## 1cmrea2021001 ## Source details **Canonical URL:** [1cmrea2021001](https://www.imf.org/-/media/files/publications/cr/2021/english/1cmrea2021001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1cmrea2021001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1cmrea2021001.pdf.json) --- ### Program overview and financing - New three-year arrangements under the ECF and the EFF of a combined SDR 483 million (175 percent of quota), split as SDR 161 million (58.3 percent of quota) under ECF and SDR 322 million (116.7 percent of quota), with semi-annual reviews. - Approval enables immediate disbursement of about US$ 177.2 million, usable for budget support. - IMF emergency support under the Rapid Credit Facility (RCF) totaled SDR 276 million (about US$ 382 million or 100 percent of Cameroon’s quota) in 2020. - Estimated financing gap of about US$1.9 billion or 4.2 percent of 2021 GDP over 2021-2024; 37 percent of gap could be financed by the proposed arrangements. - Financing gap (before budget support and IMF financing) projected to decline from US$0.8 billion (1.8 percent of GDP) in 2021 to US$0.2 billion (0.3 percent of GDP) in 2024. - IMF arrangement design: - PRGT cumulative access peak: 293.3 percent of quota in December 2022. - Combined GRA and PRGT exposure peak: 403.5 percent of quota in June 2024. - Front-loaded disbursements: 45 percent of quota upon approval and 30 percent upon completion of 1st review (75 percent of quota in 2021), then 20 percent of quota for each subsequent review. - Program judged to be fully financed with firm commitments for next 12 months through July 2022 and good prospects thereafter. - Assessment: Cameroon at high risk of debt distress but debt “remains sustainable” and capacity to repay the Fund is adequate. ### Recent economic developments (2020) and near-term outlook - 2020 outcomes: - Real GDP: decline of 1.5 percent in 2020 (IMF staff estimate). - Sector performance: agriculture and construction strong; non-oil trade, transport, tourism constrained. - Current account deficit: narrowed to 3.7 percent of GDP in 2020. - Inflation: consumer prices average 2.4 percent in 2020 (remained below 3.0 percent). - Fiscal deficit (payment order basis): 3.6 percent of GDP in 2020. - Total expenditures: 17 percent of GDP in 2020; capital spending reduced by 27.2 percent. - Credit/reserves: credit to economy accelerated slightly; NFA dropped by CFAF 12 billion (BEAC drop of CFAF 313 billion mostly offset by commercial banks increase of CFAF 301 billion). - IMF support filled 38.8 percent of external financing gap in 2020 (RCF disbursements totalling SDR 276 million). - Program baseline growth projections: - GDP growth: 3.6 percent in 2021 and 4.6 percent in 2022. - Inflation: expected to remain below 3 percent. - Public and external debt to GDP: projected to gradually decline after 2021. - Outlook drivers: SND30 implementation, large infrastructure completion, recovery in trading partners, natural gas production, PREF-CEMAC. - SDR allocation: Cameroon expected to receive an SDR allocation of about $370 million (0.87 percent of GDP) in August 2021; not included in projections; use to be discussed during first review. ### Fiscal policy, consolidation path, and contingency measures - Program aim: gradual return to fiscal consolidation consistent with CEMAC convergence criteria; overall fiscal deficit reduction of 1.9 percentage points of GDP over program. - Fiscal anchors: - Non-oil primary balance (cash basis) to decrease to 2.9 percent of GDP in 2024 from 4.6 percent of GDP in 2020. - 2021 RBL adjustments vs initial budget: - Overall cash deficit increased by 0.3 percentage points to 3.4 percent of GDP in 2021. - Non-oil primary deficit (cash basis) of 4.6 percent of GDP in 2021. - Revenue expected to increase by 0.8 percentage points to 14.3 percent of GDP (oil +0.6 percentage points to 2.2 percent; non-oil +0.2 percentage points to 12.1 percent). - Spending expected to increase by 0.8 percentage points to 17.6 percent of GDP (vaccination 0.3 percent of GDP; higher COVID-19 spending 0.1 percent; reevaluation of fuel subsidies 0.4 percent). - Revenue measures and targets: - Revenue measures (streamlining tax exemptions, recovering arrears) projected to generate additional non-oil revenues of 2.6 percentage points of GDP by 2024. - Non-oil revenue expected to increase by about 0.7 percent of GDP per year over 2021-24 or about 2 ½ -3 percent of GDP through tax measures over program. - Contingency measures under downside scenarios: - Improve collection of tax arrears; streamline tax exemptions; rationalize expenditures. - Authorities committed to consider a new revised Budget Law as needed. ### Public Financial Management (PFM) actions and weaknesses - Progress: improved budget preparation and quality of expenditure; medium-term budget framework; transposed CEMAC Directives; promulgated PFM code of transparency and good governance. - Remaining weaknesses: - Budget execution does not guarantee full compliance with parliamentary authorization; underestimation of spending needs; significant use of exceptional procedures. - SNH direct interventions amounting to CFAF 194 billion (payments without prior authorization, excluding debt service). - Required actions: - Monthly report on budget execution and credible monthly cash-flow plans on commitment basis backed by procurement plans. - Inventory and closure of government bank accounts outside the TSA. - Limit exceptional procedures by setting an indicative ceiling on SNH direct interventions. - Complete audits of domestic arrears and adopt clearance strategy. ### Debt levels, DSA results, Eurobond, and debt management - Public debt and composition (selected): - Stock of public debt (percent of GDP): 42.3 (2019); 45.8 (2020); 46.2 (2021); 45.6 (2022); 44.4 (2023); 43.1 (2024); 41.0 (2025); 39.2 (2026). - External debt (percent of GDP): 29.9 (2019); 31.1 (2020); 32.3 (2021); 31.8 (2022); 31.3 (2023); 30.6 (2024); 29.9 (2025); 29.3 (2026). - PPG debt end-2020: $US 1,813 million; external $US 1,249 million (68.9 percent of total debt). - DSA assessment: - Risk of external debt distress: High. - Overall risk of public debt distress: High. - CI score: 2.65 (April 2021 WEO and 2019 World Bank CPIA data), signaling weak debt-carrying capacity. - Staff view: despite high risk classification, debt remains sustainable given improved overall debt profile versus previous DSA. - Eurobond operation: - New Eurobond issued July 1: CFAF 450 billion; maturity 12 years; repayments scheduled on three equal tranches starting from 2030; coupon interest rate 5.95 percent. - Proceeds used for liability management including partial buy-back of 2015 Eurobond (CFAF 328.3 billion) with net financing cost ~CFAF 83.5 billion; CFAF 37.5 billion to finance projects (escrow account under TSA to be created). - SENDs (committed but undisbursed loans): - Stock of SENDs end-2020: CFAF 3,147 billion (13.7 percent of GDP). - MTDS assumes full execution of SENDs by 2025 but lacks project-level assessment; authorities committed to reassess and cancel SENDs related to old/non-performing projects. - Non-concessional borrowing limits: - Non-concessional borrowing for 2021 capped at CFAF 300 billion (with use restricted to priority TMU-listed projects); adjuster to permit up to CFAF 300 billion for high priority projects that cannot be financed concessionally. - Text also references alternative cap of CFAF 230 billion in related sections tied to project lists and adjustments. ### SONARA and SOE fiscal risks - SONARA restructuring: - Adoption of new price structure including levy on imported refined products to secure repayment of SONARA’s debt. - 2020 agreement with creditor banks representing about one-third of SONARA’s total debt; debt to SNH canceled; negotiations with oil traders ongoing. - Immediate actions include pari-passu treatment of creditors, revising bank restructuring agreements, temporary exemptions on prudential ratio, sale of OTZ securities, and ensuring SONARA pays taxes/duties. - SOE fiscal risks and governance: - SOEs characterized by low profitability, high indebtedness; institutional oversight fragmented. - Measures: exhaustive directory of public enterprises; audit of end-2020 cross debts (tax arrears of 1.5 percent of GDP); adopt a credible progressive clearance plan; strengthen governing bodies and oversight. ### Revenue mobilization, tax policy, and administration reforms - Text Table 1: Medium-Term Potential Gains from Revenue Enhancement (Percent of GDP) - Discontinuing Tax relief to businesses and households. 0.5 - Recovering SOEs tax arrears. 1.5 - Streamlining the least effective VAT tax expenditure. 0.8 - 2.6 - Taxing donor funded projects. 0.6 - Total 3.4 - 5.2 - Tax administration priorities: - Modernize tax management system; e-filing; on-line services; mobile payment options; collect recoverable tax arrears; risk-based audits; strengthen customs valuation and combat fraud/smuggling. - Customs measures: - Automation (COSMOS), debt recovery automation, extend electronic payment platforms, integrate DGI-DGD “FUSION” for data sharing, finalize CAMCIS modules, strengthen controls on timber and other exports. ### Financial sector, inclusion, and stability measures - Banking sector highlights: - NPL ratio increased to 16 percent in 2020 (12.8 percent in 2019); provisioning coverage broadly stable at 90 percent. - A few small banks (16 percent of banking assets) insolvent or undercapitalized. - Bank exposures to CEMAC States rose from 18.4 to 25.6 percent of assets between end-2019 and end-2020. - Credit to private firms increased by 3.5 percent in 2020 but its share declined; credit to public administrations and SOEs increased by 5 percent; credit to individual firms declined by 25 percent in 2020. - Policy actions: - Reduce NPLs, align bank restructuring with best practices, operationalize movable collateral registry, implement law for NPL cleanup, ensure recapitalizations within 3 years per COBAC. - SRC (Société de Recouvrement des Créances) to take over non-performing assets; performance contracts for banks; planned divestitures of State stakes in CBC (aim to sell 51 percent to strategic partner and 30 percent on BVMAC so State would retain 17 percent). - Financial inclusion: - 2017 access to financial services: 35 percent of population (lower middle-income average 58 percent). - Measures: spur mobile money, SME initiatives, credit bureaus, financial literacy, land title registries, product design to spur savings. ### Structural reforms, business climate, gender, and green economy - Business environment improvements: - Operationalize one-stop-shop “Guichet Unique”; reduce minimum paid-up capital for limited liability companies from 100,000 CFAF to 5,000 CFAF; digitalize company formation and permit processes; revise 2013 investment incentives law. - Gender equality: - Adopt gender budgeting tools; modify discriminatory laws; facilitate female entrepreneurship; consultations with banks to improve women’s access to credit. - Green economy: - SND30 measures: sustainable cultivation, reforestation, limit timber exports, rationalize water use, combat desertification, monitor climate effects. - Cameroon validated PNACC in 2015 and ratified Paris Agreement in 2016. - IMF support: TA to assess fiscal risks and resources needed for mitigation; catalyze financial support. ### Risks, RAM, and contingency responses - RAM methodology: relative likelihood definitions — low <10 percent; medium 10–30 percent; high 30–50 percent. - Major downside risks (probabilities and policy responses): - Unexpected downside shifts in Covid-19: Relative likelihood: High. Response: step up health/social spending, containment measures. - Widespread social discontent and political instability: Relative likelihood: High. Response: strengthen safety nets, accelerate structural reforms. - Spillovers from other CEMAC countries and regional security deterioration: Relative likelihood: High. Response: coordinate with CEMAC, prepare contingency plans for refugees, curtail unproductive public investments to finance security. - Contingent risks from SOEs: Relative likelihood: High (also noted Medium in a separate line). Response: enhanced monitoring, timely reporting, reduce state aid. - Other risks: sharp rise in global risk premia (Medium), oversupply/volatility in oil market (Medium), cyber attacks (Medium). - Contingency measures flagged across program: - Improve tax arrears collection; streamline tax exemptions; rationalize expenditures; consider revised Budget Law if needed. ### Program conditionality, monitoring, and prior actions - Monitoring: - Semi-annual reviews; six-monthly and continuous QPCs; quarterly ITs; structural benchmarks. - 19 structural actions over first year; four Prior Actions and eight actions before end-December 2021. - Prior Actions include: - Publishing a report on execution of COVID-19-related expenditures during the 2020 budget year (Prior Action). - Publishing on ARMP website an overall table of COVID-19 contract results from October 20, 2020 to end-June 2021 including beneficial ownership (Prior Action). - Submitting and publishing the Supreme Court audit of fiscal year 2020 COVID-19 expenses (Prior Action / Structural Benchmark). - Submission to National Assembly of revised 2021 Budget Law (Prior Action). - Quantitative performance criteria and indicative targets spelled out in Table 1 (selected entries, CFAF billions, cumulative): - Floor on non-oil primary fiscal balance (payment order basis): End-July 2021 QPC: -523; End-Dec 2021 QPC: -1,078; End-June 2022 QPC: -504. - Ceiling on net domestic financing of central government (excluding IMF financing): End-July 2021 QPC: 114; End-Dec 2021 QPC: 102; End-June 2022 QPC: 211. - Ceiling on disbursement of non-concessional external debt: End-July 2021 QPC: 308; End-Dec 2021 QPC: 566; End-June 2022 QPC: 322. - Continuous zero ceiling on accumulation of new external payment arrears. - Indicative floor on poverty-reducing social spending (FCFA, cumulative): End-Dec 2021 QPC: 1,111. ### Key statistics and projections (selected series preserved as presented) - GDP at constant prices (annual percent change): 2019: 3,7; 2020: -1,5; 2021: 3,6; 2022: 4,6; 2023: 4,9; 2024: 5,3; 2025: 5,4; 2026: 5,6. - Oil GDP at constant prices (annual percent change): 2019: 8,5; 2020: 2,6; 2021: 0,1; 2022: 0,1; 2023: 0,1; 2024: 0,1; 2025: 0,3; 2026: 0,5. - Non-Oil GDP at constant prices (annual percent change): 2019: 3,5; 2020: -1,8; 2021: 3,8; 2022: 4,8; 2023: 5,2; 2024: 5,5; 2025: 5,6; 2026: 5,8. - Nominal GDP (CFAF billions): 2019: 22.855; 2020: 22.955; 2021: 24.265; 2022: 25.865; 2023: 27.687; 2024: 29.670; 2025: 31.922; 2026: 34.359. - Consumer prices (average): 2019: 2,5; 2020: 2,4; 2021: 2,3; 2022: 2,1; 2023–2026: 2,0. - Broad money (M2 growth, percent): 2019: 6,5; 2020: 12,1; 2021: 8,4; 2022: 8,2; 2023: 8,3; 2024: 9,0; 2025: 9,5; 2026: 7,6. - Gross national savings (percent of GDP): 2019: 26,1; 2020: 22,9; 2021: 24,9; 2022: 27,1; 2023: 28,6; 2024: 30,1; 2025: 31,7; 2026: 33,4. - Gross domestic investment (percent of GDP): 2019: 30,4; 2020: 26,6; 2021: 28,9; 2022: 30,7; 2023: 32,0; 2024: 33,2; 2025: 34,6; 2026: 35,9. - Central government operations (percent of GDP): - Total revenue (including grants): 2019: 15,7; 2020: 13,7; 2021: 14,6; 2022: 15,5; 2023: 15,8; 2024: 16,4; 2025: 16,9; 2026: 17,5. - Total expenditure: 2019: 19,0; 2020: 17,0; 2021: 17,9; 2022: 18,0; 2023: 17,7; 2024: 18,0; 2025: 17,9; 2026: 18,6. - Overall fiscal balance (payment order basis, excluding grants): 2019: -3,9; 2020: -3,4; 2021: -3,7; 2022: -2,9; 2023: -2,2; 2024: -2,0; 2025: -1,3; 2026: -1,4. - External sector (percent of GDP): - Trade balance: 2019: -1,9; 2020: -1,6; 2021: -2,2; 2022: -2,5; 2023: -2,4; 2024: -2,3; 2025: -2,1; 2026: -1,8. - Current account balance excluding official grants: 2019: -4,7; 2020: -4,0; 2021: -4,4; 2022: -4,0; 2023: -3,7; 2024: -3,5; 2025: -3,1; 2026: -2,8. - Public debt (percent of GDP) of which external: - Stock of public debt: 2019: 42,3; 2020: 45,8; 2021: 46,2; 2022: 45,6; 2023: 44,4; 2024: 43,1; 2025: 41,0; 2026: 39,2. - External debt (percent of GDP): 2019: 29,9; 2020: 31,1; 2021: 32,3; 2022: 31,8; 2023: 31,3; 2024: 30,6; 2025: 29,9; 2026: 29,3. ### Implementation status, capacity development, and authorities’ views - Implementation under past ECF (2017–20): broadly satisfactory; real GDP growth averaged 4 percent in 2016-19; social spending remained low. - IMF and AFRITAC TA priorities: revenue administration, tax policy, debt and expenditure management, statistics compilation. - Authorities view IMF TA as closely aligned with program priorities and will continue to receive extensive IMF capacity development support. - Success of program depends on effective implementation of governance, anti-corruption, SOE reforms, and supportive CEMAC regional policies (including BEAC assurances on NFAs and monetary stance). *Source: IMF staff and Cameroonian authorities, July 16, 2021 (content unit: 1cmrea2021001).