## 1cmrea2020003

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### Context and request
- Weaker external demand in major trading partners (China and Europe) and a more pronounced impact of containment measures further deteriorated growth prospects and worsened Cameroon’s external and fiscal positions.
- Authorities allowed the current ECF arrangement to expire at end-September and requested financial assistance under the “exogenous shocks window” of the RCF equivalent to 40 percent of quota (SDR 110.4 million).
- The additional request brings total disbursement under the RCF to 100 percent of quota in 2020.
- The RCF disbursement of SDR 110.4 million is expected to fill 9.8 percent of the estimated financing gap; total IMF disbursements are expected to fill 29.5 percent of the estimated financing gap.

### Policy response and fiscal measures
- Commitments and actions:
  - Improve transparency and public financial management for COVID-19 emergency resources.
  - Adopted a three-year preparedness and response plan with total financing cost close to US$ 825 million (2 percent of GDP), of which about US$ 750 million have been identified or made available.
  - Monetary easing measures approved by the Bank of Central African States (BEAC).
  - Adopted a revised budget with a larger deficit to accommodate automatic stabilizers and crisis-related emergency spending.
- Fiscal stance going forward:
  - As the crisis abates, fiscal adjustment will be needed by strengthening domestic revenue mobilization and rationalizing spending while protecting social expenditures.
  - Authorities commit to a zero limit on non-concessional external borrowing given Cameroon’s overall high risk of debt distress.
- Temporary fiscal accommodations (Revised Finance Law highlights):
  - Revenues in the RFL expected to decline by CFAF 772 billion to CFAF 2,777 billion compared to the initial Budget Law.
  - Temporary tax accommodations: exemptions from the tourist tax for hotel and catering sectors for rest of 2020; exemption from withholding tax for taxis and motorbikes and petty traders for Q2; special envelope of CFAF 25 billion for expedited clearance of VAT credits; postponement of deadline to pay land taxes for 2020 to September 30, 2020.
  - Expenditure reprioritization: postponement of non-priority goods and services and capital expenditure while protecting social spending.
  - RFL allocates about US$ 310 million to the special COVID-19 account financed at 76 percent by resources released by debt service suspension and external budgetary support.

### Recent economic developments and outlook (selected projections and indicators)
- COVID-19 cases: first reported on March 6, 2020; reached 20,009 as of September 9, 2020.
- Growth and external sector:
  - Real GDP expected to decline by 2.8 percent in 2020 (an additional 1.6 percentage points relative to RCF-1).
  - Growth in 2021 revised to 3.4 percent (from 4.5 percent).
  - Europe growth revised to -9.9 percent (down 6.2 percentage points since RCF-1) and China to 1.6 percent (down 0.4 percentage points since RCF-1).
  - Average petroleum spot price projected at 41.7 dollars per barrel in 2020 (6.1 dollars higher than RCF-1 but 16.2 dollars lower compared to the Pre-COVID).
  - Current account deficit (including official grants) expected to widen to 6 percent of GDP in 2020, about 0.3 percentage point larger than at RCF-1.
- Selected comparisons (RCF-1 vs projections and levels):
  - Real GDP growth: 2019 = 3.7; 2020 = -1.2 (RCF-1) vs -2.8 (Proj.); 2021 = 4.1 (RCF-1) vs 3.4 (Proj.).
  - Oil GDP growth: 2019 = 4.3; 2020 = -5.4 (RCF-1) vs -2.3 (Proj.); 2021 = -5.7 (RCF-1) vs 1.0 (Proj.).
  - Non-oil GDP growth: 2019 = 3.7; 2020 = -1.0 (RCF-1) vs -2.8 (Proj.); 2021 = 4.6 (RCF-1) vs 3.5 (Proj.).
  - Inflation: 2019 = 2.5; 2020 = 2.8; 2021 = 2.3.
  - Total revenue (including grants): 2019 = 16.3 percent of GDP; 2020 = 13.9 (RCF-1) vs 13.3 (Proj.); 2021 = 15.4 (RCF-1) vs 14.9 (Proj.).
  - Expenditure: 2019 = 18.7 percent of GDP; 2020 = 18.4 (RCF-1) vs 17.4 (Proj.); 2021 = 17.0 (RCF-1) vs 17.6 (Proj.).
  - Overall fiscal balance (payment order basis, incl. grants): 2019 = -2.3; 2020 = -4.5 (RCF-1) vs -4.2 (Proj.); 2021 = -1.7 (RCF-1) vs -2.7 (Proj.).
  - Current account balance (incl. official transfers): 2019 = -3.7; 2020 = -5.7 (RCF-1) vs -6.0 (Proj.); 2021 = -3.4 (RCF-1) vs -4.6 (Proj.).

- Macroeconomic projections (selected series from staff tables):
  - GDP at constant prices: 2018 = 4.1; 2019 = 3.9; 2020 = -1.2; 2021 (Est. RCF-1) = -2.8; 2022 proj. = 3.4; 2023 proj. = 4.3; 2024 proj. = 4.8; 2025 proj. = 5.4; 2026 proj. = 5.4.
  - Nominal GDP (CFAF billions): 2018 = 21,493; 2019 = 22,769; 2020 = 22,615; 2021 = 22,399; 2022 = 23,687; 2023 = 25,134; 2024 = 26,806; 2025 = 28,791; 2026 = 30,922.
  - Consumer prices (average): 2018 = 1.1; 2019 = 2.5; 2020 = 2.8; 2021 = 2.8; 2022 = 2.3.
  - Current account balance (excluding official grants, percent of GDP): 2018 = -4.0; 2019 = -4.7; 2020 = -6.2; 2021 = -6.0; 2022 = -5.1.

### Health response and preparedness plan (three-year plan and budget)
- Five pillars: (i) health strategy to prevent spread and care for infected persons; (ii) mitigation of economic and financial repercussions; (iii) supply of essential products; (iv) local development of innovative solutions; (v) social resilience to alleviate repercussions on vulnerable people and households.
- Plan cost and financing:
  - Total expected cost US$ 825 million (2 percent of GDP); tax relief to affected businesses estimated at about US$ 200 million.
  - Government enacted revised finance law (enacted June 2020) increased social spending by 19.3 percent (CFAF 156 billion) to CFAF 966 billion relative to the initial budget law.
  - CFAF 180 billion allocated to the COVID-19 special account – 76 percent funded by resources released by participation to the debt service suspension initiative (DSSI: CFAF 123.5 billion) and external budgetary support.
- Execution (through July):
  - Overall social spending execution rate of 47 percent.
  - COVID-related expenditures reached 18.6 percent of the budget allocated to social spending and were executed at around 38 percent; 49 percent of remaining social spending executed.
- Selected plan components (CFAF billion):
  - Strengthening of the Health System: 58.7 (2020) — Total 58.7.
  - Identification of active cases: 17.9 (2020).
  - Management of confirmed cases: 33.3 (2020).
  - Economic and Financial Relief Measures: 198.7 (2020) and 176.3 (2021-23) — Total 375.0.
  - Domestic debt clearance: 50.0 (2021-23) — Total 100.0.
  - Clearance of stock of VAT credits: 25.0 (2020).
  - Establishment of economic recovery fund for productive sector: 20.0 (2020) and 110.0 (2021-23) — Total 130.0.
  - Tax expenditures (component): 100.0 (2020).
  - Total plan by period: 2020 = 296.0; 2021-23 = 177.8; Total = 473.8 (Percent of GDP 1.3, 0.8, 2.1 respectively).

### SONARA restructuring and related measures
- SONARA debt and restructuring:
  - SONARA’s total debt: CFAF 731 billion as of end-July 2020.
  - Agreement reached in September with creditor banks representing about a third of SONARA’s total debt.
  - Restructuring based on a 5-year business plan of SONARA operating solely as an oil importer.
  - Restructuring subject to issuance of a letter of comfort by the State; government issued the letter of comfort in February.
  - New levy to support SONARA: CFAF 47.88 per liter on imported refined oil products deposited in an escrow account at the BEAC to secure repayment of SONARA’s debt; new oil price structure entered into effect in March (structural benchmark).
  - Discussions ongoing with non-bank creditors (oil traders); short-term debt from external oil traders reclassified as arrears (0.7 percent of GDP as of end-2020) and not expected to be rolled over under SONARA’s new business plan.

### External financing, donor support, and catalytic role of IMF
- Since Board approval of the first RCF on May 4, 2020:
  - Authorities secured additional budget support of Euro 88 million from the AfDB (AfDB Board approved disbursement in June 2020; disbursements made in September 2020).
  - Multilateral and bilateral donors, including the World Bank, the EU, and France, provided cash financing close to US$300 million as of September 11, 2020; a large part of this earmarked financing has been kept outside the government budget.
- Authorities seeking additional exceptional concessional financing to fill remaining financing gap, including donor support and pending DSSI requests.
- Debt Service Suspension Initiative (DSSI) participation:
  - As of end-September 2020, all official bilateral creditors but one have agreed in principle to debt service suspension under the DSSI for the period April 30th to end-December 2020 on loans not originating from the commercial windows of their lending institutions.
  - Debt service relief expected by Cameroon from nine creditors amounts to about US$ 222.3 million, of which US$ 164.7 million due to France and US$ 51 million on loans from China EXIMBANK’s preferential window.
  - Update as of October 20, 2020: debt service relief expected amounts to about US$ 223.9 million.

