## cr17185

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### Recent macroeconomic developments and outlook
- Real GDP growth (GDP at constant prices): 5.8 (2015), 4.7 (2016), 4.0 (2017), 4.6 (2018), 5.0 (2019), 5.1 (2020).
- Oil GDP at constant prices: 28.1 (2015), -4.5 (2016), -2.4 (2017), -0.1 (2018), -3.4 (2019), -3.8 (2020).
- Non-oil GDP at constant prices: 4.9 (2015), 5.1 (2016), 4.3 (2017), 4.8 (2018), 5.3 (2019), 5.5 (2020).
- Prices and inflation:
  - GDP deflator: 0.3 (2015), -1.2 (2016), 0.9 (2017), 1.0 (2018), 1.3 (2019), 1.7 (2020).
  - Consumer prices (average): 2.7 (2015), 0.9 (2016), 0.7 (2017), 1.1 (2018), 1.4 (2019), 2.0 (2020).
  - Inflation declined to 0.3 percent at end 2016 and remained low at 0.4 percent in March 2017; expected to stay below the CEMAC convergence criterion of 3 percent in the medium-term.
- External sector and trade:
  - Export volume: 17.8 (2015), 1.0 (2016), 2.0 (2017), 5.2 (2018), 6.7 (2019), 8.5 (2020).
  - Import volume: -5.0 (2015), -19.0 (2016), 4.0 (2017), 5.3 (2018), 4.9 (2019), 4.7 (2020).
  - Terms of trade: -13.8 (2015), -20.4 (2016), 3.4 (2017), -1.0 (2018), -3.5 (2019), -2.9 (2020).
- Monetary and financial indicators:
  - Broad money (M2): 9.1 (2015), 5.6 (2016), 3.3 (2017), 5.7 (2018), 6.4 (2019), 7.5 (2020).
  - Domestic credit to the private sector: 12.8 (2015), 6.4 (2016), 5.8 (2017), 9.3 (2018), 10.8 (2019), 11.2 (2020).

### Fiscal developments, public investment, and public debt
- Fiscal balances (central government, percent of GDP):
  - Total revenue and grants: 17.9 (2015), 16.3 (2016), 16.7 (2017), 17.3 (2018), 17.6 (2019), 17.7 (2020).
  - Of which oil revenue: 3.3 (2015), 2.4 (2016), 2.4 (2017), 2.4 (2018), 2.3 (2019), 2.2 (2020).
  - Total expenditure: 19.9 (2015), 22.8 (2016), 20.1 (2017), 19.8 (2018), 19.6 (2019), 19.3 (2020).
  - Overall fiscal balance (payment order basis): -2.0 (2015), -6.5 (2016), -3.4 (2017), -2.5 (2018), -1.9 (2019), -1.6 (2020).
- Public investment trends (percent of GDP):
  - Capital expenditure: 6.7 percent (2015), 8.3 percent (2016), 7.3 percent (2017 proj.), 6.9 percent (2018 proj.), 6.7 percent (2019 proj.), 6.5 percent (2020 proj.).
  - Total expenditure (percent of GDP): 19.9 (2015), 22.8 (2016), 21.1 (2017 prog.), 20.1 (2018 prog.), 19.8 (2019 prog.), 19.6 (2020 prog.).
- Major public projects (costs, billion CFAF):
  - Electricity and Hydro (Potable water plant; Dams; Gas terminal at Kribi; thermal energy) — 1,457.9
  - Ports and airports (Kribi port) — 553.0
  - Road and rail (Kribi complex; bridge and highways) — 499.8
  - Telecommunications (Fibre optic network installation) — 42.5
  - Urban construction (Social housing) — 387.9
  - Total — 2,941.1
- Public debt:
  - Stock of public debt: 33.0 (2015), 34.1 (2016), 36.1 (2017), 36.1 (2018), 36.1 (2019), 35.1 (2020).
  - External debt share: 21.3 (2015), 22.7 (2016), 26.6 (2017), 29.2 (2018), 31.1 (2019), 31.2 (2020).
  - Contracted but undisbursed external loans: 20.8 percent of GDP at end-2016 (CFAF 3.617 trillion).
  - Domestic arrears included in total public debt: 3.6 percent of GDP.
  - SONARA supplier debt: 0.5 percent of GDP.

### Program summary, objectives, and pillars
- Program aim: restore fiscal and external sustainability and unlock job-rich, private sector-driven growth under an ECF-supported program.
- Three program pillars:
  1. Frontloaded fiscal consolidation to strengthen fiscal and external buffers while protecting social spending and social safety nets.
  2. Structural fiscal reforms to expand the non-oil revenue base, improve public investment efficiency and budget quality, and mitigate fiscal risks from contingent liabilities.
  3. Reforms to accelerate private sector-led economic diversification and boost financial sector resilience and inclusion.
- Fiscal strategy elements:
  - Prioritize public investment for economic diversification and improve public investment project selection, preparation, execution, and monitoring.
  - Rationalize government spending on goods and services; protect and expand essential social expenditure and safety nets.
  - Expand non-oil revenue base; enhance spending efficiency and budget transparency; strengthen treasury management; limit exceptional procedures.
  - Public debt management: reduce pace of debt accumulation, tilt new borrowing toward concessional financing, and closely monitor contingent liabilities.

### Key policy recommendations and staff views
- Primary policy recommendations:
  - Implement sustained fiscal adjustment by rationalizing government overhead costs, better prioritizing/sequencing capital expenditure, and increasing non-oil revenue.
  - Preserve social spending and scale up social safety nets.
  - Enhance budget credibility and transparency (quarterly budget execution reports; move toward accrual accounting; broaden Single Treasury Account).
  - Support private-sector led growth: address high non-performing loans (NPLs), resolve insolvent banks, remove administrative obstacles to private sector development, and boost financial inclusion.
- Staff view:
  - Staff supports the authorities’ request for an ECF-supported program; authorities’ commitment, substantial fiscal effort, and a comprehensive capacity development strategy mitigate implementation risks.

### Fiscal consolidation, revenue measures, and PFM reforms
- Fiscal consolidation target: about 5 percent of GDP (commitment basis) between 2016 and 2020.
- Selected revenue measures (yield, percent of GDP — Text Table 4):
  - Total: 2017 0.4, 2018 0.5, 2019 0.6, Total 1.5
  - Reduction of exemptions and other tax incentives: 2017 0.1, 2018 0.1, 2019 0.1, Total 0.3
  - New excise taxes: 2017 0.0, 2018 0.1, 2019 0.1, Total 0.2
  - Increase of excise tax on fuel distribution: 2017 0.1, 2018 0.1, 2019 0.1, Total 0.3
  - Gains from tax administration compliance: 2017 0.2, 2018 0.1, 2019 0.1, Total 0.4
  - Introduction of land tax: 2017 0.1, 2018 0.2, 2019 0.3
- PFM short-term critical actions (prior actions/structural benchmarks):
  - Include larger portion of SNH direct spending in the budget starting 2018; cap and gradually reduce these interventions.
  - Adopt a formal budget calendar and align MTBF with macro projections and ceilings.
  - Publish regular, quarterly budget execution reports (prior action).
  - Broaden the Single Treasury Account scope; prepare reliable annual Treasury plans; strictly limit treasury advances.

### Public investment implications and management
- Rapid scaling-up of public investment since 2012 largely financed with non-concessional loans; public debt rose from 15.6 percent of GDP in 2012 to 34.1 percent in 2016.
- Contracting pace exceeded implementation capacity: contracted-but-undisbursed external loans equal to 20.8 percent of GDP at end-2016, increasing risk of a debt overhang.
- Program focus:
  - Prioritize first-generation projects close to completion to avoid implementation bottlenecks.
  - Target clearance of domestic arrears of 3½ percent of GDP over the program period.
  - Commit to freeze ceiling on BEAC statutory advances at the level established based on 2014 budget revenue and agree to schedule to repay outstanding advances by 2027.
  - Cameroon had drawn CFAF 266 billion out of a ceiling of CFAF 576.5 billion as of end-March 2017.

### Public debt sustainability, borrowing limits, and remedial measures
- Debt risk assessment:
  - Under the program scenario debt remains on a sustainable path but DSA indicates risk of external debt distress remains high.
  - Breach of policy-dependent threshold under baseline is less pronounced than in 2015 Article IV DSA due to fiscal consolidation and prudent borrowing plan; external debt still vulnerable to shocks.
- Authorities’ 2017 borrowing target:
  - About CFAF 1.38 trillion in nominal terms for critical priority projects, of which about two-thirds is on semi-concessional terms.
  - Total envelope for non-concessional borrowing in 2017–19: around CFAF 2 trillion.
- Debt policy ceilings and limits:
  - External debt ceiling: CFAF 1,700 billion.
  - Ceiling for securities issues on the regional market: CFAF 300 billion.
  - New concessional loans signed in 2017 to remain below CFAF 100 billion.
  - Non-concessional loans to remain at CFAF 100 billion.
  - Ceiling on disbursements for already-signed non-concessional loans: CFAF 540 billion.
- Staff recommendations on borrowing control:
  - Strengthen controls on new borrowing; align new borrowing with absorption capacity.
  - Strengthen CNDP secretariat capacity to review and approve loan requests.
  - Clean backlog of contracted-but-not-yet-disbursed debt and prioritize concessional financing.
  - Limit contracting of new non-concessional loans to focus on completing existing projects.

### Program financing, IMF access, and disbursement schedule
- Authorities requested a 36-month ECF arrangement with access of SDR 483 million (175 percent of quota).
- Balance of payments need: about US$2.1 billion (6.7 percent of GDP) over 2017–20.
- Financing table (Text Table 6, CFAF billion):
  - Financing gap: 2017 514; 2018 370; 2019 370; 2020 47; Total 1302
  - IMF financing: 2017 178; 2018 95; 2019 95; 2020 47; Total 415
  - Budget support from other donors (Total): 2017 337; 2018 275; 2019 275; 2020 0; Total 887
    - World Bank: Total 247
    - African Development Bank: Total 377
    - France: Total 197
    - European Union: Total 66
  - Residual financing gap (1-2-3): 0 for 2017–2020 (Total 0)
  - Share of Fund financing: 2017 35; 2018 26; 2019 26; 2020 100; Total 31.9
- IMF disbursement schedule (Table 8, SDR millions):
  - 6/26/2017: 124.2 (45 percent of quota) — Executive Board approval.
  - 12/15/2017: 82.8 (30 percent of quota) — contingent on reviews/criteria.
  - 6/30/2018: 55.2 (20 percent of quota).
  - 12/15/2018: 55.2 (20 percent of quota).
  - 6/15/2019: 55.2 (20 percent of quota).
  - 12/15/2019: 55.2 (20 percent of quota).
  - 5/31/2020: 55.2 (20 percent of quota).
  - Total: 483.0 (SDR millions), 175 percent of quota.

### Financial sector stability, bank resolution, and inclusion
- Banking system vulnerabilities and indicators:
  - Capital/risk-weighted assets: 11.4 (2014), 9.9 (2015), 8.8 (2016).
  - Loans in arrears/total loans: 12.3 (2014), 12.5 (2015), 14.1 (2016).
  - Non-performing loans/total loans: 9.7 (2014), 10.5 (2015), 9.6 (2016).
  - Reserves/total deposits: 27.7 (2014), 24.3 (2015), 18.0 (2016).
  - Total banks at end-2016: 14 banks; top 4 banks hold CFAF 3,047 billion or 60.4 percent of assets.
- Resolution and fiscal cost of bank restructuring:
  - Plan to resolve five ailing banks; submit resolution plans to COBAC by end-August 2017.
  - Estimated maximum fiscal cost: 0.7 percent of GDP composed of:
    - 0.5 percent of GDP in the form of 10-year government bonds to cover transfer of NPLs to the Treasury.
    - 0.2 percent of GDP of residual capital needs after provisions release.
  - If private banks recapitalize at no cost to the state, fiscal cost of recapitalizing public banks would be 0.3 percent of GDP.
- Financial inclusion and MFIs:
  - WDI 2014: 11.4 percent of adults with an account; Government 2015: 27.8 percent; including mobile money estimate: 54 percent.
  - MFIs: 412 MFIs; MFI assets increased by 61 percent between 2012 and 2015; largest MFI has 25 percent market share; vulnerabilities include loan arrears above 20 percent.
- Agreed financial-sector measures:
  - Accelerate bank resolutions; strengthen NPL workout strategies; expand client information platform access; computerize cadaster and movable collateral registry; establish specialized financial courts; reinforce mobile banking legal framework.

### Structural competitiveness, EPA impact, and private sector reform
- Competitiveness constraints:
  - Cameroon ranked 166 in Doing Business 2016 (down from 148 in 2014).
  - Main constraints: inadequate transport and telecommunications infrastructure; unfriendly institutional environment; limited access to finance; burdensome tax system; limited regional integration.
- EPA effects (trade and revenue):
  - Short-term revenue loss likely limited (less than 0.1 percent of GDP initially).
  - Medium-to-long term revenue loss could increase to 0.5–0.6 percent of GDP once tariffs fully eliminated.
  - Offsetting potential: lower production costs, improved competitiveness, and higher growth could boost domestic tax revenues.
- Reform priorities to boost private sector:
  - Improve infrastructure completion (energy, transport), streamline tax and customs procedures, reduce administrative obstacles to private investment, and enhance access to finance.

### Data, reporting, and program monitoring requirements
- TMU and reporting:
  - Monthly submission of TOFE and detailed fiscal data within six weeks after month-end; monetary and balance sheet data from BEAC monthly; quarterly reconciliation reports; other sectoral and structural reporting per memorandum.
- Program monitoring:
  - Quantitative performance criteria and indicative targets assessed semi-annually (end-June and end-December starting June 2017) on: non-oil primary balance, net domestic financing, disbursement of contracted non-concessional loans, net BEAC financing to central government, accumulation of new external arrears, and contracting of new non-concessional loans.
  - Structural benchmarks include publication of petroleum price structure monthly from end-June 2017; completion of biometric taxpayer registration by June 2018; audit of government domestic debt and arrears by September 2017; and others listed in the MEFP (timetabled).

### Risks, contingencies, and staff appraisal
- Main program risks:
  - Delayed or insufficient fiscal adjustment; lukewarm structural reform implementation; regional spillovers; persistently lower energy prices; security-related expenditures.
- Offsets and mitigants:
  - Authorities’ leadership in regional effort; strong commitment to reform; donor budget support; contingency measures include additional expenditure consolidation and accelerated tax measures.
- Staff appraisal highlights:
  - Serious challenges from external and fiscal imbalances since 2014; need for resolute fiscal consolidation, prioritization of investment projects, strengthened PFM and debt management, and financial sector repairs to restore sustainability and support growth.

*Italic: IMF staff report (cr17185).*

### 5.8 percent in 2015 and 5.9 percent in 2014. Inflation declined to 0.3 percent at end 2016 and

### cr17185 - 5.8 percent in 2015 and 5.9 percent in 2014. Inflation declined to 0.3 percent at end 2016 and

### Recent macroeconomic developments and outlook
- Real GDP growth:
  - GDP at constant prices: 5.8 (2015), 4.7 (2016), 4.0 (2017), 4.6 (2018), 5.0 (2019), 5.1 (2020).
  - Oil GDP at constant prices: 28.1 (2015), -4.5 (2016), -2.4 (2017), -0.1 (2018), -3.4 (2019), -3.8 (2020).
  - Non-oil GDP at constant prices: 4.9 (2015), 5.1 (2016), 4.3 (2017), 4.8 (2018), 5.3 (2019), 5.5 (2020).
- Prices and inflation:
  - GDP deflator: 0.3 (2015), -1.2 (2016), 0.9 (2017), 1.0 (2018), 1.3 (2019), 1.7 (2020).
  - Consumer prices (average): 2.7 (2015), 0.9 (2016), 0.7 (2017), 1.1 (2018), 1.4 (2019), 2.0 (2020).
  - Inflation declined to 0.3 percent at end 2016 and remained low at 0.4 percent in March 2017. It is expected to stay below the CEMAC convergence criterion of 3 percent in the medium-term.
- External sector and trade:
  - Export volume: 17.8 (2015), 1.0 (2016), 2.0 (2017), 5.2 (2018), 6.7 (2019), 8.5 (2020).
  - Oil sector export volumes: 27.9 (2015), -3.1 (2016), -2.4 (2017), -0.1 (2018), -3.4 (2019), -3.8 (2020).
  - Non-oil sector export volumes: 15.2 (2015), 2.2 (2016), 3.2 (2017), 6.5 (2018), 9.0 (2019), 11.0 (2020).
  - Import volume: -5.0 (2015), -19.0 (2016), 4.0 (2017), 5.3 (2018), 4.9 (2019), 4.7 (2020).
  - Terms of trade: -13.8 (2015), -20.4 (2016), 3.4 (2017), -1.0 (2018), -3.5 (2019), -2.9 (2020).
- Monetary and financial indicators:
  - Broad money (M2): 9.1 (2015), 5.6 (2016), 3.3 (2017), 5.7 (2018), 6.4 (2019), 7.5 (2020).
  - Domestic credit to the private sector: 12.8 (2015), 6.4 (2016), 5.8 (2017), 9.3 (2018), 10.8 (2019), 11.2 (2020).

### Fiscal developments and public debt
- Fiscal balances (central government, percent of GDP):
  - Total revenue and grants: 17.9 (2015), 16.3 (2016), 16.7 (2017), 17.3 (2018), 17.6 (2019), 17.7 (2020).
    - Of which: Oil revenue: 3.3 (2015), 2.4 (2016), 2.4 (2017), 2.4 (2018), 2.3 (2019), 2.2 (2020).
  - Total expenditure: 19.9 (2015), 22.8 (2016), 20.1 (2017), 19.8 (2018), 19.6 (2019), 19.3 (2020).
  - Overall fiscal balance (payment order basis): -2.0 (2015), -6.5 (2016), -3.4 (2017), -2.5 (2018), -1.9 (2019), -1.6 (2020).
- Key fiscal developments:
  - The fiscal deficit rose to 6.5 percent in 2016, from 2 percent of GDP in 2015, largely driven by a surge in capital spending and a decline in revenues.
  - Public investment: 6.7 (2015), 8.3 (2016), 7.3 (2017), 6.9 (2018), 6.7 (2019), 6.5 (2020).
  - Private investment: 14.6 (2015), 11.9 (2016), 12.7 (2017), 13.9 (2018), 14.9 (2019), 15.8 (2020).
- Public debt:
  - Stock of public debt: 33.0 (2015), 34.1 (2016), 36.1 (2017), 36.1 (2018), 36.1 (2019), 35.1 (2020).
    - Of which: external debt: 21.3 (2015), 22.7 (2016), 26.6 (2017), 29.2 (2018), 31.1 (2019), 31.2 (2020).

### Program summary, objectives, and pillars
- Program aim:
  - The ECF-supported program aims to restore fiscal and external sustainability and unlock job-rich, private sector-driven growth.
- Program pillars:
  1. Frontloaded fiscal consolidation to strengthen fiscal and external buffers, while protecting social spending and social safety nets.
  2. Structural fiscal reforms to expand the non-oil revenue base, improve the efficiency of public investment and the quality of the budgetary system, and mitigate fiscal risks from contingent liabilities.
  3. Reforms to accelerate private sector-led economic diversification and boost the resilience of the financial sector.
- Fiscal strategy elements:
  - Better prioritization of public investment, focusing on infrastructure projects essential to economic diversification.
  - Rationalization of government spending on goods and services, while supporting expansion of essential social expenditure and safety nets.
  - Expand the non-oil revenue base and enhance spending efficiency as oil revenue declines.
  - Enhance budget credibility and transparency through publication of regular reports on budget execution.
  - Strengthen treasury management and strictly limit and eventually eliminate the resort to exceptional procedures.
  - Improve efficiency in planning, executing and monitoring public investment projects.
  - Public debt management will reduce the pace of debt accumulation, tilt new borrowing toward more concessional financing, and closely monitor contingent liabilities.
  - Reforms to maintain financial stability, boost financial inclusion, and address structural obstacles to competitiveness and diversification.

### Key policy recommendations and staff views
- Key policy recommendations:
  - Implement sustained fiscal adjustment by rationalizing government overhead costs, better prioritizing and sequencing capital expenditure, and increasing non-oil revenue.
  - Preserve social spending and scale up social safety nets.
  - Enhance the credibility and transparency of the budget and increase spending efficiency.
  - Support private-sector led growth by addressing high non-performing loans and resolving insolvent banks, and removing administrative obstacles to private sector development.
- Staff view:
  - Staff supports the authorities’ request for an ECF-supported program. The authorities’ strong commitment to the program objectives, the substantial fiscal effort, and a comprehensive capacity development strategy mitigate implementation risks.