* ### 689.5 million, or 175 percent of Cameroon’s quota) to support the country’s economic and ### 1cmrea2021001 - 689.5 million, or 175 percent of Cameroon’s quota) to support the country’s economic and ### Program overview and financing - New three-year arrangements under the ECF and the EFF of a combined SDR 483 million (175 percent of quota), split as SDR 161 million (58.3 percent of quota) under ECF and SDR 322 million (116.7 percent of quota) under EFF, with semi-annual reviews. - Approval of the ECF/EFF enables immediate disbursement of about US$ 177.2 million, usable for budget support. - IMF emergency support under the Rapid Credit Facility (RCF) totaled SDR 276 million (about US$ 382 million or 100 percent of Cameroon’s quota). - Estimated financing gap of about US$1.9 billion or 4.2 percent of 2021 GDP over 2021-2024, of which 37 percent could be financed by the proposed arrangements. - The financing gap (before budget support and IMF financing) is projected to decline from US$0.8 billion (1.8 percent of GDP) in 2021 to US$0.2 billion (0.3 percent of GDP) in 2024. - While Cameroon’s risk of debt distress is high, its debt remains sustainable and capacity to repay the Fund is adequate. ### Recent economic developments (2020) - Real GDP: decline of 1.5 percent in 2020 (estimated). - Sector performance: agriculture and construction performed strongly; non-oil activity in trade, transport, and tourism constrained. - Current account deficit: narrowed to 3.7 percent of GDP in 2020. - Inflation: remained below 3.0 percent (consumer prices average 2.4 percent in 2020). - Fiscal deficit (payment order basis): contained to 3.6 percent of GDP in 2020. - Total expenditures reached 17 percent of GDP in 2020, driven by a 27.2 percent reduction in capital spending. - Credit and reserves: credit to the economy accelerated slightly in 2020; net foreign assets (NFA) dropped by CFAF 12 billion (BEAC drop of CFAF 313 billion mostly offset by commercial banks increase of CFAF 301 billion). - IMF support in 2020: two RCF disbursements totaling SDR 276 million (about US$ 382 million or 100 percent of quota), filling 38.8 percent of the external financing gap. ### Outlook and risks (program period) - Baseline growth projections: - GDP growth: 3.6 percent in 2021 and 4.6 percent in 2022 under a gradual recovery. - Inflation: expected to remain below 3 percent. - Total public and external debt to GDP: projected to gradually decline after 2021. - Downside risks: - New wave of COVID infections, new virus strains, longer-than-expected vaccine deployment. - Weak reform implementation and intensification of ongoing armed conflicts. - Potential heightened security risk in the Far North region due to regional developments. - Upside risks: - Rising oil prices and successful structural reforms could accelerate recovery, increase fiscal revenue, and reduce debt vulnerabilities. - Contingency measures under downside scenarios: - Improve collection of tax arrears. - Streamline tax exemptions. - Rationalize expenditures. - Authorities committed to consider a new revised Budget Law as needed. - SDR allocation note: - Cameroon expected to receive an SDR allocation of about $370 million (0.87 percent of GDP) in August 2021; allocation not included in projections and its use will be discussed during the first review. ### Program objectives, pillars, and policy focus - Overall aim: maintain external sustainability, implement the National Development Strategy for 2020-30 (SND30), catalyze donor financing, and support a rapid post-pandemic recovery toward sustained, more inclusive, and diversified growth. - Five pillars of the program: 1. Mitigate the health, economic, and social consequences of the pandemic while ensuring domestic and external sustainability. 2. Reinforce good governance and strengthen transparency and the anti-corruption framework. 3. Accelerate structural fiscal reforms: modernize tax and customs administrations, mobilize revenue, improve public financial management, increase public investment efficiency, and reduce fiscal risks from state-owned enterprises. 4. Strengthen debt management and reduce debt vulnerabilities. 5. Implement structural reforms to accelerate economic diversification, boost financial sector resilience and inclusion, promote gender equality, and support a greener economy. - Program modalities and support: - Semi-annual reviews. - Cameroon to continue receiving extensive IMF technical assistance (capacity development). - Blending of PRGT with GRA resources is presumed given per capita income and prospective market access (issuance of a new Eurobond embedded in prospective market access). ### Key statistics and projections (selected) - GDP at constant prices: - 2019: 3,7 - 2020: -1,5 - 2021: 3,6 - 2022: 4,6 - 2023: 4,9 - 2024: 5,3 - 2025: 5,4 - 2026: 5,6 - Oil GDP at constant prices: 8,5 (2019); 2,6 (2020); 0,1 (2021); 0,1 (2022); 0,1 (2023); 0,1 (2024); 0,3 (2025); 0,5 (2026). - Non-Oil GDP at constant prices: 3,5 (2019); -1,8 (2020); 3,8 (2021); 4,8 (2022); 5,2 (2023); 5,5 (2024); 5,6 (2025); 5,8 (2026). - GDP deflator: 2,5 (2019); 2,0 (2020); 2,0 (2021); 1,9 (2022); 2,0 (2023); 1,8 (2024); 2,1 (2025); 2,0 (2026). - Nominal GDP (CFAF billions): 22.855 (2019); 22.955 (2020); 24.265 (2021); 25.865 (2022); 27.687 (2023); 29.670 (2024); 31.922 (2025); 34.359 (2026). - Consumer prices (average): 2,5 (2019); 2,4 (2020); 2,3 (2021); 2,1 (2022); 2,0 (2023–2026). - Broad money (M2): 6,5 (2019); 12,1 (2020); 8,4 (2021); 8,2 (2022); 8,3 (2023); 9,0 (2024); 9,5 (2025); 7,6 (2026). - Gross national savings (percent of GDP): 26,1 (2019); 22,9 (2020); 24,9 (2021); 27,1 (2022); 28,6 (2023); 30,1 (2024); 31,7 (2025); 33,4 (2026). - Gross domestic investment (percent of GDP): 30,4 (2019); 26,6 (2020); 28,9 (2021); 30,7 (2022); 32,0 (2023); 33,2 (2024); 34,6 (2025); 35,9 (2026). - Central government operations: - Total revenue (including grants, percent of GDP): 15,7 (2019); 13,7 (2020); 14,6 (2021); 15,5 (2022); 15,8 (2023); 16,4 (2024); 16,9 (2025); 17,5 (2026). - Total expenditure (percent of GDP): 19,0 (2019); 17,0 (2020); 17,9 (2021); 18,0 (2022); 17,7 (2023); 18,0 (2024); 17,9 (2025); 18,6 (2026). - Overall fiscal balance (payment order basis, excluding grants, percent of GDP): -3,9 (2019); -3,4 (2020); -3,7 (2021); -2,9 (2022); -2,2 (2023); -2,0 (2024); -1,3 (2025); -1,4 (2026). - Overall fiscal balance (cash basis, including grants, percent of GDP): -2,9 (2019); -3,6 (2020); -3,8 (2021); -3,0 (2022); -2,3 (2023); -1,9 (2024); -1,0 (2025); -1,1 (2026). - External sector: - Trade balance (percent of GDP): -1,9 (2019); -1,6 (2020); -2,2 (2021); -2,5 (2022); -2,4 (2023); -2,3 (2024); -2,1 (2025); -1,8 (2026). - Current account balance excluding official grants (percent of GDP): -4,7 (2019); -4,0 (2020); -4,4 (2021); -4,0 (2022); -3,7 (2023); -3,5 (2024); -3,1 (2025); -2,8 (2026). - Public debt: - Stock of public debt (percent of GDP): 42,3 (2019); 45,8 (2020); 46,2 (2021); 45,6 (2022); 44,4 (2023); 43,1 (2024); 41,0 (2025); 39,2 (2026). - Of which: external debt (percent of GDP): 29,9 (2019); 31,1 (2020); 32,3 (2021); 31,8 (2022); 31,3 (2023); 30,6 (2024); 29,9 (2025); 29,3 (2026). ### Staff views and conditionality highlights - Staff supports the authorities’ request for the ECF and EFF arrangements. - Letter of Intent and Memorandum of Economic and Financial Policies show program ownership and appropriate policies and safeguards. - Effective and resolute implementation of reforms—particularly to strengthen transparency, good governance, and the anti-corruption framework—is essential to help catalyze additional donor financing. - The success of Cameroon’s program will also depend on supportive policies and reforms by CEMAC regional institutions. *Source: IMF staff and Cameroonian authorities, July 16, 2021.* ### 11. Medium-term growth prospects remain positive, driven by the implementation of ### 11. Medium-term growth prospects remain positive, driven by the implementation of ### Growth outlook and drivers - Assuming the pandemic recedes during 2021-22, the global economy strengthens, and oil prices remain high, the Cameroonian economy should begin to recover and reach a growth rate of over 5 percent in the non-oil sector starting from 2023. - Non-oil growth is projected to gradually rise to 5.8 percent in 2026. - Recovery drivers: implementation of SND30, completion of large infrastructure projects, recovery in trading partner economies, natural gas production, and the CEMAC Economic and Financial Reform Program (PREF-CEMAC). ### Program rationale, objectives, and pillars - Successor program builds on the 2017–20 ECF to: - Achieve a rapid post-COVID recovery. - Strengthen medium-term external and fiscal sustainability. - Implement economic reform strategy towards sustained, more inclusive, and diversified growth while strengthening debt sustainability. - Catalyze private investment and donor financial support. - Five main pillars (drawing on SND30 and PREF-CEMAC) include: - Mitigate health, economic, and social consequences of COVID-19 while ensuring domestic and external sustainability. - Reinforce good governance, transparency, and anti-corruption. - Accelerate structural fiscal reforms to modernize tax and customs administrations, mobilize revenue, improve public financial management, increase investment efficiency, and reduce fiscal risks from SOEs. - Strengthen debt management and reduce debt vulnerabilities. - Implement structural reforms to accelerate private sector-led economic diversification and boost financial sector resilience. ### Short-term pandemic mitigation priorities - Authorities have rationalized non-priority spending while protecting the most vulnerable. - Execution rate of social spending remains low; progress in setting direct cash transfers is slow. - A mechanism developed with World Bank assistance targeting transfers to the most vulnerable is expected to gradually replace less effective universal tax expenditures. - Program aims to avoid premature tightening of fiscal policy and prioritize increasing health and social protection spending. ### 2021 fiscal stance and RBL2021 adjustments - RBL2021 changes compared to the initial budget law: - Increases the overall cash deficit by 0.3 percentage points to 3.4 percent of GDP in 2021. - Non-oil primary deficit (cash basis) of 4.6 percent of GDP in 2021. - Revenue expected to increase by 0.8 percentage points to 14.3 percent of GDP: - Oil revenue increase of 0.6 percentage points to 2.2 percent of GDP. - Non-oil revenue increase of 0.2 percentage points to 12.1 percent of GDP. - Spending expected to increase by 0.8 percentage points to 17.6 percent of GDP: - Vaccination costs additional 0.3 percent of GDP. - Higher COVID-19 related spending by 0.1 percent of GDP. - Reevaluation of fuel subsidies by 0.4 percent of GDP. - Speedup of arrears repayment reflected in the increase. - Capital spending remained unchanged. ### Fiscal consolidation path and measures - Staff supports gradual return to fiscal consolidation consistent with program objectives and CEMAC convergence criteria. - A reduction of 1.9 percentage points of GDP of the overall fiscal deficit is expected over the course of the program. - Non-oil primary balance (cash basis), the program’s fiscal anchor, is expected to decrease to 2.9 percent of GDP in 2024 from 4.6 percent of GDP in 2020. - Revenue and spending measures: - Revenue measures (streamlining tax exemptions, recovering arrears) would generate additional non-oil revenues of 2.6 percentage points of GDP by 2024. - Spending measures include policies to contain the wage bill as a share of GDP, contain transfers, and reprioritize least effective expenditure. - Actions on the wage bill include strict control of return to pay of suspended public officials and installation of an integrated career and payroll management software. ### Governance and anti-corruption measures - Program cross-cutting focus on reinforcing good governance, transparency, and anti-corruption. - Existing measures on criminalization of corruption broadly in line with UNCAC recommendations, but governance issues and corruption persist. - CONAC’s autonomy needs strengthening; no government body currently oversees implementation of public officials’ asset declaration obligations. - Program measures include: - Strengthening SOE governance (MEFP ¶38-39). - Improving the AML/CFT system (MEFP ¶54). - Implementing outstanding EITI corrective measures (MEFP ¶55). - Authorities committed to strengthening anti-corruption framework and the declaration regime during the program. - Outstanding commitments under the RCF are included as prior actions or structural benchmarks; authorities intend to publish results of COVID-19 contracts with beneficial ownership, issue COVID-19 spending report, and publish audit report. ### Revenue mobilization (objectives and measures) - Non-oil revenue would gradually increase by about 0.7 percent of GDP per year over 2021-24 or about 2 ½ -3 percent of GDP through tax measures over the program period (Structural Benchmark 5, MEFP Table 2). - Revenue administration priorities (MEFP ¶21-27-28): - Modernize tax management system, facilitate tax compliance, strengthen tax controls and risk-based audits. - Follow up on reform recommendations on taxation at the local level. - Customs revenue measures (MEFP ¶29): - Consolidate gains from revenue optimization and facilitation reforms, regular reconciliation and verification of tax database, simplify procedures, strengthen customs valuation, combat fraud and smuggling. - Tax policy (MEFP ¶30): - No new tax policy reforms in 2021 RBL, but IMF TA to support medium-term tax policy reforms and a Medium-Term Revenue Strategy. - Possible tax policy options: reducing tax expenditure; rationalizing tax regime of externally financed projects; broadening tax base in transport by combining multiple taxes and charges; reforming local taxation. - Digitalization strategy (MEFP ¶20-26-28): - Build on 2020 IMF TA: e-filing, on-line/web services, “mobile payment” options. - 2021 follow-up short-term objectives: expand tax base, strengthen enforcement by collecting recoverable tax arrears, redirect tax audits toward highest-risk taxpayers, improve crosschecking with third-party information. - Text Table 1: Medium-Term Potential Gains from Revenue Enhancement (Percent of GDP) - Discontinuing Tax relief to businesses and households. 0.5 - Recovering SOEs tax arrears. 1.5 - Streamlining the least effective VAT tax expenditure. 0.8 - 2.6 - Taxing donor funded projects. 0.6 - Total 3.4 - 5.2 - As of end-2019, cost of 371 tax measures assessed at CFAF 584.7 billion (2.6 percent of GDP), 71.1 percent benefit households. VAT tax expenditures amount to 280 measures, 68.3 percent of the total. Nearly 46 percent of VAT tax spending related to food and nonalcoholic drinks and benefit wealthiest households (40.8 percent) vs poorest (5.8 percent). - Government committed to phasing out least effective measures and replacing them with conditional cash transfer mechanisms with World Bank support. ### Public Financial Management (PFM) actions and weaknesses - Progress made: improved budget preparation and quality of expenditure; strengthened control and management of public funds; developed medium-term budget framework; transposed CEMAC Directives; promulgated PFM code of transparency and good governance. - Remaining weaknesses: - Budget execution does not guarantee full compliance with parliamentary authorization. - Persistent underestimation of spending needs and commitments undermines credibility and transparency. - Significant share of spending executed through exceptional procedures and SNH’s direct interventions amounting to CFAF 194 billion (payments made without prior authorization, excluding debt service). - Program actions to address shortcomings: - Prepare monthly report on budget execution and credible monthly cash-flow plans on commitment basis backed by procurement plans. - Prepare inventory of government bank accounts and close those outside the TSA. - Limit exceptional procedures by setting an indicative ceiling on direct interventions by SNH and accelerate transition to normal procedures. - Complete audits of domestic arrears, adopt strategy for clearing verified arrears, and avoid accumulation of new arrears. - Consider measures on fiscal decentralization drawing on FAD TA recommendations. ### Debt levels, risk assessment, and active debt management - PPG debt estimated at 45.8 percent of GDP as of end-2020 (Text Table 3). - Public external debt estimated at 31.1 percent of GDP: - Bilateral creditors: 13.4 percent of GDP. - Multilateral debt: 12.0 percent of GDP (expected to increase during program period given expected disbursements). - Cameroon assessed at high risk of debt distress, though debt remains sustainable given improved overall debt profile compared to previous DSA. - Cameroon’s CI score based on April 2021 WEO and 2019 World Bank CPIA data is 2.65, signaling a weak debt-carrying capacity. - To mitigate risks, program focuses on gradual fiscal consolidation, limited reliance on non-concessional borrowing (NCB), prudent public debt and SOE management to gradually improve external debt service and debt stock indicators. - Non-concessional borrowing limits and external borrowing program: - Non-concessional borrowing for 2021 capped at CFAF 300 billion, with new contracting strictly limited to projects listed in Table 1 of the TMU (MEFP, ¶32). - Adjuster to permit up to CFAF 300 billion of non-concessional borrowing to finance high priority projects that cannot be financed concessionally. - For 2022, NCB initially capped at any unused space from the 2021 limit and restricted to TMU-listed projects until changed by IMF Executive Board following new DSA and project list. - Text Table 2: Cameroon: 2021 External Borrowing Program (CFAF, billions) - Sources of Debt Financing: 980 - Concessional debt, of which 349 - Multilateral debt 343 - Bilateral debt 6 - Non-concessional debt, of which 631 - Commercial terms 631 - Of which, Eurobond 1/ 328 - Uses of Debt Financing: 980 - Infrastructure 652 - Debt management 2/ 328 - 1/ Excludes proceeds used to finance projects (CFAF 37.5 billion) and the buy-back net financing cost. - 2/ Buyback of the existing Eurobond. - Active debt management details: - Authorities issued a new Eurobond on July 1 (CFAF 450 billion) whose proceeds will be used for: - Liability management operations, including a partial buy-back of the 2015 Eurobond (CFAF 328.3 billion) with a net financing cost of about CFAF 83.5 billion. - To finance projects (CFAF 37.5 billion) critical for development with high economic and social returns and limited concessional financing. - Government will create an escrow account under the TSA for the CFAF 37.5 billion to ensure spending is limited to identified projects. - Use of Eurobond for project financing will be closely monitored to ensure consistency with fiscal targets; authorities will consult with staff before contracting new projects or financing approved projects. ### Medium-term debt strategy and capacity building - Substantial progress on developing a medium-term public debt strategy (MTDS); challenges remain in coordination across departments, accounting of undisbursed loan commitments, and staffing to operate MTDS analytical tool. - Authorities will prepare a more focused MTDS to develop consistent annual borrowing plans, with an enhanced communication strategy for creditors (MEFP, ¶35). *Source: Country Authorities and IMF Staff Estimates (Content unit: 1cmrea2021001 — extracted sections 11–30).