### Financing gap, revised finance law, and closing the gap
- Fiscal deterioration and financing needs:
  - Sharp deterioration of revenue: CFAF -197 billion compared to RCF-1.
  - Without corrective measures, overall fiscal deficit expected to reach CFAF 1,315 billion or 5.9 percent of GDP, 0.9 percentage point higher than RCF-1.
  - Financing gap expected to increase by CFAF 293 billion to CFAF 917 billion (4.1 percent of GDP) relative to RCF-1.
- Text Table 3 (selected entries as presented):
  - Financing Gap (RCF-1): CFAF 625.2 billion / 8.9 percent of GDP; Financing Gap (RCF-2): CFAF 174.1 billion.
  - IMF Financing (RCF-1): CFAF 226.1 billion / 2.0 percent of GDP.
  - RCF-1 (May) CFAF 1360.6; Prospective RCF-2 ......900.4.
  - Spending Reprioritization ......281 / 1.3 (of which Current Spending ......285 / 1.3; Capital Spending ......176 / 0.8; COVID-19 spending (- increase) ......-180 / -0.8).
  - Budget Support from other Development Partners: CFAF 1250.6 / 12.5.
  - Debt Relief - DSSI: CFAF 123 / 0.6.
  - Exceptional Financing total: CFAF 2741.2 / 1180.5 (of which identified financing ......660.3; unidentified financing 2741.2510.2).
- Closing the gap recommendations:
  - Scope for additional domestic financing is limited.
  - Authorities should close the gap through additional donor financing, suspension of debt service to Paris Club and G20 creditors, and budgetary reprioritization—cuts of spending in areas that will least affect mitigation of the outbreak.

### Risks, uncertainties, and DSA conclusions
- Near-term outlook highly uncertain; pandemic could be harder to eradicate than assumed, raising risk of prolonged and more severe outbreak with widespread disruptions to global economic activity and lower oil and commodity prices.
- Scenario risks and downside risks:
  - Expansion of the pandemic could intensify human suffering, socio-political tensions, and economic and social disruptions; raise budgetary costs; deepen impacts on the economy and fiscal revenues; enlarge fiscal and external financing needs; and increase public debt vulnerabilities.
  - Key downside risks include unsuccessful completion of SONARA’s debt restructuring, more protracted pandemic disruptions, less-than-expected oil and gas exports, socio-political tensions, realization of contingent liabilities, and allowing new non-concessional borrowing.
- Debt Sustainability Analysis (Annex I) key findings:
  - Risk of external debt distress: High.
  - Overall risk of debt distress: High.
  - Conclusion: Cameroon’s debt is assessed to be sustainable, albeit at high risk of external and overall public distress, contingent on concessional financing, avoiding additional non-concessional borrowing, and successful reprofiling measures (e.g., SONARA).
  - Selected DSA figures:
    - Real GDP 2020 projection: -2.8 percent.
    - Growth 2021: 3.4 percent (revised from 4.5 percent).
    - Current account deficit 2020: 6 percent of GDP.
    - Overall fiscal deficit (no corrective measures): CFAF 1,315 billion or 5.9 percent of GDP.
    - Total public sector debt (revised): 41.7 percent of GDP.
    - Public and publicly guaranteed external debt (revised): 29.0 percent of GDP.
    - SONARA debt (end-July 2020): CFAF 731 billion.
    - Levy on refined oil products: CFAF 47.88 per liter (in effect since March 2020).
  - Debt dynamics and breaches:
    - Two external debt service indicators breached thresholds under the baseline: debt-service-to-exports and debt-service-to-revenue.
    - One-off breach for PV of debt-to-exports ratio in 2020.
  - Stress tests and sensitivity analyses show that combined contingent liabilities, commodity price shocks, and market-financing shocks could push key ratios substantially above baseline paths.

### Monetary policy, banking-sector measures, and financial stability
- BEAC and supervisory actions:
  - On March 2020, BEAC reduced policy rates by 25 bps to 3.25 percent and injected liquidity.
  - On July 22, BEAC announced an asset purchase program of CFAF 600 billion for all CEMAC sovereign issuers.
  - BEAC announced long term refinancing operations for banks, conditional on beneficiary banks maintaining their levels of credits to the economy.
  - On March 2020, COBAC informed banks to utilize a capital conservation buffer of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive dividend distribution policy.
- Banking system status and risks:
  - Overall banking system described as liquid and profitable but fragile.
  - Deposits continue to increase while credit to the private sector has been declining since the fire at SONARA.
  - Banks participating in SONARA’s debt restructuring should not have to provision related exposures.
  - The COVID-19 pandemic will impact bank solvency through increased NPL ratios and provisioning requirements.
  - A few small banks are weak or insolvent; restructuring plans adopted for two small ailing private banks in January 2020; one restructuring plan was rejected in September by the main shareholders, potentially delaying implementation.

### Transparency, procurement, and prior actions (RCF-2 conditions)
- Commitments and completed prior actions:
  - Commit to strict application of budgetary procedures and controls for received financial assistance.
  - Issue a semi-annual report on COVID-19 related spending and commission an independent audit of this spending at the end of the 2020 fiscal year and publish the results.
  - Publish results of public procurement awarded by the government and the beneficial ownership of companies receiving procurement contracts on COVID-19 related expenditures.
  - Incorporate COVID-19 related expenditures in a revised finance law presented to Parliament in June 2020.
- Prior actions met and disclosures:
  - Circular implementing Article 90 of the Public Procurement Code issued and signed on October 19, 2020; published in French and English on the Public Procurement Regulatory Agency website.
  - As of October 20, 2020, authorities published lists of a total of 267 contracts awarded by the Ministries of Health, Agriculture and Rural Development—totaling CFAF 51.6 billion (45 percent of the Special COVID-19 Fund net of VAT and domestic arrears reimbursements)—including procurements’ objects, amounts, beneficiaries and beneficial owners, type of contract, and status.
  - An independent audit of COVID-19 spending will be commissioned at end-FY2020 and its results published.
- Commitments tied to RCF-2:
  - Prior actions: issue circular implementing Article 90; publish backlog of results of all COVID-19 related contracts awarded since May 4, 2020, including beneficial ownership.
  - Post-Board actions: publish, on the website of the Public Procurement Regulatory Agency and within 30 days of award, the results of public procurement awarded by the government and beneficial ownership of companies receiving procurement contracts on COVID-19 related expenditures.

### Staff appraisal, policy guidance, and recommendation
- Staff views:
  - Authorities have been proactive; staff welcomes the revised finance law and the three-year preparedness and response plan.
  - Staff supports temporary loosening of macroeconomic and financial policies to accommodate pandemic-response measures but urges close monitoring of potential fiscal risks to limit further revenue losses.
  - Authorities should develop additional contingency plans, including additional expenditure reprioritization in areas that least affect outbreak mitigation while protecting expenditure that benefits the most vulnerable.
  - Staff supports a strategy to return to fiscal consolidation once the crisis abates to safeguard debt sustainability and ensure a strong and inclusive recovery.
- Staff recommendation:
  - Staff supports the authorities’ request for financial assistance under the Rapid Credit Facility equivalent to 40 percent of quota (SDR 110.4 million or 0.4 percent of GDP).
  - Cameroon meets the eligibility requirements for the RCF and has adequate capacity to repay the Fund.
  - A disbursement of 40 percent of quota would result in Fund exposure to Cameroon of 2.5 percent of GDP in 2020.
  - Total outstanding credit from the Fund, including the proposed RCF disbursement, will amount to 255 percent of quota in 2020, within normal cumulative access limits.
  - Annual repayments expected to remain below 0.4 percent of GDP over the 2020-34 period and should peak at 0.3 percent of GDP or 2.1 percent of government revenue in 2026.

*International Monetary Fund staff; EXECUTIVE SUMMARY (Cameroon), October 5, 2020 (excerpts).*

### EXECUTIVE SUMMARY

### 1cmrea2020003 - EXECUTIVE SUMMARY

### Context and request
- Weaker external demand in major trading partners (China and Europe) and a more pronounced impact of containment measures have further deteriorated growth prospects and worsened Cameroon’s external and fiscal positions.
- Authorities allowed the current ECF arrangement to expire at end-September, reiterated interest in a successor arrangement, and requested financial assistance under the “exogenous shocks window” of the RCF equivalent to 40 percent of quota (SDR 110.4 million).
- This additional request will bring the total disbursement under the RCF to 100 percent of quota in 2020.

### Policy response and fiscal measures
- Authorities committed to improving transparency and public financial management for COVID-19 emergency resources.
- Steps taken:
  - Containment and mitigation: stepping up efforts to contain the spread of the disease, boost health and social protection spending, and provide temporary support to affected businesses and households.
  - Adopted a three-year preparedness and response plan with total financing cost close to US$ 825 million (2 percent of GDP), of which about US$ 750 million have been identified or made available.
  - Monetary easing measures approved by the Bank of Central African States (BEAC).
  - Adopted a revised budget with a larger deficit to accommodate automatic stabilizers and crisis-related emergency spending.
- Fiscal stance going forward:
  - As the crisis abates, fiscal adjustment will be needed by strengthening domestic revenue mobilization and rationalizing spending while protecting social expenditures.
  - Given Cameroon’s overall high risk of debt distress, authorities continue to commit to a zero limit on non-concessional external borrowing.