### Background, regional context, and risks
- Context and regional coordination:
  - Cameroon, the largest economy in CEMAC, was hit by significant export price declines and security threats since 2014; pooled BEAC reserves fell from US$15.3 billion at end-2014 to US$4.8 billion by end-2016.
  - At the Yaoundé summit on December 23, 2016, CEMAC heads of state agreed on coordinated measures including strong fiscal correction and substantial financing from the Fund and other partners.
  - Cameroon contributes over 50 percent of BEAC’s pooled reserves; stabilizing Cameroon supports regional reserve rebuilding.
- Socio-political and humanitarian pressures:
  - Reported about 600,000 refugees from Nigeria and C.A.R., 2.4 million facing food insecurity, and strikes in Nov 2016 in Anglophone regions leading to violence and unrest.
  - Mounting socio-political pressures ahead of Fall 2018 presidential and legislative elections could limit policy space.
- Infrastructure and growth potential:
  - Major infrastructure programs (GESP and PLANUT) increased capital spending from 24.5 to 30.7 percent of total government spending between 2010 and 2016.
  - Almost CFAF 3 trillion allocated to major projects including transport and energy; expected contributions to non-oil growth: increase GDP growth by 0.5 percent in 2018 and 0.8 percent in 2019 (once completed).
  - Noted implementation delays for some projects (e.g., Kribi deep sea port supporting infrastructure) due to planning, procurement, and expropriation funding shortfalls; authorities taking measures including more frequent physical execution reviews.

### Selected key statistics and memorandum items
- Nominal GDP (CFAF billions): 16,807 (2015), 17,386 (2016), 18,242 (2017), 19,273 (2018), 20,498 (2019), 21,925 (2020).
  - Oil: 876 (2015), 700 (2016), 917 (2017), 913 (2018), 867 (2019), 831 (2020).
  - Non-Oil: 15,931 (2015), 16,686 (2016), 17,325 (2017), 18,360 (2018), 19,630 (2019), 21,094 (2020).
- External sector balances:
  - Current account balance, including grants: -4.1 (2015), -3.6 (2016), -3.1 (2017), -3.0 (2018), -2.7 (2019), -2.2 (2020).
  - Overall balance, including grants: 2.9 (2015), -4.7 (2016), -2.0 (2017), -1.2 (2018), -1.3 (2019), 0.4 (2020).
- Gross national savings: 17.2 (2015), 16.5 (2016), 16.9 (2017), 17.8 (2018), 18.9 (2019), 20.1 (2020).
- Gross domestic investment: 21.3 (2015), 20.1 (2016), 20.0 (2017), 20.8 (2018), 21.6 (2019), 22.4 (2020).

*Source: cr17185 (IMF staff report).*

### Box 1 Figure 1. Cameroon: Public Investment

### Box 1 Figure 1. Cameroon: Public Investment

### Public capital expenditure trends
- Capital expenditure (percent of GDP):
  - 2015: 6.7 percent
  - 2016: 8.3 percent
  - 2017 (proj.): 7.3 percent
  - 2018 (proj.): 6.9 percent
  - 2019 (proj.): 6.7 percent
  - 2020 (proj.): 6.5 percent
- Total expenditure (percent of GDP):
  - 2015: 19.9 percent
  - 2016: 22.8 percent
  - 2017 (prog.): 21.1 percent
  - 2018 (prog.): 20.1 percent
  - 2019 (prog.): 19.8 percent
  - 2020 (prog.): 19.6 percent

### Public expenditure breakdown and major projects
- Public expenditure breakdown (percent of total expenditure) shows capital expenditure and current expenditure shares across 2010–2016 (figure; exact annual shares not numerically listed in source figure).
- Project sector and project descriptions with costs (billion CFAF):
  - Electricity and Hydro: Potable water plant; Dams; Gas terminal at Kribi; thermal energy — 1,457.9
  - Ports and airports: Kribi port — 553.0
  - Road and rail: Kribi complex; bridge and highways — 499.8
  - Telecommunications: Fibre optic network installation — 42.5
  - Urban construction: Social housing — 387.9
  - Total — 2,941.1

### Key fiscal and macroeconomic statistics linked to public investment
- Fiscal balances:
  - Overall budget balance, payment order basis (incl. grants):
    - 2015: -2.0 percent of GDP
    - 2016: -6.5 percent of GDP
    - 2017 (proj.): -3.4 percent of GDP
    - 2018 (proj.): -2.5 percent of GDP
    - 2019 (proj.): -1.9 percent of GDP
    - 2020 (proj.): -1.6 percent of GDP
  - Overall budget balance, cash basis (incl. grants):
    - 2015: -2.7 percent of GDP
    - 2016: -5.4 percent of GDP
    - 2017 (proj.): -4.2 percent of GDP
    - 2018 (proj.): -3.9 percent of GDP
    - 2019 (proj.): -2.8 percent of GDP
    - 2020 (proj.): -2.4 percent of GDP
- Revenue composition (percent of GDP):
  - Total revenue (incl. grants):
    - 2015: 17.9
    - 2016: 16.3
    - 2017 (proj.): 16.7
    - 2018 (proj.): 17.3
    - 2019 (proj.): 17.6
    - 2020 (proj.): 17.7
  - Oil revenue:
    - 2015: 3.3
    - 2016: 2.4
    - 2017 (proj.): 2.4
    - 2018 (proj.): 2.4
    - 2019 (proj.): 2.3
    - 2020 (proj.): 2.2
  - Non-oil revenue:
    - 2015: 14.6
    - 2016: 13.6
    - 2017 (proj.): 13.9
    - 2018 (proj.): 14.5
    - 2019 (proj.): 15.1
    - 2020 (proj.): 15.3
- Public debt and contingent liabilities:
  - Total public debt: 15.6 percent of GDP in 2012 rising to 34.1 percent of GDP in 2016.
  - Domestic arrears included in total public debt: 3.6 percent of GDP.
  - Supplier debt of the oil refinery SONARA: 0.5 percent of GDP.
  - Stock of contracted, but undisbursed external loans: 20.8 percent of GDP at end-2016.
- Balance of payments and reserves:
  - Current account deficit: narrowed to 3.6 percent of GDP in 2016 from 4.1 percent of GDP in 2015.
  - Imputed reserves: fell to 3.7 months of imports in 2016 (6 months in 2015).
  - Drawdown of US$750 million Eurobond proceeds used to finance the deficit.
- Monetary and credit indicators:
  - Annual growth rates at end-2016 (y/y):
    - Broad money growth: 5.6 percent
    - Private sector credit growth: 6.4 percent
  - Imputed reserves declined by CFAF 99 billion in January–March 2017.

### Analysis of public investment implications
- Rapid scaling-up of public investment since 2012 was financed largely with non-concessional loans, contributing to a sharp rise in public debt from 15.6 percent of GDP in 2012 to 34.1 percent of GDP in 2016.
- The pace of contracting new loans has exceeded implementation capacity, evidenced by contracted but undisbursed external loans equal to 20.8 percent of GDP at end-2016, increasing the risk of a debt overhang.
- Large infrastructure projects account for a significant share of public investment spending (Total cost listed as 2,941.1 billion CFAF across major projects), with some nearly completed projects highlighted as priorities for completion to maximize growth payoffs.

### Program targets and policy recommendations related to public investment
- Fiscal consolidation and public investment prioritization:
  - A fiscal consolidation of about 5 percent of GDP (commitment basis) between 2016 and 2020 is the backbone of the program.
  - Consolidation achieved through expenditure rationalization focused on prioritizing public investment, and a gradual expansion in the non-oil revenue base.
  - The fiscal retrenchment, combined with more restrictive regional monetary policy, aims to build domestic deposits to about 2.4 months of expenditure by 2020 (0.5 month in 2016).
- Investment implementation and debt management:
  - Authorities concurred with staff’s recommendation to focus on first-generation projects close to completion to avoid implementation bottlenecks and mitigate debt-overhang risks.
  - Program targets a clearance of domestic arrears of 3½ percent of GDP over the program period.
  - Domestic financing to unwind gradually; audit and clearance plan for domestic arrears and quarterly reporting on amounts outstanding.
  - Commitment to freeze the ceiling on BEAC statutory advances at the level established based on 2014 budget revenue and agreement to a schedule to repay outstanding advances by 2027.
  - Cameroon had drawn CFAF 266 billion out of a ceiling of CFAF 576.5 billion as of end-March 2017.
- Social protection and mitigation:
  - Program would preserve priority social spending via a floor on spending on key sectors such as education, health, employment promotion, youth and women protection.
  - Authorities intended to prepare a national social protection strategy.
- Growth outlook linked to investment:
  - Growth projected to decline to about 4 percent in 2017 then recover to about 4.5–5 percent in 2018–19 as investor confidence returns and large infrastructure projects come into operation.

*Sources: Cameroonian authorities; and IMF staff calculations.*

### 19.      Staff and the authorities agreed on the importance of setting credible and realistic

### 19.      Staff and the authorities agreed on the importance of setting credible and realistic

### Short-term objectives and 2017 budget
- Program set short-term objectives broadly in line with the 2017 budget.
- On revenue, the program is slightly more cautious than the budget, based on a conservative estimate of the combined impact of the new tax measures and exemptions (MEFP ¶22–23, 25–27, Text Tables 3, 4).
- Staff proposed to keep recurrent spending at 12.8 percent of GDP (12.4 percent of GDP in the budget), with a floor of about 3.5 percent of GDP on social spending (MEFP ¶20–21).
- Agreed that public investment program spending objectives should be guided by execution capacity of ongoing infrastructure projects, which were being implemented at a slower pace than anticipated.

### Program Pillar #2: Boosting Non-Oil Revenue and Spending Efficiency — Revenue mobilization
- With oil revenue gradually declining, non-oil revenue base needs to expand to create fiscal space for infrastructure and priority spending (Annex III).
- Authorities intend to introduce new tax policy measures in the 2018 budget focused on three areas (MEFP ¶23):
  - (i) broadening the property tax base using better collection procedures (SB);
  - (ii) reducing the number of exemptions to improve the VAT yield;
  - (iii) streamlining tax incentives.
- Staff concurred and noted some measures need regional coordination to reduce tax arbitrage.
- Administration measures agreed to enhance revenue mobilization (MEFP ¶25–27):
  - (i) broaden income tax base among SMEs through easier physical and electronic access, and simpler forms;
  - (ii) enhance VAT administration by accelerating VAT refunds and eliminating automatic withholding;
  - (iii) strengthen controls by cross-checking taxpayer information between customs and tax administrations (SB);
  - (iv) finalize implementation of biometric taxpayer identification (SB).
  - At customs: implement more efficient audit and exemption monitoring procedures (MEFP ¶25–27).
- Fuel pricing transparency and fiscal risk reduction:
  - Low pass-through of the 2017 drop in international oil prices generated windfall revenue used to offset overdue subsidies to SONARA; recovery in prices poses risk subsidies could re-emerge.
  - Staff indicated current low prices are an opportunity to reinstate the automatic fuel pricing mechanism used until 2008.
  - Authorities committed to publish petroleum prices on a monthly basis (SB), and to prepare a strategy to ensure sustainability of the fuel pricing structure and preserve SONARA’s financial viability (SB, MEFP ¶24).

- Text Table 4. Cameroon: Yield of Proposed Revenue Measures (percent of GDP) — reported yields (as presented in source):
  - Total: 2017 0.4, 2018 0.5, 2019 0.6, Total 1.5
  - Reduction of exemptions and other tax incentives: 2017 0.1, 2018 0.1, 2019 0.1, Total 0.3
  - New excise taxes: 2017 0.0, 2018 0.1, 2019 0.1, Total 0.2
  - Increase of excise tax on fuel distribution: 2017 0.1, 2018 0.1, 2019 0.1, Total 0.3
  - Gains from tax administration compliance: 2017 0.2, 2018 0.1, 2019 0.1, Total 0.4
  - Introduction of land tax: 2017 0.1, 2018 0.2, 2019 0.3

### Public Financial Management (PFM)
- Significant PFM weaknesses remain despite progress; disconnects between:
  - budget passed by parliament (systematically underestimates actual spending needs),
  - spending commitments (include off-budget activities by SNH),
  - actual cash implementation (includes payments of previous year’s arrears) (Box 4).
- Short-term critical PFM focus areas (MEFP ¶28–30):
  - Enhance budget credibility and transparency:
    - gradually move to accrual accounting;
    - strictly limit exceptional procedures;
    - accelerate transposition of CEMAC directives into national law (SB).
    - Start including larger portion of SNH direct spending in the budget starting in 2018, cap and gradually reduce these interventions (IT); include these expenditures in monthly fiscal reports for better monitoring (prior action).
    - Adopt a formal budget calendar to integrate recurrent and investment budgets and align MTBF with macro projections and ceilings (prior action).
    - Publish regular, quarterly budget execution reports (prior action).
  - Strengthen treasury management:
    - broaden the Single Treasury Account scope;
    - prepare more reliable annual Treasury plans attached to annual budget laws (CEMAC Directive).
    - strictly limit treasury advances; prohibit use of correspondent accounts to preserve budgetary allocations beyond current year; produce monthly reports on balances of these accounts; limit exceptional procedures for investment spending; undertake more frequent reconciliation of financing data with the BEAC (MEFP ¶34).
  - Enhance public investment efficiency:
    - PIMA assessment found public investment efficiency in Cameroon about half that of highest-performing countries (40 percent for SSA); key weaknesses in preparation and execution phases.
    - Main weaknesses: lack of integration of MTBF with annual budgets; inclusion of immature projects causing delays and low infrastructure quality; slow/inefficient procurement; difficulties in expropriation and landowner compensation hampering implementation.
    - Authorities plan to strengthen project preparation by specifying project selection criteria in a binding document (SB, MEFP ¶31); enhanced planning of multi-year projects to support program budgeting (MEFP ¶32).
    - AfDB supporting capacity building in strategic planning and project maturation fund; World Bank assisting preparation of new procurement code.

- Box 4: PFM diagnostics (March 2017 PEFA update, April 2017 Fund PFM mission):
  - Positive developments: improved taxpayer registration, time limits for fund transfers, regular reconciliation with Treasury; National Public Debt Committee (CNDP) established in 2008; MTEF and MTBF implementation; parliamentary reviews strengthen accountability.
  - Problematic issues: extensive use of treasury advances; payments of previous year’s arrears well beyond 90-day complementary period; direct spending by SNH regularized ex-post displacing regular spending; weak links between successive MTBFs and between MTBF and annual budgets; use of below-the-line treasury correspondent accounts to secure multi-year allocations; blurred fiscal years, arrears accumulation, complicated treasury management; weaknesses in budgetary framework, reporting and documentation; budget risks from public enterprises due to absence of aggregated risk information.

### Maintaining debt sustainability and addressing fiscal risks
- Under program scenario, Cameroon’s debt remains on a sustainable path, but DSA suggests risk of external debt distress remains high.
- Breach of policy-dependent threshold under baseline is significantly less pronounced than in 2015 Article IV DSA due to fiscal consolidation and prudent borrowing plan; public external debt remains highly vulnerable to exogenous shocks.
- Authorities’ 2017 borrowing target: about CFAF 1.38 trillion in nominal terms for critical priority projects, of which about two-thirds is on semi-concessional terms (MEFP ¶35).
- Total envelope for non-concessional borrowing in 2017–19: around CFAF 2 trillion.
- Given limited concessional resources, non-zero limit on non-concessional debt allows financing of high-priority projects (example: stabilization of Douala’s power transmission system).
- Staff recommendations on borrowing control:
  - Strengthen controls on new borrowing; align new borrowing with absorption capacity.
  - Strengthen capacity of technical CNDP secretariat to review and approve loan requests (MEFP ¶37).
  - Clean backlog of contracted-but-not-yet-disbursed debt and prioritize concessional financing (MEFP ¶36).
  - Limit contracting of new non-concessional loans to focus on completing existing projects and allow pipeline projects to mature (MEFP ¶35).
  - Strictly limit external borrowing by public enterprises under CNDP control to reduce external arrears risks (prior action, MEFP ¶38).

- Fiscal risks from public enterprises and PPPs:
  - Public enterprises account for a sixth of public sector employment.
  - Annual budget subsidies to public enterprises reach about 1 percent of GDP.
  - SOEs have accumulated gross debt of about 4 percent of GDP, including 0.4 percent of GDP in publicly-guaranteed external debt, and arrears in the order of 3 percent of GDP (Text Figure 2).
  - Staff supported plan to gradually reduce arrears, divest commercially-viable SOEs, and eliminate subsidies to insolvent SOEs.
  - Authorities will report SOEs’ contingent liabilities together with explicit and contingent government commitments on PPPs in an annex to the budget (SB, MEFP ¶33, 38).

### Program Pillar #3: Accelerating private sector-led diversification — financial stability and inclusion
- Banking system remained resilient but vulnerabilities are emerging (Annex IV):
  - Low exposure to government and underdeveloped interbank and regional markets limited regional crisis impact, but increased holdings of regional government claims render banks vulnerable to sovereign default (16 percent of banks’ total assets as of end 2016).
  - Compliance with prudential ratios unchanged from end-2015, with five small and non-systemic banks still insolvent (includes three private banks, a recently nationalized bank, and a recently-created small public bank).
  - Banks’ liquidity remains high, although declining; only a few require BEAC refinancing.
  - Share of loans in arrears has been steadily increasing; structurally-high NPLs hinder ability to extend new credit.

- Financial sector measures agreed with COBAC (Annex IV; MEFP ¶42–43):
  - Accelerate resolution of the five ailing banks by submitting to COBAC a resolution plan by end-August 2017 (SB).
  - Urge capitalization agreements with shareholders for private banks to reduce fiscal costs and moral hazard; public non-systemic banks to be recapitalized by the State as less costly than liquidation.
  - Staff estimate fiscal costs associated with existing plans at a maximum of 0.7 percent of GDP, including:
    - (i) 0.5 percent of GDP in the form of 10-year government bonds to cover cost of transferring NPLs of ailing banks to the Treasury (collected by government debt collection agency and added to domestic debt stock with future debt service included in budget);
    - (ii) 0.2 percent of GDP of residual capital needs for the banks (after release of provisions on NPLs bought by the treasury), which could be accommodated in the current budget envelope (MEFP ¶43).
  - If private banks recapitalize at no cost to the state, fiscal cost of recapitalizing public banks would be only 0.3 percent of GDP.
  - Ensure transparency: align methodology used by SRC to price NPL transfers and its governance and accountability with best practices.
  - Prepare a strategy to reduce NPLs by facilitating workouts through rescheduling and/or write-off; streamline foreclosure processes, tax treatment of debt restructuring/write-off, and judiciary processes on contentious debts; submit strategy to COBAC for review and joint implementation by September 2017 (SB, MEFP ¶42).

- Measures to promote financial sector development and inclusion (MEFP ¶44–46):
  - Give access to the client information platform to all credit institutions and micro-finance institutions (SB, MEFP 44a).
  - Reinforce reliability of collateralization by computerizing the cadaster and the movable collateral registry (SB); secure the land registry (MEFP ¶44b).
  - Establish specialized courts for financial matters and develop extra-judicial arbitration mechanisms (MEFP ¶44c).
  - Reinforce the legal framework for mobile banking (MEFP ¶46).

- Financial sector indicators (Text Table 5, 2014–16, percent) — reported values as presented:
  - Capital adequacy:
    - Capital/risk-weighted assets: 2014 11.4, 2015 9.9, 2016 8.8
    - Base Capital/ risk-weighted assets: 2014 9.1, 2015 9.3, 2016 7.6
    - Non-performing loans less provisions/Equity: 2014 10.3, 2015 28.0, 2016 12.3
    - Capital/Assets: 2014 3.3, 2015 8.7, 2016 8.1
  - Asset quality:
    - Loans in arrears/total loans: 2014 12.3, 2015 12.5, 2016 14.1
    - Non-performing loans/total loans: 2014 9.7, 2015 10.5, 2016 9.6
    - Large exposures (> 25 % of equity)/equity: 2014 125, 2015 166.0, 2016 160.1
  - Results and profitability:
    - Return on Assets (ROA): 2014 0.8, 2015 0.7, 2016 0.7
    - Return on Equity (ROE): 2014 15.0, 2015 15.0, 2016 18.0
  - Liquidity:
    - Reserves/total deposits: 2014 27.7, 2015 24.3, 2016 18.0
    - Liquid assets/Total assets: 2014 23.0, 2015 23.2, 2016 (value not separately provided in source table formatting)
    - Liquid assets/ST liabilities: 2014 139.0, 2015 147.0, 2016 148.2
    - Total deposits /Total loans: 2014 141.0, 2015 129.0, 2016 128.3
  - Note: Data obtained from BEAC/COBAC. The new small public bank is excluded.