* ### 31. Cameroon’s large stock of committed but undisbursed loans (SENDs) reflects a lack of ### 1cmrea2021001 - 31. Cameroon’s large stock of committed but undisbursed loans (SENDs) reflects a lack of ### Committed but undisbursed loans (SENDs) - The 2021-23 MTDS assumes full execution of the stock of the SENDs by 2025 but does not yet provide an assessment of these projects, their priority, and key vulnerabilities. - Authorities reiterated commitment to: - Reassess and cancel SENDs related to old and non-performing projects. - Strengthen controls on new borrowing to better align with absorption capacity. - MEFP reference: ¶37. ### SONARA debt restructuring - Progress and measures: - Adoption of a new price structure, including a levy on imported refined oil products to secure repayment of SONARA’s debt. - Agreement in 2020 with creditor banks representing about a third of SONARA’s total debt. - Debt owed to SNH has been cancelled. - Negotiations ongoing on restructuring debt owed to oil traders. - Authorities committed to timely resolution to preserve financial stability and minimize current and future fiscal costs. - Further discussions scheduled during the first review. - MEFP references: ¶40-41. ### SOE fiscal risks and governance - Findings: - SOEs face structural difficulties: low profitability and high indebtedness, raising risk of larger budget transfers. - Institutional framework for oversight of public enterprises is fragmented among multiple stakeholders, limiting effectiveness of financial supervision. - Governance and control actions (2021 IMF TA recommendations; MEFP ¶34, 39): - Establish an exhaustive directory of public enterprises. - Schedule an audit of end-2020 cross debts between the State and public enterprises (tax arrears of 1.5 percent of GDP). - Adopt (2022) a credible and progressive clearance plan based on the cash requirements of public enterprises. - Supplement existing texts to strengthen control of budgetary risks, and the classification and functioning of governing bodies of public enterprises. - MEFP reference: ¶34. ### Public debt decomposition and key debt statistics (Text Table 3, end-2020 to 2022) - Total debt (end-2020): $US 1813 million; Percent of total debt: 100.0; Percent of GDP: 42.6 - External (end-2020): $US 1249 million; Percent of total debt: 68.9; Percent of GDP: 29.3 - Multilateral creditors (end-2020): $US 511 million; Percent of total debt: 28.2; Percent of GDP: 13.2 - IMF (end-2020): $US 10 million; Percent of total debt: 1.2; Percent of GDP: 0.4 - World Bank (end-2020): $US 191 million; Percent of total debt: 10.5; Percent of GDP: 4.5 - AfDB (end-2020): $US 153 million; Percent of total debt: 8.4; Percent of GDP: 3.6 - Other Multilaterals (end-2020): $US 65 million; Percent of total debt: 3.6; Percent of GDP: 1.5 - o/w IDB (end-2020): $US 38 million; Percent of total debt: 2.1; Percent of GDP: 0.9 - o/w IFAD (end-2020): $US 9 million; Percent of total debt: 0.5; Percent of GDP: 0.2 - Bilateral creditors (end-2020): $US 569 million; Percent of total debt: 31.4; Percent of GDP: 13.4 - Paris Club (end-2020): $US 189 million; Percent of total debt: 10.4; Percent of GDP: 4.4 - o/w France (end-2020): $US 162 million; Percent of total debt: 8.9; Percent of GDP: 3.8 - o/w Japan (end-2020): $US 9 million; Percent of total debt: 0.5; Percent of GDP: 0.2 - Non-Paris Club (end-2020): $US 380 million; Percent of total debt: 21.0; Percent of GDP: 8.9 - o/w China (end-2020): $US 351 million; Percent of total debt: 19.4; Percent of GDP: 8.3 - o/w Turkey (end-2020): $US 16 million; Percent of total debt: 0.9; Percent of GDP: 0.4 - Eurobonds (end-2020): $US 83 million; Percent of total debt: 4.6; Percent of GDP: 2.0 - Commercial lenders (end-2020): $US 85 million; Percent of total debt: 4.7; Percent of GDP: 2.0 - o/w Bank of China (end-2020): $US 24 million; Percent of total debt: 1.3; Percent of GDP: 0.6 - o/w Intesa San Paolo SPA (end-2020): $US 19 million; Percent of total debt: 1.1; Percent of GDP: 0.5 - Domestic (end-2020): $US 564 million; Percent of total debt: 31.1; Percent of GDP: 13.2 - T-Bills (BTA) (end-2020): $US 42 million; Percent of total debt: 2.3; Percent of GDP: 1.0 - Bonds (end-2020): $US 145 million; Percent of total debt: 8.0; Percent of GDP: 3.4 - Structured debt (end-2020): $US 155 million; Percent of total debt: 8.5; Percent of GDP: 3.6 - Non-structured debt (end-2020): $US 12 million; Percent of total debt: 0.7; Percent of GDP: 0.3 - BEAC advances (end-2020): $US 107 million; Percent of total debt: 5.9; Percent of GDP: 2.5 - Floats and arrears (end-2020): $US 101 million; Percent of total debt: 5.6; Percent of GDP: 2.4 - Contingent liabilities (memo): $US 136 million; Percent of GDP: 3.2 - o/w Public guarantees (external): $US 5 million; Percent of GDP: 0.3 - o/w Other contingent liabilities: $US 131 million; Percent of GDP: 2.3 - o/w external: $US 70 million; Percent of GDP: 3.9 - o/w domestic: $US 60 million; Percent of GDP: 3.4 - Nominal GDP (CFAF, billions): 2295524 - Exchange rate, end of period (CFAF/US$): 539 - Exchange rate, period average (CFAF/US$): 575 - Notes: - Debt stock as of end-2020 is old Eurobond; debt service projection includes interest payments for the new Eurobond. - The new Eurobond has a maturity of 12 years, with repayments scheduled on three equal tranches starting from 2030; coupon interest rate is 5.95 percent. ### Structural reforms to strengthen productivity and diversify the economy - Improving the business environment (MEFP, ¶27-50-51): - Identified weaknesses: cross-border trading, paying taxes, registering protection of property rights, contract enforcement, judiciary. - Authorities intend to: - Strengthen framework for public-private sector dialogue. - Operationalize one-stop-shop “Guichet Unique” to improve property registration. - Reduce minimum paid-up capital for limited liability companies from 100,000 CFAF to 5,000 CFAF. - Digitalize stages of company formation, deployment of permits, and payment of taxes. - Revise the 2013 law on investment incentives to address unintended negative impacts on competition and the tax base. - Alleviate private sector constraints related to contract enforcement and protection of investor and property rights. - Promoting gender equality (MEFP, ¶53): - Progress noted in promoting and protecting women's rights, but disparities persist. - Cameroon’s global gender gap index remains below the average for lower-middle income countries. - Authorities intend to adopt gender budgeting tools and modify discriminatory laws and policies to facilitate female entrepreneurship, including stepping up consultations with banks to facilitate access to credit for women. - Strengthening financial stability and inclusion: - Banking sector fragilities (MEFP, ¶37): - NPL ratio increased to 16 percent in 2020 (12.8 percent in 2019). - COBAC’s July 2020 decision loosened NPL definitions; provisioning coverage broadly stable at 90 percent. - A few small banks (16 percent of banking assets) are insolvent or undercapitalized. - Bank exposures to CEMAC States increased from 18.4 to 25.6 percent of assets between end-2019 and end-2020. - Credit to private firms increased by 3.5 percent in 2020, but its share in total credit declined by 4.6 percentage points; credit to public administrations and SOEs increased by 5 percent; credit to individual firms declined by 25 percent in 2020. - Authorities’ aims (MEFP, ¶38): - Continue reduction plan for NPLs and align bank restructuring plans with best practices. - Operationalize registry of movable collateral launched in 2019; implement 2019 law allowing clean-up of past NPLs. - Ensure restructuring plans minimize costs to public finance and that historical shareholders bear losses and participate in timely recapitalization (subject to COBAC “fit and proper” criteria). - Recapitalizations to be achieved within 3 years, in line with COBAC regulations. - Ongoing SONARA restructuring should be consistent with banks’ asset coverage ratio and long-term financing needs; possible temporary exemption of prudential minimum fixed asset ratio, monitored bank-by-bank. - Staff back-of-the-envelope estimations suggest banks accounting for 60 percent of bank capital should not require an exemption beyond one year, and only one bank accounting for less than 10 percent of bank capital may be at risk of not being able to meet the ratio more sustainably. - Financial inclusion (MEFP, ¶39): - As of 2017, 35 percent of population had access to financial services (compared to 58 percent average for lower middle-income countries). - Options include: spurring mobile money (regulation and bank partnerships); SME initiatives (business model reform of SME bank, registry of movable collateral, credit bureaus, strengthen Centrale des Bilans et des Risques, factoring schemes); individual-focused measures (financial literacy, land title registries, product design to spur savings, consumer protection). - Promoting the green economy (MEFP, ¶52): - Around 320,000 Cameroonians are affected by climate-related disasters every year. - SND30 measures include: - Promote sustainable cultivation practices. - Encourage reforestation actions and limit timber exports. - Rationalize use of surface and ground water resources through new practices and technologies. - Intensify actions to combat desertification, land degradation, and industrial pollution. - Operationalize systems to monitor, prevent and respond to climate change effects. - IMF support options: - TA to assess fiscal risks and evaluate resources needed for mitigation plans. - Encourage public policies and domestic resource mobilization in favor of green growth. - Continue to catalyze financial support; Cameroon already benefits from external programs including the World Bank’s Inclusive and Resilient Cities Development Project and Germany’s Forests and Environment project. - Notes: Cameroon validated its National Adaptation Plan for Climate Change (PNACC) in 2015 and ratified the Paris Agreement in 2016. ### Program modalities, financing needs, and IMF arrangements - Financing gap and needs (2021–2024): - Financing gap estimated at just under CFAF 1 trillion (US$1.9 billion) or 4.2 percent of 2021 GDP over 2021-2024. - Gap declines from US$0.8 billion (1.8 percent of GDP) in 2021 to US$0.2 billion (0.3 percent of GDP) in 2024. - Text Table 4 (selected items, CFAF, billions): - Total Financing Requirements (2021): 2021: 1640; 2022: 1718; 2023: 1796; 2024: 1851; 2025: 2007; 2026: [value appears but context truncated]. - Current Account Deficit (2021): 964; 2022: 918; 2023: 940; 2024: 946; 2025: 909; 2026: 869 - Amortization of PPG Debt (2021): 704; 2022: 503; 2023: 599; 2024: 590; 2025: 616 - Gross Reserves Accumulation (2021): 353; 2022: 219; 2023: 179; 2024: 259; 2025: 326; 2026: 484 - Financing Gap (aggregated rows): 437; 260; 223; 960; 0; 0 (table layout preserved as presented) - IMF Financing (Additional/Exceptional Financing Sources): 161; 85; 86; 43; 00 - Prospective ECF: 54; 28; 29; 14; 00 - Prospective EFF: 107; 57; 57; 29; 00 - Budget Support (excl. IMF): 110; 174; 137; 53; 00 - WB: 79; 106; 53; 53; 00 - Exceptional Financing: 166; 00; 00 - DSSI: 166; 000; 00 - Residual gap: 0; 0; 0; 0; 0; 0 - Source: Country Authorities and IMF Staff Estimates. - IMF arrangement proposal (¶44): - Three-year arrangements under the ECF/EFF with combined access of 175 percent of quota (SDR 483 million; US$690 million). - Blend: SDR 483 million composed of SDR 161 million (58.3 percent of quota) under the ECF and SDR 322 million (116.7 percent of quota) under the EFF. - PRGT cumulative access will peak at 293.3 percent of quota in December 2022. - Combined GRA and PRGT exposure will peak at 403.5 percent of quota in June 2024. - Financing disbursed as budget support via the Central Bank. - Cameroon assessed at high risk of debt distress, although debt assessed to remain sustainable and improve over time (¶32). - Capacity to repay and exposure (¶45): - After disbursements of 75 percent of quota in 2021, Fund exposure to Cameroon would be 2.9 percent of GDP at year end and would peak at 3.1 percent of GDP in 2022. - Projected repurchases beginning in 2023 will cap growth of net outstanding credit at 0.2 percentage points of GDP during the program. - Annual repayments will peak at 0.4 percent of GDP in 2027, representing 23.1 percent of total debt service. - Risks mitigated by keeping access within normal limits and leveraging Fund catalytic role. - Program is fully financed with firm commitments for next 12 months through July 2022 and good prospects thereafter. - Front-loaded disbursements (¶46): - 45 percent of quota upon program approval and 30 percent upon completion of the 1st review (75 percent of quota in 2021), followed by 20 percent of quota for each subsequent review. - Structural Benchmarks: 19 actions over first year; four Prior Actions and eight actions before end-December 2021. - Program performance monitoring (¶47): - Reviewed semi-annually via six-monthly and continuous QPCs, quarterly ITs, and SBs. - Prior Actions include: - Publishing a report on execution of COVID-19-related expenditures during the 2020 budget year (Prior Action). - Publishing on the ARMP website an overall table of the results of contracts related to COVID-19 and awarded from October 20, 2020 to end-June 2021, including beneficial ownership (Prior Action). - Submitting to IMF staff, the Prime Minister, Senate, and National Assembly the audit prepared by the audit bench of the Supreme Court (Chambre des Comptes) of fiscal year 2020 expenses related to COVID-19 (Prior Action). - Publishing this audit (Structural Benchmark for end-December 2021). - On debt-related QPCs, should risk classification improve via active debt management, Staff would revise program conditionalities in line with the DLP. ### BEAC policy assurances and regional considerations - BEAC assurances (¶48): - Updated policy assurances on end-June 2021 and end-December 2021 NFAs. - Commitments: - Appropriate monetary policy stance, together with member states implementing agreed fiscal adjustment, to support external reserves build-up, including increasing policy rate if reserves fall markedly. - Adapt liquidity management and re-introduce liquidity absorption to reduce excess liquidity, stimulate interbank market, and improve monetary policy transmission. - Discontinue public securities purchase program in September 2021. - Finalize adaptations for foreign exchange regulation for the extractive sector by end-2021. - Regional assurances on NFAs are critical for Cameroon’s program success and will help bolster region’s external sustainability. - Note: Given Cameroon’s share of BEAC reserves, its capacity to repay the Fund directly affects the capacity to repay the Fund of other CEMAC countries. *Source: Country Authorities & IMF Staff estimates (excerpts and tables from MEFP and associated text).* ### 49. The BEAC has implemented priority recommendations from the 2017 safeguards ### 1cmrea2021001 - 49. The BEAC has implemented priority recommendations from the 2017 safeguards ### BEAC safeguards and financial reporting - The BEAC has implemented priority recommendations from the 2017 safeguards assessment. - The BEAC has issued its FY 2019 audited financial statements in full compliance with IFRS. - Under the IMF safeguards policy and in line with the four-year cycle for safeguards assessments of regional central banks, an update safeguards assessment of the BEAC is expected to be conducted. - The ECF/EFF support will be channeled to the Treasury through its accounts at the BEAC. ### External financing, IMF support, and Text Table 5 (Cameroon: External Financing Gap) - The proposed ECF/EFF arrangements will cover 38 percent of financing needs and are expected to catalyze additional financing from IFIs (Text Table 5). - Assistance under the ECF/EFF would be critical for securing additional financing to cover the external financing gap. - Total IMF disbursements would fill 39 percent of the estimated financing gap for 2021 and 33 percent for 2022. - Text Table 5 (as presented in source): - 2021202220232024 - Total (CFAF, billions) - Total (SDR, millions) - Percent of Gap - Percent of Quota - 1 Financing Gap 4372602239610151307100474 - IMF Financing 16185864337548337175 - Prospective ECF 542829141251611258 - Prospective EFF 10757572925032225117 - Budget Support from other Donors 1101741375347461147221 - AFDB053530 - 1061371050 - World Bank791065353 - 29137529136 - France0000 0000 - EU160160 - 3241315 - Other 15151504558421 - Debt Relief 1660001662131677 - DSSI (Net) - 2 1660001662131677 - Residual Gap0000 0000 - Source: IMF staff estimates and projections. - 1/ Cameroon's current quota is SDR 276.0 million. ### Program focus and pillars - Following two RCF disbursements in 2020, the authorities have requested new ECF/EFF arrangements focused on higher, more inclusive growth, and export diversification. - The new arrangements will help the country address protracted balance of payments needs and support the authorities’ reform agenda. - The program would focus on five pillars: - i) recovering from and mitigating the consequences of the pandemic, while ensuring macroeconomic sustainability; - ii) reinforcing good governance and strengthening transparency and anti-corruption measures; - iii) accelerating reforms to modernize tax and customs administration, mobilizing revenue, improving PFM, increasing investment efficiency, and reducing fiscal risks from SOEs; - iv) strengthening debt sustainability and management; - v) intensifying structural reforms to boost economic diversification and financial sector resilience. ### Fiscal policy guidance and public financial management - Staff welcomes the adoption of the revised budget law to accommodate the measures undertaken to address the impact of the pandemic. - Authorities should continue to monitor closely any potential fiscal risks, to limit further