### Recent economic developments, outlook, and key projections
- COVID-19 evolution and impact:
  - Cases first reported on March 6, 2020; reached 20,009 as of September 9, 2020 (the 6th most confirmed cases overall in SSA).
- Growth and external sector:
  - Real GDP expected to decline by 2.8 percent in 2020 (an additional 1.6 percentage points relative to RCF-1).
  - Growth in 2021 revised to 3.4 percent (from 4.5 percent).
  - Europe growth revised to -9.9 percent (down 6.2 percentage points since RCF-1) and China to 1.6 percent (down 0.4 percentage points since RCF-1).
  - Average petroleum spot price projected at 41.7 dollars per barrel in 2020 (6.1 dollars higher than RCF-1 but 16.2 dollars lower compared to the Pre-COVID).
  - Current account deficit (including official grants) expected to widen to 6 percent of GDP in 2020, about 0.3 percentage point larger than at RCF-1.
- Inflation and sectoral growth (selected comparisons RCF-1 vs projections):
  - Real GDP: 2019 = 3.7; 2020 = -1.2 (RCF-1) vs -2.8 (Proj.); 2021 = 4.1 (RCF-1) vs 3.4 (Proj.).
  - Oil GDP: 2019 = 4.3; 2020 = -5.4 (RCF-1) vs -2.3 (Proj.); 2021 = -5.7 (RCF-1) vs 1.0 (Proj.).
  - Non-oil GDP: 2019 = 3.7; 2020 = -1.0 (RCF-1) vs -2.8 (Proj.); 2021 = 4.6 (RCF-1) vs 3.5 (Proj.).
  - Inflation: 2019 = 2.5; 2020 = 2.8; 2021 = 2.3.
  - Total revenue (including grants): 2019 = 16.3 percent of GDP; 2020 = 13.9 (RCF-1) vs 13.3 (Proj.); 2021 = 15.4 (RCF-1) vs 14.9 (Proj.).
  - Expenditure: 2019 = 18.7 percent of GDP; 2020 = 18.4 (RCF-1) vs 17.4 (Proj.); 2021 = 17.0 (RCF-1) vs 17.6 (Proj.).
  - Overall fiscal balance (payment order basis, incl. grants): 2019 = -2.3; 2020 = -4.5 (RCF-1) vs -4.2 (Proj.); 2021 = -1.7 (RCF-1) vs -2.7 (Proj.).
  - Current account balance (incl. official transfers): 2019 = -3.7; 2020 = -5.7 (RCF-1) vs -6.0 (Proj.); 2021 = -3.4 (RCF-1) vs -4.6 (Proj.).

### Health response and preparedness plan
- Three-year preparedness and response plan adopted with five pillars:
  - (i) health strategy to prevent spread and care for infected persons;
  - (ii) mitigation of economic and financial repercussions;
  - (iii) supply of essential products;
  - (iv) local development of innovative solutions;
  - (v) social resilience to alleviate repercussions on vulnerable people and households.
- Plan cost and components:
  - Total expected cost US$ 825 million (2 percent of GDP); tax relief to affected businesses estimated at about US$ 200 million.
- Government allocations and execution:
  - Revised finance law (enacted June 2020) increased social spending by 19.3 percent (CFAF 156 billion) to CFAF 966 billion relative to the initial budget law.
  - CFAF 180 billion allocated to the COVID-19 special account – 76 percent funded by resources released by participation to the debt service suspension initiative (DSSI: CFAF 123.5 billion) and external budgetary support.
  - Data through July: overall social spending execution rate of 47 percent; COVID-related expenditures reached 18.6 percent of the budget allocated to social spending and were executed at around 38 percent; 49 percent of remaining social spending executed.

- Preparedness and response plan (selected figures, CFAF billion unless otherwise noted):
  - Strengthening of the Health System: 58.7 (2020) — Total 58.7.
  - Identification of active cases: 17.9 (2020).
  - Management of confirmed cases: 33.3 (2020).
  - Economic and Financial Relief Measures: 198.7 (2020) and 176.3 (2021-23) — Total 375.0.
  - Acquisition of food and inputs for pastoral agricultural production: 3.7 (2020) and 12.0 (2021-23) — Total 15.7.
  - Domestic debt clearance: 50.0 (2021-23) — Total 100.0.
  - Clearance of stock of VAT credits: 25.0 (2020).
  - Establishment of economic recovery fund for productive sector: 20.0 (2020) and 110.0 (2021-23) — Total 130.0.
  - Tax expenditures (component): 100.0 (2020).
  - Strengthening Research & Innovation: 8.1 (2020) and 1.5 (2021-23) — Total 9.6.
  - Production of chloroquine and azithromycin: 5.0 (2020).
  - Development of distance learning tools & virtual work platforms: 2.0 (2020).
  - Social Resilience & Strategic Procurement total: 30.5 (2020).
  - Establishment of Solidarity Fund for vulnerable youth and elderly: 5.0 (2020).
  - Extension of the social safety nets program: 5.0 (2020).
  - Provision of distance-learning materials (including to rural areas): 4.0 (2020).
  - Total plan by period: 2020 = 296.0; 2021-23 = 177.8; Total = 473.8 (Percent of GDP 1.3, 0.8, 2.1 respectively).

### SONARA restructuring and related measures
- Agreement reached in September with creditor banks representing about a third of SONARA’s total debt (CFAF 731 billion as of end-July 2020).
- Restructuring features:
  - Based on a 5-year business plan of SONARA operating solely as an oil importer.
  - Subject to issuance of a letter of comfort by the State in favor of creditor banks, allowing COBAC to apply pre-existing prudential treatment on non-provisioning of government or government-guaranteed exposures.
  - Secured by a new levy to support SONARA: CFAF 47.88 per liter on imported refined oil products deposited in an escrow account at the BEAC to secure repayment of SONARA’s debt.
- Government issued the letter of comfort in February; new oil price structure entered into effect in March (structural benchmark).
- Discussions ongoing with non-bank creditors (oil traders).

### External financing, donor support, and catalytic role of IMF
- IMF emergency financing is catalyzing donor support:
  - Since Board approval of the first RCF on May 4, 2020, authorities secured additional budget support of Euro 88 million from the AfDB (AfDB Board approved disbursement in June 2020; disbursements made in September 2020).
  - Multilateral and bilateral donors, including the World Bank, the EU, and France, provided cash financing close to US$300 million as of September 11, 2020; a large part of this earmarked financing has been kept outside the government budget.
- Authorities seeking additional exceptional concessional financing to fill remaining financing gap, including donor support and pending DSSI requests.

### Financing gap, revised finance law, and requested IMF support
- Fiscal deterioration and financing needs:
  - Sharp deterioration of revenue: CFAF -197 billion compared to RCF-1.
  - Without corrective measures, overall fiscal deficit expected to reach CFAF 1,315 billion or 5.9 percent of GDP, 0.9 percentage point higher than RCF-1.
  - Financing gap expected to increase by CFAF 293 billion to CFAF 917 billion (4.1 percent of GDP) relative to RCF-1.
- Revised Finance Law (RFL) measures:
  - Revenues in the RFL expected to decline by CFAF 772 billion to CFAF 2,777 billion compared to the initial Budget Law.
  - Temporary tax accommodations and relief measures include: exemptions from the tourist tax for hotel and catering sectors for rest of 2020, exemption from withholding tax for taxis and motorbikes and petty traders for Q2, a special envelope of CFAF 25 billion for expedited clearance of VAT credits, and postponement of deadline to pay land taxes for 2020 to September 30, 2020.
  - RFL provides expenditure reprioritization: postponement of non-priority goods and services and capital expenditure while protecting social spending.
  - RFL allocates about US$ 310 million to the special COVID-19 account financed at 76 percent by resources released by debt service suspension and external budgetary support.
- Text Table 3 (Budgetary Financing Sources, 2020) — selected entries:
  - Financing Gap (RCF-1): CFAF 625.2 billion / 8.9 percent of GDP; Financing Gap (RCF-2): CFAF 174.1 billion.
  - IMF Financing (RCF-1): CFAF 226.1 billion / 2.0 percent of GDP; of which IMF-ECF 900.4 (note: figures as presented in source).
  - RCF-1 (May) CFAF 1360.6; Prospective RCF-2 ......900.4.
  - Spending Reprioritization ......281 / 1.3 (of which Current Spending ......285 / 1.3; Capital Spending ......176 / 0.8; COVID-19 spending (- increase) ......-180 / -0.8).
  - Budget Support from other Development Partners: CFAF 1250.6 / 12.5.
  - Debt Relief - DSSI: CFAF 123 / 0.6.
  - Exceptional Financing total: CFAF 2741.2 / 1180.5 (of which identified financing ......660.3; unidentified financing 2741.2510.2).
  - Memorandum item: Financing Gap after Spending Reprioritization CFAF 625.2 / 8.6 / 2.9 / 630.2 (values presented as in source).
  - Note: The financing gap in the RCF1 Request assumes IMF Financing includes a disbursement for the 6th review (CFAF 45 billion). This disbursement is excluded from RCF-2.
- Closing the gap:
  - Scope for additional domestic financing is limited.
  - Authorities should close gap through additional donor financing, suspension of debt service to Paris Club and G20 creditors, and budgetary reprioritization—cuts of spending in areas that will least affect mitigation of the outbreak.

### Risks and uncertainties
- Near-term outlook highly uncertain; pandemic could be harder to eradicate than assumed, raising risk of prolonged and more severe outbreak with widespread disruptions to global economic activity and lower oil and commodity prices.
- Scenario risks:
  - Expansion of the pandemic could intensify human suffering, socio-political tensions, and economic and social disruptions, raise budgetary costs, deepen impacts on the economy and fiscal revenues, enlarge fiscal and external financing needs, and increase public debt vulnerabilities.
- Baseline assumptions include persistent social distancing in 2021 with a reduction in intensity over time.

_International Monetary Fund staff; EXECUTIVE SUMMARY (Cameroon), October 5, 2020._

### 11.      The authorities have also strengthened their efforts to alleviate the impact on

### 11.      The authorities have also strengthened their efforts to alleviate the impact on

### Social measures and fiscal support for households
- Family allowance increased permanently from CFAF 2,800 to CFAF 4,500.
- Pensions that did not benefit from the 2016 reform have been raised permanently by 20 percent.
- Payment of family allowances to staff of companies continued.
- Social security contributions for the second quarter have been spread, and late fees canceled.
- Budget allocations to the social safety net program increased from CFAF 9 to 25 billion to benefit a larger population.

