for the Poverty Reduction and Growth Facility (PRGF)—the IMF's main instrument for financial assistance to low-income countries—but that do not have a PRGF-supported program in place. Financing terms are equivalent to a PRGF arrangement and are more concessional than under other IMF emergency lending facilities.

Following the Executive Board’s discussion of Cameroon, Mr. John Lipsky, Deputy Managing Director and Acting Chair, stated:

“The Cameroonian authorities are to be commended for their recent economic achievements. Prudent management of oil windfalls under the recently completed PRGF-supported program has allowed the authorities to accumulate government deposits at the BEAC and contribute to the regional pool of foreign exchange reserves. These savings now provide some welcome buffers that can be used to alleviate the impact of the global crisis.

“The global crisis is however presenting the Cameroonian authorities with a difficult set of challenges. Lower oil prices are reducing exports and fiscal revenues. Considerably weaker external demand is adversely affecting key exports. Tighter external financing conditions have delayed important investment projects. As a result of these sizable shocks, growth is expected to be slower, and the overall fiscal and external balances are projected to turn into a deficit. In the absence of appropriate social safety nets, the social costs of the downturn could be severe.

“Against this background, the authorities’ efforts to deal with the effects of the crisis with Fund support under the rapid access component of the Exogenous Shocks Facility are welcome. Their commitment to preserve macroeconomic stability and tackle structural impediments to growth will contribute to making the country’s economy more resilient in the future.

“The implementation of the 2009 budgetary priority spending plans will help to avoid a public sector contraction in a year of slower economic growth. At the same time, efforts will be stepped up to achieve greater nonoil revenue mobilization and strengthen public expenditure management and transparency. Decisive actions are needed to improve governance, make the business environment more attractive, and enhance the role of the financial sector in the development of the economy. The authorities’ commitment to address these challenges through a medium-term economic program in the context of a new Poverty Reduction Strategy under preparation is welcome. Although tackling the structural impediments to faster growth will be more challenging in a crisis environment, it will put the country on a stronger footing to reduce poverty in a sustainable way.

“Continued vigilance will be required against downside risks to the financial sector, which could be negatively affected by a protracted economic slowdown. Close monitoring of developments in cooperation with regional supervisors will help ensure that corrective actions are taken as needed,” added Mr. Lipsky.