revenue losses. - Should downside risks materialize, the authorities should stand ready to implement additional contingency measures, including expenditure reprioritization in areas that will least hinder efforts to mitigate the pandemic, while protecting expenditure that benefits the most vulnerable. - Staying the course on gradual fiscal consolidation will be crucial for rebuilding fiscal and external buffers. - Staff supports the authorities’ objective to return to the fiscal consolidation path once the crisis abates to safeguard debt sustainability and ensure a strong and inclusive recovery in line with Cameroon’s medium-term reform agenda. - Program aims: - broaden the non-oil revenue base; - reduce discretionary tax exemptions; - combat tax fraud and evasion; - enhance tax and customs administration; - completion of the Treasury Single Account reform and reduced recourse to direct interventions, and exceptional spending procedures will help improve cash management and budget execution and strengthen fiscal transparency and budget credibility. ### SOEs, audits, and fiscal risks - Urgently addressing financial and fiscal risks associated with SOEs remains a high priority. - Staff urges the authorities to strengthen efforts to restructure SONARA without delays, based on a thorough cost-benefit analysis of all available options. - Timely completion of the planned audits of four large SOEs is critical for mitigating contingent risks, along with the clearance of government cross-debts with SOEs and of government arrears. ### Debt management and borrowing policy - Given Cameroon’s high risk of debt distress, efforts to strengthen public debt management and limit non-concessional borrowing remain critical. - Staff welcomes the authorities’ commitment to limit non-concessional borrowing to macro critical projects for which concessional financing is not available. - Staff emphasized the importance for debt sustainability of: - a prudential borrowing policy; - steadfast implementation of structural fiscal reforms; - measures to contain SOE risks. ### Transparency, governance, and anti-corruption actions - Steadfast commitment to strengthen transparency and good governance and reduce corruption risks will be critical. - Further steps to enhance the business climate, investment efficiency, and financial inclusion are essential to unlock Cameroon’s growth potential, and should be accompanied by strong efforts to protect property and investor rights and effectively enforce the anti-corruption legal framework. - Prior actions and structural benchmarks related to COVID-19 expenditures: - Authorities aim to publish the results of contracts related to COVID-19 and awarded from October 20, 2020 to end-June 2021 (Prior Action). - Authorities intend to submit to the IMF, Prime Minister, Senate, and National Assembly the audit report of COVID-19-related expenditures by the Supreme Court’s audit bench (Chambre des Comptes) and to publish the audit report by end-December 2021 (Structural Benchmark). - Authorities intend to publish a report on the execution of COVID-19-related expenditures during the 2020 budget year (Prior Action). ### Conditionality and staff support - Based on the strength of the program, corrective action taken by BEAC and policy assurances contained in the June-2021 Union-wide background paper, staff supports the authorities’ request for assistance under the ECF/EFF in the amount of 175 percent of quota. - Staff proposes that completion of the first review under the ECF/EFF arrangements be conditional on the implementation of critical policy assurances at the union level, as established in the June 2021 union-wide background paper. - These assurances are critical for the success of Cameroon’s program and will help bolster the region’s external sustainability. *Source: IMF staff report excerpt (Cameroon).* ### 4. PPG refers to public and publicly guaranteed and UCT refers to upper credit tranche. ### 4. PPG refers to public and publicly guaranteed and UCT refers to upper credit tranche. ### Key economic projections and growth - GDP at constant prices: 3.7 -1.5 3.6 4.6 4.9 5.3 5.4 5.6 (2019–2026, annual percentage change sequence as presented) - Oil GDP at constant prices: 8.5 2.6 0.1 0.1 0.1 0.1 0.3 0.5 - Non-Oil GDP at constant prices: 3.5 -1.8 3.8 4.8 5.2 5.5 5.6 5.8 - GDP deflator: 2.5 2.0 2.0 1.9 2.0 1.8 2.1 2.0 - Nominal GDP (at market prices, CFAF billions): 22,855 22,955 24,265 25,865 27,687 29,670 31,922 34,359 - Oil: 935 663 947 887 888 889 892 897 - Non-Oil: 21,920 22,292 23,318 24,977 26,798 28,780 31,030 33,462 - Consumer prices (average): 2.5 2.4 2.3 2.1 2.0 2.0 2.0 2.0 - Consumer prices (eop): 2.4 2.1 2.1 2.0 2.0 2.0 2.0 2.0 ### Money, credit, and financial conditions - Broad money (M2) growth (annual percent change): 6.5 12.1 8.4 8.2 8.3 9.0 7.5 7.6 - Net foreign assets (percent of beginning broad money): 5.7 -0.2 2.6 2.8 2.7 4.3 5.0 6.7 - Net domestic assets (percent of beginning broad money): 0.8 12.4 5.8 5.5 5.6 4.8 4.5 1.0 - Domestic credit to the private sector (annual percent change): 1.4 1.1 3.3 4.9 6.2 7.4 7.5 7.7 - Monetary survey (CFAF billions, selected projections): - Net foreign assets: 2,371 2,359 2,522 2,708 2,908 3,248 3,678 4,310 - Net domestic assets: 3,204 3,893 4,253 4,624 5,031 5,408 5,801 5,893 - Domestic credit: 4,030 4,883 5,553 6,096 6,638 7,110 7,603 7,918 - Credit to the economy (CFAF billions): 3,268 3,409 3,494 3,647 3,848 4,103 4,380 4,687 - Broad money (CFAF billions): 5,575 6,252 6,775 7,332 7,938 8,656 9,479 10,203 - Currency outside banks: 1,152 1,334 1,438 1,550 1,671 1,815 1,979 2,124 - Deposits: 4,423 4,918 5,336 5,782 6,267 6,841 7,500 8,079 - Velocity (GDP/average M2): 4.1 3.7 3.6 3.5 3.5 3.4 3.4 3.4 ### Fiscal accounts and public finances - Total revenue (including grants) as percent of GDP: 15.7 13.7 14.6 15.5 15.8 16.4 16.9 17.5 - Total revenue (percent of GDP): 15.1 13.6 13.5 14.3 15.1 15.5 16.0 16.6 - Oil revenue (percent of GDP): 2.6 1.9 1.6 2.2 2.1 1.9 1.7 1.6 - Non-oil revenue (percent of GDP): 12.5 11.7 11.9 12.1 13.0 13.6 14.3 15.0 - Non-oil revenue (percent of non-oil GDP): 13.1 12.0 12.6 13.4 14.0 14.7 15.4 16.2 - Total expenditure (percent of GDP): 19.0 17.0 17.9 18.0 17.7 18.0 17.9 18.6 - Current expenditure (percent of GDP): 11.8 11.0 10.6 11.4 11.0 11.0 11.1 11.2 - Capital expenditure (percent of GDP): 7.0 5.1 5.6 5.6 6.1 6.3 6.8 7.4 - Overall fiscal balance (payment order basis): - Excluding grants (percent of GDP): -3.9 -3.4 -3.7 -2.9 -2.2 -2.0 -1.3 -1.4 - Including grants (percent of GDP): -3.3 -3.3 -3.4 -2.5 -1.8 -1.6 -0.9 -1.1 - Overall balance (cash basis, including grants) (percent of GDP): -2.9 -3.6 -3.8 -3.0 -2.3 -1.9 -1.0 -1.1 - Primary balance (payment order basis, incl. grants) (percent of GDP): -2.3 -2.4 -1.8 -2.2 -1.6 -1.1 -0.9 -0.2 -0.4 (multi-year sequence) - Non-oil primary balance (payment order basis, incl. grants) (percent of non-oil GDP): -4.8 -4.3 -3.4 -4.4 -3.7 -3.0 -2.6 -1.8 -1.8 Selected central government operations (CFAF billions, 2022–2026 projections): - Total revenue and grants: 3.5843.14 3.3853.53 314.00 34.3884.85 5.4086.02 4 (table formatting preserved) - Total revenue: 3.4513.11 03.2783.46 3.8984.28 44.7495.29 95.911 (table as presented) - Total expenditure: 4.3383.89 44.079,7 4.3534.648 4.8945.338 5.7006.393 (original formatting preserved) ### External sector and balance of payments - Current account balance (CFAF billions): -992 -845 -964 -915 -936 -941 -903 -863 (2021–2026 sequence) - Trade balance (CFAF billions): -432 -358 -530 -646 -670 -693 -658 -613 - Exports, goods (CFAF billions): 3.238 2.651 3.185 3.300 3.461 3.682 3.970 4.267 - Oil and oil products: 1.292 825 1.228 1.182 1.173 1.186 1.225 1.281 - Non-oil sector: 1.946 1.826 1.958 2.117 2.288 2.496 2.745 2.986 - Imports, goods (CFAF billions): -3.670 -3.009 -3.715 -3.946 -4.132 -4.375 -4.628 -4.880 - Services (net): -362 -219 -262 -246 -271 -282 -285 -289 - Exports, services: 1.295 958 1.093 1.362 1.398 1.498 1.619 1.744 - Imports, services: -1.656 -1.177 -1.355 -1.608 -1.668 -1.780 -1.903 -2.033 - Income (net): -494 -509 -472 -368 -326 -319 -338 -356 - Of which: interest due on public debt: -177 -138 -197 -154 -144 -151 -158 -158 - Transfers (net): 295 241 300 345 332 353 377 396 - Inflows: 458 379 444 498 494 525 560 592 - Outflows: -163 -138 -144 -153 -162 -172 -184 -196 - Capital and financial account balance (CFAF billions): 1.071 434 851 877 948 1.178 1.334 1.495 - Capital account: 50 20 30 32 34 37 39 42 - Financial account: 1.020 413 821 846 914 1.142 1.295 1.452 - Official capital (CFAF billions): 557 273 421 241 265 375 450 533 - Borrowing (CFAF billions): 877 495 1.153 744 813 897 968 1.044 - Amortization (CFAF billions): -320 -222 -733 -503 -547 -522 -517 -512 - Non-official capital (net) (CFAF billions): 782 358 480 644 709 797 874 950 - Foreign direct investment (percent of GDP): 2.3 1.4 1.9 2.4 2.5 2.7 2.7 2.7 - Overall balance (CFAF billions): 163 -51 -113 -381 2 237 431 632 - Current account balance (percent of GDP): - Including grants: -4.3 -3.7 -4.0 -3.5 -3.4 -3.2 -2.8 -2.5 - Excluding grants: -4.7 -4.0 -4.4 -4.0 -3.7 -3.5 -3.1 -2.8 - Trade balance (percent of GDP): -1.9 -1.6 -2.2 -2.5 -2.4 -2.3 -2.1 -1.8 - Oil exports (percent of GDP): 5.7 3.6 5.1 4.6 4.2 4.0 3.8 3.7 - Non-oil exports (percent of GDP): 8.5 8.0 8.1 8.2 8.3 8.4 8.6 8.7 - Imports (percent of GDP): 16.1 13.1 15.3 15.3 14.9 14.7 14.5 14.2 - Terms of trade (percent change): 23.1 -5.6 -0.6 -6.0 -3.6 -2.9 -3.2 -3.3 - Oil price ($US dollars per barrel): 61.4 41.3 58.5 54.8 52.5 51.3 50.7 50.5 ### Public debt and debt service - Stock of public debt (percent of GDP): 42.3 45.8 46.2 45.6 44.4 43.1 41.0 39.2 - Of which: external debt (percent of GDP): 29.9 31.1 32.2 31.8 31.3 30.6 29.9 29.3 - Debt service (CFAF billions, annual profiles shown in Table 5 memorandum): - Debt service (memorandum, CFAF billions): 948 657 692 673 675 670 669 646 708 755 961 956 982 873 922 (multi-year sequence) - Debt indicators related to IMF capacity to repay (Table 5, selected rows): - Outstanding IMF credit based on existing and prospective drawings (SDR millions): 9.10.8 1,021.2 1,090.2 1,081.9 985.3 818.5 623.8 450.8 289.5 159.5 73.6 29.4 4.9 0.0 0.0 (sequence as presented) - Outstanding IMF credit (CFAF billions): 708.7 790.9 846.5 841.7 768.8 640.7 488.3 352.9 226.6 124.8 57.6 23.0 3.8 0.0 0.0 - Percent of government revenue (outstanding IMF credit): 20.1 19.8 19.3 17.3 14.2 10.6 7.5 5.1 3.0 1.5 0.6 0.2 0.0 0.0 0.0 - Percent of exports of goods and services (outstanding IMF credit): 16.6 17.0 17.4 16.2 13.8 10.7 7.6 5.2 3.1 1.6 0.7 0.3 0.0 0.0 0.0 - Percent of debt service (outstanding IMF credit): 74.8 120.3 122.3 125.2 113.9 95.6 73.0 54.6 32.0 16.5 6.5 6.0 2.4 0.4 0.0 - Capacity-to-repay indicators (Table 5, selected years): - Principal, charges and interest schedules (SDR millions and CFAF billions) preserved as tabulated for 2021–2035 (see Table 5 for full series) - Net use of Fund credit (SDR millions) sequence: 207.0 110.4 71.8 -4.9 -93.1 -163.5 -191.7 -170.3 -159.2 -128.5 -84.9 -43.6 -24.3 -4.8 0.1 ### Financial soundness indicators (selected) - Capital adequacy: - Total bank regulatory capital to risk-weighted assets (percent): 9.1 9.7 10.8 10.7 14.0 15.0 11.6 13.1 (2016–2020 and CEMAC Average entries as presented) - Total capital (net worth) to assets (percent): 7.5 7.8 8.7 8.9 9.4 10.9 10.9 11.9 - Asset quality: - Non-performing loans to total loans (percent): 10.7 10.8 12.4 12.8 16.0 17.0 18.0 20.7 - Profitability and liquidity (selected): - Net income to average capital (ROE) (percent): 20.6 27.9 22.4 24.7 ... 18.5 17.1 ... - Liquid assets to total assets (percent): 23.2 24.2 26.4 25.9 30.3 26.5 25.1 27.9 - Liquid assets to short-term liabilities (percent): 148.7 149.3 162.4 161.9 180.3 162.1 153.5 167.6 ### IMF program disbursements (proposed schedule, selected items) - Executive Board approval of the ECF & EFF Arrangements: 7/29/2021 — Amounts: 45.0 (percent of quota); 15.0 30.0 124.2 41.4 82.8 (percent of quota breakdown as presented) - Observance and review tranches with dates and amounts (percent of quota and millions of SDRs) preserved as presented for reviews through 6/3/2024 - Total proposed disbursements (percent of quota and SDRs): Total 175.0 58.3 116.7 483.0 161.0 322.0 (table totals preserved as presented) - Quota: "Cameroon's current quota is SDR 276.0 million." *Source: Cameroonian authorities; and IMF staff estimates and projections (content unit: 1cmrea2021001).* ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### RAM methodology and probability definitions - The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). - Relative likelihood: "low" = probability below 10 percent; "medium" = probability between 10 and 30 percent; "high" = probability between 30 and 50 percent. - "Short term" = risk could materialize within 1 year; "medium term" = within 3 years. - Non‑mutually exclusive risks may interact and materialize jointly. ### Major downside and upside risks, impacts, and recommended policy responses - Unexpected downside shifts in the Covid-19 pandemic - Relative likelihood: High - Impact if realized: Growth falls and public financing needs increase sharply, leading to higher fiscal and external financing gap and undermining debt sustainability. - Recommended policy response: Step up spending on health and social protection, and adopt measures to contain the spread of the pandemic while limiting its impact on the economy. - Unexpected upside shifts in the Covid-19 pandemic - Relative likelihood: Low - Impact if realized: Faster than expected containment of the pandemic leading to faster than expected growth recovery and boosting commodity prices. - Recommended policy response: Leverage unexpected gains to bolster fiscal space and catalyze the structural reform agenda. - Sharp rise in global risk premia exposing financial and fiscal vulnerabilities - Relative likelihood: Medium - Impact if realized: Sharp increase in global risk premia exacerbating financial and fiscal vulnerabilities. - Recommended policy response: Accelerate structural reforms to reduce macroeconomic imbalances and boost investor confidence; enhance bank supervision and regulation to reduce risk exposure; encourage digital financial inclusion. - Widespread social discontent and political instability - Relative likelihood: High - Impact if realized: Social tensions erupt as the pandemic and inadequate policy response cause socio-economic hardship in part due to unequal access to vaccines. Growing political polarization and instability weaken policymaking and confidence. - Recommended policy response: Strengthen social safety net and accelerate structural reforms to enhance social cohesion. - Oversupply and volatility in the oil market - Relative likelihood: Medium - Impact if realized: Higher supply and lower demand leading to renewed weakness in energy prices. - Recommended policy response: Widen the non-oil tax base, increase efficiency of the national oil refinery (SONARA) and spur competition in the oil import sector. - Cyber attacks - Relative likelihood: Medium - Impact if realized: Cyber attacks on critical global financial, transport or communication infrastructure and broader private and public institutions trigger systemic financial instability or widespread disruptions in socio-economic activities. - Recommended policy response: Enhance investment in IT systems and increase awareness of cyber security. - Spillovers from other CEMAC countries - Relative likelihood: High - Impact if realized: Worsening economic situation of other CEMAC countries could affect Cameroon through extra pressure in the payment and banking systems. - Recommended policy response: Coordinate with other CEMAC countries to build additional buffers through fiscal consolidation and structural reforms. - Spillovers of the regional security situation - Relative likelihood: High - Impact if realized: A deterioration of the regional security situation would lead to an increase in displaced populations, a costlier security response, and decline of investment in affected regions. - Recommended policy response: Provide space for higher security expenditure in the budget by curtailing unproductive public investments; prepare contingency plans for refugees with UNHCR. - Contingent risks from state-owned enterprises (SOEs) - Relative likelihood: High (noted also as Medium in a separate line) - Impact if realized: Contingent risks from state-owned enterprises could impose further pressures on public debt and the ongoing fiscal consolidation under the program. - Recommended policy response: Contain the risks by enhanced monitoring and timely reporting of the risks of the state-owned enterprises and developing strategies to reduce the state aid to these companies. --- ### Annex II. Implementation of ECF and RCF Commitments ### Program overview and access - The three-year Extended Credit Facility (ECF) arrangement approved June 26, 2017: - Total access: SDR 483 million (about US$ 680.7 million or 175 percent of Cameroon’s quota). - Program pillars: (i) frontloaded fiscal consolidation while protecting social spending and safety nets; (ii) structural fiscal reforms to expand non-oil revenue base, improve public investment efficiency and budget quality, and mitigate fiscal risks from contingent liabilities; (iii) reforms to accelerate private-sector-led diversification and boost financial sector resilience. - Rapid Credit Facility (RCF) support in 2020: - Two disbursements approved totaling SDR 276 million (about US$ 382 million or 100 percent of quota). - Program commitments under the RCFs incorporated as Prior Actions and Structural Benchmarks in the proposed program. ### Performance under the ECF - Overall assessment: Broadly satisfactory; program helped restore financial viability and external stability through fiscal adjustment and appropriate monetary policy. - Growth: Real GDP growth averaged 4 per cent in 2016-19. - Fiscal and external buffers: Notable progress but social spending remains low. - Overall fiscal balance: reduced from 5.1 percent of GDP in 2016 to 2.9 percent in 2019. - Regional reserve coverage ratio (BEAC): moved from 2.3 