### Monetary policy and banking-sector support
- On March 2020, BEAC reduced policy rates by 25 bps to 3.25 percent and injected liquidity.
- On July 22, BEAC announced an asset purchase program of CFAF 600 billion for all CEMAC sovereign issuers.
- BEAC announced long term refinancing operations for banks, conditional on beneficiary banks maintaining their levels of credits to the economy.
- On March 2020, COBAC informed banks to utilize a capital conservation buffer of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive dividend distribution policy.
- Banking system status:
  - Overall banking system described as liquid and profitable but fragile.
  - Deposits continue to increase while credit to the private sector has been declining since the fire at SONARA.
  - Banks participating in SONARA’s debt restructuring should not have to provision related exposures (see para. 6).
  - The COVID-19 pandemic will impact bank solvency through increased NPL ratios and provisioning requirements.
  - A few small banks are weak or insolvent; in January 2020 authorities and COBAC adopted restructuring plans for two small ailing private banks.
  - The restructuring plan of one of the two banks was rejected in September by the main shareholders, potentially delaying implementation.

### Debt relief, external financing, and DSSI participation
- Authorities requested debt service suspension under the G20 debt service suspension initiative (DSSI).
- As of end-September 2020, all official bilateral creditors but one have agreed in principle to debt service suspension under the DSSI for the period April 30th to end-December 2020 on loans not originating from the commercial windows of their lending institutions.
- Debt service relief expected by Cameroon from nine creditors amounts to about US$ 222.3 million, of which:
  - US$ 164.7 million due to France.
  - US$ 51 million on loans from China EXIMBANK’s preferential window.
- Apart from two German official creditors, with whom debt rescheduling agreements were effectively signed in July 2020, Cameroon is still in the process of concluding bilateral agreements with other official creditors.
- As a beneficiary of the DSSI, Cameroon committed to:
  - Disclose all public sector financial commitments, respecting commercially sensitive information.
  - Contract no new non-concessional debt during the suspension period (from 1st May to 31st December 2020), other than agreements under this initiative or in compliance with limits agreed under the Fund’s Debt Limits Policy (DLP) or the World Bank’s policy on non-concessional borrowing.

### Transparency, procurement, and use of COVID-19 resources
- In the Letter of Intent of the RCF-1, the authorities committed to:
  - Strict application of budgetary procedures and controls for received financial assistance.
  - Issue a semi-annual report on COVID-19 related spending and commission an independent audit of this spending at the end of the 2020 fiscal year and publish the results.
  - Publish documents relating to the results of public procurement awarded by the government and the beneficial ownership of companies receiving procurement contracts on COVID-19 related expenditures.
  - Incorporate COVID-19 related expenditures in a revised finance law to be presented to the Parliament in June 2020.
- Since RCF-1, actions taken:
  - Enacted a realistic revised finance law incorporating COVID-19 related expenditures.
  - Created a special COVID-19 account dedicated to finance the national response plan; governed by a circular from the Minister of Finance specifying modalities of organization, operation, and monitoring-evaluation mechanisms.
  - The account’s functioning mechanisms enable monitoring to meet transparency and accountability requirements in accordance with the law on transparency and good governance in public finance management and the law on the financial regime of the State and other public entities (both adopted in July 2018).
- Commitments around RCF-2 (prior actions and post-Board actions):
  - Issue before the RCF-2 Board date a circular implementing Article 90 of the Public Procurement Code to modify standard procurement forms, particularly regarding beneficial ownership information (a prior action).
  - Publish after the RCF-2 Board date, on the website of the Public Procurement Regulatory Agency and within 30 days of the award on any contract, the results of public procurement awarded by the government and the beneficial ownership of companies receiving procurement contracts on COVID-19 related expenditures.
  - Publish before the RCF-2 Board date the backlog of all COVID-19 related contracts awarded since May 4, 2020, including beneficial ownership (a prior action).

### Rapid Credit Facility (RCF) request, eligibility, and IMF financing
- Authorities requested a disbursement under the RCF equivalent to 40 percent of quota to address urgent balance of payments needs emerging from the pandemic.
- The RCF disbursement of SDR 110.4 million (40 percent of quota) is expected to fill 9.8 percent of the estimated financing gap.
- This additional request will bring the total disbursement under the RCF to 100 percent of quota in 2020.
- Total IMF disbursements are expected to fill 29.5 percent of the estimated financing gap.
- Eligibility and related assessments:
  - Cameroon meets the eligibility requirements for support under the Exogenous Shocks Window of the RCF.
  - Authorities committed to application of budgetary procedures and controls, including audits in strict compliance with the Law on the Code for Transparency and Good Governance in Public Finance Management in Cameroon and the Law on the Financial Regime for the Government and Other Public Entities (enacted July 2018).
  - Cameroon is at high risk of debt distress; however, debt is assessed to remain sustainable.
  - The updated DSA incorporates SONARA’s agreed debt restructuring with creditor banks, reflects SONARA’s new business plan and new price structure generating enough resources to cover its debt.
  - On balance, while debt service ratios continue to be breached under the baseline scenario, debt can be assessed as sustainable given the downward path of debt indicators and progress on reprofiling SONARA’s debt (see Annex I).
  - A disbursement of 40 percent of quota would result in Fund exposure to Cameroon of 2.5 percent of GDP in 2020 (Table 5).
  - Total outstanding credit from the Fund, including the proposed RCF disbursement, will amount to 255 percent of quota in 2020, within normal cumulative access limits.
  - Annual repayments will remain below 0.4 percent of GDP over the 2020-34 period and should peak at 0.3 percent of GDP or 2.1 percent of government revenue in 2026.

### Coordination with BEAC and disbursement mechanics
- BEAC implemented priority recommendations from the 2017 safeguards assessment, including alignment of secondary legal instruments with its Charter and issuance of FY 2019 audited financial statements in full compliance with IFRS.
- RCF support will be channeled to the Treasury by the BEAC.
- An MoU between the BEAC and the government will be signed.
- RCF disbursements will be disbursed to the BEAC and be on-lent to the government to provide urgent budgetary financing.

### Staff appraisal and policy guidance
- Macroeconomic outlook and financing gap:
  - Compared to RCF-1, the macroeconomic outlook has deteriorated with additional downward revisions of 1.6 and 1.1 percentage points for growth for 2020 and 2021 respectively.
  - Financing gap estimated at 4.1 percent of GDP for 2020.
- Staff views on authorities’ response:
  - Authorities have been proactive; staff welcomes the revised finance law and the three-year preparedness and response plan.
  - Staff supports temporary loosening of macroeconomic and financial policies to accommodate pandemic-response measures but urges close monitoring of potential fiscal risks to limit further revenue losses.
  - Authorities should develop additional contingency plans, including considering additional expenditure reprioritization in areas that least affect outbreak mitigation (such as further postponement of non-priority goods and services or capital expenditure), while protecting expenditure that benefits the most vulnerable.
  - Staff supports the strategy to return to fiscal consolidation once the crisis abates to safeguard debt sustainability and ensure a strong and inclusive recovery in line with Cameroon’s medium-term reform agenda.
- Transparency and governance:
  - Staff welcomes authorities’ commitment to strengthen transparency and good governance and to ensure funds received, including from the RCF disbursement and resources freed up by the DSSI, are efficiently spent on addressing the pandemic crisis.
  - Reiterated commitments to prior actions and publication requirements tied to RCF-2 (see above).

*Source: CAMEROON — INTERNATIONAL MONETARY FUND (excerpts).*

### 25.      Staff supports the authorities’ request for financial assistance under the Rapid Credit

### 1cmrea2020003 - 25.

### Request for Fund assistance and staff recommendation
- Staff supports the authorities’ request for financial assistance under the Rapid Credit Facility equivalent to 40 percent of quota (SDR 110.4 million or 0.4 percent of GDP).
- Cameroon meets the eligibility requirements for the RCF and has adequate capacity to repay the Fund.
- Total access under the RCF for 2020 would reach 100 percent of quota and is intended to help address urgent and large financing needs and catalyze additional external financing.
- Staff notes that risks to the outlook are substantial and Cameroon remains at high risk of debt distress, but the debt is assessed as sustainable given:
  - the downward path of debt indicators,
  - progress on the reprofiling of SONARA’s debt and ensuring its viability,
  - the condition of identifying enough concessional resources to close identified financing gaps and avoiding additional non-concessional borrowing.
- Staff expresses confidence that the authorities will pursue economic policies appropriate for addressing the impact of the virus, based on the country’s track record and strong relations with the Fund.

### Macroeconomic outlook (selected indicators)
- GDP at constant prices: 4.1 (2018), 3.9 (2019), -1.2 (2020), -2.8 (2021, Est. RCF-1), 3.4 (2022 proj.), 4.3 (2023 proj.), 4.8 (2024 proj.), 5.4 (2025 proj.), 5.4 (2026 proj.).
- Oil GDP at constant prices: -2.7 (2018), 8.2 (2019), -5.4 (2020), -2.3 (2021), 2.2 (2022), -0.5 (2023), 0.9 (2024), 3.5 (2025), 1.7 (2026).
- Non-Oil GDP at constant prices: 4.4 (2018), 3.6 (2019), -1.0 (2020), -2.8 (2021), 3.5 (2022), 4.6 (2023), 5.0 (2024), 5.5 (2025), 5.6 (2026).
- Nominal GDP (at market prices, CFAF billions): 21,493 (2018), 22,769 (2019), 22,615 (2020), 22,399 (2021), 23,687 (2022), 25,134 (2023), 26,806 (2024), 28,791 (2025), 30,922 (2026).
- Consumer prices (average): 1.1 (2018), 2.5 (2019), 2.8 (2020), 2.8 (2021), 2.3 (2022), 2.1 (2023), 2.0 (2024), 2.0 (2025), 2.0 (2026).
- Current account balance (excluding official grants, percent of GDP): -4.0 (2018), -4.7 (2019), -6.2 (2020), -6.0 (2021), -5.1 (2022), -3.7 (2023), -2.7 (2024), -1.9 (2025), -1.5 (2026).
- Exports of goods and services (CFAF billions, memorandum): 3,242 (2019), 3,780 (2020), 4,184 (2021), 4,497 (2022), 4,869 (2023), 5,208 (2024), 5,443 (2025).