### Addressing structural obstacles to competitiveness and diversification
- Competitiveness deteriorated in 2016 as falling commodity prices worsened terms of trade and the REER marginally appreciated.
- Falling prices for main commodity exports (oil, cocoa and timber) produced a deterioration in the terms of trade of 31.5 percent in 2014–16.
- REER recorded a slight appreciation of 2 percent in 2016, mainly driven by changes in the Euro exchange rate.
- EBA-lite methodologies indicate a moderate REER overvaluation of up to about 12 percent (Annex I).
- Projected recovery in oil prices expected to support improvement in terms of trade in 2017; reforms to improve business climate expected to strengthen diversification and alleviate structural bottlenecks to competitiveness.

*Italic: IMF staff summary based on the provided source content.*

### 31.      The authorities concurred with the mission that the main obstacles to competitiveness

### cr17185 - 31.      The authorities concurred with the mission that the main obstacles to competitiveness

### Structural competitiveness: constraints and reforms
- Main obstacles to competitiveness were structural.
- Cameroon ranked 166 in the World Bank’s Doing Business indicators in 2016, down from 148 in 2014.
- Main issues:
  - inadequate transport and telecommunications infrastructures
  - an unfriendly institutional environment for enterprises
  - limited access to finance
  - a burdensome tax system
  - limited regional integration, with the unilateral implementation of the EPA representing an additional challenge
- Authorities’ reform agenda and external support:
  - Pursuing broad reforms in the identified areas, supported by development partners.
  - With World Bank and African Development Bank support, addressing bottlenecks to electricity distribution and transport.
  - Short-term focus on measures to facilitate intra-regional trade, make the tax system more accessible, and ensure timely payment of government bills to domestic suppliers (SB, MEFP ¶48).

### Program modalities, financing needs, and conditionality
- Authorities requested a 36-month arrangement under the Extended Credit Facility (ECF), with access of SDR 483 million (175 percent of quota).
- Justification for access level: size and protracted nature of the balance of payments need, strength of the proposed program, and Cameroon’s capacity to repay the Fund.
- Balance of payments need and shocks:
  - A large and protracted balance of payments need of about US$2.1 billion (6.7 percent of GDP) over 2017–20 (Tables 6, 7).
  - Oil revenue declined by 2 percent of GDP between 2014 and 2016 owing to the collapse in world oil prices.
  - Security and humanitarian costs from Cameroon’s role in the war against Boko Haram amounting to about 1 percent of GDP annually in 2014–16.
- Program conditionality and monitoring:
  - Quantitative performance criteria based on semi-annual reviews (end-June and end-December, starting in June 2017) on: the non-oil primary balance, net domestic financing, disbursement of already contracted non-concessional loans, net BEAC financing to the central government, accumulations of new external arrears, and contracting of new non-concessional loans.
  - Key BEAC balance sheet items presented in the monetary survey on a quarterly basis.
  - Indicative targets on: net reduction in the stock of domestic arrears, non-oil revenues, social spending, and off-budget spending by the national oil company (SNH).
  - Structural conditionality supports the program’s three pillars (Appendix I Table 2).
- Cameroon’s capacity to repay the Fund:
  - Cameroon has implemented three PRGT and four GRA-supported programs.
  - Outstanding to the Fund: 49.08 million SDRs as of end-May.
  - Repayments from the proposed ECF-supported program would peak at 3.9 percent of imputed reserves in 2026 and start declining in 2027.

### Financing package and donor coordination
- Text Table 6: Financing Gap, 2017-20 (CFAF Billion)
  - 1. Financing gap: 2017 = 514; 2018 = 370; 2019 = 370; 2020 = 47; Total = 1302
  - 2. IMF financing: 2017 = 178; 2018 = 95; 2019 = 95; 2020 = 47; Total = 415
    - percent of quota: 2017 = 75; 2018 = 40; 2019 = 40; 2020 = 20; Total = 175
  - 3. Budget support from other donors: 2017 = 337; 2018 = 275; 2019 = 275; 2020 = 0; Total = 887
    - World Bank: 2017 = 123; 2018 = 62; 2019 = 62; 2020 = 0; Total = 247
    - European Union: 2017 = 22; 2018 = 22; 2019 = 22; 2020 = 0; Total = 66
    - African Development Bank: 2017 = 126; 2018 = 126; 2019 = 126; 2020 = 0; Total = 377
    - France: 2017 = 66; 2018 = 66; 2019 = 66; 2020 = 0; Total = 197
  - 4. Residual financing gap (1-2-3): 2017 = 0; 2018 = 0; 2019 = 0; 2020 = 0; Total = 0
  - Share of Fund financing: 2017 = 35; 2018 = 26; 2019 = 26; 2020 = 100; Total = 31.9
- Donor coordination:
  - Fund support expected to catalyze additional donor financing.
  - Budget support from IFIs and donors would cover remaining financing gap of about US$1.4 billion (Text Table 6).
  - Close coordination with partners to ensure complementarity, avoid overlaps, and address issues critical to unlock medium-term growth potential.

### Prior actions, safeguards, and implementation capacity
- Prior actions implemented ahead of Board meeting:
  - Total amount of oil revenue and direct spending by SNH added to monthly fiscal reporting (implemented on June 1).
  - Directive from the Minister of Finance mandating CNDP must issue a prior opinion for all new external borrowing of public enterprises (issued on June 6).
  - Ministerial Circular setting the budgetary calendar for 2018 (issued on June 20).
  - First quarterly budget execution report (January-March 2017) published on June 20.
- Safeguards assessment for BEAC:
  - BEAC finalizing implementation of remaining priority recommendations as part of IMF safeguards “rolling measures”.
  - At end-March 2017 the BEAC Board of Directors and CEMAC Ministerial Committee adopted governance-focused amendments to the BEAC Charter; adoption finalized in early June 2017.
  - Major advances toward BEAC’s full transition to IFRS during 2017 to strengthen financial transparency.
  - An update safeguards assessment started in June 2017.
- Implementation capacity and risk mitigation:
  - Implementation capacity considered good; supported by a medium-term capacity building strategy developed jointly with authorities (Annex V).
  - Significant portion of adjustment and key structural measures in 2017 designed to mitigate risks associated with the 2018 elections.
  - Discussed contingent measures: additional expenditure consolidation in current spending and faster rollout of new tax measures.
  - Staff encouraged analysis of revenue sources most at risk and to release corresponding expenditures only once revenues materialize.
  - Data quality generally satisfactory; staff encouraged establishing/adjusting internal processes to ensure timely and accurate production of required information.

### Staff appraisal: macroeconomic diagnosis and policy recommendations
- Macroeconomic challenges:
  - Serious challenges from growing external and fiscal imbalances driven by falling export prices and security threats since 2014, together with expansionary policies.
  - Consequences: widening fiscal deficits, rising public debt, dwindling international reserves, and weakening competitiveness.
  - External stability assessment shows only modest overvaluation of the real effective exchange rate.
- Fiscal consolidation and priorities:
  - Authorities committed to sustained fiscal adjustment to maintain fiscal and external sustainability nationally and support regional stability (Cameroon contributes over half of the BEAC’s pooled reserves).
  - A large share of adjustment to be achieved in 2017 with a balanced reduction of recurrent and capital spending.
  - Staff welcomes commitment to preserve social and critical recurrent spending and to broaden the non-oil revenue base.
  - Urged careful review of investment project pipeline to prioritize key, ongoing infrastructure projects with established growth benefits.
- Monetary and regional policy interaction:
  - Tighter regional monetary policy will support fiscal consolidation: limits on net BEAC financing and tighter credit conditions for banks.
  - Staff welcomes commitment to freeze country-specific ceilings on statutory advances at 2014 levels and BEAC policies aiming at gradual reimbursement and full elimination of these advances.
- Revenue mobilization and spending efficiency:
  - Starting in 2018, new tax policy and administration measures expected to drive fiscal adjustment; expenditure broadly stable in real terms.
  - Authorities plan to develop the potential of the land tax and streamline exemptions and tax incentives.
  - Authorities urged to consider contingency measures for potential EPA adverse impact on tariff revenue.
  - Expenditure-side priorities: align annual budgets with MTBFs, eliminate exceptional spending procedures, gradually reduce off-budget spending by the oil company, publish regular budget execution reports, and enhance public investment quality and efficiency.
- Public debt management:
  - Focus on reducing pace of debt accumulation, tilt new borrowing toward more concessional financing, and closely monitor contingent liabilities.
  - Rapid accumulation of non-concessional loans risks increasing debt service burden; large stock of undisbursed commitments indicates absorption constraints.
  - Authorities committed to strictly limit new non-concessional borrowing, review undisbursed loan portfolio, and strengthen project preparation and execution.
  - Contingent liabilities from state-owned enterprises and PPPs to be monitored and contained via comprehensive reporting and deeper structural reforms.
- Financial sector and private-sector led diversification:
  - Determined actions needed to support private-sector led diversification: promote a sound and inclusive financial system, improve the business environment.
  - Authorities committed to accelerate resolution of insolvent banks and address high NPLs to boost financial sector resilience and financial intermediation.
  - Staff encourages enhanced coordination of tax policies and harmonization of customs procedures at the regional level.

*International Monetary Fund staff report excerpt (Cameroon).*

### 43.      Staff supports the authorities’ request for a new three-year arrangement under the

### 43.      Staff supports the authorities’ request for a new three-year arrangement under the

### Program support and risks
- Staff supports the authorities’ request for a new three-year arrangement under the ECF.
- Risks to program implementation:
  - delayed or insufficient fiscal adjustment;
  - lukewarm structural reform implementation.
- Offsets to risks:
  - authorities’ leadership in the regional effort;
  - strong commitment to reform.

### Real and external sector developments (highlights from figures, 2011–16)
- Growth composition, 2014Q4–2016Q3: primary, secondary excl. oil, oil, tertiary, taxes and duties components shown in Figure 1.
- Consumer Price Index: "Consumer prices (average)1.9 2.7 0.9 0.7 1.1 1.4 2.0 2.0 2.0" (Table 1).
- Effective exchange rates: NEER and REER appreciating (Figure 1 caption: "Effective exchange rates are appreciating ...").
- Trade and external balances: trade balances slowly adjusting; overall balance of payments deteriorating; "leading to rapid loss of reserves" (Figure 1 captions).

### Fiscal sector developments (2013–17, Figure 2 and Tables 2a/2b)
- Expenditure and composition: total expenditure and components shown as 12 month total as a percentage of 12 month GDP (Figure 2).
- Revenue trends:
  - "Revenue has been declining, mainly due to oil..." (Figure 2 caption).
  - Table 2b: Total revenue and grants 18.1 17.9 16.9 16.3 17.1 16.7 17.3 17.6 17.7 17.8 17.9 (percent of GDP sequence).
  - Oil sector revenue (percent of GDP): 4.3 3.3 2.3 2.4 2.5 2.4 2.4 2.3 2.2 2.1 2.0.
  - Non-oil revenue (percent of GDP): 13.5 14.6 14.0 13.6 14.1 13.9 14.5 15.1 15.3 15.4 15.6.
- Fiscal balances:
  - Overall fiscal balance (payment order basis) excluding grants: -5.1 -2.1 -6.8 -4.4 -3.8 -2.8 -2.2 -1.8 -1.5 -1.4.
  - Including grants: -4.8 -2.0 -6.5 -4.0 -3.4 -2.5 -1.9 -1.6 -1.2 -1.1.
  - Non-oil primary balance (payment basis, percent of non-oil GDP): -9.2 -5.2 -8.4 -5.2 -4.4 -3.6 -3.1 -2.8 -2.5.
- Public debt and financing:
  - Stock of public debt (percent of GDP): 26.2 33.0 34.1 36.1 36.1 36.1 35.1 33.8 32.4 (Table 1).
  - Financing composition shows increased reliance on domestic resources and BEAC statutory advances (Figure 2).

### Government expenditure assessment (Figure 3)
- Government spending has risen since 2004 but continues to lag average LIDC levels.
- Current and capital spending:
  - Cameroon’s wage bill is significantly lower than the average LIDC (Wage Bill Benchmark, 2015 or most recent year).
  - Capital stock among the lowest in the world and of poor quality (Capital Stock and Infrastructure Quality, 2015).
- Health spending and outcomes:
  - Public health expenditure considerably lower than CEMAC peers and average LIDC.
  - Lower-than-average health outcomes (infant deaths per 1,000; life expectancy; hospital beds; nurses and midwives; physicians per 1,000) shown in Figure 3.

### Financial sector indicators (Figure 4)
- Financial access and depth:
  - Financial access remains low; mobile banking use among the lowest in SSA.
  - Domestic credit to private sector (percent of GDP) rising but sector remains shallow.
- Bank performance and soundness:
  - Banks remain profitable (Return on Equity, 2015–16).
  - Non-performing loans are high but below the regional average (Non-Performing Loans, 2015–16).
- Credit distribution:
  - Credit is well distributed across sectors (Cameroon: Credit Sectoral Distribution, 2014–16).

### Key economic and financial indicators and projections (selected lines from Table 1)
- GDP at constant prices: 5.9 5.8 4.7 4.0 4.6 5.0 5.1 5.5 5.5 (sequence as presented).
- Oil GDP at constant prices: 13.8 28.1 -4.5 -2.4 -0.1 -3.4 -3.8 6.2 5.8.
- Non-Oil GDP at constant prices: 5.6 4.9 5.1 4.3 4.8 5.3 5.5 5.5 5.5.
- Nominal GDP (at market prices, CFAF billions): 15,846 16,807 17,386 18,242 19,273 20,498 21,925 23,558 25,338.
- Oil output (thousands of barrels per day): 75.4 95.8 92.8 90.4 89.5 86.4 83.1 88.6 93.7.
- Consumer prices (average): 1.9 2.7 0.9 0.7 1.1 1.4 2.0 2.0 2.0.
- Export volume (percent change): 17.6 17.8 1.0 2.0 5.2 6.7 8.5 10.0 9.5.
- Average oil export price (US$ per barrel): 88.5 51.9 34.6 44.7 44.5 43.8 43.6 44.0 44.7.
- Broad money (M2) annual change: 10.8 9.1 5.6 3.3 5.7 6.4 7.5 8.0 8.6.
- Domestic credit to the private sector (percent of GDP): 14.4 12.8 6.4 5.8 9.3 10.8 11.2 11.9 14.3.
- Gross national savings (percent of GDP): 18.6 17.2 16.5 16.9 17.8 18.9 20.1 21.4 22.6.
- Gross domestic investment (percent of GDP): 22.9 21.3 20.1 20.0 20.8 21.6 22.4 23.1 23.8.
- Total revenue (percent of GDP): 18.1 17.9 16.3 16.7 17.3 17.6 17.7 17.8 17.9.
  - Oil revenue (percent of GDP): 4.3 3.3 2.4 2.4 2.4 2.3 2.2 2.1 2.0.
  - Non-oil revenue (percent of GDP): 13.5 14.6 14.6 13.6 14.1 14.5 15.1 15.3 15.4 15.6.
- Overall fiscal balance (payment order basis) excluding grants: -5.1 -2.1 -6.8 -3.8 -2.8 -2.2 -1.8 -1.5 -1.4.
- Current account balance (percent of GDP) excluding official grants: -4.7 -4.5 -4.0 -3.5 -3.4 -3.1 -2.6 -2.0 -1.6.
- Stock of public debt (percent of GDP): 26.2 33.0 34.1 36.1 36.1 36.1 35.1 33.8 32.4.
- Gross official reserves (imputed reserves, US$ billions): 3.2 3.5 2.3 2.5 2.7 2.9 3.1 3.4 3.6.
- Official reserves in months of imports: 3.9 6.0 3.7 3.9 4.0 4.1 4.2 4.3 4.3.

### Central government operations (selected figures, Table 2a)
- Total revenue and grants (CFAF billions): 2,870 3,013 2,945 2,838 3,119 3,046 3,330 3,612 3,878 4,190 4,526.
- Total expenditure (CFAF billions): 3,626 3,352 3,750 3,964 3,845 3,663 3,813 4,010 4,222 4,483 4,816.
- Current expenditure (CFAF billions): 2,286 2,334 2,224 2,493 2,258 2,334 2,486 2,630 2,794 2,960 3,178.
  - Wages and salaries: 852 911 955 940 999 999 1,065 1,123 1,210 1,290 1,375.
  - Goods and services: 768 789 667 919 694 718 803 859 904 957 1,030.
  - Interest: 69 70 24 31 45 19 81 64 155 164 165 16 5 16 6 18 3 (interest line formatting preserved as in source).
- Capital expenditure (CFAF billions): 1,319 1,132 1,526 1,441 1,587 1,329 1,328 1,380 1,428 1,522 1,638.
- Overall balance (cash basis) excluding grants (CFAF billions): -780 -463 -863 -997 -821 -833 -808 -644 -588 -349 -345.
- Financing (CFAF billions): 734 452 943 736 250 374 214 482 292 290.
  - External financing, net: 579 880 340 415 359 356 335 351 382 346.
  - Domestic financing, net: 137 -429 615 320 -109 18 -121 131 -90 -56.
- Unpaid government obligations (end-year): 711 598 615 558 372 186 000 0 0 0.

### Balance of payments (selected lines, Table 3)
- Current account balance (CFAF billions): -689.1 -694 -627 -563 -578 -560 -492 -398 -326 (Table 3 header series).
- Trade balance (CFAF billions): -222 -220 -128 -91 -117 -158 -123 -131 22.
- Exports, goods (CFAF billions): 3,244 3,085 2,710 3,064 3,214 3,329 3,515 3,838 4,194.
  - Oil and oil products: 1,353 1,176 772 994 1,000 962 933 977 1,029.
  - Non-oil sector: 1,891 1,909 1,937 2,070 2,214 2,367 2,582 2,860 3,165.
- Imports, goods (CFAF billions): -3,466 -3,306 -2,838 -3,155 -3,331 -3,487 -3,638 -3,850 -4,072.
- Current account balance (percent of GDP) excluding grants: -4.7 -4.5 -4.0 -3.5 -3.4 -3.1 -2.6 -2.0 -1.6.
- Financial account and overall balance details shown; financing gap and possible IMF financing noted (Table 3).

### Monetary survey (selected lines, Table 4)
- Net foreign assets (CFAF billions, sample entries): 1,669 2,192 1,438 1,504 1,302 1,116 1,424 1,458 1,415 1,483 1,516 1,603 1,753 1,903.
  - Bank of Central African States (BEAC) component: 1,447 1,930 1,106 1,018 867 732 1,091 1,126 1,082 1,151 1,183 1,270 1,420 1,570.
  - Of which: IMF credit entries preserved as shown (negative values).
- Net domestic assets and domestic credit: domestic credit series includes net claims on public sector and credit to private sector; credit to the private sector (CFAF billions, sample) 2,224 2,508 2,668 2,697 2,736 2,775 2,824 2,890 2,955 3,086 3,419 3,802 4,255 4,862.
- Broad money (M2, CFAF billions): 3,774 4,116 4,346 4,294 4,306 4,304 4,490 4,551 4,660 4,743 5,045 5,423 5,856 6,362.
- Memorandum items:
  - Contribution to growth of broad money: Net foreign assets 3.4 13.9 -18.3 ... Net domestic assets 7.3 -4.8 23.9 ... (entries preserved).
  - Credit to the economy (annual percentage change): 11.3 14.6 6.6 11.2 9.9 7.1 5.2 6.3 7.1 8.3 10.6 10.6 11.7 12.8.

### Risk Assessment Matrix (Table 5)
- Source of risks, relative likelihood, impact, and recommended policy response summarized:
  - Economic fallout from political fragmentation: Medium likelihood; policy: Improve CEMAC integration and economic relationship with Nigeria; improve business environment; implement structural reforms to improve competitiveness.
  - Tighter and more volatile global financial conditions: Medium likelihood; recommended: Implement necessary fiscal consolidation and structural reforms to reduce external imbalances and boost investor confidence.
  - Persistently lower energy prices: High likelihood; impact: strain fiscal and BOP; recommended: Widen non-oil tax base, increase efficiency of SONARA, spur competition in oil import sector.
  - Spillovers of worsening economic situation of other CEMAC countries: High likelihood; recommended: Coordinate with other CEMAC countries to build additional buffers through fiscal consolidation and structural reforms.
  - Spillovers of the regional security situation: Medium likelihood; recommended: Provide space for higher security expenditure by curtailing unproductive public investments; prepare contingency plans for refugees with UNHCR.