months of imports in 2017 to 3.5 months of imports in 2019. - Human Capital Index rank: Cameroon ranks 139 out of 157. - Cash transfer mechanism: little progress in establishing an effective cash transfer mechanism. ### Fiscal consolidation and social protection - Program included a floor on social spending (designed with the World Bank) and measures to expand non-oil revenue and improve spending efficiency. - Social spending: remained low relative to peers despite a floor on social spending in the program. ### Structural fiscal reforms and public financial management (PFM) - Revenue mobilization: - Non-oil revenues: reached around 15.7 percent of GDP in 2019, up from 15.0 percent of GDP in 2017. - Reforms implemented: strengthened exchange of information between tax and customs administrations; improved interface between active taxpayer database and tax management. - Ongoing constraints: exemptions and tax expenditures continue to constrain revenue collection. - PFM progress: - Achievements: improved budget preparation, quality of expenditure, development of a medium-term budget framework; transposition of CEMAC Directives and promulgation of laws related to PFM code of transparency and good governance. - Remaining weaknesses: budget execution does not guarantee full compliance with parliamentary authorization; spending needs, commitments, and cash implementation often underestimated; significant execution through exceptional procedures or SNH direct interventions; low public investment execution rates with high management costs and delays. ### Public debt management - Public debt dynamics: - Public debt: increased from 33.3 percent of GDP in 2016 to 42.7 percent of GDP at end-2019. - External debt stock: 31.2 percent of GDP at end-2019. - Concessional share: around 40 percent of external debt is on concessional terms. - Contingent liabilities and SOEs: - Monitoring of contingent liabilities remains insufficient despite high risks posed by SOEs. - Broadening the debt perimeter to include SONARA contributed to the observed increased indebtedness. - Medium-Term Debt Strategy (MTDS): - Cameroon has an MTDS since 2010, but implementation remains challenging. - All project financing proposals and PPP projects are examined by the National Public Debt Committee (CNDP); new loan agreements require unconditional CNDP approval. - Large stock of SENDs indicates lack of consistency between MTDS and project planning. ### Private sector diversification, business environment, and financial sector resilience - Business environment: - Doing Business rank (World Bank 2020): 167 out of 199. - Constraints: starting a business, getting electricity, obtaining construction permits, paying taxes, registering property, enforcing contracts. - EITI membership since 2007. - Financial sector: - Reforms: generalized access to creditor databases to all credit and microfinance institutions; computerized register of movable securities; adopted a resolution plan for troubled banks in consultation with IMF staff and COBAC; formulated a national strategy in the context of the BEAC regional financial inclusion strategy project. ### Follow-up on RCF commitments and status as of dates in the report - RCF-1 (May 4, 2020) commitments: - (i) Issue a semi-annual report on COVID-19 related spending — Status: Ongoing (a report for March-December 2020 under preparation). - (ii) Commission an independent audit of this spending at end-2020 fiscal year and publish results — Status: Ongoing (call for bids launched to shortlist consultants by end-April). - (iii) Publish public procurement results and beneficial ownership of companies receiving procurement contracts related to COVID-19 expenditures — Status: Ongoing (converted into a prior action for RCF-2 approval). - RCF-2 (October 20, 2020) actions and commitments: - Prior actions: - (i) Issue before the RCF-2 Board date a circular implementing Article 90 of the Public Procurement Code to modify standard procurement forms regarding beneficial ownership information — Status: Met. - (ii) Publish before the RCF-2 Board date the backlog of all COVID-19 related contracts awarded since May 4, 2020, including beneficial ownership of successful bidders — Status: Met. - Other commitments: - (i) Publish after the RCF-2 Board date on the Public Procurement Regulatory Agency website and within 30 days of award the results of public procurement and beneficial ownership of companies receiving contracts — Status: Partially met (contracts totaling CFAF 53 billion published as of March 31, 2020; this does not cover totality of contracts and beneficial ownership not regularly published). - (ii) Issue a semi-annual report on COVID-19 related spending — Status: Ongoing (report for March-December 2020 under preparation). - (iii) Commission an independent audit of COVID-19 related spending at end-2020 fiscal year and publish results — Status: Ongoing (call for bids launched to shortlist consultants by end-April). - The outstanding commitments are incorporated into the new program design as prior actions or structural benchmarks. ### Implementation status of quantitative performance criteria and structural benchmarks (high-level) - Quantitative performance criteria and indicative targets (end-December and end-June where specified) showed mixed observance across reviews; status lines in the original tables indicate instances of "Met" and "Not met" across floors and ceilings for non-oil primary fiscal balance, net domestic financing, net borrowing from the central bank, disbursement of non-concessional external debt, accumulation of external payments arrears, and other indicators. - Structural benchmarks not completed as of September 15, 2020 included: - Finalize diagnostic studies of large public companies (CAMTEL, PAD, CAMAIR Co, CAMWATER) — status: in progress, some contracts disrupted by COVID-19. - Strengthen accountability of project implementation units and consider linking remuneration to performance — status: in progress (draft circular and draft standard performance contract prepared; pending Prime Minister’s signature/decree). - External diagnostic study on SONARA restructuring options — status: ongoing (contract signed August 11, 2020; first interim report being validated). - Audit of all pre-2019 arrears, adoption of audited arrears payment plan, and transfer to Debt Management Agency (CAA) — status: ongoing (independent auditor recruited; audit report validated in December 2020; remaining step: adopt payment and implementation plan). - Inventory of cross-debts between public enterprises and the State and adoption of plan for discharging respective debts — status: ongoing (inventory carried out for 06 companies; awaiting information from other public companies; remaining step: adopt a debt clearance plan). *Source: Annex I. Risk Assessment Matrix and Annex II. Implementation of ECF And RCF Commitments (Cameroon).* ### Annex III. Cameroon’s Response to the Covid-19 Crisis ### Annex III. Cameroon’s Response to the Covid-19 Crisis ### A. Evolution of the Pandemic - First cases reported on March 6, 2020. - Weekly confirmed infections: - Initially peaked in June 2020 and declined gradually up to November 2020. - Resurged since January 2021 with an increase in fatality rates. - Geographic and demographic note: - All regions in Cameroon affected. - More males infected than females overall. - Variants detected: - South African and the UK strains detected by the Cameroonian Center for Research on Emerging Diseases. - Epidemiological totals as of end-June 2021: - Accumulated total infection cases: 80,487 - Recovered: 78,244 (97.3 percent) - Died: 1,320 - Government containment timeline and measures: - March 17, 2020: Package of 13 containment measures including closure of land, air and sea borders; quarantine for travelers returning from high-infection countries; suspension of entry visas; closure of schools and universities; prohibition of gatherings of more than 50 persons; closure of bars, restaurants and entertainment spots after 6 pm; suspension of missions of civil servants and parastatals abroad; cancellation of school and university games; ban on overloading taxis and public transportation. - Social distancing/sanitation: use of electronic communications and digital tools for meetings of more than 10 persons; compliance with WHO hygiene recommendations. - April 10, 2020: Additional measures—mandatory wearing of a mask in all public areas; local production of anti-COVID drugs; establishment of specialized treatment centers in all regional capitals; intensification of screening tests and awareness campaigns. - April 30, 2020: Deconfinement measures—lifting restriction on bars, restaurants, and leisure facilities operating after 6 p.m. provided social distancing and mask use; relaxation of passenger limits in public transport while maintaining compulsory masks and prohibiting overloading. - Since July 2020: Decentralized approach relying on health districts and regions to monitor cases, increase local testing, reinforce screening of incoming travelers, and strengthen health services; authorities opted not to re-impose confinement but to enforce barrier measures, increase testing, and strengthen treatment capacities. - Schools reopened in June 2020; COVID-19 screenings for all travelers landing in Cameroon strengthened. - Border mobility: Some land border crossing points remain shut or partially operational to enable trade. ### B. Economic Measures to Mitigate the Impact of the Pandemic - Fiscal support package announced on April 30, 2020, providing temporary tax accommodations and other measures for businesses: - Exemptions from the tourist tax in the hotel and catering sectors for the rest of the 2020 financial year. - Exemption from withholding tax for taxis and motorbikes and petty traders for the second quarter of 2020. - Allocation of a special envelope of CFAF 25 billion for expedited clearance of VAT credits awaiting reimbursement. - Postponement of the deadline to pay property taxes for the 2020 financial year to end-September 2020. - Measures to alleviate short-term impact on households: - Increase in the family allowance from CFAF 2,800 to CFAF 4,500. - A raise of 20 percent on pensions that did not benefit from a 2016 reform. - Three-month payment of family allowances to employees of companies unable to pay social security contributions or which had placed their staff on technical leave due to the crisis. - Spreading payment of social security contributions for the second quarter of 2020 over three instalments and canceling late fees. - Preparedness and Response Plan (three-year) with total financing close to US$ 825 million, comprised of five pillars: - Health strategy to prevent spread and care for infected persons: US$101 million. - Mitigation of economic and financial repercussions, including US$200 million tax relief to affected businesses: US$646 million. - Supply of essential products: US$9.5 million. - Local development of innovative solutions: US$16.5 million. - Social resilience to alleviate repercussions on vulnerable people and households: US$52 million. - Special COVID-19 account: - Created to finance the national pandemic response plan with modalities specified by a Minister of Finance circular. - Enacted in June 2020 allocated close to US$310 million to the account, financed at 76 percent by external budgetary support and resources released by debt service suspension. - The 2021 Finance Law enacted in December 2020 allocates close to $185 million to the account. ### C. Vaccination - National vaccine readiness and deployment plan adopted under UN country team guidance. - Total cost to implement the plan in 2021: $138 million for coverage of about 5 million people (20 percent of Cameroon’s population). - Logistics and deployment: - Local vaccine deployment team established; in-country logistic arrangements being put in place. - Expected vaccine deliveries: 864,000 doses of the AstraZeneca/Oxford (SIII) vaccine and 200,000 doses of SINOPHARM vaccine (Chinese). - Estimated persons vaccinated: 104,000 - Authorities intend to strengthen communication for community support for COVID-19 vaccination. ### D. External Sector Assessment (summary points relevant to pandemic context) - Overall assessment for 2020: Cameroon’s external position assessed to be moderately weaker than implied by fundamentals and desirable policies. - 2020 current account balance: - Narrowed to -3.7 percent of GDP (including official grants) due to compressed imports and less-than-anticipated impact on non-oil exports. - Net international investment position (NIIP) trajectory: - NIIP deteriorated from -25.9 percent of GDP in 2018 to -28.7 percent of GDP in 2019. - Gross foreign assets: 31.0 percent of GDP (2019). - Gross foreign liabilities: 59.7 percent of GDP (2019). - Debt assets: 20.9 percent of GDP (2019). - Debt liabilities: 48.5 percent of GDP (2019). - Net liability position increased from -15.6 percent of GDP in 2014 to -28.7 percent of GDP in 2019. - Assessment and risks: - Current NIIP assessed to be sustainable, but growth in net liability position raises risks to external sustainability; Cameroon is at high risk of external debt distress. - Need to strengthen public debt management and limit non-concessional borrowing. - Model estimates and gaps (2020): - EBA-Lite Current Account (CA) model: - CA norm: -2.3 percent of GDP - Cyclically adjusted CA: -3.8 percent of GDP - CA gap: -1.5 percent of GDP under current policies - Policy gap: 2.0 percent of GDP driven by tighter fiscal policy (+2.2 percent), lower public health spending (+0.71 percent), lower private credit (+0.15 percent), and slower credit growth (+0.12 percent) - REER gap (from CA model): 10.5 percent (REER assessed to be overvalued by 10.5 percent based on CA model) - EBA-lite REER model gave a positive CA gap of 1.9 percent of GDP corresponding to a REER gap of -12.9 percent; staff considers REER-model results less reliable for Cameroon. - Capital and financial flows: - Net capital inflow estimated to have decreased to 1.8 percent of GDP in 2020 from 3.7 percent of GDP in the previous year (excluding program lending, including private short-term capital), driven by a large drop in inbound FDI and other investment outflows. - Official capital flows including budget supports from international donors also decreased. - Prospects: Capital flows including FDIs projected to increase in the medium term with pandemic recovery and proposed ECF program; upside from increased oil prices; downside risks from protracted pandemic, deteriorating international sentiment, and concerns over debt sustainability. - Recommended policy focus to support external sustainability: - Gradual fiscal consolidation following measures to contain the pandemic. - Steadfast implementation of structural reforms to enhance competitiveness. - Strengthen public debt management and limit non-concessional borrowing. ### E. Capacity Development and Authorities’ Views (selected items) - IMF and AFRITAC Centre TA priorities over last two years: revenue administration, tax policy, debt and expenditure management, and compilation and dissemination of statistics. - CD strategy objectives for 2021-23: improve government revenue mobilization; raise efficiency, effectiveness, and transparency of public expenditure; strengthen debt management capacity and MTDS; enhance statistics compilation and timely dissemination. - Authorities’ views: - Value IMF dialogue and regular TA missions; find priorities closely aligned with program objectives and TA sequencing complementary. - Top 3 TA priorities (Table summary): - Domestic revenue mobilization: - Assess tax policy and propose measures to extend tax base (notably expansion of property tax and streamlining tax exemptions). - Enhance tax administration: strengthen compliance, tax auditing, expand electronic procedures and payments, combat fraud and smuggling. - Expenditure and cash management: - Ensure spending executed through normal channels and comply with 2018 law on transparency and good governance in public finance management. - Accelerate transition to the Treasury Single Account (TSA). - Improve monitoring and forecasting of consolidated government cash position; prepare monthly and annual cash plans. - Monitor management and performance of public enterprises to limit fiscal risks. - Increase effectiveness of capital spending via better project selection, planning, execution, and evaluation. - Debt policy and management: - Enhance quality and reliability of public debt data. - Strengthen medium-term debt strategy (MTDS) and enforce consistency between borrowing decisions and MTDS. - Ensure all project financing proposals are approved by the National Public Debt Committee (CNDP). *Source: Annex III. Cameroon’s Response to the Covid-19 Crisis (excerpt).