### Fiscal outlook and central government operations (selected)
- Total revenue and grants (percent of GDP): 16.1 (2018), 15.7 (2019), 13.9 (2020), 13.1 (2021, Est. RCF-1), 13.2 (2022 proj.), 14.9 (2023 proj.), 14.2 (2024 proj.), 14.6 (2025 proj.), 14.7 (2026 proj.), 14.8 (2027 proj.), 15.0 (2028 proj.).
- Total revenue (percent of GDP): 15.7 (2018), 15.2 (2019), 13.5 (2020), 12.6 (2021), 12.8 (2022), 14.5 (2023), 13.8 (2024), 14.2 (2025), 14.3 (2026), 14.5 (2027), 14.7 (2028).
- Oil sector revenue (percent of GDP): 2.3 (2018), 2.6 (2019), 1.2 (2020), 1.2 (2021), 1.5 (2022), 1.4 (2023), 1.8 (2024), 1.7 (2025), 1.6 (2026), 1.6 (2027), 1.5 (2028).
- Non-oil sector revenue (percent of GDP): 13.3 (2018), 12.6 (2019), 12.3 (2020), 11.4 (2021), 11.3 (2022), 13.1 (2023), 12.0 (2024), 12.5 (2025), 12.7 (2026), 12.9 (2027), 13.1 (2028).
- Total expenditure (percent of GDP): 18.5 (2018), 19.1 (2019), 18.4 (2020), 17.6 (2021), 17.3 (2022), 17.6 (2023), 17.6 (2024), 17.2 (2025), 16.6 (2026), 16.5 (2027), 16.3 (2028).
- Overall fiscal balance (payment order basis, excluding grants, percent of GDP): -2.9 (2018), -3.9 (2019), -4.9 (2020), -5.0 (2021), -4.6 (2022), -3.1 (2023), -3.7 (2024), -3.1 (2025), -2.3 (2026), -2.0 (2027), -1.7 (2028).
- Covid-19 spending (CFAF billion): 180 (2020), 180 (2021), 100 (2022), 74 (2023).

### Public debt and debt distress assessment
- Stock of public debt (percent of GDP, selected): 39.5 (2018), 41.7 (2019), 45.5 (2020), 43.5 (2021), 43.8 (2022), 43.8 (2023), 43.1 (2024), 41.8 (2025), 40.4 (2026).
- Of which: external debt (percent of GDP): 28.6 (2018), 29.0 (2019), 34.3 (2020), 30.8 (2021), 30.6 (2022), 30.4 (2023), 29.4 (2024), 28.3 (2025), 27.6 (2026).
- Assessment: Cameroon remains at high risk of debt distress, but staff judges debt sustainable contingent on concessional financing, avoiding additional non-concessional borrowing, and implementation of reprofiling measures (e.g., SONARA).

### Balance of payments and external financing
- Current account balance (CFAF billions): -778 (2018), -992 (2019), -1,280 (2020), -1,219 (2021), -1,081 (2022), -805 (2023), -632 (2024), -448 (2025), -380 (2026).
- Trade balance (CFAF billions): -295 (2018), -432 (2019), -765 (2020), -756 (2021), -696 (2022), -616 (2023), -538 (2024), -424 (2025), -425 (2026).
- Exports, goods (CFAF billions): 2,885 (2018), 3,238 (2019), 2,229 (2020), 2,306 (2021), 2,605 (2022), 2,801 (2023), 3,024 (2024), 3,298 (2025), 3,533 (2026).
- Oil and oil products exports (CFAF billions): 1,040 (2018), 1,292 (2019), 654 (2020), 833 (2021), 986 (2022), 1,053 (2023), 1,131 (2024), 1,238 (2025), 1,308 (2026).
- Imports, goods (CFAF billions): -3,180 (2018), -3,670 (2019), -3,994 (2020), -3,062 (2021), -3,301 (2022), -3,417 (2023), -3,562 (2024), -3,722 (2025), -3,958 (2026).
- External financing / financing gaps (selected, CFAF billions): Financing gap 0 (2018), 0 (2019), 625 (2020), 986 (2021), 362 (2022), 601 (2023), 811 (2024), 450 (2025), 0 (2026). Of which: IMF-ECF 90 (2018), 90 (2019), 45 (2020), 0 (2021), 0 (2022), 0 (2023), 0 (2024), 0 (2025), 0 (2026).
- Exceptional financing and prospective items (CFAF billions): IMF: RCF-1 (May) 136; IMF: Prospective RCF-2 90; DSSI 118–123 (values appear as 118 and 123 in different tables); Other Covid-related financing 274 and 130/118 in different entries.

### Monetary and banking (selected)
- Broad money (M2, CFAF billions): 5,235 (2018), 5,550 (2019), 5,451 (2020), 5,596 (2021, Est. RCF-1), 5,917 (2022 proj.), 6,407 (2023 proj.), 6,976 (2024 proj.), 7,754 (2025 proj.), 8,674 (2026 proj.).
- Net foreign assets (CFAF billions): 2,073 (2018), 2,361 (2019), 2,016 (2020), 2,125 (2021), 2,226 (2022), 2,472 (2023), 2,725 (2024), 3,150 (2025), 3,755 (2026).
- Credit to the private sector (CFAF billions): 2,929 (2018), 2,970 (2019), 2,890 (2020), 2,743 (2021), 2,697 (2022), 2,706 (2023), 2,733 (2024), 2,757 (2025), 2,743 (2026).
- Credit to the economy (annual percentage change): 10.5 (2018), 1.1 (2019), -2.0 (2020), -8.8 (2021), -1.5 (2022), 0.3 (2023), 0.9 (2024), 0.8 (2025), -0.5 (2026).
- Broad money (annual percentage change): 13.7 (2018), 6.0 (2019), -1.8 (2020), 0.8 (2021), 5.7 (2022), 8.3 (2023), 8.9 (2024), 11.2 (2025), 11.9 (2026).

### Indicators of capacity to repay the Fund and Fund exposure
- Outstanding Fund credit (SDR millions): 703.8 (2020), 703.8 (2021), 703.8 (2022), 662.4 (2023), 598.9 (2024), 502.3 (2025), 361.6 (2026), 220.8 (2027), 121.4 (2028), 44.2 (2029), 0.0 (2030 onward for listed years).
- Outstanding Fund credit (CFAF billions): 561.3 (2020), 521.8 (2021), 516.6 (2022), 483.8 (2023), 436.7 (2024), 366.0 (2025), 263.4 (2026), 160.9 (2027), 88.5 (2028), 32.2 (2029), 0.0 (2030 onward).
- Outstanding Fund credit (percent of government revenue): 19.0 (2020), 15.5 (2021), 14.1 (2022), 12.3 (2023), 10.2 (2024), 7.9 (2025), 5.4 (2026), 3.0 (2027), 1.5 (2028), 0.5 (2029), 0.0 (2030).
- Outstanding Fund credit (percent of exports of goods and services): 17.3 (2020), 13.8 (2021), 12.3 (2022), 10.8 (2023), 9.0 (2024), 7.0 (2025), 4.8 (2026), 2.8 (2027), 1.4 (2028), 0.5 (2029), 0.0 (2030).
- Outstanding Fund credit (percent of quota): 255.0 (2020), 255.0 (2021), 255.0 (2022), 240.0 (2023), 217.0 (2024), 182.0 (2025), 131.0 (2026), 80.0 (2027), 44.0 (2028), 16.0 (2029), 0.0 (2030).
- Net use of Fund credit (SDR millions): 331.2 (disbursements recorded), net use entries show 331.2 followed by negative repayments in later years: -41.4, -63.5, -96.6, -140.8, -140.8, -99.4, -77.3, -44.2.
- Quota (in SDRs): 276,000,000.
- Memorandum: Nominal GDP (CFAF billions) projections include 22,399 (2020), 23,687 (2021), 25,134 (2022), 26,806 (2023), 28,791 (2024), 30,922 (2025), 33,110 (2026), 35,697 (2027), 38,388 (2028), 41,220 (2029).

*Source: Cameroonian authorities; and IMF staff estimates and projections (from the provided IMF staff document).*

### Annex I. Debt Sustainability Analysis

### Annex I. Debt Sustainability Analysis

### Risk rating and overall assessment
- Risk of external debt distress: High
- Overall risk of debt distress: High
- Granularity in the risk rating: Sustainable
- Application of judgment: No
- Mechanical risk rating under the external DSA: High
- Mechanical risk rating under the public DSA: High
- Realism tools flagged: None
- Conclusion: Cameroon’s debt is assessed to be sustainable, albeit at high risk of external and overall public distress. The rating is highly vulnerable to risks including unsuccessful completion of SONARA’s debt restructuring, more protracted and severe disruptions due to the pandemic, and socio-political tensions.

### Macroeconomic projections and outlook
- The current DSA reflects a further deteriorated outlook due to COVID-19, including lower growth, wider fiscal deficit and deterioration in external balances.
- The shock is still expected to be temporary and a gradual recovery is forecast starting from 2021.
- Real GDP: expected decline by an additional 1.6 percentage points relative to RCF-1, reaching -2.8 percent in 2020.
- Growth in 2021: revised down to 3.4 percent (from 4.5 percent).
- Current account deficit: expected to widen to 6 percent of GDP in 2020, 0.3 percentage point larger than projected at the time of the RCF-1 (including official grants).
- Overall fiscal deficit (no corrective measures): expected to reach CFAF 1,315 billion or 5.9 percent of GDP, 0.9 percentage point higher than RCF-1.
- After spending reprioritization: the overall deficit is expected to remain broadly unchanged compared to the one projected at the time of RCF-1.
- Updated 2019 figures result in revisions to debt stocks: total public sector debt revised to 41.7 percent of GDP (from 40.9 percent in RCF-1) and public and publicly guaranteed external debt revised to 29.0 percent of GDP (from 30.4 percent in RCF-1).