### External financing requirements
- Table 6 header present but detailed numerical series not provided in the excerpt.

*Sources: Cameroonian authorities; BEAC authorities; and IMF staff calculations and estimates as presented in the source content.*

### 1. Total financing requirement

### 1. Total financing requirement

### Total financing requirement (series by item)
- Total financing requirement (row values): 817.9, 1346.6, -18.6, 910.3, 949.1, 943.8, 901.7, 830.0, 777.2
- Current account deficit (row values): 689.1, 694.1, 627.5, 563.2, 578.5, 560.4, 492.3, 397.7, 326.2
- Debt amortization (row values): 99.9, 169.5, 178.2, 202.4, 233.7, 273.0, 275.4, 281.6, 289.6
- Repayment to the Fund (row values): 2.6, 18.4, 17.7, 18.3, 17.8, 16.9, 0.7, 0.7, 11.4
- Change in gross reserves (increase=+) (row values): 26.3, 464.6, -842.0, 126.5, 119.1, 93.5, 133.3, 150.0, 150.0

### Total financing sources (series by item)
- Total financing sources (row values): 817.9, 1346.6, -18.6, 396.0, 578.9, 573.6, 854.2, 830.0, 777.2
- Capital transfers (row values): 6.4, 11.1, 36.3, 36.3, 36.3, 36.3, 36.3, 36.3, 36.3
- Foreign direct investment (net) (row values): 455.1, 352.3, 324.7, 315.4, 340.9, 379.1, 417.8, 530.3, 639.0
- Portfolio investment (net) (row values): 11.6, 12.0, 12.3, 12.7, 13.1, 13.5, 13.9, 14.3, 14.7
- Debt financing (row values): 344.8, 971.3, -392.0, 31.6, 188.6, 144.8, 386.2, 249.1, 87.2
  - Public sector (row values): 582.8, 990.3, 481.6, 573.6, 602.3, 621.0, 640.3, 678.4, 732.5
  - Non-public sector (row values): -237.9, -19.1, -873.6, -542.0, -413.7, -476.2, -254.1, -429.3, -645.3
  - Short-term debt (row values): -237.9, -19.1, -873.6, -542.0, -413.7, -476.2, -254.1, -429.3, -645.3
- Other net capital inflows (row values): -23.5, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0

### Total financing needs and identified financing
- Total financing needs (row values): 0.0, 0.0, 0.0, 514.3, 370.2, 370.1, 47.5, 0.0, 0.0
- Expected financing (row values): 336.7, 275.1, 275.1
  - African Development Bank (row values): 125.7, 125.7, 125.7
  - World Bank (row values): 123.5, 61.9, 61.9
  - France (row values): 65.6, 65.6, 65.6
  - European Union (row values): 21.9, 21.9, 21.9
- Residual financing gap (row values): 177.6, 95.0, 95.0, 47.5
  - IMF ECF financing (row values): 177.6, 95.0, 95.0, 47.5
- Amortization (repeated row values): 99.9, 169.5, 178.2, 202.4, 233.7, 273.0, 275.4, 281.6, 289.6

### Gross Fiscal Financing Needs (Table 7 condensed highlights, 2016–22)
- A. Overall fiscal deficit (cash basis, including grants) (2016–2022): 943, 765, 744, 584, 530, 292, 290
- B. Other financing needs (2016–2022): 394, 624, 476, 579, 378, 549, 434
  - Amortization (including arrears) (2016–2022): 367, 391, 436, 417, 303, 290, 316
    - External (2016–2022): 131, 202, 232, 269, 255, 260, 289
      - o/w Amortization (excl. IMF) (2016–2022): 113, 184, 215, 253, 255, 260, 278
      - o/w Repayment of IMF credit (2016–2022): 18, 18, 17, 16, 0, 0, 11
    - Domestic (2016–2022): 237, 189, 204, 148, 483, 128
      - o/w Amortization of Tbills (2016–2022): 203, 119, 134, 118, 483, 128
      - o/w Amortization of Bonds (2016–2022): 33, 70, 300, 0, 0, 0
  - Banking System (2016–2022): 272, 334, 016, 176, 259, 118
  - Other deposits (2016–2022): 272, 334, 016, 176, 259, 118
- C. = A + B Total financing needs (2016–2022): 1,338, 1,389, 1,220, 1,163, 390, 884, 2,724
- D. Identified sources of financing (2016–2022): 1,349, 874, 850, 793, 386, 184, 2,724
  - External (2016–2022): 453, 544, 571, 588, 606, 642, 624 (Drawing: same series)
    - o/w Project financing (ext.) (2016–2022): 453, 544, 571, 588, 606, 642, 693
  - Domestic (2016–2022): 896, 331, 279, 205, 255, 200, 100
    - Banking System (2016–2022): 655, 350, 000, 0, 0, 0, 0
    - BEAC Statutory advances (2016–2022): 93, 350, 000, 0, 0, 0, 0
    - Government deposits (2016–2022): 47, 500, 000, 0, 0, 0, 0
    - Bank loans (2016–2022): 83, 000, 000, 0, 0, 0, 0
    - Other bank financing (2016–2022): 4, 000, 000, 0, 0, 0, 0
    - Other non-bank financing (2016–2022): 242, 296, 279, 205, 255, 200, 100
      - o/w Bond issuance (2016–2022): 82, 50, 500, 000, 0, 0, 0
- E = C - D Financing gap: -125, 143, 703, 704, 700
- Errors and omissions: -120, 000, 00
- F. Exceptional external financing (2016–2022): 337, 275, 275, 000
  - Multilateral (2016–2022): 315, 253, 253, 000
  - Bilateral (2016–2022): 22, 2, 22, 000
- E - F Residual financing needs: IMF - ECF (2016–2022): 178, 95, 95, 47, 00

### Proposed Schedule of Disbursements under the ECF Arrangement, 2017–20 (Table 8)
- 1: Date of Availability 6/26/2017; Amount (in millions of SDR) 124.2; In percent of quota 45; Conditions: Executive Board approval of the ECF arrangement.
- 2: Date of Availability 12/15/2017; Amount 82.8; In percent of quota 30; Conditions: Observance of continuous and end-June 2017 performance criteria, and completion of the first review.
- 3: Date of Availability 6/30/2018; Amount 55.2; In percent of quota 20; Conditions: Observance of continuous and end-December 2017 performance criteria, and completion of the second review.
- 4: Date of Availability 12/15/2018; Amount 55.2; In percent of quota 20; Conditions: Observance of continuous and end-June 2018 performance criteria, and completion of the third review.
- 5: Date of Availability 6/15/2019; Amount 55.2; In percent of quota 20; Conditions: Observance of continuous and end-December 2018 performance criteria, and completion of the fourth review.
- 6: Date of Availability 12/15/2019; Amount 55.2; In percent of quota 20; Conditions: Observance of continuous and end-June 2019 performance criteria, and completion of the fifth review.
- 7: Date of Availability 5/31/2020; Amount 55.2; In percent of quota 20; Conditions: Observance of continuous and end-December 2019 performance criteria, and completion of the sixth review.
- Total: Amount 483.0 (in millions of SDR); In percent of quota 175

### Capacity to Repay the Fund (Table 9 highlights, 2016–27)
- Principal (SDR millions) series (selected): 21.5, 20.7, 19.9, 18.8, -, -, -, -, -, -, -, -
- Charges and interest (SDR millions) series (selected): -, 0.6, 0.8, 0.8, 0.8, 0.8, 0.8, 0.8, 0.8, 0.8, 0.8
- Outstanding Fund credit (SDR millions): 59.4, 245.7, 336.2, 427.8, 483.0, 483.0, 470.6, 423.7, 354.7, 263.6, 167.0, 82.8
- Net use of Fund credit (SDR millions): -21.5, 186.3, 90.5, 91.6, 55.2, 0.0, -12.4, -46.9, -69.0, -91.1, -96.6, -84.2
- Disbursements (SDR millions): -, 207.0, 110.4, 110.4, 55.2, -, -, -, -, -, -, -
- Repayments and repurchases (SDR millions): 21.5, 20.7, 19.9, -, 18.8, -, -, 12.4, 46.9, 69.0, 91.1, 96.6, 84.2
- Memorandum items (CFA F billions): Nominal GDP (2016–2027): 17,386; 18,242; 19,273; 20,498; 21,925; 23,558; 25,338; 27,117; 29,031; 31,097; 33,288; 35,636
- Exports of goods and services (CFA F billions, 2016–2027): 3,695; 4,142; 4,333; 4,521; 4,767; 5,187; 5,641; 6,049; 6,471; 6,925; 7,384; 7,902
- Government revenue (CFA F billions, 2016–2027): 2,839; 3,040; 3,330; 3,612; 3,878; 4,190; 4,529; 4,852; 5,228; 5,631; 6,057; 6,512
- Debt service (total) (CFA F billions, 2016–2027): 183.1; 248.3; 307.0; 362.4; 375.5; 393.1; 429.6; 643.6; 673.8; 733.8; 622.5; 648.8
- CFA francs/SDR (period average) (2016–2027): 823.8; 858.2; 860.9; 860.8; 860.2; 862.6; 867.4; 867.4; 867.4; 867.4; 867.4; 867.4

### External Stability and REER assessment (Annex I highlights)
- Under program assumptions, REER estimated overvalued by up to about 12 percent across three “EBA-lite” models.
- Terms of trade deteriorated by over 30 percent over the last two years, primarily driven by a fall in oil prices.
- From 2015 to 2016, REER appreciated by 2 percent and NEER by 3.6 percent.
- Current account deficit projected to have narrowed to 3.6 percent of GDP in 2016; projected to narrow to about 2 percent of GDP by 2020 under program reforms.
- Foreign exchange reserves declined in 2016 to US$2.3 billion from US$3.5 billion in 2015 (from 6 to 3.7 months of imports).
- EBA-lite model estimates of REER overvaluation: CA approach 11.5 percent; IREER approach 8 percent; ES approach 0.1 percent.
- Assumptions: trade elasticity -0.34; target net IIP and current account norms specified in models; sensitivity noted—downside scenarios produce REER estimates between -1.5 percent and 11.8 percent.
- CA method estimates total policy gap -8.1 percent; fiscal gap 2.5 percent below desirable level; reserve accumulation gap 5.9 percent below desired levels; models assume desired reserve growth 9 percent (to reach 4.2 months of imports by end of program).

### Potential impact of the Economic Partnership Agreement (Annex II highlights)
- EPA entered into force in August 2016; aims for progressive and asymmetric trade liberalization and transparent trade rules; regional CEMAC-EPA not yet signed.
- EPA expected to reduce customs revenue substantially, with potential long-run positive impact on domestic tax revenue.
- EPA provisions: duty- and quota-free access for Cameroon exports to the EU; gradual liberalization of 80 percent of EU exports to Cameroon over 15 years; Cameroon can exclude some products; provision for compensation via PRADA.
- Trade patterns (2015): 27.6 percent of all Cameroonian imports from the EU (33.4 percent of non-oil imports); EU accounted for 31 percent of all customs revenue; exports to the EU represented 39.6 percent of total exports.
- Trade with Asian countries, including China, has grown fast and, since 2014, has exceeded trade with the EU.

*Source: IMF staff estimates and projections.*

### 4. The EPA will affect trade volumes through three channels. First, by firms increasing the

### 4. The EPA will affect trade volumes through three channels. First, by firms increasing the

### Trade effects of the EPA
- Channels through which the EPA affects trade volumes:
  - Firms increasing the quantity of imported goods from the EU as their cost falls.
  - Trade diversion: firms importing from non-EU countries may switch to importing goods from EU countries to take advantage of relatively lower price.
  - Guaranteeing Cameroon’s exports continued free access to the EU market.
- Overall trade impact depends on:
  - The imports’ elasticity to tariff changes.
  - The ability of domestic firms to supply the EU market.
- Policy action:
  - The authorities have set up the Enterprise Upgrading Centre to boost domestic firms’ competitiveness.

### Short- and medium-term revenue impact of the EPA
- Short-term:
  - Likely limited given gradual phasing out of tariffs.
  - Estimates suggest foregone revenue could be less than 0.1 percent of GDP in the first few years.
- Medium-to-long term:
  - Revenue loss could increase to 0.5–0.6 percent of GDP once tariffs are fully eliminated.
  - This estimate does not account for potential additional revenue loss from trade diversion effects.
- Offsetting factors:
  - EPA expected to reduce cost of production of domestic firms, improve competitiveness, and ultimately boost growth, which may have positive implications for domestic tax revenue.
- Policy recommendation:
  - Strengthen domestic tax collection to reduce reliance on trade-related tax revenue.

*Italic: Source — IMF staff report excerpt (Cameroon).*

### Annex III. Increasing Revenue Mobilization — overview
- Context:
  - Continued low revenue levels expected in the natural resources sector for the next three years.
  - Customs and tax administrations must prioritize increasing domestic revenue mobilization.
  - IMF’s Fiscal Affairs Department (FAD) stands ready to support and provide technical assistance.
- Objective:
  - Bring tax revenue collections up to their potential by 2019–20 through a combination of measures targeting tax policy and revenue administration, to start implementation in 2017 for effect in the 2018 budget.

### A. Cameroon’s performance and reform context
- Historical progress:
  - Reforms over the past ten years improved tax effort.
- Potential:
  - It should be possible to significantly increase (non-oil) tax revenues to reflect the country’s real potential.
- FAD estimate:
  - Gap of 2.5 percent of GDP between Cameroon’s revenues and its tax potential in 2015.

### B. Tax policy measures — key measures and recommendations
- Property tax (Taxe foncière – TF) overhaul:
  - Current TF administration by the DGI brings in CFAF 4 billion (earmarked for financing local governments).
  - DGI estimates revenue potential at CFAF 20 billion when reform is launched and up to CFAF 100 billion when fully up and running (to be distributed between the State and local government).
  - Proposal: combine TF with the electricity bill (in partnership with ENEO) without changing the rate to expand and secure the tax base and facilitate collections.
  - Benefits include better taxing of individuals and property income and detecting income hidden abroad.
- Exemptions and tax expenditures:
  - Represented 0.93 percent of GDP in 2015 (CFAF 155 billion).
  - VAT tax expenditures set out in the General Tax Code (CGI) represent more than 80 percent of all such expenditures assessed.
  - Recommendation: significantly reduce the scope of exemptions, limiting them strictly to those set out in CEMAC Directive 07/11-UEAC-028-CM-22.
  - Recommendation: restrict tax and customs advantages of mining or oil titles to holders of those titles, excluding subcontractors.
- Investment incentives:
  - Governed primarily by Law No. 2013/04 of April 18, 2013 establishing private investment incentives.
  - Concerns: law places incentives outside the CGI, creates tax planning risks, and conditions are easy to meet so almost all new investments qualify, threatening revenue mobilization.
  - Recommendations:
    - Limit scope of investment regimes to companies only.
    - Implement the law strictly, excluding investments in activities already existing on Cameroonian territory.
    - Improve fluidity and transparency of key administrative procedures (e.g., processing of VAT credit refund applications).
- Tax expenditure evaluation:
  - Completion of an initial evaluation of the impact of tax expenditures in 2015 is important for fiscal transparency.
  - Publication of the evaluation conclusions will inform public debate and help prevent proliferation of preferential tax measures.

### C. Key administration measures — DGI measures to enhance non-oil revenue
- Control of exemptions:
  - Introduce an annual program of ex post controls of exemptions, potentially under the National Investigations Unit.
  - Aim to recover duties owed immediately and apply administrative penalties and sanctions.
  - For the DGI, focus on closer monitoring of exceptional arrangements granted in large investment projects, including applicability periods and areas.
- Combat fraud:
  - Enhance capacity focusing on risk analysis, investigations, research, and ex post assessment.
- VAT management:
  - Smooth processing of VAT credit refund applications and reduce payment delays with a target maximum of 10 days.
- Expand tax base:
  - Use deployment of medium-sized taxpayer centers (CIMEs) to streamline taxpayer management and better understand VAT.
  - Once CIMEs deployment is complete, consider raising the VAT threshold.
- Inter-agency collaboration:
  - Improve exchange of information and collaboration between customs and taxation to fight informal sector growth and secure tax rolls.
- Transfer pricing:
  - Establish a dedicated unit to better control transfer pricing by multinational companies located in Cameroon.

*Italic: Source — IMF staff report excerpt (Cameroon).*

### Annex IV. Financial Sector Issues and Policies to Maintain Financial Stability and Enhance Inclusion — maintaining stability
- Banking sector resilience and vulnerabilities:
  - Despite deteriorating solvency and asset quality, Cameroon’s banking sector showed resilience over the last two years, with only four small banks remaining critically insolvent.
  - At end-2016, 14 banks (of which two are state-owned) operate in Cameroon.
  - High concentration: top 4 banks hold CFAF 3,047 billion or 60.4 percent of assets (all banks total CFAF 5,042 billion).
  - Foreign-owned banks (9): CFAF 3,422 billion, 67.9 percent market share.
  - Domestic private banks (3): CFAF 1,403 billion, 27.8 percent.
  - Domestic public banks (1): CFAF 216 billion, 4.3 percent.
- Prudential indicators and trends:
  - System capital adequacy declined from 11.4 to 8.8 percent over the last 2 years.
  - Liquidity ratio stable at a comfortable level but with some banks below or narrowly above regulatory threshold of 100 percent.
  - Deposits to loans ratio declined slightly.
  - Deterioration of indicators requires close monitoring due to variation across banks and lack of frequent on-site supervision.
- Asset quality and concentration:
  - Loans in arrears / Total loans increased from 12.5 to 14.1 percent in 2016.
  - Large credit exposures: high ratio to equity of large exposures (35 percent noted elsewhere).
  - Exposure to sovereign risk increased through holdings of bonds issued by other CEMAC countries.
- Liquidity, FX, and interest rate risks:
  - System-wide liquidity ratio reported as 148 percent.
  - Ratio of banks’ deposits at the BEAC to total assets declined from 10.6 to 7.8 percent between 2014 and 2016 (after accounting for refinancing).
  - Refinancing increased in 2016 by 6 percent of total assets.
  - Exposure to interest rate risk not subject to regulation or reporting requirement, a major loophole.

### Resolution of ailing banks — fiscal implications and principles
- Problem:
  - Four ailing banks carried for many years; three privately owned and one nationalized in September 2016 awaiting NPL transfer to the treasury to restore compliance. A new public small bank also experiencing difficulties.
- Restructuring approach:
  - Public bank: transfer of non-performing assets to the State and recapitalization (less costly than orderly liquidation).
  - Private banks: recapitalization by current shareholders preferred; if no agreement, combination of State recapitalization and sale of NPLs to the State.
  - Rescue principles: private shareholders should be wiped out or diluted; rescue justified for reasons of political stability.
  - Recapitalization preferred if it can restore prudential compliance quickly.
- Estimated fiscal cost and components:
  - Overall maximum fiscal costs manageable at about 0.7 percent of GDP, composed of:
    - (i) Bond issuance to purchase the NPLs: 92.6 CFAF billion = 0.5 percent of GDP.
    - (ii) Release of the Provision (100%): 92.6 CFAF billion = 0.5 percent of GDP.
    - (iii) Need of capital to respect prudential norm: 151.0 CFAF billion = 0.8 percent of GDP.
    - (iv) Need of capital after the NPLs operation (iii)-(ii) if (iii)>0: 58.4 CFAF billion = 0.3 percent of GDP.
    - (v) Contribution expected from the Private sector: 33.0 CFAF billion = 0.2 percent of GDP.
    - (vi) Need of capital after considering private sector contribution (v)-(iv) if (v)<(iv): 27.5 CFAF billion = 0.2 percent of GDP.
    - Total potential fiscal cost (i)+(vi): 120.1 CFAF billion = 0.7 percent of GDP.
  - Contingent liabilities noted.
- Implementation detail:
  - Issuance of 10-year government bonds amounting to 0.5 percent of GDP to cover cost of transferring NPLs to the Treasury.
  - Government debt collection agency will be mandated to collect the debt.
  - Amount added to domestic debt stock for the DSA and future debt services included in the budget.
  - Residual capital needs of 0.2 percent of GDP (after release of provisions) could be accommodated in the current budget envelope.

*Italic: Source — IMF staff report excerpt (Cameroon).*

### Enhancing financial inclusion — key observations and figures
- Financial access (World Development Indicators vs government data):
  - WDI 2014: only 11.4 percent of Cameroonian adults had an account in a financial institution; 1.9 percent had access to credit; 1.8 percent had a mobile account despite >70 percent cellphone subscription rate.
  - Government 2015 data: number of adults with an account at a financial institution rose to 27.8 percent; number of financial institutions per 100,000 habitants rose to 4.9.
  - Including mobile money services brings access level to an estimate of 54 percent of the adult population.

*Italic: Source — IMF staff report excerpt (Cameroon).*

### 6.      Based on the Global Findex database,

### cr17185 - 6.      Based on the Global Findex database,

### Financial access: disparities and drivers
- Being male in Cameroon improves the probability of having a bank account by 35 percent (Findex, 2014).
- Holding at least a primary school diploma doubles the probability of having a bank account.
- Being among the top 60 percent earners multiplies this probability by a factor of 9.
- Among the most educated groups and salaried workers, women show a higher propensity to own bank accounts.
- Among the lowest income quintile, women have higher access to loans due to targeted loan programs.
- Cameroon has a large share of adults relying on informal financial arrangements: 51 percent compared to 40 percent average for SSA.
- Reasons for not having a bank account in Cameroon (percentages as shown in source): 26%, 27%, 22%, 13%, 6%, 71%, 8%, 22%, 18%.