* ### 3. To capitalize on the reforms implemented within the framework of the program supported ### To capitalize on the reforms implemented within the framework of the program supported ### Program request and financing arrangement - Government requests IMF support through: - a three year arrangement under the Extended Credit Facility (ECF) and - a three year arrangement under the Extended Fund Facility (EFF) - covering the period 2021-24 for an amount equivalent to 175 percent of its quota, equivalent to 483 million SDRs or about CFAF 375 billion (SDR 161 million or 58.3 percent of quota (ECF) and SDR 322 million or 116.7 percent of quota (EFF)), to be disbursed in seven installments. - Immediate financing need: - first disbursement sought of 45 percent of quota. - Supporting documentation attached: - Memorandum of Economic and Financial Policies (MEFP) - Technical Memorandum of Understanding (TMU) ### Program objectives and structural reform priorities - Core objectives: - strengthen external viability and contribute to community efforts to boost BEAC's foreign exchange reserves; - achieve strong, sustained, and inclusive growth supported by adequate financing and budgetary policies compatible with the fight against the COVID-19 pandemic, resumption of economic growth, and poverty reduction; - structural transformation of the economy in line with SND-30 (National Development Strategy for 2020-30) aiming to raise Cameroon to the rank of emerging country by 2035. - Structural reform areas: - budgetary revenue mobilization; - public expenditure quality and processes; - management of public enterprises; - business climate improvements; - public debt management. - Program anchors: - gradual fiscal consolidation by almost 2 percentage points of GDP in 2021-24 to reach the regional convergence criterion by 2024; - measures to increase revenues and rationalize public expenditure while improving their quality; - prioritization of concessional loans and Public-Private Partnership financing where appropriate; - active debt management and strengthening the authority of debt oversight bodies (CNDP, Caisse Autonome d’Amortization). ### Macroeconomic outlook and assumptions - COVID-19 context and recovery hypothesis: - assumption of a gradual attenuation of COVID-19 during 2021-22. - Growth projections and sectoral drivers: - non-oil sector growth should begin to recover from 2021 and reach 5 percent starting from 2023. - average annual growth of the oil sector over 2022-26 would be close to zero, with increased gas production offsetting depletion of oil fields. - supports to growth include: agro-food industry, manufacturing and chemical industries, wood processing, continued construction and rehabilitation of road infrastructure, improved energy supply via new hydroelectric dams and transmission infrastructure, positive effects of development programs for coffee, bananas, cotton, rubber, actions to increase food crop production and productivity, and resumption of agricultural activity following expected appeasement in insecure regions. - External sector and reserves: - objective to achieve a regional coverage rate of nearly five months of imports for the region in the medium term. - current account deficit targeted to stabilize around 3 percent of GDP in the medium term. ### 2020 recent economic developments and key statistics - GDP growth: - GDP growth slowed sharply in 2020 against an increase of 4.0 percent projected before the onset of the pandemic. - INS provisional estimates show an increase of 0.7 percent against a preliminary estimate of -1.5 percent by IMF staff. - External trade (DGD figures, 2020): - global trade fell by 20.3 percent in value; - imports fell by -17.6 percent; - exports fell by -24.6 percent. - global non-oil trade fell by 9.4 percent: imports -8.7 percent, exports -11.1 percent. - Inflation: - average rate of 2.5 percent in 2020. - Public finances (RBL and execution, 2020): - Revised Budget Law (RBL) adopted June 2020 to reflect pandemic impacts, CAS creation, DSSI admission, exceptional disbursements, and raised government securities ceiling. - budget revenue collected reached a rate of 109 percent against the revenue target of the RBL. - expenditure execution rate: 100.3 percent compared to RBL forecasts. - deficit in the overall balance on a payment order basis: 3.3 percent of GDP (compared to 4.5 percent anticipated in the RBL). - cash deficit: set at 4.9 percent of GDP in the RBL, reached 3.6 percent of GDP. - Balance of payments: - external current account deficit estimated at 3.7 percent of GDP in 2020, compared to 4.3 percent in 2019. - Monetary and financial indicators: - money supply increased 12.1 percent year-on-year in 2020 (compared to 6.5 percent a year earlier). - state's net debt position vis-à-vis the banking system increased by 57 percent in 2020 compared to 2019. - loans to the economy grew 4.3 percent in 2020. - net foreign assets fell by 0.5 percent. - Public debt (end-2020): - outstanding public sector debt: 45.2 percent of GDP, of which 0.1 percent is direct debt guaranteed by the central government and 4.0 percent is debt of public companies not endorsed and identified. - this outstanding amount increased by 2.3 percent of GDP compared to end-2019. - external public debt reached 31.1 percent of GDP at end-2020, an increase of 1.0 percent of GDP compared to end-2019. - external disbursements: CFAF 874 billion (including CFAF 351 billion in non-concessional terms) against CFAF 767 billion envisaged in the 2020 debt plan. - new signed non-concessional commitments: CFAF 79 billion (against 350 billion provided for in the State debt plan in 2020). - total signed commitments in 2020: 475 billion FCFA. - stock of committed but undisbursed loans (SENDs): 13.7 percent of GDP at end-2020. - IMF staff estimates public sector debt at 45.8 percent of GDP (external and domestic debt at 31.1 and 14.7 percent of GDP respectively) at end-2020, including Treasury floats but excluding SOE debt not covered in the DSA. ### Liability management and Eurobond operation - Eurobond operation: - new Eurobond issued on July 1 for CFAF 450 billion. - proceeds allocation: - liability management including a partial buy-back of the 2015 Eurobond estimated at CFAF 328.3 billion with net financing cost estimated at around CFAF 83.5 billion; - finance projects: CFAF 37.5 billion. - Government will create an escrow account under the TSA for the CFAF 37.5 billion to ensure spending is limited to the identified projects, in line with the Fund’s Debt Limits Policy (DLP). - note: new Eurobond maturity and rate—maturity of 12 years with principal payments on three equal tranches starting from 2030; interest rate is 5.95 percent. ### Fiscal policy framework and public finance objectives - Fiscal consolidation strategy (2021-24): - gradual reduction of the overall budget deficit to achieve the regional convergence criterion by 2024. - main instruments: - improve mobilization of non-oil revenue while maintaining incentive economic policy and protective social policy; - strengthen effectiveness and efficiency of public spending, both current and capital; - gradual reduction of state arrears to public enterprises and the private sector. - specific fiscal priorities to accommodate: health response to COVID-19; reconstruction plan for southwest and northwest regions; strengthen decentralization; control costs of major international sporting events (notably Africa Cup of Nations (ACN 2022)); start implementation of universal health coverage. ### Debt policy and debt management strengthening - Debt policy goals: - slow pace of new external debt commitments; - prioritize concessional external borrowing for projects meeting maturity criteria. - Institutional and operational measures: - set debt ceilings in relation to project preparation and implementation capacity; - strengthen CNDP authority in approving new external loans contracted or guaranteed by the State; - improve Caisse Autonome d’Amortization (CAA) ability to monitor internal and external debt of all public enterprises; - conduct active debt management policy to lower cost and bring Cameroon back to a moderate risk classification of indebtedness. - Program monitoring: - Government commits to communicate regularly to IMF staff all required information within prescribed deadlines per the TMU; - Government will consult with IMF on possible additional measures before revisions to the MEFP. ### Risks to the outlook - External risks: - duration and intensity of the COVID-19 pandemic; - level and volatility of commodity prices; - persistence of international trade tensions. - Domestic risks: - worsening insecurity in conflict regions; - influx of refugees from neighboring countries; - deterioration in the financial situation of certain public and quasi-public sector companies. - Mitigating factor: - dynamism of the non-oil sector could help mitigate negative impacts of these risks. _This summary is based on the Letter of Intent and Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding attached to the government request (2021–22)._ ### 16. The Government's public finance policy over 2021-2024 will be based on budgetary ### 1cmrea2021001 - 16. The Government's public finance policy over 2021-2024 will be based on budgetary ### Fiscal consolidation objectives (2021-2024) - Objective: budgetary consolidation aimed at reducing the budget deficit and strengthening debt and external position sustainability. - Mechanisms: increased mobilization of non-oil internal revenue and continued rationalization of public spending. - Overall budget deficit (payment basis) path: - 2020: settled at 3.3 percent - 2021: would reach 3.4 percent of GDP - 2024: gradually decline to around 1.6 percent - Public sector debt projection: - Gradual decline reaching almost 41 percent by end-2025. ### 2021 budget law and Revised Budget Law (RBL) considerations - Initial 2021 budget law (commitment basis): - Budget deficit envisaged: 2.8 percent of GDP. - Total revenue incorporated: 13.6 percent of GDP. - Oil revenue sensitivity: - A slight increase in world oil prices would induce an increase in oil revenues of 0.3 percentage points of GDP. - Specific measures in 2021 budget law: - Import-substitution measures with negative impact on customs revenue estimated at CFAF 0.6 billion. - Ad valorem excise duties with positive impact estimated at CFAF 8 billion. - Total expenditure planned: 0.4 percentage point of GDP lower than revised 2020 budget law (due to COVID-19 spending savings and reduction of subsidies and transfers). - Need for RBL 2021 due to: - Unexpected rise in world oil prices, cost of national COVID-19 vaccination deployment plan, unanticipated external funding, new international issue for 2015 Eurobond buyback. - Request for higher non-concessional borrowing ceiling to allow issuance of 450 billion CFA francs. - Adoption of RBL is a prior action for conclusion of a new IMF-supported program. ### Government securities and debt management - Use of bills and bonds on subregional market according to budget law and cash flow requirements. - 2021 budget law authorizes issuance of public securities with maturity > one year (OTA): CFAF 350 billion. - Issuance of government securities with maturity < one year (BTA): determined by cash flow requirements, respecting zero net emission target at end-2021. ### Budget execution controls and limits on exceptional procedures - 2020: share of expenditure executed through derogation procedures in expenditure financed from own resources (excluding debt service) reached 11.9 percent. - Targets and controls: - Apply 2021 budget execution circular to limit provisional commitments and cash advances. - Total volume of expenditure by exceptional procedures in 2021, excluding direct interventions, should be below 5 percent of the total envelope of expenditure financed from own resources (excluding debt service). - Cap on level of direct interventions by National Hydrocarbons Corporation (SNH) at CFAF 145 billion for 2021; RBL 2021 includes budgetary credits to cover these expenses. - Expenditure through exceptional procedures will be regularized and reported in the monthly TABORD. - Commitments effectively stopped before end-November 2021; payment orders at end-December 2021. Additional period limited to one month after end of budget year. ### Digitization of budgetary procedures - Upstream: dematerialization of draft budget law documentation via digital tablets and parliamentary platform; development prospects for an application downloadable online. - Chain of expenditure: - Continued optimization of PROBMIS application and CAS management module for total dematerialization of expenditure processing. - Focus on strengthening electronic communication, dedicated platforms, automated data exchanges, electronic archiving, and densification of computer network. - Human resources/payroll: - Complete digitalization of career management, pay and pension within SIGIPES II project, including introduction of biometrics for attendance monitoring. ### Revenue mobilization and expenditure rationalization actions - Revenue measures: - Intensify collection of tax and customs arrears, particularly from public administrations, public establishments and enterprises. - Implement measures to address taxes/duties from cross-debt agreements and arrears in jointly funded cash markets. - DGI and DGD to strengthen control over companies at risk of under-reporting. - Intensify Enforcement of State Revenue campaign to improve non-tax revenue performance. - Expenditure measures: - Continue rationalization: strengthen budgetary discipline, limit derogatory procedures, supervise and rationalize transfers and subsidies to companies/public establishments, strengthen budgetary control. - Maintain budgetary regulation measures: precautionary blocking of credits for goods and services, quarterly expenditure quotas to principal authorizing officers, cancellation of irrelevant budget credits. - In event of a shock: execute a consequent budgetary adjustment via a new revised finance law. ### Civil service wage bill reform - Actions envisaged: - Strict control of return to pay of public officials suspended following physical counting of State personnel (COPPE). - Installation of SIGIPES 2 to replace ANTILOPE and SIGIPES tools. ### Protection of social spending and programmatic floors - Fiscal consolidation to continue while protecting priority social spending. - 2021-24: increase spending dedicated to social sectors (health, education, social affairs) with improved quality and performance-based health expenditure management. - Continuation and extension of cash transfer programs and labor-intensive works (THIMO) for vulnerable households. - Social spending floor for 2021: - FCFA 1110.8 billion FCFA, or 4.6 percent of GDP, constituting a quantitative indicator of the program. ### Medium-term fiscal policy objectives (CEMAC convergence) - Fiscal framework consistent with consolidation objective to meet CEMAC convergence criterion in medium term. - Target: gradual reduction of the reference budget balance to bring it below the CEMAC convergence criterion (1.5 percent of GDP, payment order basis) by 2024. - Instruments: - Continuous improvement in mobilization of non-oil revenue. - Reduction in tax expenditure. - Rationalization of non-priority expenditure. - Better prioritization of capital expenditure. - Non-oil revenue projection: would gradually increase by about 0.7 percent of GDP per year over 2021-24 supported by about 2 ½ -3 percent of GDP in tax measures over the program period (Structural Benchmark 5, Table 2). ### Public finance management reforms (cash management, STA, transparency) - Deepening cash management reforms and operationalization of Single Treasury Account (STA) with BEAC: - Prepare credible monthly cash plans based on commitment plans backed by procurement plans. - Continue closing and repatriating bank accounts eligible for Treasury Single Account (TSA) to BEAC. Total resources transferable to STA in 2021 estimated at a minimum of CFAF 50 billion. - Continue dialogue with technical and financial partners on centralization of counterpart funds for jointly funded projects in a single “basket fund” account with BEAC. - Deflate balances of correspondents' accounts while ensuring government deposits objective; ban funding correspondent accounts other than those with a main accountant from budget appropriations and ban opening new correspondent accounts. - Financial reporting and transparency: - Strengthen State's financial reporting to make budgetary and accounting information exhaustive, reliable, and timely. - Summary situation of Treasury operations (SROT) and Public Finance Tracking report to be available no later than 45 days after end of each month, and 45 days after additional period for end of year data. - Publish quarterly execution report on Ministry of Finance website and in newspapers; develop and publish interim and annual reports and a Citizen Budget with civil society participation. - Capital expenditure effectiveness: - Strict application of decree on maturation of investment projects: include in budget only projects with maturity visa issued by Minister in charge of public investments. - Accountability of program/project implementation units through standardized performance contracts and linking remuneration to performance indicators; require quarterly reports with physical and financial implementation indicators, revision of disbursement plans, and project management expenses. - A decree laying down performance monitoring methods for program/project management units financed by ordinary domestic and external resources to be signed and published before end of 2021. - Establish institutional framework for preparation, implementation, and control of large-scale development projects. - Creation of a maturation and compensation fund for public investment projects. - Establish mechanism for evaluating recurring charges for maintenance, upkeep, and depreciation of State assets. ### Tax administration reforms (DGI) - DGI priorities to improve revenue collection, fight fraud and tax evasion, and ensure integrity of taxpayer files and IT systems: - Continued implementation of prior registration requirement for persons performing economic transactions (subscription electricity, water, or telephone, opening and keeping bank account, taking out an insurance contract). - Simplification and digitalization across registration, online declaration, online obtaining/transmission of tax documents, follow-up of requests, payment of taxes and duties; issuance of tax reminders and notification of adjustments. - Finalization of reform of revamped tax centers (CDIs): computerization, reduction in number, strengthening human and infrastructural resources. - Implement declaration and payment of taxes and duties by mobile phone for small taxpayers and individuals. - Abolition of cash payment of taxes and duties in tax centers. - Implement electronic invoicing to ensure traceability and exhaustive fiscal monitoring and optimization of VAT and excise duty monitoring. - Strengthen fiscal control via automated monitoring system for Large Business Directorate (DGE) and taxes of medium-sized enterprises (CIME); use local and international expertise via "inspector of taxes without borders" mechanism. - Comprehensive reform of tax regime for small and medium-sized enterprises by raising threshold for VAT liability. - Finalize DGI-DGTCFM-DGB interconnection for use of DGI