### Financing strategy and key assumptions
- The ECF arrangement expired as of end-September 2020 without completing the final 6th review and subsequent disbursement; financing under the ECF was reduced by CFAF 45 billion (20 percent of quota or SDR 55.2 million).
- Financing under the RCF was increased by CFAF 90 billion to 226 billion.
- Financing gaps over the medium-term were incorporated based on the assumption that 50 percent of the gaps would be financed locally.
- Debt service suspension under the DSSI: Cameroon requested suspension and received positive responses from nine official bilateral creditors to suspend debt service totaling CFAF 123.5 billion (or 0.6 percent of GDP).
- SONARA debt treatment:
  - SONARA’s debt amounting to CFAF 731 billion as of end-July 2020.
  - DSA reflects rescheduled debt service projections in line with the restructuring agreement reached in September 2020 with local banks, representing about a third of SONARA’s debt.
  - Short-term debt from external oil traders is reclassified as arrears (0.7 percent of GDP as of end-2020) and is no longer expected to be rolled over under SONARA’s new business plan to operate solely as an importer.
  - Partial clearance of these arrears including SONARA’s asset sales and conversion of debt held by SNH into SONARA shares is reflected in the baseline.
  - Agreement with local banks includes access to trade financing, expected to replace financing from external suppliers over the projection period.
- SONARA operational measures: DSA incorporates SONARA’s improved profitability supported by the new oil price structure for refined oil products including levy of CFAF 47.88 per liter, which has been in effect since March 2020.
- Medium-term projections benchmarked against higher exports due to stronger oil and gas exports driven by additional production from explorations.
- Ongoing discussions with other creditors including oil traders; restructuring of that debt is not assumed in the baseline given uncertainty regarding final terms.

### Debt dynamics, indicators, and breaches
- Two external debt service indicators breached their thresholds under the baseline: debt-service-to-exports and debt-service-to-revenue.
- One-off breach occurred for the PV of debt-to-exports ratio in 2020.
- SONARA’s accumulated external arrears following the 2019 refinery fire are not government guaranteed and are below the LIC DSF’s de minimis threshold (1 percent of GDP).
- Projection trajectory:
  - Debt service indicators are projected to continue their downward trajectory after the temporary increase due to the maturing Eurobond (2023-2025), assuming progress on SONARA reprofiling and viability.
  - Debt stock indicators remain below thresholds after a one-off breach in 2020.
  - Thanks to stronger exports from higher oil and gas exports, debt dynamics are expected to improve in the medium and long term.

### Risks, vulnerabilities, and contingent actions
- Major downside risks:
  - Unsuccessful completion of SONARA’s debt restructuring.
  - More protracted and severe disruptions due to the COVID-19 pandemic.
  - Socio-political tensions.
- If downside risks materialize, authorities would likely need to identify additional measures to maintain debt sustainability.

### Key statistics and figures (as presented)
- Risk of external debt distress: High
- Overall risk of debt distress: High
- Composite Indicator score (contextual): 2.76 (based on the April WEO 2020 and the World Bank’s 2019 CPIA) — implies medium debt-carrying capacity.
- Real GDP 2020 projection: -2.8 percent
- Additional decline relative to RCF-1: 1.6 percentage points
- Growth 2021: 3.4 percent (revised from 4.5 percent)
- Current account deficit 2020: 6 percent of GDP
- Increase vs RCF-1: 0.3 percentage point
- Overall fiscal deficit (no corrective measures): CFAF 1,315 billion or 5.9 percent of GDP
- Increase vs RCF-1: 0.9 percentage point
- Total public sector debt (revised): 41.7 percent of GDP (from 40.9 percent)
- Public and publicly guaranteed external debt (revised): 29.0 percent of GDP (from 30.4 percent)
- ECF financing reduction: CFAF 45 billion (20 percent of quota or SDR 55.2 million)
- RCF financing increase: CFAF 90 billion to 226 billion
- Assumed locally financed share of financing gaps: 50 percent
- DSSI relief from nine official bilateral creditors: CFAF 123.5 billion (or 0.6 percent of GDP)
- SONARA debt (end-July 2020): CFAF 731 billion
- SONARA arrears reclassified: 0.7 percent of GDP as of end-2020
- Levy on refined oil products: CFAF 47.88 per liter (in effect since March 2020)

*Annex I. Debt Sustainability Analysis*

### 4.      This rating is highly vulnerable to a range of risks. Key downside risks include a more

### 4.      This rating is highly vulnerable to a range of risks

### Key risks and policy implications
- Key downside risks:
  - A more protracted and severe COVID-19 shock.
  - Less-than-expected oil and gas exports due to slower recovery in trading partners.
  - Socio-political tensions.
  - Realization of contingent liabilities, including from unsuccessful or incomplete restructuring on SONARA’s debt.
  - Allowing for new non-concessional borrowing would further weaken debt sustainability and undermine efforts to secure international community support in an environment in which G20 agreed on debt service suspension on bilateral government loans for low-income countries.
- Upside possibility:
  - A possible extension of the G20-DSSI could reduce Cameroon’s debt service burden in the near-term and provide additional resources to bolster crisis mitigation efforts.
- Policy recommendation when downside risks materialize:
  - The authorities would likely need to identify additional measures to ensure that debt is sustainable.

### External Debt Sustainability — Baseline scenario (selected indicators)
- External debt (nominal) (in percent of GDP):
  - 2017: 27.7
  - 2018: 30.4
  - 2019: 30.9
  - 2020: 32.7
  - 2021: 32.5
  - 2022: 32.3
  - 2023: 31.3
  - 2024: 30.2
  - 2025: 29.5
  - 2030: 26.6
  - 2040: 18.4
- Of which: public and publicly guaranteed (PPG) (in percent of GDP):
  - 2017: 25.1
  - 2018: 28.6
  - 2019: 29.0
  - 2020: 30.8
  - 2021: 30.6
  - 2022: 30.4
  - 2023: 29.4
  - 2024: 28.3
  - 2025: 27.6
  - 2030: 25.1
  - 2040: 17.5
- Change in external debt:
  - 2017: 2.3
  - 2018: 2.7
  - 2019: 0.4
  - 2020: 1.9
  - 2021: -0.2
  - 2022: -0.2
  - 2023: -1.0
  - 2024: -1.1
  - 2025: -0.7
  - 2030: -0.7
  - 2040: -0.6
- Identified net debt-creating flows:
  - 2017: -1.3
  - 2018: -0.7
  - 2019: 1.9
  - 2020: 4.7
  - 2021: 1.4
  - 2022: 0.0
  - 2023: -1.0
  - 2024: -1.8
  - 2025: -2.1
  - 2030: -3.4
  - 2040: -5.0
- Non-interest current account deficit (in percent of GDP):
  - 2017: 1.9
  - 2018: 2.5
  - 2019: 3.4
  - 2020: 4.4
  - 2021: 3.6
  - 2022: 2.2
  - 2023: 1.5
  - 2024: 0.7
  - 2025: 0.5
  - 2030: -1.0
  - 2040: -2.9
- Exports (in percent of GDP):
  - 2017: 18.7
  - 2018: 18.9
  - 2019: 19.9
  - 2020: 14.5
  - 2021: 16.0
  - 2022: 16.6
  - 2023: 16.8
  - 2024: 16.9
  - 2025: 16.8
  - 2030: 15.5
  - 2040: 13.5
- Imports (in percent of GDP):
  - 2017: 20.6
  - 2018: 21.8
  - 2019: 23.4
  - 2020: 19.5
  - 2021: 20.4
  - 2022: 19.9
  - 2023: 19.3
  - 2024: 18.8
  - 2025: 18.5
  - 2030: 15.5
  - 2040: 11.2
- Net FDI (negative = inflow) (in percent of GDP):
  - 2017: -2.3
  - 2018: -1.7
  - 2019: -2.3
  - 2020: -1.6
  - 2021: -2.2
  - 2022: -1.9
  - 2023: -1.9
  - 2024: -1.8
  - 2025: -1.8
  - 2030: -1.7
  - 2040: -1.6
- Endogenous debt dynamics (contribution, in percent of GDP):
  - 2017: -1.0
  - 2018: -1.5
  - 2019: 0.8
  - 2020: 1.9
  - 2021: 0.0
  - 2022: -0.3
  - 2023: -0.6
  - 2024: -0.7
  - 2025: -0.7
  - 2030: -0.7
  - 2040: -0.5
- Residual (includes exceptional financing, changes in gross foreign assets, valuation adjustments) (in percent of GDP):
  - 2017: 3.6
  - 2018: 3.5
  - 2019: -1.5
  - 2020: -2.8
  - 2021: -1.7
  - 2022: -0.2
  - 2023: 0.0
  - 2024: 0.7
  - 2025: 1.4
  - 2030: 2.7
  - 2040: 4.4
- Sustainability indicators (selected):
  - PV of PPG external debt-to-GDP ratio (selected years):
    - 2020: 26.4
    - 2021: 28.7
    - 2022: 26.6
    - 2023: 25.9
    - 2024: 24.6
    - 2025: 23.3
    - 2030: 20.4
    - 2040: 14.4
  - PV of PPG external debt-to-exports ratio (selected years):
    - 2020: 132.4
    - 2021: 198.0
    - 2022: 166.5
    - 2023: 155.5
    - 2024: 146.5
    - 2025: 138.0
    - 2030: 131.3
    - 2040: 106.7
  - PPG debt service-to-exports ratio (selected years):
    - 2017: 14.1
    - 2018: 17.3
    - 2019: 19.3
    - 2020: 16.4
    - 2021: 15.3
    - 2022: 15.5
    - 2023: 18.4
    - 2024: 17.1
    - 2025: 14.7
    - 2030: 11.9
    - 2040: 10.7
  - PPG debt service-to-revenue ratio (selected years):
    - 2017: 15.6
    - 2018: 18.5
    - 2019: 22.4
    - 2020: 17.0
    - 2021: 15.2
    - 2022: 15.5
    - 2023: 18.6
    - 2024: 17.1
    - 2025: 14.6
    - 2030: 11.2
    - 2040: 9.7
- Gross external financing need (Billion of U.S. dollars):
  - 2017: 1.5
  - 2018: 2.6
  - 2019: 2.9
  - 2020: 2.2
  - 2021: 1.9
  - 2022: 1.6
  - 2023: 1.6
  - 2024: 1.2
  - 2025: 0.9
  - 2030: -0.4
  - 2040: -4.9