### Barriers to formal financial inclusion
- Demand-side impediments identified:
  - fees and procedural requirements
  - travel distance to agencies
  - lack of trust
  - poverty and lack of financial education
- Supply-side and operational impediments to credit access:
  - lack of reliable debtor information
  - inadequate collateral
  - lack of bankable projects
  - unsuitable legal recourse for bad loan recovery
  - limited competition in the telecommunications sector slowing mobile banking development

### Role and vulnerabilities of Microfinance Institutions (MFIs)
- MFIs in Cameroon:
  - total of 412 MFIs operate independently or through cooperatives.
  - MFIs represent about 16 percent of banks’ total assets.
  - MFI assets increased by 61 percent between 2012 and 2015.
  - MFIs are mostly concentrated in Douala and Yaoundé regions (51 percent of the agencies).
  - The largest MFI has a 25 percent market share and was recently authorized to operate as a bank.
- Key vulnerabilities:
  - lax supervision and high credit risk with loan in arrears above 20 percent.
  - lack of credit information, reliable collateral, internal controls, and adequate debt collection mechanisms.
  - weak capacity and governance, large exposure to connected parties.
  - operational challenges from the difficult regional security situation requiring increased investment in security.
- Regulatory priorities:
  - finalize ongoing regulatory reform for MFIs.
  - tighten regulatory requirements to reduce the number of MFIs to a manageable level for the regulator.
  - close monitoring of the bank–MFI nexus given ownership and sponsorship links between MFIs and banks.

### Mobile banking: expansion and regulatory needs
- Mobile financial services:
  - launched in 2011 in Cameroon.
  - operated by two out of three mobile companies and three banks (as described).
  - the number of financial services offered by mobile money has expanded to include deposits collection, payroll deposit, bill payment (energy, cable television, telephone), money transfers (including international), insurance sales, and tax payments.
  - use has more than tripled since 2012 in terms of number of subscribers and transactions.
  - less than a quarter of cellphone subscribers use mobile money.
  - with more banks and the third mobile operator expected to enter the market, growth potential is high.
- Policy and regulatory priorities:
  - review the regulatory framework for mobile banking in coordination with regional authorities to better meet business needs of market stakeholders.
  - increase competition in telecommunication and internet markets to support mobile banking development.

### Public financial management (PFM) and capacity development (CD) priorities
- Current PFM issues:
  - disconnect between the budget passed by parliament, spending commitments, and actual cash implementation.
  - approved budget systematically underestimates actual expenditure needs.
  - lack of adequate planning for multi-year investment projects; off-budget spending by the national oil company displaces regular expenditures.
  - accumulation of expenditure float with payments due exceeding 90 days.
- PFM reform priorities under the program:
  - (i) ensure annual budgets are comprehensive, credible and transparently implemented by strengthening the medium-term fiscal framework, focusing on multi-year investment planning, and enforcing existing budget regulations and limiting/eliminating resort to exceptional procedures;
  - (ii) strengthen treasury management and fully implement the single treasury account;
  - (iii) strengthen expenditure control procedures;
  - (iv) enhance monitoring of fiscal risks by eliminating cross-debt cancellations between the State and SOEs, and identifying and reducing state contingent liabilities, including those arising from PPP.
- CD actions:
  - IMF Fiscal Affairs Department (FAD) visited Yaoundé in April 2017 to assess PFM and establish a plan for ongoing support through the program period.
  - CD plan to be informed by the results of the recent PEFA update; FAD to cooperate with AFRITAC-Center.

### Tax policy, administration, and CD priorities
- Context and challenges:
  - decline in oil prices since 2014 increases the need to raise non-oil tax revenue.
  - obstacles include a large informal sector and inefficient tax exemptions and subsidies.
  - need for better integration of customs and tax administration to reduce tax fraud opportunities.
- Tax policy and administrative reform priorities:
  - (i) widen the tax base, notably through the successful roll-out of a land tax starting in 2018; strengthen control over transfer pricing practices by multinational companies; adopt an automatic fuel price adjustment mechanism coupled with the revision of excise tax policy;
  - (ii) rationalize exemptions and eliminate inefficient tax incentive schemes;
  - (iii) enhance tax and customs administrations, notably by establishing a single tax payer ID to allow better sharing of information between administrations, accelerating VAT refund, and improving customs reporting and risk management.
- CD strategy:
  - TA missions from headquarters and AFRITAC-Central will assist implementation.
  - strategy will be informed by results of a recent TADAT assessment.

### Statistics: current gaps and CD priorities
- Current situation:
  - fiscal, price, and trade statistics compiled monthly; GDP and external debt statistics produced quarterly.
  - current account data produced annually; international investment position (IIP) published irregularly.
  - typical transmission lag to the Fund ranges from 4 weeks to several months; GDP data transmitted with a 4-month lag.
  - Cameroon has begun rebasing national account data but rebasing not fully implemented and statistics not yet reported at the rebased level.
- Priorities:
  - (i) use the National Summary Data Page (NSDP) as the main dissemination portal for macroeconomic statistics;
  - (ii) finalize the rebasing of national account statistics;
  - (iii) complete the transition to Balance of Payments Manual 6 (BPM6);
  - (iv) increase the frequency of data collection to quarterly for balance of payments, and annually for the IIP; transmission of monthly trade data is important.
- CD strategy:
  - provide additional TA from STA and AFRITAC-Central to complete and implement the national accounts rebasing exercise.
  - a joint 3-year program (commencing in July 2016) by the Fund’s statistics department and the Japanese Government will support transition to BPM6 and collection of IIP statistics.

### Financial sector stability CD priorities
- Other TA priorities include support to:
  - establish a framework for effectively and efficiently solving the problem of troubled banks;
  - design a strategy to address high NPLs;
  - implement a collateral registry.
- Coordination with the regional supervisor (COBAC) is emphasized.

### Program context and key program figures (from Letter of Intent / MEFP)
- fiscal consolidation required: just under 5 percent of GDP over three years, of which about 3 percent of GDP will be in 2017.
- balance of payments financing requirement in 2017: approximately 4.7 percent of GDP.
- IMF request under the ECF:
  - arrangement covering the period 2017–20 in an amount equivalent to 175 percent of its quota, corresponding to SDR 483 million (or approximately CFAF 415 billion), to be disbursed in seven tranches.
  - request for an initial disbursement of 45 percent of quota.

*International Monetary Fund staff report excerpts (cr17185).*

### 1. This Memorandum of Economic and Financial Policies (MEFP) describes the recent

### This Memorandum of Economic and Financial Policies (MEFP) describes the recent economic developments and economic priorities and objectives of the authorities of Cameroon concerning their request for an arrangement supported by the International Monetary Fund (IMF) through the Extended Credit Facility (ECF) for the period 2017–19.

### Recent economic developments and policy framework
- The program is part of a collective effort by CEMAC countries following the Extraordinary Summit of the CEMAC Heads of State of December 23, 2016 in Yaoundé to support fiscal and external sustainability and the stability of the monetary arrangement.
- The program aims to restore external and fiscal sustainability, improve competitiveness while supporting economic growth, and strengthen financial sector resilience.
- The GESP (Growth and Employment Strategy Paper) is the country’s 10-year development strategy for 2010–20, targeting strong, inclusive growth to reduce poverty and attain emerging country status by 2035.

Key recent macro outcomes and drivers
- Real GDP growth: 5.9 percent in 2014; 5.8 percent in 2015; around 4.5–5 percent in 2016.
- Oil production increased since 2012 but declined slightly in 2016.
- Inflation: 2.7 percent in 2015; 0.9 percent in 2016 (below the CEMAC convergence criterion of 3 percent), a decline of 1.8 points.
- Transport costs: fell by 0.7 percent in 2016 versus an increase of 7.5 percent in 2015.
- Petroleum price reductions in January 2016: gasoline from CFAF 650 to CFAF 630; diesel from CFAF 600 to CFAF 575.
- Fiscal deficit (payment order basis): expected to amount to 6.5 percent in 2016.
  - Contributors: substantial budget commitments to the war against Boko Haram, refugees and displaced persons; capital expenditure related to the Emergency Plan; gradual clearing of arrears.
- Public debt stock: expected around 34.1 percent of GDP at end-2016 versus 19 percent in 2013.
  - Drivers: accelerated disbursements for first-generation GESP projects; Eurobonds in 2015 of US$750 million (approximately CFAF 450 billion); financing for PLANUT; incorporation of domestic and external payment arrears (3.5 percent of GDP) and SONARA supplier debt (0.5 percent of GDP).
- Reserve coverage: decline from 5.9 months of imports in 2015 to 3.7 months in 2016.
- Monetary conditions: slow growth in money supply and credit; deterioration in the government’s net position vis-à-vis the banking system due to Eurobond use, statutory advances from BEAC, and issuances of bills and bonds.

### Implementation of the Growth and Employment Strategy Paper (GESP)
- GESP objectives:
  - Increase annual average economic growth to 5.5 percent between 2010 and 2020;
  - Reduce underemployment by approximately one third, from 75.4 percent in 2005 to less than 50 percent in 2020;
  - Reduce the poverty rate from 39.9 percent in 2007 to less than 28 percent in 2020.
- Assessment 2010–15: growth rate 4.9 percent versus GESP target of 6.1 percent for the same period.
- Major investment projects driving growth: Kribi gas fired power station; Kribi industrial port complex including Kribi deep water port; Lom Pangar reservoir dam; eastern and western Douala city entrances; Memve’ele and Mekin hydroelectric dams; Douala-Yaoundé and Yaoundé-Nsimalen highways; second Wouri River bridge.
- PLANUT implemented since 2015 to accelerate medium-term investment program, fight poverty, and promote job creation.
- Share of capital expenditure in total government outlays increased from 24.5 percent in 2010 to 30.7 percent in 2015.
- Labor and poverty indicators from ECAM-4:
  - Underemployment: 79.0 percent in 2014 (deterioration of 7.9 percentage points versus 2007).
  - Poverty rate: 37.5 percent in 2014 (decline of 2.4 percentage points versus prior survey).

### Economic and financial program for 2017–20 (objectives and priorities)
- Primary aims:
  - Complete execution and operationalization of first-generation projects;
  - Accelerate execution and operationalization of PLANUT projects;
  - Start and implement projects in progress/startup phase, prioritizing concessional financing and public-private partnerships where financing not yet secured;
  - Select and mature second-generation projects;
  - Remove procurement bottlenecks undermining public investment efficiency;
  - Implement key structural reforms to stimulate private sector and reduce poverty;
  - Promote diversification, enhanced processing of primary commodities, and integration into global value chains.

### Macroeconomic framework and projections
- Growth projections:
  - Expected around 4 percent in 2017 (decline from 2016) due to low contribution from extractive industries and reduced government spending, offset by growth in food agriculture and agrofood/manufacturing.
  - Expected to increase gradually in 2018 to 5 percent in 2019 and stabilize at approximately 5.5 percent in the medium term.
- Growth drivers: food agriculture (15 percent of total GDP and 70 percent of primary sector GDP), agrofood and manufacturing, tariff elimination under EPAs (August 2016), Kribi deep water port, Memve’ele hydroelectric dam, start of Kribi natural gas operations end-2017, potential increased oil production after 2019.
- Fiscal and external sustainability objectives:
  - Overall budget deficit expected to gradually reach 1.9 percent of GDP in 2019 (on a commitment basis).
  - Current account balance expected to reach 2.6 percent of GDP.
- Debt policy priorities:
  - Slow the pace of new external debt commitments and favor concessional borrowing.
  - Strengthen debt management to: limit debt ceilings consistent with project preparation/implementation capacity; strengthen CNDP authority to approve new external loans (including public enterprises); improve CAA capacity to monitor external debt of public enterprises and avoid arrears.
- Regional monetary policy priorities (BEAC):
  - Freeze ceiling on statutory advances at 2014 level;
  - Increase the policy rate to absorb excess liquidity;
  - If required, limit refinancing of government bills and bonds.
- Financing gap and external assistance:
  - Available domestic and external resources leave a significant financing gap expected to be met through budgetary support from technical and financial partners and Fund resources.
  - These resources expected to amount to approximately 6.7 percent of GDP over four years.
  - Objective to increase reserve coverage from 3.7 months of imports in 2016 to more than 4 months by 2019–20.

Risks to baseline scenario
- External and domestic risks include:
  - Rapid deterioration of regional imbalances from insufficient adjustments by other CEMAC countries or inadequate BEAC management of “free riders,” leading to larger declines in foreign exchange reserves;
  - Resurgence of the terrorist threat in the Lake Chad basin entailing additional security costs;
  - Persistently sluggish external demand reducing non-hydrocarbon exports (mitigated if oil prices increase).
- Policy readiness:
  - Government stands ready to implement additional policies if risks materialize, to consult CEMAC peers on delayed adjustments, enhance budgeting of security spending, and pursue UN fundraising to support humanitarian costs.

### Fiscal policy (2017–19)
Fiscal stance and 2017 targets
- Overall budget deficit (payment order basis): expected to amount to CFAF 617 billion in 2017.
  - 2017 budget law aims for overall budget deficit of CFAF 726 billion.
- 2017 revenue measures (estimated additional revenue approximately CFAF 55 billion):
  - Increase in excise tax on petroleum products (TSPP);
  - Introduction of a tourist tax on overnight stays in hotels and other accommodation;
  - VAT and income tax on furnished rental accommodation;
  - Reestablishment of a 10 percent customs duty on imports of clinker and 5 percent on fish;
  - Excise duties on tourism vehicles over 10 years old, utility vehicles over 15 years old, and on nonreturnable packaging;
  - 10 percent withholding tax on agricultural levies on cocoa and coffee.
- Expenditure measures (estimated savings approximately CFAF 60 billion versus 2016 budget law):
  - Freeze procurement of vehicles outside strategic and social sectors;
  - Reduce scale of overseas missions;
  - Streamline committees and commissions.
- Social and service priorities:
  - Increase share of spending to health, education, and social protection;
  - Prepare a national social protection strategy with partner support.
- Capital expenditure prioritization:
  - Four selection criteria for investment projects: rate of financial execution of PLANUT resources for 2015–2016; sectoral priorities in GESP; use of resources held in banks/financial institutions that are already earning interest; absorption capacity of project managers.
  - Preference for concessional external financing; if concessional resources insufficient for projects with confirmed returns, government will consult IMF staff on amending debt ceiling to include non-concessional loans consistent with debt sustainability; public-private partnerships to support investment policy.

Fiscal consolidation 2018–19
- Strategy: increase revenue while limiting and enhancing expenditure quality.
- Target for non-oil revenue: approximately 15 percent of GDP in 2019 (supported by tax policy measures and improved tax/customs administration efficacy).
- Expenditure consolidation: gradual reduction from 20.1 percent of GDP in 2017 to 19.6 percent of GDP in 2019, while preserving priority social expenditure.

*Memorandum of Economic and Financial Policies (MEFP) — Cameroon (2017–19 ECF request).*

### 23. The tax policy measures identified are outlined below:

### 23. The tax policy measures identified are outlined below:

### Tax policy measures and revenue potential
- Personal income/property tax reform beginning with the 2018 budget law:
  - Reform property tax collection through an enhanced partnership with the electricity distribution company.
  - Revenue potential: approximately CFAF 10 billion at the beginning of implementation and up to CFAF 50 billion once fully deployed, based on assumed resource sharing with decentralized local governments.
- Transfer pricing control:
  - Establish a dedicated unit within the Directorate General of Taxes (DGI) to ensure better control of transfer price practices by private operators, particularly in the petroleum and forestry sectors and other large multinational subsidiaries; the unit might benefit from appropriate technical assistance.
- Review and rationalization of exemptions and tax expenditures:
  - Tax expenditures represented 0.93 percent of GDP in 2015 (CFAF 155 billion).
  - VAT tax expenditure provided for in the General Tax Code (CGI) represent more than 80 percent of the total assessed expenditure.
  - From the 2018 budget law, review texts governing tax exemptions to:
    - Manage periods of special exemption regimes.
    - Shift scope of application to priority sectors: agriculture, health, education, and tourism.
    - Reserve tax and customs relief only to those holding mining or petroleum permits, excluding subcontractors.
  - Continue assessment of VAT tax expenditure and extend assessment to other indirect and income taxes.

### SONARA (national oil refinery) and petroleum pricing reforms
- SONARA profitability depends on world petroleum prices, the U.S. dollar exchange rate, and domestic petroleum product price structure.
- Identified measures:
  - Publish the petroleum product price structure on a monthly basis, clearly highlighting the subsidy component, from end-June 2017 (structural benchmark).
  - Prepare a strategy to ensure sustainability of the petroleum products’ price structure and the financial viability of SONARA ahead of possible future increases in world petroleum prices.
  - Review a fixed adjustment coefficient for SONARA’s margins to reduce revenue volatility and set it at a level allowing SONARA to cover operating costs associated with domestic supply.

### Tax and customs administration reforms and collection performance
- Domestic non-oil tax revenue increased by almost 51 percent over five fiscal years: from CFAF 1,053 billion in 2012 to CFAF 1,585.5 billion in 2016.
- Measures to expand the tax base while maintaining incentives in priority sectors (agriculture, health, education, tourism, agroindustry):
  - Collect outstanding balances:
    - DGD backlog from public administrations in 2016: CFAF 107.3 billion, with a collection potential of approximately CFAF 9 billion in 2017.
    - DGI outstanding stock in 2016: CFAF 814.6 billion, 77 percent derived from public agencies, with approximately CFAF 45 billion collectable in 2017.
  - Strengthen monitoring of exemptions via closer collaboration between DGI and DGD on investigations and inspection.
  - Enhance information sharing and collaboration between DGI and DGD; joint quarterly DGI-DGD reports to identify fraud and additional revenue from information sharing based on the FUSION system (structural benchmark).
  - Continue automation and integrated systems:
    - DGI: continue integrated tax management system project that could be operational in 2020; continue electronic declaration and payment initiatives.
    - DGD computerization priorities:
      - Optimal use of Customs information technology applications.
      - Extension of the single form for foreign trade operations to all segments of customs clearance (pre and post clearance).
      - Continued geographical expansion of the electronic payment platform.
      - Continued geographical expansion of ASYCUDA and other applications.
      - Development of a specific application for managing foreign exchange controls.
      - Development of a new computerized customs system (CAMPASS).
  - DGI-specific measures:
    - Improve VAT collection efficiency (control of refunds, gradual review of withholding at source).
    - Continue taxpayer segmentation through creation of Medium-sized Taxpayer Centers nationwide.
    - Complete biometric registration of taxpayers to have a complete register by June 2018 (structural benchmark).
  - DGD-specific measures:
    - Strengthen value checking system, including scanning of 100 percent of merchandise offloaded and advanced use of information systems.
    - Carry out more intensive monitoring of the informal sector.
    - Strengthen monitoring of customs disputes (successful in 2016).
    - Continue HALCOMI operation to stop illegal trading:
      - Operations at borders with Gabon and Equatorial Guinea to avoid dumping of tax-exempt products.
      - Nigeria side: restrict negative effects of the devaluation of the naira on the Cameroonian economy.
    - Strengthen post customs clearing controls, based on partnership with DGI (FUSION application).
    - Initiate partnerships with large operators that use subcontractors to ensure compliance by subcontractors.
    - Sign agreement with the Regulatory Agency for Public Procurement (ARMP) to improve monitoring of customs taxation for public procurement.

### Structural fiscal reforms — Budget management
- Strengthen credibility and transparency of the budget; confirm universality (comprehensiveness) and annuality; adopt rolling medium-term expenditure program aligned with the annual budget.
- 2017 measures:
  - Limit direct interventions by Société Nationale des Hydrocarbures du Cameroun (SNH) financed from petroleum royalties:
    - In 2016, direct interventions accounted for 60 percent of total petroleum royalties.
    - Government to limit such expenditure to 50 percent of SNH royalties and gradually reduce this ceiling thereafter.
    - Total SNH petroleum revenue and amount of direct interventions to be indicated as memorandum items in the table of government financial operations (TOFE), in addition to the amount of royalties (prior action).
    - Beginning in 2018, envisage providing sufficient budget entry to cover all security expenditure.
  - Publish quarterly budget execution reports online, beginning with the first quarter of 2017 (prior action).
  - Adopt a budget calendar aligning the MTEF with annual budgets; communicate expenditure ceilings in June each year (prior action).
  - Accelerate transposition of CEMAC public finance directives into Cameroon legislation; draft law transposing the Directive on Budget Laws to be forwarded to CEMAC for validation by September 30, 2017 (structural benchmark).
- 2018–19 measures:
  - Full implementation of program budget approach.
  - From the 2018 budget law, prepare a reliable consolidated commitment plan based on the public procurement plan to guide budget programming and cash management.
  - Prepare a TOFE on a payment order basis, and subsequently on a commitment basis.