active taxpayer file as sole repository for payment of public orders, automatic accounting of tax payments, and dematerialization of operations on execution of public order. - Improve collection by strengthening forced collection of tax debts from importers by DGD. - Strengthen real time automatic information collection for large taxpayers. - Extend use of FUSION tool to Regional Tax Centers. - Complete computerization of tax audit chain from information collection, to issuing tax reminders, programming, and notification of adjustments. - Implement reform of integrated agent to broaden tax base and reduce informal sector size. - Strengthen monitoring of personal income tax through universal income declaration before June 30 each year. - Continue reform of integrated system of taxes and duties management. ### Customs administration reforms (DGD) - Broaden tax base and optimize revenue: - Optimize spontaneous revenue collection on high-yield products: vehicles, clinker, wood, fuels and lubricants, textiles, mobile phones. - Capitalize on tax loopholes, particularly specific taxation (oil, mining and gas taxation). - Ensure cash payment of customs taxes/duties related to imports for public procurement, regardless of financing mode, at contracting authorities' behest. - Continue rationalization of tax expenditure with Technical and Financial Partners' support. - Trade facilitation and information systems: - Improve and harmonize handling of goods in territory. - Strengthen pooling of information with logistics chain actors (GPAC, CNCC, banks) via interfacing information systems toward a data warehouse. - Finalize optimization of Cameroon Customs Information System (CAMCIS) functionalities and remaining modules (litigation, performance management, intelligence management, ex post control). - Continue interfacing CAMCIS with Ministry of Transport’s information system to stem vehicle registration fraud. - Capitalize on reconciliation of tax bases with Société Générale de Surveillance (SGS). - Collaborate with Ministry of Forestry (MINFOF), SGS and partners to account for timber exports and secure export earnings. - Improve business climate and reduce delays/costs: - Pursue paperless procedures: interconnect Central African customs administrations' information systems; develop automatic management/clearance system for bail releases; automatize monitoring of suspensive and economic regimes; initiatives for one-stop-shop environment per UN-CEFACT Resolution No 33. - Reduce delays and costs by strengthening mechanisms that permit release of goods before payment of customs duties and taxes. - Implement modern customs incentive regimes: rationalize transit including single bond; promote economic regimes (inward/outward processing, drawback, economic zones); finalize Authorized Economic Operator (AEO) program implementation. - Strengthen fight against fraud and improve controls: - Establish alert procedure for authorized intermediaries to inform Customs Administration of suspicions on foreign trade financial transactions. - Reinforce obligation of authorized intermediaries (banks) to transmit monthly information on all foreign trade-related international financial transactions. - Submit all products under Export Tracking Sectoral Program (PSSE) to pre-shipment inspection. - Require communication of financial transactions by authorized intermediaries to Directorate General of Customs by the 10th of each month. - Improve accounting and valuation of exports via an intelligent system for real-time information sharing on exported products and an operational framework to check consistency between export repatriations and DGD data. - Continue Operation Stop Illicit Trade (HALCOMI) to fight fraud, smuggling and other major trafficking. *International Monetary Fund — Cameroon country document content unit 1cmrea2021001* ### 29. Improving customs revenue to support the financing of the National Development ### 29. Improving customs revenue to support the financing of the National Development ### Customs revenue and administration reforms - Measures the Government is considering to improve customs revenue collection: - Strengthening the automation and digitalization of ex-post controls and surveillance like the Cameroon Customs Monitoring System (COSMOS). - Strengthening the recovery of the stock of outstanding debts through the automation of debt monitoring, with the consequence of suspending some facilities (moratoriums, direct withdrawals, duty and tax credits, suspensive and economic regimes) to debtor companies. - Strengthening the control of illicit transactions. - The promotion of exports and the mastery of customs-related taxation. - The extension of electronic payment platforms to all stakeholders in the national logistics chain. - Joint DGI–DGD work based on "FUSION" software to guarantee collection, sharing and use of information, relying on: - Continuing to clean up the taxpayer file through the full migration of the secured DGI file into the DGD information system (CAMCIS). - Strengthening monitoring and securing of non-salaried or professional persons who still carry foreign trade operations through the implementation of an alert mechanism in the event of operations that do not comply with the status of employee. - Simplifying procedures by: - creating a single file of taxpayers with customs debts and tax debts; - integrating tax arrears in the system of the Single Window for Foreign Trade Operations (GUCE) to make this available on the platform before an operator can make a payment; - merging the certificate of non-royalty (ANR) issuance system and that of customs clearance into a single document. - Strengthening and rationalizing joint DGI–DGD controls by improving capacities in both administrations. - Continuing to assess and reduce tax expenditure by finalizing the related 2020 report. ### Tax policy reform and tax base broadening - Rationale: - Broadening the tax base remains a challenge given the considerable weight of tax expenditure, the weight of the informal sector, and the low contribution of personal income tax. - In a post-COVID-19 recovery context, the government chose tax break (suspension of the creation of new levies) and proactive support to companies; only measures to improve tax administration were prioritized in the 2021 Budget Law. - The Government intends to carry out a diagnostic study of fiscal policy with IMF technical assistance to inform short-and-medium term fiscal policy measures. - Tax policy levers for assessment: - Reduction in tax expenditure: - Overall tax expenditure represented 21percent of non-oil tax revenue and 2.6 percent of GDP in 2019, according to the report on tax expenditure annexed to the 2021 Finance Law. - Expected continuation of reduction by removing exemptions and incentives that are ineffective and counterproductive. - Potential reforms include: - generalization and improvement of the VAT system and the gradual increase in customs duties towards the level of the Common External Tariff (CET) on staple foodstuffs which are currently VAT exempt; - targeting of sectors eligible for private investment incentives, following a review of the April 18, 2013 law; - strengthening monitoring of benefits granted to eligible companies through compliance checks; - alignment of agreements and specific commitments signed before 2013 with the law of April 18, 2013 on incentives for private investment; - removal of the import exemption on certain goods already produced or likely to be produced locally. - Rationalization of the tax regime of externally financed projects through the effective abolition of the tax support regime. - Broadening of the tax base in the transport sector by combining multiple taxes and charges owed by carriers into a single levy. - An overhaul of property taxation as a prelude to reform of local taxation. - Apply excise duties on certain products likely to be produced locally. - Continued implementation of import-substitution measures, including subjecting certain goods likely to be produced locally to excise duty, promoting exports, and strengthening national supply of consumer products. ### Debt policy and management of contingent liabilities - Debt sustainability priorities: - Avoid increased risks of debt distress and strengthen debt sustainability. - Given high risk of debt distress, the government will: - slow down the pace of new external debt commitments; - favor concessional loans; - limit non-concessional debt to high priority projects for which no concessional financing is available in accordance with the new IMF policy on external debt limits for countries at high risk of debt distress; - manage to meet project implementation deadlines as specified in loan agreements; - put in place a prudent issuance policy for government securities based on cash flow requirements; - develop the secondary market to build the yield curve as a benchmark for domestic loans, with the support of the BEAC. - Ceilings and limits: - The ceiling on new non-concessional external debt contracted or guaranteed by the government will be adjusted upward to a maximum of CFAF 230 billion exclusively for the projects specified in the authorities’ project list and contracted or guaranteed after program approval. - If external debt contracted or guaranteed by the government between January 1st, 2021 and the date of program approval and linked to specific projects exceeds CFAF 70 billion, this ceiling would be adjusted downward accordingly. - For the first quarter of 2022, until modified by the Executive Board, the 2022 ceiling on new non-concessional external debt contracted or guaranteed by the government will be adjusted upward, up to a maximum determined by the difference (i) CFAF 230 billion, and (ii) the amount of the adjustor applied at end-December 2021, exclusively for the projects specified in the authorities’ project list. - The 2021 Budget Law sets the overall ceiling for new external commitments at CFAF 650 billion as well as an exceptional guarantee of CFAF 200 billion for domestic borrowing by public and private companies, as an accompanying measure against COVID-19. - The 2021 Revised Budget Law provides for active management of public debt with the reprofiling of the 2015 Eurobond; this operation raises the issuance ceiling for non-concessional loans by 450 billion CFA francs, to refinance part of the 2015 Eurobond. - Public debt management framework: - The National Public Debt Committee (CNDP) will systematically examine all debt proposals, including public enterprises and PPP projects and all requests for guarantees. - CNDP approval required only if projects meet criteria of maturity, priority, quality of financing, fiscal sustainability, and economic opportunity, accounting for impact on debt sustainability; only an unconditional favorable opinion from CNDP will lead to signing of new loan agreements. - Compliance with public debt procedures manual adopted in September 2019 will be ensured. - Government will ensure that no new collateralized loan is contracted by itself or by public enterprises. - Domestic debt and arrears: - Audit of all accounts payable before 2019 at Treasury and branches was carried out in 2020; audited and validated amounts were settled, canceled, or transferred to the Autonomous Amortization Fund (CAA) with a clearance plan from 2021. - A “floating debt” audit operation concerning all payment arrears as of December 31, 2019 is in progress, comprising four separate audits: (i) central government debts not yet committed, expenses committed but with unsettled payment orders (DENO); (ii) debts of public enterprises and public establishments; (iii) debts of decentralized territorial communities; and (iv) State rental debts and those resulting from compensation/expropriation for public utility works. - The Government intends to adopt a plan to clear all arrears audited and will no longer accept claims on any kind of debt securities from before 2019. ### Medium-term debt strategy and SENDs - The Government prepared a medium-term debt strategy (MTDS) covering 2021-23 and updated the SENDs disbursement plan for 2021-25. - At end-2020, the stock of SENDs amounted to 3,147 billion FCFA, or 13.7 percent of GDP. - The SENDs disbursement plan will be made consistent with MTDS external funding expenditure; government will take measures to improve execution rates of current projects to achieve gradual reduction in the stock of SENDs. - Quarterly disbursement plans for all investment projects will be prepared with project managers/coordinators and will serve as the basis for disbursement requests, in accordance with the annual disbursement plan of SENDs. - The Government will consider canceling SENDs on long-lasting and non-performing projects. ### Public enterprise reform and management of contingent liabilities - Objectives: strengthen management and governance of public enterprises to improve public service delivery and limit fiscal risks. - Key actions and commitments: - Ensure implementation of reforms resulting from laws N ° 2017/011 and N ° 2017/010 of July 12, 2017; supplement provisions and implementing decrees of June 19, 2019 to strengthen control of budgetary risks, classification and functioning of governing bodies. - Assess financial sustainability of public enterprises via diagnostic studies underway for CAMTEL, CAMWATER, and the Douala Autonomous Port, and audits of other deficit and/or highly indebted public enterprises. - Carry out a diagnostic study of all approved or administered prices of products offered by public enterprises to review determination formulas and/or possible liberalization. - Treasury to issue quarterly payments on consumption due by the State to utility services (ENEO, CAMWATER, CAMTEL, SONARA, CAMPOST) relying on sufficient annual budgetary allocations to limit cross-debts; in return, entities must respect tax obligations. - Complete an inventory of cross debts as of end-December 2020 between the State and companies and between companies themselves by June 2022; it will cover 30 public companies and/or utility service companies with the most important tax debts or claims on the government per the Green Paper annexed to the 2021 Budget Law. - Public enterprises that benefited from on-lending or guaranteed loans must fulfill contractual obligations; government will initiate discussions to define recovery plans for unpaid debts settled by the State and set monitoring terms to meet debt service deadlines. - For new financing, introduce more security and provisions to collect debt service on time and preferably before due dates; amounts expected from public enterprises in respect of retroceded or guaranteed debt will be clearly identified and recorded in the Budget Law. - Require compliance with CNDP prior examination procedures for any indebtedness or recourse to State guarantee by public enterprises. - Strengthen governance: ensure boards include highly qualified agents with sector expertise, strengthen internal control systems, require production and publication of audited annual financial statements, and submission of business plans as per laws. - Strengthen role of the Technical Commission for the Rehabilitation of Public and Parapublic Sector Enterprises (CTR) as a transversal body steering the State’s shareholding policy; reassess the role and institutional position of the Technical Commission for Privatization and Liquidation (CTPL). - Introduce, by the end of the current three-year evaluation cycle, additional criteria for classification of companies and public establishments for officer/director remuneration in line with international best practices. - Rationalize the state portfolio: reduce public sector presence where private sector can operate more efficiently, merge entities offering similar services, and use PPPs where appropriate with solid institutional framework; amend PPP legal and regulatory framework in accordance with regional directives to improve transparency, specify modalities, and ensure a unique framework for all PPP projects. - CTR to establish a regularly updated dashboard of risks by public company to map State portfolio risks. ### Improving public enterprise performance and transparency - Policy directions: - Sign performance contracts specifying public service obligations, unit costs (as basis for subsidy payments), and measurable indicators of quantity and quality of services. - Gradual reduction of subsidies to low-performance enterprises. - Introduce large public enterprises in industrial sectors into the stock market. - Implement accompanying measures based on better use of the local market. - Program contracts and evaluation reports will be published on the MINFI’s official website within three months of their completion. ### SONARA (refinery) recovery and options - Diagnostic study findings and recommendations: - The study established human, technical, technological, and financial assessment of the disaster, provided strategic and operational diagnosis after the fire, and proposed four preferential options for restarting refining activity given technical and technological designs (simple or complete). - To have an efficient, competitive, and viable refinery, it was suggested that the refinery restart on the final configuration of the “SONARA 2010” project, with a complex refinery having a hydrocracking unit (DHC) in the medium term. - This option was validated by the Inter-ministerial Committee (CIM) on April 20, 2021. - CIM recommended a detailed engineering study (Summary Preliminary Project – APS and Detailed Preliminary Project – APD) to provide: (i) detailed description of the work and detailed evaluation of its cost; and (ii) realistic provisional construction schedule. *Source: 1cmrea2021001 - 29. Improving customs revenue to support the financing of the National Development* ### 42. In the immediate term, the government continues to take steps towards the financial ### 1cmrea2021001 - 42. In the immediate term, the government continues to take steps towards the financial ### SONARA financial sustainability (immediate-term actions) - Reach restructuring agreements on all SONARA's debts based on: - the pari-passu