### Public Sector Debt — Baseline scenario (selected indicators)
- Public sector debt (in percent of GDP):
  - 2017: 37.7
  - 2018: 39.5
  - 2019: 41.7
  - 2020: 43.5
  - 2021: 43.8
  - 2022: 43.8
  - 2023: 43.1
  - 2024: 41.8
  - 2025: 40.4
  - 2030: 35.8
  - 2040: 31.3
- Of which: external debt (in percent of GDP) (repeats external share under public):
  - 2017: 25.1
  - 2018: 28.6
  - 2019: 29.0
  - 2020: 30.8
  - 2021: 30.6
  - 2022: 30.4
  - 2023: 29.4
  - 2024: 28.3
  - 2025: 27.6
  - 2030: 25.1
  - 2040: 17.5
- Change in public sector debt:
  - 2017: 4.4
  - 2018: 1.8
  - 2019: 2.2
  - 2020: 1.8
  - 2021: 0.3
  - 2022: 0.0
  - 2023: -0.8
  - 2024: -1.2
  - 2025: -1.4
  - 2030: -0.7
  - 2040: -0.4
- Identified debt-creating flows:
  - 2017: 0.9
  - 2018: -0.2
  - 2019: 2.0
  - 2020: 4.7
  - 2021: 1.1
  - 2022: 0.1
  - 2023: -0.8
  - 2024: -1.2
  - 2025: -1.4
  - 2030: -0.8
  - 2040: -0.4
- Primary deficit (in percent of GDP):
  - 2017: 4.2
  - 2018: 1.6
  - 2019: 2.5
  - 2020: 2.9
  - 2021: 2.3
  - 2022: 1.5
  - 2023: 0.9
  - 2024: 0.7
  - 2025: 0.4
  - 2030: 0.8
  - 2040: 0.8
- Revenue and grants (in percent of GDP):
  - 2017: 17.2
  - 2018: 18.1
  - 2019: 17.8
  - 2020: 14.4
  - 2021: 16.5
  - 2022: 17.0
  - 2023: 17.0
  - 2024: 17.2
  - 2025: 17.3
  - 2030: 16.6
  - 2040: 15.1
- Automatic debt dynamics — contribution from interest rate/growth differential (in percent of GDP):
  - 2017: -3.3
  - 2018: -0.4
  - 2019: -0.8
  - 2020: 1.8
  - 2021: -1.1
  - 2022: -1.4
  - 2023: -1.7
  - 2024: -1.9
  - 2025: -1.9
  - 2030: -1.6
  - 2040: -1.2
- Sustainability indicators (selected):
  - PV of public debt-to-GDP ratio (selected years):
    - 2020: 39.2
    - 2021: 39.9
    - 2022: 39.7
    - 2023: 39.2
    - 2024: 38.2
    - 2025: 36.9
    - 2030: 35.4
    - 2040: 31.0
  - PV of public debt-to-revenue and grants ratio (selected years):
    - 2020: 220.4
    - 2021: 276.5
    - 2022: 240.4
    - 2023: 230.3
    - 2024: 224.5
    - 2025: 214.1
    - 2030: 204.9
    - 2040: 187.4
  - Debt service-to-revenue and grants ratio 3/:
    - 2017: 15.3
    - 2018: 18.1
    - 2019: 21.6
    - 2020: 51.6
    - 2021: 44.6
    - 2022: 54.0
    - 2023: 59.5
    - 2024: 60.0
    - 2025: 58.6
    - 2030: 42.6
    - 2040: 46.4
  - Gross financing need 4/ (in percent of GDP):
    - 2017: 8.0
    - 2018: 5.1
    - 2019: 8.4
    - 2020: 10.4
    - 2021: 9.6
    - 2022: 10.7
    - 2023: 11.0
    - 2024: 11.0
    - 2025: 10.5
    - 2030: 7.9
    - 2040: 7.8

### Key macroeconomic and fiscal assumptions (selected)
- Real GDP growth (in percent):
  - 2017: 3.5
  - 2018: 4.1
  - 2019: 3.9
  - 2020: -2.8
  - 2021: 3.4
  - 2022: 4.3
  - 2023: 4.8
  - 2024: 5.4
  - 2025: 5.4
  - 2030: 5.5
  - 2040: 5.6
  - Average (projection): 4.5
  - Another listed projection: 4.4
- GDP deflator in US dollar terms (change in percent):
  - 2017: 3.6
  - 2018: 6.3
  - 2019: -3.3
  - 2020: 3.3
  - 2021: 10.0
  - 2022: 2.7
  - 2023: 2.3
  - 2024: 2.1
  - 2025: 2.0
  - 2030: 1.8
  - 2040: 1.8
  - Projection entries: -0.2 and 2.8 also appear in the table.
- Effective interest rate (percent) 4/:
  - 2017: 3.2
  - 2018: 4.5
  - 2019: 3.2
  - 2020: 3.5
  - 2021: 3.5
  - 2022: 3.3
  - 2023: 3.0
  - 2024: 2.9
  - 2025: 2.8
  - 2030: 2.6
  - 2040: 2.6
  - Projections row entries: 3.3 and 2.9 also appear.

### Stress tests, scenarios, and market-financing risks (summary)
- Figures and tables present alternative scenarios and tailored stress tests for 2020–2030, including:
  - Most extreme shock scenarios (e.g., combined contingent liabilities) push PV of debt-to-revenue and debt service-to-revenue ratios substantially above baseline paths.
  - Tailored tests include combined contingent liabilities, commodity price shocks, and market financing shocks.
- Market-financing risk indicators:
  - Benchmarks and indicators reported include Gross Financing Needs (GFN) and EMBI spreads with stated thresholds; figures show potential heightened liquidity needs and breach assessments (e.g., "Breach of benchmark Yes/No" and values such as EMBI = 570 referenced in the figure captions).
  - Charts indicate debt service-to-revenue ratio, PV of debt-to-exports ratio, PV of debt-to-GDP ratio, and debt service-to-exports ratio across 2020–2030 under baseline and market-financing scenarios.

### Sensitivity analysis highlights (selected)
- Table 3 and Table 4 provide sensitivity analyses for key indicators of public and publicly guaranteed external debt and public debt for 2020–2030 under:
  - Alternative scenarios (e.g., historical averages).
  - Bound tests (B1: Real GDP growth; B2: Primary balance; B3: Exports; B4: Other flows; B5: Depreciation; B6: Combination).
  - Tailored tests (C1: Combined contingent liabilities; C3: Commodity price; C4: Market financing).
- A bold value in the tables indicates a breach of the relevant threshold or benchmark.

*Sources: Country authorities; and staff estimates and projections.*

### Appendix I. Letter of Intent

### 1cmrea2020003 - Appendix I. Letter of Intent

### Background and economic shock
- Date and place: Yaoundé, October 5, 2020 (original letter); Revised Letter of Intent dated October 19, 2020; Supplement dated October 20, 2020.
- Context: COVID-19 pandemic caused simultaneous supply and demand shocks, amplified by:
  - breakdown of supply and logistics chains;
  - reduction of domestic and international demand due to containment measures by main trading partners (China and Europe);
  - drop in private transfers from abroad (including remittances);
  - closure of land and air borders leading to event cancellations and reduced tourism;
  - pre-existing shocks: security crisis in North-West and South-West regions, fight against Boko Haram in extreme north, and suspension of SONARA's production since the end-May 2019 fire.

### Macroeconomic impact and projections
- Real GDP growth:
  - 3.9 percent in 2019;
  - projected decline to -2.8 percent in 2020;
  - compared with -1.2 percent projected at the time of the RCF approved in May 2020.
- Government revenue: projected to drop by 0.7 percentage points of GDP more than previously estimated.
- External sector:
  - current account deficit expected to widen by 0.3 percentage points of GDP in 2020 from previous RCF projections;
  - external financing gap estimated at 4.1 percent of GDP in 2020.
- Other dynamics: increase in non-performing loans led to bank credit retrenchment and contributed to slowing economic growth.

### Fiscal and policy response
- Amended 2020 Budget Law adopted by Parliament in June 2020:
  - Takes into account COVID-19 impact on government revenue;
  - Reprioritizes current and capital spending by reducing non-essential items;
  - Includes funding for emergency health response and support to most affected businesses and households;
  - Keeps the overall fiscal balance in percent of GDP at the level set in the May 2020 RCF (5 percent).
- External and donor financing sources noted: World Bank, African Development Bank (AfDB), European Union (EU), French Development Agency (AFD), and the G-20 debt service suspension initiative (DSSI).
- Three-year resilience and socio-economic support strategy for 2020-22:
  - Estimated cost: US$825 million (2 percent of GDP);
  - Of which about US$320 million for 2020.
  - Five pillars: (i) health response; (ii) mitigation of economic and financial repercussions; (iii) supply of essential products; (iv) Research and innovation for endogenous solutions; (v) social resilience for vulnerable people and households.
- Special allocation account established: “Special Fund for National Solidarity in the Fight Against the Coronavirus and its Socio-Economic Impact” for accounting, monitoring, and transparent management consistent with laws of 11 July 2018 and Code of transparency.