### Capital expenditure efficiency
- Implement measures based on Public Investment Management Assessment (PIMA) recommendations (2016):
  - Ensure all sectors have strategies and strengthen line ministry capacity to identify and prepare investment programs and projects.
  - Continue reforms to improve planning, allocation, execution, monitoring, and evaluation of capital expenditure:
    - Create a database of “mature” projects; use only “mature” projects in the medium-term budget framework (MTBF); budget only for projects included in MTBFs.
    - Specify project selection criteria in the project maturity guide (structural benchmark).
  - Process measures:
    - MINEPAT to establish in July 2017 a multidisciplinary team to review project maturity (administrative, technical, financial).
    - Team responsibilities: ensure quality of studies and bidding documents, efficient allocation, appropriate procedures, identify pre-year-n procedures, plan award and execution operations, implement strategic monitoring for project execution (end-2017-early 2018).
- Manage multiyear commitments to ensure annuality:
  - Break down overall commitment authorizations for multiyear projects into payment appropriations included in subsequent budget laws.
  - Integrate MTEF module into the PROBMIS application.
- Public-private partnerships (PPPs):
  - Limit PPP use to cost-effective projects where private sector offers better service at lower cost.
  - Enhance assessment and monitoring; use public bidding procedures systematically.
  - Analyze contingent liabilities relating to PPPs and present them in an annex to annual budget laws on fiscal risks, along with risks from public enterprises (structural benchmark).

### Improving cash management
- Expand scope of treasury single account (CUT) to facilitate cash management:
  - Conduct an inventory of accounts of public administrative establishments in commercial banks and limit opening of new accounts (structural benchmark).
  - Prepare a strategy for gradual expansion of CUT scope (structural benchmark).
  - With support of the Bank of Central African States, carry out CUT implementation.
- Reform objectives and operational measures:
  - Make the cash plan the priority tool for cash management; cash plan should accompany the draft budget law and be formalized in the budget calendar (CEMAC directive).
    - Establish a working group coordinated by the Directorate General of Treasury, Financial, and Monetary Cooperation comprising key data-producing administrations to prepare and validate the cash plan.
  - Implement actions to significantly reduce exceptional procedures (cash advances, revolving funds) and cash payments:
    - Limits on cash advances and procedures to release funds with simplified procedures for expenditure commitments.
    - Prohibition of credit safeguard mechanisms beyond the current fiscal year.
    - Observance of conventional practices in opening/managing revolving funds; limit advances to petty expenditures.
    - Reduction of cash disbursements by transferring all expenditure items in excess of CFAF 100,000 directly into beneficiary accounts.
    - Use regular budget execution procedures for all capital expenditure items, including large projects.
    - Subordinate any expenditure commitment except discounting prior to start of activities to presentation of a detailed statement or invoice with a certificate that service has been provided.
    - Reject decisions to release funds to provision 420 and 450 accounts.
    - Set annual ceilings on resources allocated to organizations such as Crédit Foncier, Fonds Routier, and Fonds National de l’Emploi.
    - Ensure compliance with the annual budget principle in execution, particularly in the 420 accounts.
  - Produce a monthly table to monitor correspondent accounts showing cash inflows and outflows separately; clean up 420 and 450 accounts and eliminate unjustified transactions.
  - Establish mechanisms to manage cash balances in accordance with market conditions in coordination with the central bank (debt repurchases, placement of surpluses, coverage of deficits with appropriate instruments, risk management).
  - Audit to identify and validate expenditure float and government arrears by end-September 2017; prepare a gradual plan to clear these amounts to be included in the budget beginning with the 2018 budget law.
  - Prepare quarterly monitoring reports on residual balances pending payment and other amounts owed beginning in December 2017 (structural benchmarks).

*Source: cr17185 - 23. The tax policy measures identified are outlined below:*

### 35. Our debt policy will aim to avoid the risks of over-indebtedness and place public debt

### 35. Our debt policy will aim to avoid the risks of over-indebtedness and place public debt

### Debt policy framework and ceilings
- External debt ceiling: CFAF 1,700 billion.
- Ceiling for securities issues on the regional market: CFAF 300 billion.
- Debt plan focus: priority projects with substantial growth potential, on concessional terms.
- Expectations for 2017 loan package:
  - New concessional loans signed in 2017 to remain below CFAF 100 billion.
  - Non-concessional loans to remain at CFAF 100 billion.
- Ceiling on disbursements for already-signed non-concessional loans: CFAF 540 billion.
- For 2018–19, non-concessional debt ceilings will be set to reflect:
  - the execution rate from the three previous years,
  - the volume of projects considered to be mature,
  - the disbursements envisaged on the committed but non-disbursed balances (“soldes engages non-décaissés” -SENDs).

### Committed but non-disbursed balances (SENDs) and remedial measures
- Large stock of SENDs reflects project maturation problems.
- Measures:
  - Careful review of SENDs to promote priority, growth-oriented projects with concessional financing.
  - CNDP coordinating identification of projects with SENDs exceeding four years to eliminate unjustified projects.
  - Target: substantial reduction in total stock of SENDs at end-December 2017.
  - Ensure gradual disbursement of these funds, in accordance with schedules shown in Table 1.

### 2017 borrowing plan (preliminary) — selected project terms and totals (January–May, 2017)
- Selected project entries (Amounts in FCFA billions; interest rate, grace period (years), maturity (years), type):
  - Project to supply drinking water to the cities of Meyomessala, Nkongsamba, Loum and Melong — GIEK / Export Credit Norway — Water — 37.7 — 1.1% — 2 — 8.5 — Commercial
  - Construction of electricity transmission lines between Nkongsamba-Bafoussam and Ydé-Abong Mbang, and related infrastructure — EXIM India — Energy — 57.0 — 6M Libor  + 1.75% — 5 — 10 — Commercial
  - Electricity transmission lines for the Memve'ele hydroelectric dam — EXIM China — Energy — 88.0 — 6M Libor + 3.2% — 3 — 12 — Commercial
  - Project for transport sector development — IBRD (World Bank) — Transport — 113.1 — 6M Euribor + 1.5% — 7 — 23 — Semi concessionnal
  - Development of the Yde-Brazzaville international corridor phase II (Mintom lélé) — JICA — Transport — 33.1 — 0.3% — 10 — 40 — Concessionnal
  - Livestock development project — World Bank (IDA) — Livestock — 61.0 — 1.3% — 5 — 25 — Semi-concessionnal
  - Rebuilding transport networks and reform (SONATREL Project) — World Bank (IBRD) — Energy — 202.3 — 6M Euribor+ 1.5% — 7 — 30 — Semi-concessionnal
- Aggregate totals (Text Table 1 / Text Table 2 totals):
  - Total amounts: 1,368.3 (Total)
  - Commercial: 297.9
  - Semi-concessionnal: 1,070.4
  - Concessionnel: 33.1
- Additional summarized totals (separate block):
  - Total: 160.9
  - Commercial: 108.7
  - Semi concessionnal: 9.3
  - Concessionnal: 43.0

### Public debt management and CNDP governance
- CNDP scope now extends to all commitments undertaken by the government and public enterprises regarding debt.
- All loan agreements on the government’s account or on-lent to public enterprises subject to prior approval from the CNDP.
- Regulatory measures to ensure public enterprises cannot take on debt without prior opinion from the CNDP (prior action).
- Matters brought before the Committee:
  - Requests and offers of financing of interest to the government and its bodies;
  - Domestic and external public loans or those guaranteed by the government;
  - The proposal of annual debt ceilings;
  - Public debt restructuring, conversion, or on-lending operations.

### Public enterprises: fiscal risk monitoring and efficiency review
- Review to improve viability, efficiency, and competitiveness of public enterprises and agencies.
- Short-term measure: strengthen monitoring of fiscal risks through presentation and analysis of consolidated financial situation in the annex to future budget laws (structural benchmark).
- Commitment to strengthen management of public enterprises to reduce and gradually eliminate subsidies currently allocated to these enterprises.

### Consistency with regional monetary policy
- Commitment to policies consistent with maintaining stability of the monetary arrangement and restoring BEAC’s reserves.
- Support for tighter regional monetary policy to limit direct and indirect monetary financing and address causes of reserve fall.
- Government agrees to comply with regional commitment: freeze of the ceiling on statutory advances at the level established based on 2014 budget revenue.
- Government will refrain from any new direct financing from the banking system, except in exceptional circumstances, and at rates less than or equal to that of the most recent bond issues having the same maturity, including commissions and other fees.
- Long-term objective: all government bank financing configured as government securities issues.

### Financial sector stability, legacy clearance, and supervisory reforms
- Financial sector shows resilience but faces vulnerabilities: structural burden of overdue claims, portfolio concentration, and emerging risks (liquidity, foreign exchange, interest rates).
- Program components:
  - Component 1: Elimination of legacy overdue claims and rapid resolution of banks in difficulty.
    - Priority: clear overdue claims under COBAC supervision by September 2017 (structural benchmark).
    - Support assignment of operational targets to banks with deadlines, restructuring for potentially solvent debtors, compulsory collection for others.
    - Possibility to write off the oldest claims subject to full provisioning, or use Société de Recouvrement des Créances du Cameroun (SRC) after sale to the government, respecting good governance.
    - Strengthen legal environment for recovery (judicial and extra-judicial) and introduce tax flexibility for restructuring/write-offs.
    - Plan for resolution of banks in difficulty to be developed in consultation with Fund staff and submitted to COBAC by August 2017 (structural benchmark).
    - Priority: preserve financial stability, avoid moral hazard, privilege private shareholder support to reduce budgetary costs.
    - Resolution approaches: transfer of sound assets and deposits to an outside institution followed by liquidation of residual assets and liabilities; State repurchase of overdue claims only at fair price valuation using internationally-accepted methodology with a recovery strategy to maximize net present value.
    - Review of SRC governance, with IMF technical assistance if applicable.
  - Component 2: Establish legal, regulatory, and operational environment for better risk selection, monitoring, and management.
    - Objectives and structural benchmarks:
      a. Widespread use of the CIP-FIBANE-CASEMF platform for category one microfinance establishments (structural benchmark) to enhance debtor transparency and monitoring.
      b. Improve collateralization mechanisms: computerization of the property registry and of the registry of movable collateral (structural benchmark), and more reliable registry of property collateral.
      c. Improve execution mechanisms: establish chambers specializing in financial matters within courts (or create commercial courts), framework for procedural delays, development of extra-judiciary arbitration mechanisms.
- Prudential regulation adjustments:
  - Expand surveillance to include foreign exchange risk, interest rate risk in banks’ portfolios, and operational risk.
  - Support regional plans to upgrade safety nets (bank resolution and deposit guarantee mechanisms) to align with international best practices.

### Financial inclusion and microfinance sector priorities
- Priority: strengthen stability of the microfinance sector and facilitate development of mobile banking per national strategy for inclusive finance adopted in 2014.
- Strategy priority areas include:
  - (i) regulatory reforms to the microfinance institutions (MFI) sector;
  - (ii) strengthening social performance of MFIs, specifically governance, resources, and financial and technical support;
  - (iii) capacity development for senior managers and corporate decision-making bodies.
- Support COBAC’s efforts to finalize new regulation on microfinance, strengthen supervision of the sector, and monitor contagion risks between banks and MFIs.
- Contribute to strengthening supervision of mobile banking operations and support COBAC reviews of regulations governing such operations when required.
- Plan to complete various ongoing credit access reforms in 2017.

### Competitiveness and private sector development
- Government committed to accelerate measures for private sector development and economic diversification.
- Main obstacles: lack of infrastructure, narrow private sector access to financial services, unfavorable business environment.
- Infrastructure completion (energy and transport) expected to boost productivity and enable private sector to drive growth.
- Identified reform areas (approximately 10 areas); selected reforms under way:
  a. Modernize legislative framework via revision of CEMAC Customs Code and implementation of the CEMAC customs tariff according to the 2017 version of the Harmonized System.
  b. Finalize, in 2017, the digitized cadastral plan of Douala, Yaoundé, Garoua, Maroua, and national level.
  c. Computerize the commerce registry and the registry of equipment loans.
  d. Establish an escrow account specifically for reimbursement of VAT credits and set up an interactive online monitoring system for VAT credit reimbursement files.
  e. Implement electronic payment points in the division tax centers.
  f. Reduce processing lags for government invoices between commitment and coverage by the treasury to reduce liquidity constraints of service providers (structural benchmark).

### Program arrangements and monitoring timetable
- Program subject to semiannual reviews and performance criteria, indicative targets and structural benchmarks as set out in Tables 1 and 2 of the Memorandum and the Technical Memorandum of Understanding.
- Review schedule:
  - First review based on end-June 2017 targets; expected completion by December 15, 2017.
  - Second review based on end-December 2017 targets; expected completion by June 30, 2018.

### Quantitative performance criteria and indicative targets (selected figures)
- A. Quantitative performance criteria and indicative targets (in billions of CFAF, cumulative for each fiscal year unless otherwise specified):
  - Floor on the non-oil primary fiscal balance (commitment basis): -61 -392 -708 -974 -37 -348
  - Ceiling on the net domestic financing of the central government excluding IMF financing:  -73 -1878 -200 -21 -5
  - Ceiling on the disbursement of non-concessional external debt contracted as of the date of program approval: 280 540 540 315 315
  - Ceiling on net borrowing of the central government from the Central Bank excluding IMF financing (stock): -35085 -253 -286 -241
- B. Continuous quantitative performance criteria:
  - Ceiling on the accumulation of new external payments arrears: 0 0 0 0 0
  - Ceiling on new non-concessional external debt contracted or guaranteed by the government: 100 100 100 500 500
- C. Indicative Targets:
  - Floor on non-oil revenue: 599 1,185 1,811 2,457 642 1,308
  - Ceiling on the net accumulation of domestic payment arrears: -11500 -5700
  - Floor on social spending: 253 406 624 262 422
  - Ceiling on direct interventions of SNH: 168 168 168
- Memorandum item:
  - Cumulative external budget support, excluding IMF (earliest disbursement): 0 0 4 4 33 700

*Source: Cameroonian authorities.*

### 2. New concessional external debt contracted or guaranteed by the government

### 2. New concessional external debt contracted or guaranteed by the government

### Definitions and scope
- "Government" means the central government of the Republic of Cameroon, including all implementing agencies, institutions, and any organizations receiving special public funds whose powers are included in the definition of central government under GFSM 2001 (paragraphs 2.48–50). Excludes local governments, the central bank, and other public entities with autonomous legal status whose operations are not included in the TOFE.
- "Public enterprise" is a commercial or industrial unit fully or partially owned by the government that sells goods and services to the public on a large scale.
- "Debt" follows the Guidelines on Public Debt Conditionality (Executive Board Decision 15688–(14/107)) definition and includes commitments contracted or guaranteed for which value has not been received; direct, non-contingent liabilities created under a contractual arrangement requiring scheduled payments of principal and/or interest.
- "External debt" for performance criteria is any borrowing or debt service in a currency other than the CFA franc; this includes debt between CEMAC countries.
- Guaranteed debt: any explicit legal obligation incumbent on the government to reimburse a debt in the event of payment default by the debtor.
- "Concessional external debt" is external debt with a grant component of at least 35 percent. The grant component is the difference between face value and present value expressed as a percentage of face value. Present value is calculated at the date the debt is contractually arranged by discounting debt service payments using a discount rate of 5 percent.
- "Domestic debt" = all government debts and obligations in CFA francs, including unreimbursed balances, advances from BEAC, Treasury bills and bonds, structured debt, nonstructured debt, domestic payment arrears, and debt to SONARA suppliers.
  - Structured bank debt: all claims of local banks on the government except treasury bills and bonds; outstanding balance at end-2016 was CFAF 86.36 billion, plus direct advance arrangements.
  - Nonstructured debt: balances payable transferred to the Caisse Autonome d’Amortissement (CAA) not subject to formal reimbursement agreements; outstanding balance at end-2016 was CFAF 113.96 billion. Under the program, nonstructured debt is part of the stock of domestic payment arrears and payments on it reduce the stock of domestic payment arrears and affect the primary balance on a cash basis.

### Concessionality and calculation
- Concessionality threshold: grant component of at least 35 percent.
- Discount rate for present value calculations: 5 percent.
- Concessionality calculation reflects maturity, grace period, schedule of maturities, commitment fees, and management fees. Concessionality of Islamic Development Bank (IsDB) loans will reflect existing agreement between IsDB and the IMF.
- A reference instrument for calculating grant component is cited (IMF concessionality calculator link referenced in source).

### Net domestic financing and components
- "Net domestic financing of the government" = (i) net bank credit to the government; and (ii) net nonbank financing.
  - Net bank credit to the government:
    - Change in balance between government’s liabilities and assets with the national banking system.
    - Assets include: cash resources on hand with the treasury; treasury deposits with the central bank (excluding HIPC account and C2D account); credit balance of CAA accounts with commercial banks earmarked for debt reimbursement.
    - Outstanding government liabilities include: financing from the central bank (statutory advances), net IMF financing (disbursements net of reimbursements), refinancing of guaranteed bonds, treasury paper held by the central bank; financing from commercial banks (direct advances and loans, securities, treasury bills and bonds held by local banks).
    - Net bank credit is calculated from BEAC data and should be reconciled monthly between the treasury and the BEAC.
  - Net nonbank financing includes:
    - Change in outstanding balance of government securities (treasury bills and bonds) issued in CFA francs on the regional financial market and not held by the local banking system.
    - Change in outstanding balance of structured nonbank domestic debt.
    - Privatization revenue.
    - Change in balance of correspondent bank accounts (including Account 42) and consignment accounts.
    - Change in balance of outstanding claims on the government abandoned by the private sector.
    - Net nonbank financing is calculated by the public treasury.

### Domestic payment arrears
- Domestic payment arrears = (i) payment arrears on expenditure; and (ii) payment arrears on domestic debt.
  - Payment arrears on expenditure:
    - "Balances payable" with payment lag exceeding the regulatory period of 90 days.
    - Balances payable are unpaid obligations for which normal expenditure execution procedures were followed and are still pending payment; include invoices due and not paid with public and private enterprises, but exclude domestic financial debt service (principal and interest).
    - Balances payable under 90 days are payments in progress.
    - Information to determine balances payable is provided in Table 3 of the management indicators (TABORD); treasury will monitor monthly to identify arrears in the stock of balances payable.
  - Payment arrears on domestic debt:
    - Difference between the amount due under a domestic debt arrangement (or reimbursement of treasury securities, bills, or bonds matured) and the amount effectively paid after the payment deadline or maturity date.

### Program monitoring and conditionality
- The Technical Memorandum of Understanding (TMU) defines quantitative performance criteria and indicative objectives used to assess performance under Cameroon’s Extended Credit Facility (ECF) program in 2017, and establishes reporting frameworks and deadlines.
- Quantitative performance criteria and indicative objectives for end-June and end-December 2017 are provided in Table 1 of the MEFP; structural benchmarks are provided in Table 2 of the MEFP.
- The TMU notes specific program-related operational practices:
  - Revenue recorded on a cash basis.
  - Oil revenue defined as the total transferable balance of SNH plus income tax on petroleum companies and gas operators; recorded on a cash basis.
  - VAT recorded net of VAT reimbursements.
  - Pipeline fees paid by COTCO recorded under nontax revenue.
  - Privatization revenue must be recorded on a gross basis; costs of sale recorded separately under expenditure.
  - Total government expenditure and net lending are recorded on a payment authorization basis unless otherwise indicated; spending advances by SNH are part of government expenditure.

### Structural benchmarks and fiscal governance measures (selected items)
- Prior actions and structural benchmarks (2017–18) include (indicative list from Table 2):
  - Adopt a budget calendar to align MTBF with annual budgets and align capital and recurrent budget preparation — Prior action.
  - Publish quarterly budget execution reports — Prior action and quarterly structural benchmarks from end-June 2017; report published in newspapers and online.
  - Submit a draft law transposing the CEMAC Directive on Budget Laws into national law to the CEMAC commission — September 2017; submission of revised draft law to the CEMAC Commission.
  - Improve collection of property tax by linking to electricity distribution and share revenue between central and decentralized units — December 2017; 2018 budget law.
  - Strengthen information sharing between DGI and DGD; joint quarterly reports beginning June 2017 — Report submitted to IMF staff.
  - Publish petroleum product price structure monthly beginning June 2017 — Publication online and in newspapers.
  - Prepare strategy ensuring sustainability of petroleum product price structure and financial viability of SONARA — December 2017; strategy document submitted to IMF staff.
  - Complete implementation of biometric taxpayer registration — June 2018; system of operation.
  - Prepare report evaluating VAT escrow account funding efficacy and propose plan to clear stock of appropriations identified at December 31, 2016 — December 2017; report submitted to IMF staff.
  - Include total petroleum receipts of SNH and direct interventions in TOFE — Prior action and monthly structural benchmark from end-June; monthly TOFE.
  - Issue MINFI directive requiring CNDP prior opinion for any external indebtedness by public enterprises (except normal commercial transactions) — Prior action; MINFI directive.
  - Take stock of and confirm balances outstanding and arrears from prior fiscal years — September 2017; audit report submitted to IMF staff.
  - Adopt plan to gradually clear balances outstanding and arrears from previous fiscal years — December 2017; report submitted to IMF staff.
  - Produce quarterly report on balances outstanding and arrears beginning April 2018 (reporting on end-2017 balances) — Report submitted to IMF staff.
  - Disclose type and volume of contingent liabilities in an annex to the budget law, including PPP liabilities — Annual beginning October 2017; annexed to the budget law.
  - Prepare inventory of all accounts of public administrative establishments with commercial banks and strictly limit opening of new accounts — June 2017; inventory submitted to IMF staff.
  - Adopt strategy to gradually expand coverage of the Treasury single account — September 2017; strategy submitted to IMF staff.
  - Develop national social protection strategy to be implemented starting with the 2018 budget law — December 2017; consultant report.
  - Update and implement guide to project maturity process — December 2017; circular signed by the Prime Minister.
  - Adopt and submit to COBAC a strategy to clear commercial banks' overdue claims — September 2017; strategy forwarded by the Minister of Finance to COBAC.
  - Adopt a resolution plan for banks in difficulty to be submitted to COBAC — August 2017; plan forwarded by the Minister of Finance to COBAC.
  - Expand access to creditor databases to all credit and microfinance institutions — March 2018; database available.
  - Computerize the movable collateral registry — March 2018; registry available online.
  - Reduce processing lags for invoices from commitment to treasury coverage to two months — March 2018; report by the Director General of the Treasury.

*Source: cr17185 - 2. New concessional external debt contracted or guaranteed by the government (IMF PDF).*

### 19. External payment arrears are defined as external debt obligations of the government that

### 19. External payment arrears are defined as external debt obligations of the government that

### I. QUANTITATIVE PROGRAM OBJECTIVES
- Paragraph 20: Quantitative objectives (QO) are as specified in Table 1 of the MEFP and, unless noted, are assessed on a cumulative basis from the beginning of the calendar year to which they apply. Details for assessment follow.

#### A. Non-oil primary balance (Performance criteria)
- Paragraph 21: A floor for the non-oil primary balance is a quantitative objective in Table 1 of the MEFP.
- Paragraph 21: The non-oil primary balance = primary balance (paragraph 12) minus oil revenue (paragraph 6).
- Paragraph 22: Consistency rule for TOFE data: cumulative miscellaneous expenditure not otherwise classified (including errors and omissions) for a given month must not exceed 5 percent of the cumulative expenditure for that month, in absolute value.
- Paragraph 22: If the 5 percent limit is exceeded, a comprehensive reconciliation exercise for all TOFE source data will be undertaken in consultation with IMF staff.
- Paragraph 23 (Cutoff): Detailed government financial operations data (primary balance, oil revenue, miscellaneous expenditure not otherwise classified) will be transmitted monthly within six weeks from the end of the month.

#### B. Net domestic financing of the government excluding net financing from the IMF (Performance criteria and adjustment)
- Paragraph 24: A ceiling on net domestic financing excluding net IMF financing is a QO in Table 1 of the MEFP; definition per paragraph 17 excluding net IMF financing.
- Paragraph 25: Ceiling will be adjusted if disbursements of external budget support net of external debt service and payment of external arrears are below programmed levels.
- Paragraph 26: Quarterly adjustment rule for 2017: if disbursements net of external debt service and external arrears are below (above) programmed amounts, quarterly ceilings adjusted upward (downward) commensurately, within the limit of CFAF 70 billion. This ceiling may be revised to reflect the rate of budget aid disbursements during the year.
- Paragraph 27 (Cutoff): Detailed data on net domestic financing (bank and nonbank) and status of budget support disbursements, reimbursement of external debt service, and status of external arrears will be submitted monthly within six weeks after the end of the month.

#### C. Disbursement of non-concessional external loans signed before program approval (Performance criteria)
- Paragraph 28: A ceiling on disbursements of non-concessional external debt contracted before program approval is a QO in Table 1 of the MEFP. Applicable to contractual debt arranged but not disbursed at program approval.
- Paragraph 28: This PC is based on external debt definition in paragraph 14 and concessionality concept in paragraph 15.
- Paragraph 29 (Cutoff): Detailed information on disbursements of external debts contracted by the government must be reported within six weeks after the end of the month, indicating date signed and distinguishing concessional vs non-concessional loans.

#### D. Net borrowing of the central government from the Central Bank (Performance criteria)
- Paragraph 30: A ceiling on net borrowing from the BEAC is a QO in Table 1 of the MEFP.
- Paragraph 30: Definition: Central Bank’s claims on the government, excluding IMF financing, in particular unpaid balances of statutory advances (capped at CFAF 300 billion), refinancing of guaranteed bonds, and treasury securities held by the Central Bank, minus Treasury deposits with the Central Bank and cash balances.
- Paragraph 31 (Cutoff): Detailed information on all financing from the BEAC to the government must be reported within six weeks after the end of the month.

#### E. Non-accumulation of external payment arrears (Performance criteria)
- Paragraph 32: A ceiling of zero on the accumulation of external payment arrears is a continuous QO in Table 1 of the MEFP.
- Paragraph 32: This PC applies to accumulation of new external arrears as defined in paragraph 19; excludes arrears subject to rescheduling.
- Paragraph 32: Government undertakes not to accumulate any new external payment arrears on its debt, except arrears subject to rescheduling. The PC is continuous and measured cumulatively from program approval.
- Paragraph 33 (Cutoff): Data on balances, accumulation, and reimbursement of external arrears will be reported within six weeks after the end of each month. The PC is monitored continuously and any occurrence of new external arrears should be immediately reported to the Fund.

#### F. New non-concessional external debt contracted or guaranteed by the government (Performance criteria and adjustment)
- Paragraph 34: A ceiling on new non-concessional external debt contracted or guaranteed by the government is a continuous QO in Table 1 of the MEFP. Government commits not to contract or guarantee any non-concessional external debt above the Table 1 ceiling.
- Paragraph 34: This PC applies to external debt as defined in paragraph 14 and uses concessionality concept in paragraph 15. It also applies to government-guaranteed contingent liabilities (paragraphs 14 and 15), public enterprises receiving government transfers (paragraph 4), municipalities, and other public sector entities.
- Paragraph 34: Exclusions: borrowing arranged in CFA francs, treasury bills and bonds issued in CFA francs on the CEMAC regional market, regular short-term supplier loans, regular import credits, IMF loans, and debt relief via rescheduling or refinancing.
- Paragraph 34: This commitment is ongoing, measured cumulatively from IMF Executive Board approval of the extended credit facility, and will not be subject to adjustment factors.
- Paragraph 35 (Adjustment): Ceiling will be adjusted upwards to accommodate budget support from the World Bank, the AFDB and France for debt management purposes up to amounts indicated in memorandum item Nr. 1 of MEFP Table 1.
- Paragraph 36 (Cutoff): Monthly status of all loans (conditions and creditors) contracted by the government must be reported within six weeks after the end of the month. Same obligation applies to government guarantees. The PC is monitored continuously and any contracting or guaranteeing of debt should be immediately reported to the Fund.

### II. OTHER INDICATIVE QUANTITATIVE OBJECTIVES
- Paragraph 37 (G. Non-oil revenue): A floor on non-oil revenue as defined in paragraph 7 is an indicative objective in Table 1 of the MEFP.
- Paragraph 38 (H. Net accumulations of domestic payment arrears): A ceiling on net accumulations of domestic payment arrears is an indicative objective in Table 1 of the MEFP. Domestic payment arrears defined in paragraph 18.
- Paragraph 39 (I. Social expenditure): A floor on social expenditure as defined in paragraph 11 is an indicative objective in Table 1 of the MEFP; monitored regularly in connection with program implementation.
- Paragraph 40 (Cutoff): Data on the government's financial position as presented in the TOFE, detailed revenue listing highlighting oil revenue, domestic payment arrears, and status of social expenditure execution must be reported within six weeks after the end of the month.

### III. DATA SUBMISSION REQUIREMENTS
- Paragraphs 23, 27, 29, 31, 33, 36, 40: Recurrent requirement — detailed monthly reporting of relevant fiscal and debt data within six weeks after the end of the month; continuous monitoring and immediate reporting required for any occurrence of new external arrears or contracting/guaranteeing of debt.

*Source: cr17185 - 19. External payment arrears are defined as external debt obligations of the government that*

### 41. The quantitative data on the government's quantitative and indicative objectives will be

### 41. The quantitative data on the government's quantitative and indicative objectives will be reported to IMF staff with the periodicity described in Table 1

### Data reporting requirements (government finances, monetary sector, balance of payments, real sector, structural reforms)
- The government undertakes to report all data revisions immediately to IMF staff and to report any information or data not specifically addressed in the TMU but required for program implementation.
- Government finances (responsible institution: Ministry of Finance (MINFI) unless otherwise noted)
  - The government financial operations table (TOFE) and customary annex tables: Monthly reporting; Reporting lag: 6 weeks.
  - Domestic budget financing (net bank credit to the government, stock of treasury bills and bonds pending reimbursement, domestic debt reimbursement status, privatization revenue, and abandoned claims): MINFI/BEAC; Monthly; Reporting lag: 6 weeks.
  - Implementation status of social expenditure defined in Paragraph 11: MINFI; Monthly; Reporting lag: 6 weeks.
  - Status of balances payable for the current fiscal year (orders unpaid) distinguishing over 90 days and under 90 days: MINFI; Monthly; Reporting lag: 6 weeks.
  - Domestic debt reimbursement status: MINFI/BEAC; Monthly; Reporting lag: 6 weeks.
  - Statistics on external debt contracted and guaranteed (detailed listing of external debt service matured/paid, list of new loans specifying financial conditions, loans guaranteed and external arrears, and list of arrangements in negotiation): MINFI/CAA; Monthly; Reporting lag: 6 weeks. The contracting or guaranteeing of external debt, and the occurrence of external arrears should be immediately reported.
  - Quarterly reconciliation report on (i) monetary statistics reflecting the net treasury position with TOFE data on net domestic financing from the banking system and (ii) CAA external debt data with TOFE net external financing: MINFI/BEAC; Quarterly; Reporting lag: 8 weeks.
  - Data on implementation of the public investment program, including detailed listing of financing sources: MINFI/MINEPAT/CAA; Quarterly; Reporting lag: 6 weeks.
  - Prices, consumption, and taxation of petroleum products (current price structure; detailed calculation based on free on board or ex refinery price; volumes purchased and distributed by SONARA with retail vs industry split; breakdown of tax revenue on petroleum products—customs duty, excise tax on petroleum products (TSPP), and value-added tax (VAT)—and unpaid subsidies): MINFI; Monthly; Reporting lag: 4 weeks.
  - Monthly statement of correspondent accounts (including Account 42) and consignment deposits with the treasury broken down into major categories: MINFI; Monthly; Reporting lag: 6 weeks.
  - Revenue forecasts and outturns for the Directorate General of Taxes (DGI); Directorate General of Customs (DGD); Directorate General of Treasury, Financial, and Monetary Cooperation (DGTCFM) by type of tax: DGI, DGD, DGTCFM; Monthly; Reporting lag: 6 weeks.
  - VAT reimbursement balance (requests for reimbursement, payments made, and status of the VAT reimbursement account): MINFI/DGI; Monthly; Reporting lag: 6 weeks.
  - Status of the SNH (volumes exported, prices, exchange rates, operating costs, spending advances, commitments to the government, and balance transferable to the Treasury): MINFI; Monthly; Reporting lag: 6 weeks.
  - Status of payment of invoices from the government to public enterprises and status of payments of any subsidies and tax liabilities of these enterprises: MINFI; Quarterly; Reporting lag: 6 weeks.
- Monetary sector (responsible institution: BEAC)
  - Consolidated balance sheet of monetary institutions: Monthly; Reporting lag: 6 weeks.
  - Provisional data on the comprehensive monetary survey: Monthly; Reporting lag: 6 weeks.
  - Final data on the comprehensive monetary survey: Monthly; Reporting lag: 10 weeks.
  - Government net position: Monthly; Reporting lag: 6 weeks.
  - Intervention rate and borrowing and lending interest rates: Monthly; Reporting lag: 6 weeks.
- Balance of payments and external sector
  - Preliminary annual balance of payments data: MINFI; Annual; Reporting lag: 9 months.
  - Foreign trade statistics: MINFI/INS; Monthly; Reporting lag: 3 months.
  - Any revision of the balance of payments data (including services, private transfers, official transfers, and capital transactions): BEAC/MINFI; On revision; Reporting lag: 2 weeks.
- Real sector
  - Provisional national accounts and any revision of the national accounts: INS; Annual; Reporting lag: 7 months after year-end.
  - Quarterly national accounts: INS; Quarterly; Reporting lag: 3 months.
  - Disaggregated consumer price indices (Yaoundé and Douala): INS; Monthly; Reporting lag: 2 weeks.
  - Quarterly inflation note: INS; Quarterly; Reporting lag: 3 months.
- Structural reforms and other data
  - Any official report or study devoted to Cameroon’s economy, from date of publication/finalization: MINEPAT; Reporting lag: 2 weeks.
  - Any decision, decree, law, order, or circular having economic or financial implications, from its publication date or effective date: MINFI/MINEPAT; Reporting lag: 2 weeks.

### Statistical capacity, data adequacy, and identified shortcomings
- General assessment
  - Data provision has shortcomings, but is adequate for surveillance. Improvements are needed in quality, coverage, and timeliness across most macroeconomic datasets.
- Real sector statistics (INS)
  - INS released revised national accounts estimates in December 2013 incorporating key features of the 2008 SNA.
  - Remaining gaps: overhaul and integration of the production index with annual national accounts components; selection of price indices for deflation; and employment information.
  - STA missions in 2009–2011 supported improvements and quarterly national accounts starting in 2012; a rebasing to 2005 was completed but not yet implemented.
- Government finance statistics
  - Quality broadly adequate but with shortcomings in coverage, periodicity, timeliness, and accessibility.
  - Weaknesses: incomplete compilation of budget implementation data on a commitment and partly on a cash basis; lack of information on local government finances; poor monitoring of cross-liabilities in the public sector and public enterprise debt; lack of comprehensive and timely financial information on public enterprises.
  - Authorities plan to establish comprehensive fiscal accounts on a commitment basis, introduce a functional budget classification, and monitor the float (difference between cash and commitment balances). An ongoing audit of government domestic debt will cover cross-liabilities and public enterprise external debt.
  - Efforts underway to collect operations data on the largest 20 public enterprises and to enhance transparency of oil sector financial operations.
- Monetary and financial statistics (BEAC)
  - Monetary statistics are reported monthly in SRFs with delays up to two months.
  - Key shortcoming: lack of data on interest rates offered by financial institutions to non-financial entities for deposits and loans.
  - Depository corporation survey excludes deposit-taking microfinance institutions.
- Balance of payments and external debt
  - Since March 2006 STA TA, BOP data quality improved but with significant delays; latest reported data refer to end-2016.
  - External debt data are broadly adequate for public and explicitly guaranteed debt; Caisse Autonome d'Amortissement (CAA) maintains a fairly comprehensive database with loan-by-loan projected debt-service flows.
  - Gaps: irregular receipt of debt disbursement and position statements from some foreign creditors, impairing real-time debt monitoring.
- Data dissemination and reporting
  - Cameroon commenced participation in GDDS in 2001.
  - Cameroon does not report data for publication in the IMF Government Finance Statistics Yearbook or the GFS section in International Financial Statistics.
  - Data reporting for Fund Balance of Payments Statistics publications has encountered delays.

### Relations with the Fund — financial relations and key numeric indicators (as of April 30, 2017 unless otherwise noted)
- Membership status
  - Joined: July 10, 1963; Article VIII.
- General Resources Account
  - Quota: 276.00 SDR Million; %Quota: 100.00.
  - Fund holdings of currency: 274.97 SDR Million; %Quota: 99.62.
  - Reserve Tranche Position: 1.03 SDR Million; %Quota: 0.37.
- SDR Department
  - Net cumulative allocation: 177.27 SDR Million; % Allocation: 100.00.
  - Holdings: 15.55 SDR Million; % Allocation: 8.77.
- Outstanding Purchases and Loans
  - ESF RAC Loan: 46.43 SDR Million; % Quota: 16.82.
  - ECF Arrangements: 2.66 SDR Million; % Quota: 0.96.
- Latest financial arrangements (selected)
  - ECF Oct 24, 2005–Jan 31, 2009: Amount Approved: 18.57 SDR Million; Amount Drawn: 18.57 SDR Million.
  - ECF Dec 21, 2000–Dec 20, 2004: Amount Approved: 111.42 SDR Million; Amount Drawn: 79.59 SDR Million.
  - ECF Aug 20, 1997–Dec 20, 2000: Amount Approved: 162.12 SDR Million; Amount Drawn: 162.12 SDR Million.
- Projected payments to the Fund (SDR millions; based on existing use of resources and present holdings of SDRs)
  - 2017: Principal: 10.35; Charges/Interest: 0.53; Total: 10.88.
  - 2018: Principal: 19.9; Charges/Interest: 0.77; Total: 20.66.
  - 2019: Principal: 18.84; Charges/Interest: 0.78; Total: 19.62.
- HIPC and MDRI (selected)
  - HIPC decision point date: Oct-00; Completion point date: Apr-06.
  - Assistance committed by all creditors (US$ Million): 1,267.00.
  - Of which: IMF assistance (US$ million): 37.04; (SDR equivalent in millions): 28.62.
  - Disbursement of IMF assistance (SDR Million): Assistance disbursed to the member: 28.62; Interim assistance: 11.25; Completion point balance: 17.37; Additional disbursement of interest income: 5.05; Total disbursements: 33.67.
  - MDRI-eligible debt (SDR Million): 173.26 (Financed by: MDRI Trust 149.17; Remaining HIPC resources 24.09).
- Exchange arrangements
  - Cameroon participates in the CEMAC currency union; CFA franc pegged to the euro at CFAF 655.957 per euro.
  - Local currency equivalent: CFAF 836.6 = SDR 1, as of December 31, 2016.
  - Effective January 1, 2007 the CEMAC arrangement was reclassified as a “conventional pegged arrangement.”
- Article IV and FSAP
  - Last Article IV consultation concluded November 18, 2015.
  - FSSA report issued May 2000; FSSA update completed February 2009; CEMAC regional FSAP update conducted in 2015.
- Safeguards assessment of BEAC
  - Last quadrennial assessment completed in 2013; an update safeguards assessment of the BEAC started in June 2017.
  - At end-March 2017 BEAC Board and CEMAC Ministerial Committee adopted amendments to the BEAC Charter; major advances toward full transition to IFRS were noted.
- Technical assistance (selected activity lists for 2014–2017 are documented in the source).

### Debt sustainability assessment and policy recommendations
- Risk assessment
  - Cameroon’s risk of external debt distress remains high.
  - Under the program scenario, fiscal consolidation, changes in the composition of new debt, and envisaged reforms under the IMF-supported program would help improve the debt profile and mitigate concerns compared to the 2015 Article IV assessment.
  - Under the program baseline, the breach of the policy-dependent threshold for the present value of debt to exports is marginal and temporary.
  - Standard stress tests show external debt is highly vulnerable to exogenous shocks.
- Policy actions recommended to mitigate debt and sustainability risks
  - (i) A resolute and effective fiscal consolidation.
  - (ii) A shift in the composition of new borrowing towards concessional loans.
  - (iii) Closer scrutiny of debt developments, especially for externally-financed projects.
  - (iv) Implementation of policies to boost growth and non-oil exports.
  - (iv) Strengthening of public debt management as well as the overall economic policy framework to improve the country’s risk rating.
- Contextual note
  - Cameroon’s three-year average CPIA is 3.2, which yields a policy performance category of weak.

*Prepared by IMF African Department; informational annex dated June 16, 2017.*

### 1.      Public debt in Cameroon has steadily increased since the debt relief under the enhanced

### 1.      Public debt in Cameroon has steadily increased since the debt relief under the enhanced 

### Overview and recent trajectory
- Total public sector debt (external plus domestic public debt) increased threefold since 2010 to 35.2 percent of GDP in 2016, with 70 percent of the increase driven by a surge in public and publicly guaranteed (PPG) external debt.
- The increase in public debt during 2009–15 was 25 percentage points of GDP, more than double the median for SSA countries (12 percentage points of GDP).
- Public debt still remains below the pre-HIPC period and relatively low compared to peers in sub-Saharan Africa (SSA), but the recent pace of accumulation is a concern.