### Request to the IMF and program orientation
- Request for additional emergency financing under the Rapid Credit Facility (RCF):
  - Amount requested: SDR110.4 million, equivalent to 40 percent of our quota.
  - Purpose: to ease pressure on fiscal revenues and official foreign reserves, and address urgent fiscal and balance of payments needs.
- Longer-term intention: discuss terms of a new arrangement (second generation program) to achieve higher and more inclusive growth, aligned with Central Africa Heads of State resolution and Economic and Financial Reforms Program of CEMAC.

### Commitments on use of funds, transparency, and debt management
- Firm commitment to effective and transparent use of public funds; ensure RCF disbursement and DSSI resources are efficiently spent on addressing the pandemic.
- Specific commitments in the context of COVID-19 related contracts (preserved wording and ordering):
  - (i) issuing before the RCF-2 Board date a circular implementing Article 90 of the Public Procurement Code to modify the standard procurement forms, in particular with regard to documents providing information on the identification of the beneficial ownership of companies receiving procurement contracts;
  - (ii) publishing after the RCF-2 Board date on the website of the Public Procurement Regulatory Agency and within 30 days of the award on any contract, the results of public procurement awarded by the government and the beneficial ownership of companies receiving procurement contracts;
  - (iii) publishing before the RCF-2 Board date, the backlog of the results of all COVID-19 related contracts awarded since May 4, 2020, including the beneficial ownership;
  - (iv) issuing a semi-annual report on COVID-19 related spending;
  - (v) commissioning an independent audit of this spending at the end of the 2020 fiscal year and publishing the results.
- Debt management: risk of debt distress remains high; debt management will be strengthened and external borrowing strategy will continue to rely on concessional loans, in line with the G-20 DSSI commitment.

### Governance and cooperation with the IMF
- Cameroon government will:
  - maintain constructive dialogue with the IMF;
  - provide Fund staff with all data and information necessary to evaluate policies, including those under RCF access;
  - cooperate with the IMF on any updated safeguards assessment of the BEAC to be carried out by the IMF;
  - not introduce or intensify exchange and trade restrictions or other measures that would compound balance of payments difficulties;
  - authorize the IMF to publish this Letter and the staff report for the request for disbursement under the RCF.

### Prior actions for RCF-2 (as presented)
- To issue before the RCF-2 Board date a circular implementing Article 90 of the Public Procurement Code, to modify the standard procurement forms in particular with regard to documents providing information on the identification of the beneficial ownership of companies receiving procurement contracts related to COVID-19.
- To publish before the RCF-2 Board date the backlog of the results of all COVID-19 related contracts awarded since May 4, 2020, including the beneficial ownership.

*Appendix I. Letter of Intent (Yaoundé, October 5, 2020); Revised Letter of Intent (October 19, 2020); Supplement and staff statement (October 20, 2020).*

### 1.      Prior actions have been met. Prior actions on issuing a circular allowing the publication

### 1cmrea2020003 - 1.      Prior actions have been met. Prior actions on issuing a circular allowing the publication

### Prior actions and transparency measures
- Prior actions on issuing a circular allowing the publication of the beneficial ownership of companies receiving COVID-19 procurement related contracts; and publishing the backlog of the results of all COVID-19 related contracts awarded since May 4, 2020, including the beneficial ownership were completed.
- The circular has been signed on October 19, 2020.
- The circular has been published (both French and English versions) on the website of the Public Procurement Regulatory Agency (www.armp.com).
- As of October 20, 2020, the authorities have published on the website of the Public Procurement Regulatory Agency (www.armp.com), lists of a total of 267 contracts awarded by the Ministries of Health, Agriculture and Rural Development.
  - These lists include the procurements’ objects, amounts, beneficiaries and beneficial owners, type of contract, and status.
  - The contracts amount in total to CFAF 51.6 billion, 45 percent of the Special COVID-19 Fund (net of VAT and domestic arrears reimbursements).
- Based on the authorities’ commitment to publish all the procurements’ results, including their beneficial owners, ongoing tenders will be published once awarded.
- An independent audit of this spending will be commissioned at the end of the 2020 fiscal year and its results published.

### Update on the Debt Service Suspension Initiative (DSSI)
- As of October 20, 2020, all official bilateral creditors have agreed in principle to debt service suspension under the DSSI for the period April 30th to end-December 2020 on their loans not originating from the commercial windows of their lending institutions.
- The debt service relief expected by Cameroon amounts now to about US$ 223.9 million compared to US$ 222.3 million in the issued Staff Report.

### Request for further IMF support and authorities’ commitment
- The authorities are requesting another disbursement under the RCF (RCF-2) amounting to 40 percent of quota to help close the additional financing gap.
- Both RCF disbursements will cover less than 30% of total financing needs and catalyze assistance from other partners.
- The authorities are committed to using the Covid-19-related resources in a proper manner, notably through increased monitoring, accountability and transparency safeguards.
- The authorities intend to request a successor medium-term arrangement with the Fund once the impact of the crisis subsides.

### Recent economic developments and outlook
- Since May, the authorities have eased some containment measures while raising public awareness of the virus, increasing testing, and enhancing capacity of health centers. Social protection spending also has been maintained.
- An amended finance law was enacted to accommodate more severe developments and the need for increased emergency and other social spending.
- A Covid-19 special account has been created and funded through the budget and resources freed from participation in the G-20’s debt service suspension initiative (DSSI).
- A three-year preparedness and response plan was adopted to prevent and treat infections; mitigate economic and financial fallout; and enhance social resilience through assistance to vulnerable groups.
- Progress on SONARA:
  - Good progress has been made with the company’s bank debt restructuring, with an agreement reached with all creditor banks which owe a third of its total debt.
  - Discussions with non-bank creditors are being pursued.
- Macroeconomic projections and shocks:
  - Real GDP is now projected to drop by 2.8 percent this year—against an initial projection of    -1.2 percent at the time of RCF-1—and to grow by 3.4 percent in 2021 amid a gradual recovery in trading partners, prolonged effects of shocks and continued containment measures.
  - The current account deficit is expected to be larger than initially anticipated, on the back of reduced oil and non-oil exports.
  - The fiscal deficit is expected to increase further mainly due to lower revenues.
  - These projections are predicated on a favorable evolution of the pandemic; a prolonged and/or more severe pandemic would lead to even larger financing needs.
- The crisis effects are compounded by:
  - Security crisis in the North-West and South-West regions.
  - Instability caused by the terrorist group of Boko Haram in the extreme north region.
  - Interruption of SONARA’s production activities in mid-2019.

### Policy priorities and measures
- Health and social protection remain priority areas, with increased health and social protection spending and policy support to contain humanitarian, economic and financial effects.
- Fiscal policy measures:
  - Temporary tax accommodation to businesses through tax suspensions and deferred payments.
  - Purchases of non-priority goods and services and capital spending have been delayed or cancelled while social spending for the most vulnerable is preserved.
  - Assistance to households strengthened through increased family allowance, augmentation of some pensions; and alleviated social security contributions.
- Transparency and controls:
  - Continued strict application of budgetary procedures and controls required by the Cameroonian Laws for received financial support.
  - Issuance of semi-annual report on Covid-19 spending.
  - Commission of an independent audit of this spending at end-FY2020 and publication of its results.
  - Publishing results of public procurement and the beneficial ownership of companies receiving Covid-19 procurement contracts.
  - The authorities have met two key prior actions for disbursement under RCF-2, related to public procurement and the pipeline of all Covid-19 related contracts respectively.
  - Continued compliance with the transparency and debt limit requirements under the DSSI.
- Monetary and financial sector measures:
  - Monetary policy easing introduced in March and June 2020 by the regional central bank (BEAC) is maintained, with reduced policy rates, liquidity injection and the asset purchase program.
  - Banks can benefit from long-term refinancing operations conditional to maintaining their levels of credit to the economy.
  - COBAC allows banks to use some of their capital buffer to absorb losses stemming from the effects of the pandemic while limiting dividend distribution.
- Debt management:
  - Authorities are committed to a prudent borrowing strategy relying mainly on concessional loans.
  - Debt management will continue to be strengthened.
  - Cameroon’s participation in the DSSI provides payment relief for the benefit of crisis-related emergency spending.
  - Authorities look forward to prompt conclusion of bilateral agreements with official creditors to ensure effective debt rescheduling.

### Conclusion and next steps
- Due to the severity of the combined effects of multiple shocks and the difficulty to implement the rest of their medium-term program in such context, the Cameroonian authorities have decided to let the ECF arrangement expire at the end of September 2020.
- The authorities continue to maintain a constructive and candid dialogue with the Fund.
- As the crisis wanes, fiscal consolidation will resume, with the aim to preserve fiscal and debt sustainability.
- The authorities intend to negotiate a successor arrangement with the Fund to support their reform agenda towards robust, sustained and inclusive growth, with emphasis on economic diversification, in line with the resolution of CEMAC Heads of State in favor of second-generation programs.
- Cameroon faces additional financing gaps stemming from the prolonged pandemic and the more severe impact of containment measures and seeks the support of the Executive Board to meet urgent budgetary financing needs.

*Statement by Mr. Raghani, Executive Director for Cameroon and Mr. N'Sonde, Senior Advisor to the Executive Director October 21, 2020*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1cmrea2020003.pdf_