### Undisbursed external debt and creditor composition
- Contracted external debt but not yet disbursed: CFAF 3.617 trillion or 20.8 percent of GDP.
- Largest share in undisbursed loans: China (Exim Bank) 35.6 percent.
- Shares of other creditors (undisbursed loans, 2016): World Bank (IDA) 11.7 percent; Islamic Development Bank 9.5 percent; African Development Bank 9.4 percent; Other multilaterals 3.2 percent; France 8.7 percent; Other bilaterals 6.3 percent; Commercials 15.5 percent.
- Non-concessional loans account for 15.5 percent of the undisbursed amount.
- About a quarter of these loan obligations have been signed over 4 years ago but disbursements have not yet started.
- Loans are typically tied to infrastructure projects; some projects are not mature and counterpart funds have not materialized, leading to disbursement delays.

### Coverage of public debt in this DSA (broadened)
DSA coverage expanded to include:
- The stock of domestic arrears (expenditure float) of 3.5 percent of GDP at end-2016.
- Additional domestic arrears of 0.5 percent of GDP arising from the government not fully compensating oil marketers for losses from selling fuels below cost recovery levels.
- The debt stock of the oil refinery, SONARA, estimated at 1.5 percent of GDP at end-2016 (o/w external 300.2 billion FCFA).
- Contingent liabilities of 0.1 percent of GDP related to external claims on two SOEs.

Text Table 1 (selected figures, 2016)
- Public and publicly guaranteed debt (Authorities' estimate): 5,152 (billions FCFA) — 29.6 (percent of GDP)
- External debt (Authorities' estimate): 3,877 (billions FCFA) — 22.3 (percent of GDP)
- Domestic debt (Authorities' estimate): 973 (billions FCFA) — 5.6 (percent of GDP)
- BEAC statutory advance: 231 (billions FCFA) — 1.3 (percent of GDP)
- Publicly guaranteed debt: 710 (billions FCFA) — 0.4 (percent of GDP)
- Expenditure float: 615 (billions FCFA) — 3.5 (percent of GDP)
- Debt to oil marketers: 82 (billions FCFA) — 0.5 (percent of GDP)
- External claims on SOEs: 100 (billions FCFA) — 0.1 (percent of GDP)
- SONARA debt: 268 (billions FCFA) — 1.5 (percent of GDP)
- Public and publicly guaranteed debt (IMF staff estimate): 6,127 (billions FCFA) — 35.2 (percent of GDP)
- Domestic (IMF staff estimate): 2,139 (billions FCFA) — 12.3 (percent of GDP)
- External (IMF staff estimate): 3,989 (billions FCFA) — 22.9 (percent of GDP)

### Domestic debt profile and SONARA
- Domestic public debt remained broadly stable in 2016 at about 12½ percent of GDP.
- Composition: Treasury bills ≈ 20 percent of central government domestic debt; treasury bonds ≈ 40 percent with average maturity 4.8 years.
- The 2015 Eurobond proceeds were used partly to retire SONARA debts; low international prices improved SONARA’s financial position.
- Authorities estimate that part of SONARA debt (1.1 percent of GDP) is associated with SONARA own commercial operations and not government fuel pricing policies.

### Contingent liabilities and SOE exposures
- Gross debt held by main state-owned enterprises (excluding SONARA) accounted for 2.8 percent of GDP in 2015.
- SOEs’ gross unpaid tax liabilities to the central government stood at 2.2 percent of GDP; after netting out unpaid subsidies, this is 0.7 percent of GDP on a net basis in 2015.
- Cross-liabilities between SOEs and the state remain significant; cross-debts among SOEs exist (especially public utility companies) but are difficult to track quantitatively.

### Debt composition trends and external borrowing
- At end-2016, about 30 percent of public external debt was owed to multilateral institutions.
- Debt to non-Paris Club creditors (NPC creditors) amounted to about 26 percent of total external debt, up from 15½ percent in 2012; China accounted for 95 percent of NPC external debt.
- Share of government borrowing from commercial sources rose from 6 percent of the external debt stock at end-2012 to about 21 percent at end-2016 following the issuance of a $750m Eurobond in 2015.
- Public external debt remains mostly concessional, but commercial and NPCC debt are increasing.

### Debt management capacity and governance
- IMF and World Bank technical assistance focused on strengthening debt management strategy formulation and rationalizing functions.
- National Public Debt Committee (CNDP), chaired by the Minister of Finance, has started reviewing externally-financed project proposals.
- Contracting of external debt is still undertaken by both the Ministry of Finance and the Ministry of Economy, Planning, and Regional Development.
- Public enterprises can contract external debts without preliminary authorization by the CNDP.
- Timely tracking of loan disbursements is inadequate (particularly for project loans), often leading to significant revisions in external debt data.

### Assumptions and macroeconomic framework (comparisons with prior DSAs)
Key points (from Text Table 2 and Box 1):
- Real GDP growth (percent)
  - DSA 2016: 2015-16 = 5.2; 2017-21 = 4.9; 2022-36 = 5.5
  - DSA 2015: 2015-16 = 5.9; 2017-21 = 5.2; 2022-36 = 4.8
  - DSA 2014: 2015-16 = 5.5; 2017-21 = 5.5; 2022-36 = 5.5
- Total revenue excluding grants (percent of GDP)
  - DSA 2016: 2015-16 = 16.9; 2017-21 = 17.1; 2022-36 = 18.1
  - DSA 2015: 2015-16 = 17.7; 2017-21 = 16.6; 2022-36 = 15.6
  - DSA 2014: 2015-16 = 18.3; 2017-21 = 17.7; 2022-36 = 16.4
- Exports of goods and services (percent of GDP)
  - DSA 2016: 2015-16 = 22.5; 2017-21 = 22.3; 2022-36 = 21.9
  - DSA 2015: 2015-16 = 25.6; 2017-21 = 21.7; 2022-36 = 15.8
  - DSA 2014: 2015-16 = 27.1; 2017-21 = 25.5; 2022-36 = 24.2
- Oil price (US dollars per barrel)
  - DSA 2016: 2015-16 = 46.8; 2017-21 = 54.6; 2022-36 = 55.2
  - DSA 2015: 2015-16 = 69.2; 2017-21 = 56.3; 2022-36 = 61.1
  - DSA 2014: 2015-16 = 108.0; 2017-21 = 93.3; 2022-36 = 91.7

Medium-term (2017–21) assumptions (Box 1)
- Real GDP growth projected to average 4.7 percent in the medium term.
- Annual inflation projected to increase from under 1 percent in 2016 to 2 percent in the medium term.
- Revenue-to-GDP ratio projected to rise from 16.9 (2015–16) to 17.1 in the medium term.
- Oil prices expected to stabilize at $US 54.0 in the medium term.
- External current account deficit projected to improve; financing assumed through an IMF-supported program, international donors, and private capital inflows.

Long-term (2022–36) assumptions (Box 1)
- Real GDP growth projected to average 5.5 percent in the long term.
- Revenue-to-GDP ratio projected to rise slightly to 18.1 percent.
- Exports projected to remain stable at about 21.9 percent of GDP in the long run.

New external borrowing composition (Text Table 3, selected)
- New borrowing, 2017 DSA (CFAF billions unless otherwise stated) shows increased concessionality relative to the 2015 DSA, with the share of concessional loans higher in the current DSA while maintaining growth-enhancing investments.
- Discount rate used in DSA: 5 percent (approved October 2013).
- Financing gap during 2017–19 assumed fully covered by IMF financing and budget support from donors.
- Grant element of new borrowing assumed to be higher and maintained at a relatively high level through the DSA horizon.

### External debt sustainability, classification, and stress tests
- Cameroon classified as weak policy performers: three-year average CPIA score = 3.2 (scale 1 to 6).
- Policy-dependent thresholds for this category:
  - PV of debt-to-exports ratio: 100 percent
  - PV of debt-to-revenue ratio: 200 percent
  - PV of debt service-to-exports ratio: 30 percent
  - Debt service-to-exports ratio: 15 percent
  - Debt service-to-revenue ratio: 18 percent
- DSA results: risk of debt distress assessed as "high."
  - Debt service indicators (relative to exports and revenue) increase in the medium term before declining, remaining below policy-dependent thresholds under baseline.
  - PV of debt-to-exports ratio breaches its threshold (smaller and temporary breach compared with 2015 DSA).
  - The breach is within a 5 percent band above the threshold but significant downside risks warrant caution; potential upgrade to “moderate” risk if the IMF-supported program is delivered.
- Standard stress tests:
  - Export shock stress test brings forward breach of PV of debt-to-exports ratio to 2017 and triggers an additional breach for debt-service-to-exports ratio (projected to exceed 15 percent threshold by 2023, but return below by end of DSA horizon).
  - A one-time 30 percent depreciation in the nominal exchange rate would temporarily breach the PV of debt-to-GDP ratio threshold.

### Downside risks and policy implications
- Downside risks:
  - Less ambitious fiscal consolidation would raise public debt and worsen debt dynamics.
  - Subdued global demand and slow structural reforms could weaken non-oil exports with adverse implications for debt sustainability.
  - Weak public debt management and inadequate tracking of disbursements have led to higher actual external debt disbursement figures than initially anticipated.
- Policy implications highlighted:
  - Continue fiscal consolidation: boost revenue mobilization and rationalize expenditure, better prioritize capital spending in line with absorption capacity.
  - Maintain prudent and sustainable borrowing: lower non-concessional external borrowing and increase grant/concessional share of new borrowing.
  - Strengthen public debt management: clarify roles and responsibilities, ensure preliminary authorization for SOE external borrowing, and improve timely tracking of loan disbursements.
  - Pursue structural reforms to improve competitiveness, economic diversification, and financial inclusion to support medium- and long-term growth and export base expansion.

*Source: IMF staff report (Cameroon DSA), 2016 (as presented in the supplied content).*

### 14.      Although a high risk of debt distress rating typically calls for a zero limit on non-

### 14.      Although a high risk of debt distress rating typically calls for a zero limit on non-

### Non-concessional borrowing and rationale
- The DSA assumes a shift of new borrowing towards more concessional loans but leaves some room for non-concessional loans for development and debt management purposes.
- With Cameroon’s income being above the IDA’s cutoff, access to concessional resources may be limited considering the large infrastructure gaps and the authorities’ development plan to address these gaps.
- Authorities’ stated policy: direct non-concessional loans only to priority and high-return projects to support debt sustainability, as growth dividends from these projects would potentially generate resources for servicing the debt.
- Authorities’ plan for 2017: use the room for non-concessional borrowing for high-priority projects, such as strengthening and stabilization of Douala’s transmission system to ensure the reliability of power supply, which would help reduce power generation cost and boost private sector activities.
- Prioritizing semi-concessional loans from development partners for projects and budget support would preserve debt sustainability provided fiscal consolidation and structural reforms are on track.
- Footnotes from the source:
  - 8 See staff guidance note on the DSA (http://www.imf.org/external/np/pp/eng/2013/110513.pdf)
  - 9 It should be noted that with the peg to the Euro, and a third of external debt being denominated in Euros, the shock to public debt resulting from a currency depreciation would be less pronounced than what the DSA results would suggest.
  - 10 Loans with a positive grant element but below the minimum threshold of 35 percent.
  - 11 The issue arises with external debts associated with direct payments by creditors to overseas companies.

### Public sector debt sustainability
- External debt would increase temporarily in the medium term as the government relies on external concessional financing to rebuild reserves and support the adjustment; domestic borrowing will remain modest and declines steadily in line with the tighter regional monetary policy.
- Baseline scenario projections:
  - PV of total public debt as a share of GDP is expected to decline gradually over time from 29 percent of GDP in 2016 to 20 percent of GDP in the long term.
  - This level is well below the DSF benchmark level of 38 percent of GDP associated with heightened public debt vulnerabilities for weak policy performers.
  - PV of total public debt as a share of revenue is expected to fall to around 110 percent in the long term, from 176 percent in 2016.
- Stress-test finding:
  - Under the historical scenario (unchanged policy), the PV of public debt to GDP ratio would keep rising until breaching the threshold of 38 percent of GDP by 2019.
- Debt management capacity:
  - The Caisse Autonome d’Amortissement (CAA) is the government body in charge of debt management; it tracks contracting and disbursement of new domestic and external loans, disseminates comprehensive data on public debt statistics, and receives resources from the treasury to service government debt.
  - Areas needing strengthening: ability of the CAA to monitor wider public sector borrowing—notably SOEs’ nonguaranteed external debt—and disbursement for project loans.

### Conclusions
- A credible fiscal consolidation package to restore fiscal and external sustainability would help Cameroon mitigate the risk of debt distress, although it would retain its “high” risk rating.
- The breach of the policy-dependent threshold in the case of the PV of debt-to-exports ratio under the baseline scenario suggests Cameroon faces a high risk of debt distress.
- Compared with the 2015 DSA, the breach in the current DSA is smaller and temporary in nature.
- Significant downside risks to public debt remain as standard stress tests show Cameroon’s external debt remains highly vulnerable to exogenous shocks.
- Policy implication: need for prudent macroeconomic policies, notably a credible fiscal consolidation program to ensure fiscal and external sustainability.

### Recommendations to improve debt sustainability and reduce the risk of debt distress
- Increase non-oil revenue and streamline public spending to achieve fiscal consolidation.
- Make greater use of concessional borrowing.
- Monitor debt developments more closely, especially for externally-financed projects, notably by setting borrowing ceilings more in line with project implementation capacity to avoid continued accumulation of non-disbursed loans.
- Implement policies to boost growth and exports of the non-oil economy.
- Strengthen public debt management as well as the overall economic policy framework to improve the country’s risk rating.

*CAMEROON — INTERNATIONAL MONETARY FUND*

### 19.      The authorities see room for improving debt management and monitoring, and agree that

### 19.      The authorities see room for improving debt management and monitoring, and agree that 

### Summary findings
- Authorities see room for improving debt management and monitoring and agree that fiscal consolidation while protecting growth-enhancing investment would help safeguard debt sustainability.
- Authorities concur that closer scrutiny by the CNDP of all external borrowing including non-guaranteed borrowing by SOEs would be important.
- Ceilings on new non-concessional borrowing agreed in the context of the program were aligned with implementation capacity.
- Authorities consider risks of debt distress mitigated by:
  - the current relatively low level of public debt;
  - the focus of public spending on infrastructure projects, notably in the energy and transport sectors, expected to pave the way for a stronger growth outlook than envisaged in the DSA;
  - continuous reforms in the business environment expected to boost the export sector.

### Debt dynamics and stress-test indicators (selected figures from DSA)
- Public sector debt (Percent of GDP): 2013: 19.0; 2014: 27.5; 2015: 34.2; 2016: 35.2; 2017: 37.3; 2018: 37.2; 2019: 37.1; 2020: 36.0; 2021: 34.7; 2016-21 Average: 26.8; 2022-36 Average: 25.4
- Foreign-currency denominated (Percent of GDP): 2013: 12.0; 2014: 18.9; 2015: 21.5; 2016: 22.9; 2017: 26.8; 2018: 29.4; 2019: 31.3; 2020: 31.3; 2021: 31.1; 2016-21 Average: 25.3; 2022-36 Average: 24.6
- Change in public sector debt (Percent of GDP): 2013: 3.5; 2014: 8.6; 2015: 6.7; 2016: 1.0; 2017: 2.1; 2018: -0.2; 2019: -0.1; 2020: -1.1; 2021: -1.4; 2016-21 Average: -1.3; 2022-36 Average: -0.5
- PV of public sector debt (Percent of GDP): 2016-21 Average: 29.3; 2022-36 Average: 19.8
- PV of public sector debt-to-revenue and grants ratio (in percent): 2013: 80.9; 2014: 103.2; 2015: 151.7; 2016: 175.5; 2017: 179.9; 2018: 169.6; 2019: 164.4; 2020: 158.9; 2021: 151.7; 2016-21 Average: 114.6; 2022-36 Average: 108.1
- Debt service-to-revenue and grants ratio (in percent): 2013: 8.4; 2014: 9.2; 2015: 18.5; 2016: 15.5; 2017: 18.6; 2018: 17.8; 2019: 16.1; 2020: 12.2; 2021: 11.0; 2016-21 Average: 11.9; 2022-36 Average: 8.7
- Gross financing need 1/ (Percent of GDP): 2016-21 Average: 5.6; 2022-36 Average: 1.5
- PV of public sector debt (Billions of U.S. dollars, memorandum): 2026-36 Average nominal GDP (Billions of US dollars) and PV data: Nominal GDP (Billions of US dollars) listed across projections; PV of PPG external debt (Billions of US dollars): 2016: 4.0; 2017: 4.6; 2018: 5.7; 2019: 6.7; 2020: 7.7; 2021: 8.3; 2026-36 values and projections provided in table.

Notes on stress tests and sensitivity analysis (high-level)
- Stress tests include scenarios such as one-time depreciation shocks and export shocks (the most extreme stress test defined as the test that yields the highest ratio on or before 2026).
- Table 2 sensitivity snapshots (selected): PV of Debt-to-GDP Ratio baseline and scenarios (2016–36) — Baseline: 29 (2016), 30 (2017), 29 (2018), 29 (2019), 28 (2020), 27 (2021), 21 (2026), 20 (2036). Alternative scenarios and bound tests produce higher ratios in adverse cases (detailed year-by-year numbers reported in the DSA tables).
- Table 3a (External DSA) selected indicators:
  - External debt (nominal) / PPG external debt (Percent of GDP): 2013: 12.0; 2014: 18.9; 2015: 21.5; 2016: 22.9; 2017: 26.8; 2018: 29.4; 2019: 31.3; 2020: 31.3; 2021: 31.1; 2016-21 Average: 25.3; 2022-36 Average: 24.6
  - Exports (Percent of GDP): 2016-21 Average: 22.2; 2022-36 Average: 21.4
  - PV of external debt (in percent of exports): 2016-21 Average: 104.6; 2022-36 Average: 88.7
  - Debt service-to-exports ratio (in percent): 2016-21 Average: 7.4; 2022-36 Average: 7.3

### Key macroeconomic assumptions (selected exact series)
- Real GDP growth (in percent): 2013: 5.2; 2014: 6.0; 2015: 5.8; 2016: 4.0; 2017: 1.3; 2018: 4.7; 2019: 4.0; 2020: 4.6; 2021: 5.0; 2016-21 Average: 5.1; 2022-36 Average: 5.5
- Average nominal interest rate on forex debt (in percent): 2013: 3.2; 2014: 1.6; 2015: 2.4; 2016: 2.0; 2017: 0.7; 2018: 1.3; 2019: 2.2; 2020: 2.3; 2021: 2.2; 2016-21 Average: 2.1; 2022-36 Average: 2.8
- Inflation rate (GDP deflator, in percent): 2013: 6.3; 2014: 1.9; 2015: 1.8; 2016: 3.1; 2017: 1.5; 2018: -1.2; 2019: 0.9; 2020: 1.0; 2021: 1.3; 2016-21 Average: 1.7; 2022-36 Average: 1.8
- Grant element of new external borrowing (in percent) (projections): values by year shown in DSA tables; sample projection series in Table 3a: 22.4, 23.4, 24.8, 24.3, 25.2, 25.2, 24.2, 24.2, 24.8, 24.5 across projection years.

### Policy commitments and recommendations (actions the authorities will take)
- Strengthen debt management and monitoring:
  - Strengthen the authority of the National Public Debt Committee (CNDP).
  - Improve the capacity of the Caisse Autonome d’Amortissement (CAA) to better monitor external debt of public enterprises and avoid arrears accumulation.
  - Closer scrutiny by CNDP of all external borrowing including non-guaranteed borrowing by SOEs.
  - Set non-concessional debt ceilings in line with capacity to prepare and execute projects.
- Fiscal consolidation while protecting priority spending:
  - Focus revenue mobilization on non-oil revenue, including increasing excise tax on petroleum products and broadening the tax base.
  - Strengthen structure and efficiency of current spending while protecting health, education, and social protection.
  - Prioritize capital expenditure and defer lower-priority projects, guided by PIMA recommendations and criteria aligning budgetary resources with implementation capacity.
- Contingent liabilities and PPPs:
  - Make greater use of PPPs where private sector can operate at lower cost, with contingent liabilities analyzed and reported in annual budget laws along with risks from public enterprises.
- Monetary and financial sector measures:
  - Comply with regional commitments to freeze the ceiling on BEAC statutory advances.
  - BEAC to continue tighter regional monetary policy; central bank increased key lending rate to 2.95 percent in March 2017.
  - Modernize monetary framework and instruments; introduce an emergency liquidity support instrument for solvent banks with Fund TA.
  - Implement program to clear overdue claims and rapidly resolve banks in difficulty; strengthen microfinance stability and develop mobile banking.
- Competitiveness and private sector development:
  - Implement reforms to improve business environment, address infrastructure gaps in energy and transport, and improve private sector access to financial services.
  - Enhance coordination of tax policies and harmonize customs procedures at the regional level.

*Source: IMF staff and Cameroonian authorities, Cameroon DSA and Statement by Mr. Sembene and Mr. Bah (June 26, 2017).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2017/cr17185.pdf_