principle, treating all creditors (local banks and traders) equally and equitably; - an amortization period fixed according to the level of resources currently collected and deposited with the "Support to the Refinery" special account located at the central bank BEAC. - Revise debt restructuring agreements between SONARA and local banks concluded in October 2020 based on the realistic principles above. - Government requested a temporary exemption on the application of the prudential ratio on the minimum fixed asset coverage which is set at 100 percent. - Authorize SONARA to sell its OTZ securities (zero coupon treasury bonds) on the over-the-counter market of the BVMAC to replenish the special account "Support to the refinery" in the context of its ongoing debt restructuring. - Validate any loss of earnings (MAG) monthly and pay the amounts owed by the State not later than 90 days. - Require SONARA to regularly pay taxes and customs duties owed to the Treasury. - Ensure SONARA is authorized to import a volume of petroleum products compatible with its financial commitments. ### Regional monetary policy and foreign exchange measures - Government will join regional authorities to preserve the stability of the monetary arrangement and rebuild BEAC reserves. - Ensure enforcement of new foreign exchange regulations in all aspects under government responsibility. - Specific measures: - Continue to identify accounts held by public enterprises abroad and invite compliance with new foreign exchange regulations about opening offshore accounts. - Ensure, in liaison with the BEAC, that before signing new concession contracts or revenue sharing agreements with the extractive industries they comply with foreign exchange regulations; take measures to ensure the new petroleum code is fully compliant with CEMAC's foreign exchange regulations. - Ministry of Finance will execute due diligence related to domiciliation of export transactions with a resident commercial bank. - Create a BEAC-Commercial Banks-MINFI (DGTCFM-DGD) data exchange computer platform to facilitate control and monitoring of repatriation of export earnings. - Sign a protocol for exchange of foreign trade data including commercial banks, microfinance institutions, foreign exchange offices, DGD, DGTCFM and BEAC. - Platform uses: data sharing, automated production of statistics, conduct of controls, issuance and follow-up of alerts on suspicious transactions. ### Financial sector stability and restructuring measures - Resolution plans for two troubled banks validated; Head of State authorized the State to bear the cost of restructuring; COBAC deems plans credible. - Plans require non-performing assets be taken over by the Société de Recouvrement des Créances (SRC) at an overall tax-neutral cost to the State. - Performance contracts to be signed with each bank covering governance aligned with best practices, return to compliance with prudential standards and long-term profitability, and a strategy to sell State shares over 3 to 5 years. - Remaining historical shareholders are requested to participate in filling the asset shortage. - SME bank (Banque Camerounaise des PME or BC-PME): - New business model adopted by the Board on February 27, 2020; Articles of Association made compliant. - Model based on indirect financing and private sector participation in capital; being implemented gradually. - Public bank (CBC): - Continues to implement performance contract after transfer of its non-performing loans portfolio to SRC, assessed under IMF methodology. - State owns 98percent of CBC’s shares; decided to sell 51percent to a strategic partner and 30percent on the Central African Securities Exchange (BVMAC). - After operation, State will own only 17percent of CBC’s shares. - Ministry of Finance ensures strict application of new microfinance regulations in force since January 1, 2018; will ensure MFIs comply with institutional transformation, governance, and management control. ### Reducing non-performing loans and related reforms - Training on resolution of banking disputes: - 20 judges and 10 clerks from 4 major business centers trained; training concluded March 2019. - Deployment of these judges in commercial chambers and concentration of banking court cases on these magistrates are effective. - Authorities will ensure annual follow-up of training based on practical cases and extend training every two or three years to other judges. - Government intends to transform commercial chambers into specialized commercial courts with judges trained in commercial litigation. - National movable security directory (RNSM) operational: - As of end-December 2020, 12 out of 22 credit institutions and 08 microfinance institutions had declared movable securities to the RNSM. - 1,683 lines registered amounting to CFAF 479.8 billion. - Strengthen functioning of SRC including: - (i) diversification of its activities; - (ii) extension of the privilege of the Treasury to debt recovery related to the new activities of the SRC; - (iii) management of real estate assets; - (iv) improving operational capacities. ### Financial sector development (medium term and SND-30 axes) - Six axes for government interventions (as specified in SND-30): - (i) financial inclusion and densification of the financial and banking system; - (ii) development of local financing for investments and exports; - (iii) strengthening regional and international financing of investments and exports; - (iv) development of supplier credit; - (v) contribution of the Cameroonian Diaspora and repatriation of capital invested abroad; - (vi) development of financial talents and skills. - National Economic and Financial Committee (CNEF) leading update of the national strategy for financial sector development. - Diversify investor base in government securities (medium term): - During 2021 develop a strategy with BEAC to encourage participation of non-bank investors (insurance, pension funds, individuals, etc.) particularly in long-maturity issuance. - Ensure compliance with specifications of Special Purpose Vehicles (SVT), including obligation to partially transfer their subscriptions to customers. ### Competitiveness and private sector development - Key structural obstacles identified: - Basic infrastructures that remain insufficient, expensive, and under-developed. - Persistent high factor costs. - Difficulties of access to finance for small and medium-size enterprises and very small businesses. - A workforce not yet adapted to current and future needs. - Still low purchasing power within an emerging middle class. - A legal and judicial system to be improved. - Major economic crises (security crises, health crisis linked to COVID-19). - Government commitments: - Promote a tax policy more conducive to development, improve basic infrastructure, and strengthen governance. - SND-30 vision: structural transformation with private sector priority; three promotion areas: - (i) technological catch up and development; - (ii) incentive for business development; - (iii) protection of the national economic space. - Intensify dialogue with private sector; create and reinforce a formal consultation framework; operationalize deposit and consignment fund to collect taxpayers’ deposits ahead of tax disputes. ### Trade facilitation and AfCFTA - Commit to support regional initiatives for migration of customs information system, limit intermediate controls for transit, simplify procedures and administrative formalities. - Specific objectives: - (i) reduce transit times for goods for import, export, and transit; - (ii) reduce port transit costs for import and export; - (iii) complete dematerialization of procedures on port platforms; - (iv) implement Trade Facilitation Agreement measures. - Ensure proper functioning of the National Trade Facilitation Committee (CONAFE). - Ensure implementation of national strategy related to the African Continental Free Trade Area (AfCFTA). ### Business incentives and monitoring - Medium-term intentions: - (i) build a renovated system of incentives for business development; - (ii) gradually build a critical mass of "national champions" companies in industrial and financial sectors; - (iii) set up specialized bodies per the Investment Charter and reform consular chambers; - (iv) change public enterprises into instruments for accelerating industrialization through performance; - (v) strengthen monitoring and evaluation of companies receiving incentives and take corrective measures against proven slippage. ### Environment, climate change, and natural resource management - Actions per SND-30 to strengthen sustainable management and adaptation/mitigation: - (i) promote rational use of soils through sustainable cultivation practices; - (ii) create community and communal forests, encourage reforestation, and limit export of logs; - (iii) rationalize use of surface water and groundwater resources through new practices and technologies; - (iv) intensify actions to combat desertification, land degradation, and industrial pollution; - (v) operationalize system for monitoring, preventing and responding to effects of climate change. ### Good governance, AML/CFT, and EITI compliance - Strengthen good governance, transparency, rule of law and fight against corruption; improve anti-corruption strategy and legal/institutional framework. - AML/CFT: - National Risk Assessment (ENR) with World Bank support and 2021-2024 priority action plan presented January 19, 2021. - GABAC on-site visit during February 23 – March 15, 2021; preliminary report on shortcomings awaited. - Assessments to guide strategic decision-making and resource allocation using a risk-based approach. - EITI: - EITI Board (January 21, 2021) concluded Cameroon made significant progress on the 2019 EITI Standard but only three out of fourteen corrective measures were successfully observed. - Cameroon has until next validation expected to begin in April 2023 to implement the 11 remaining measures plus 4 measures from EITI-2019 new requirements. - Government intends to redouble efforts to implement EITI Board recommendations. ### Gender equality - Continue efforts to promote equality between men and women; commitments include: - Ratified almost all regional and international instruments (Beijing Declaration, CEDAW, SDGs, AU 2063). - National Gender Policy adopted in 2014. - Since 2010, presidential circulars include gender consideration in State budget preparation. - Commit to adapting budgeting tools to be more gender sensitive per AFRITAC recommendations. - Pledge to modify discriminatory laws and policies to facilitate female entrepreneurship and consult the banking system to facilitate access to credit for women. ### Program modalities and monitoring (reviews schedule) - Program will be monitored through semi-annual reviews and performance criteria, indicative targets and structural benchmarks as defined in Tables 1 and 2 and the attached technical memorandum of understanding. - Review schedule and expected completion dates: - First review: based on end-July 2021 targets; expected to be completed by December 15, 2021. - Second review: based on end-December 2021 targets; expected to be completed by June 15, 2022. - Third review: based on end-June 2022 targets; expected to be completed by December 15, 2022. ### Selected quantitative performance criteria and indicative targets (Billions of FCFA, cumulative basis for each fiscal year) — Table 1 (2021–June 2022) - A. Quantitative Performance Criteria - Floor on the non-oil primary fiscal balance (payment order basis): - End-July 2021 QPC: -523 - End-Sep 2021 IT: -847 - End-Dec 2021 QPC: -1,078 - End-March 2022 IT: -250 - End-June 2022 QPC: -504 - Ceiling on the net domestic financing of the central government (excluding IMF financing) 2/: - End-July 2021 QPC: 114 - End-Sep 2021 IT: 55 - End-Dec 2021 QPC: 102 - End-March 2022 IT: 155 - End-June 2022 QPC: 211 - Ceiling on net borrowing of the central government from the central bank (excluding IMF financing) 2/: - End-July 2021 QPC: 99 - End-Sep 2021 IT: 109 - End-Dec 2021 QPC: 114 - End-March 2022 IT: 25 - End-June 2022 QPC: 50 - Ceiling on the disbursement of non-concessional external debt 3/: - End-July 2021 QPC: 308 - End-Sep 2021 IT: 472 - End-Dec 2021 QPC: 566 - End-March 2022 IT: 161 - End-June 2022 QPC: 322 - B. Continuous Quantitative Performance Criteria (starting from the program approval) - Ceiling on the accumulation of new external payments arrears 4/: - End-July 2021 QPC: 0 - End-Sep 2021 IT: 0 - End-Dec 2021 QPC: 0 - End-March 2022 IT: 0 - End-June 2022 QPC: 0 - Ceiling on new non-concessional external debt contracted or guaranteed by the government 5/ 6/ 7/: - End-July 2021 QPC: 0 - End-Sep 2021 IT: 0 - End-Dec 2021 QPC: 0 - End-March 2022 IT: 0 - End-June 2022 QPC: 0 - C. Indicative Targets - Floor on non-oil revenue: - End-July 2021 QPC: 1,646 - End-Sep 2021 IT: 2,192 - End-Dec 2021 QPC: 2,930 - End-March 2022 IT: 796 - End-June 2022 QPC: 1,598 - Ceiling on the net accumulation of domestic payment arrears: - End-July 2021 QPC: 0 - End-Sep 2021 IT: -41 - End-Dec 2021 QPC: -81 - End-March 2022 IT: -14 - End-June 2022 QPC: -28 - Floor for poverty-reducing social spending: - End-July 2021 QPC: 450 - End-Sep 2021 IT: 745 - End-Dec 2021 QPC: 1,111 - End-March 2022 IT: 158 - End-June 2022 QPC: 380 - Ceiling on direct interventions of SNH: - End-July 2021 QPC: 100 - End-Sep 2021 IT: 120 - End-Dec 2021 QPC: 145 - End-March 2022 IT: 40 - End-June 2022 QPC: 65 - Share of spending executed through exceptional procedures on authorized (payment order) spending 8/: - End-July 2021 QPC: 5 - End-Sep 2021 IT: 5 - End-Dec 2021 QPC: 5 - End-March 2022 IT: 4 - End-June 2022 QPC: 4 *Source: 1cmrea2021001 — https://www.imf.org/-/media/files/publications/cr/2021/english/1cmrea2021001.pdf* ### 1. Cumulative external budget support, excluding IMF (earliest disbursement) ### 1. Cumulative external budget support, excluding IMF (earliest disbursement) ### Quantitative ceilings and program numbers - Item 1 (Cumulative external budget support, excluding IMF): 53; 53; 110; 53; 106 - Item 2 (New concessional external debt contracted or guaranteed by the government 9/): 219; 300; 350; 88; 150 - Item 3 (Balance of the special account for the unused statutory advances): 61; 51; 41; 41; 41 - Sources: Country authorities and IMF Staff projections - Specific adjustment and ceiling rules cited: - To be adjusted by potential use of the Eurobond proceeds of CFAF 37.5 billion. - The zero ceiling applies until the end of the arrangement. - On a contracting basis in accordance with the IMF's debt limits policy. - The ceiling on net domestic financing (excluding payment of arrears) of the budget and the ceiling on the net borrowing from the central bank will be adjusted if the amount of disbursements of external budgetary assistance excluding IMF financing, falls short of or exceeds program forecasts. - If disbursements are less (higher) than the programmed amounts, the ceiling will be raised (reduced) pro tanto, up to a maximum of CFAF 120 billion at the end of each quarter. - These ceilings include deposits of CFAF 37.5 billion at the central bank from the eurobond refinancing operations. - The 2021 ceilings include also CFAF 30 billion at end-July and CFAF 40 billion at end-September and December of BEAC repurchases (to be adjusted based on the realization) of Cameroon's bonds. - For 2021 the adjustment will be equal to the amount of non-concessional budget support approved up to a maximum of CFAF 110 billion. - For 2022 the adjustment will be equal to the amount of non-concessional budget support approved up to a maximum of CFAF 174 billion. - In 2021, the ceiling on new non-concessional external debt contracted or guaranteed by the government will be adjusted upward, to a maximum of CFAF 230 billion exclusively for the projects specified in the authorities’ project list (Table 1) and contracted or guaranteed after program approval. - To the extent that external debt contracted or guaranteed by the government between January 1st 2021 and the date of program approval and linked to specific projects exceeds CFAF 70 billion, this ceiling would be adjusted downward accordingly. - For the first quarter of 2022, until modified by the Executive Board, the 2022 ceiling on new non-concessional external debt contracted or guaranteed by the government will be adjusted upward, up to a maximum determined by the difference (i) CFAF 230 billion, and (ii) the amount of the adjustor applied at end-December 2021, exclusively for the projects specified in the authorities’ project list (Table 1). ### Structural benchmarks (selected obligations and schedules) - Prior Actions and Indicative Targets (Public finance, debt management, PIM, Revenue Mobilization): - 1 Submit to the National Assembly a revised budget bill for 2021 in line with the objectives of the program — Letter of transmission to the National Assembly - 2 Publish an execution report of expenses related to COVID-19 and executed during the 2020 budget year — Publication of the report - 3 Publish on the ARMP website an overall table of the results of contracts related to COVID-19 and awarded from October 20, 2020 to the end of June 2021, including the actual beneficial owners of contracting entities — Publication on the ARMP website - 4 Submission of the audit prepared by the audit bench of the supreme court (chambre des comptes) of fiscal year 2020 expenses related to COVID-19 — Submission to the IMF, Prime Minister, Senate, and National Assembly - 5 Prepare a diagnosis of the tax policy and formulate recommendations for the establishment of a development-oriented tax system that at the same time broadens the tax base — Oct-21 Diagnostic sent to IMF staff - 6 Publish the audit prepared by the audit bench of the supreme court (chambre des comptes) of fiscal year 2020 expenses related to COVID-19 — Dec-21 A copy of the audit report published on the website of the Ministry of Finance is sent to IMF staff - 7 Adopt and publish all the implementing texts of the Public Procurement Code, including those relating to the establishment of internal administrative management structures — Sep-21 A copy of all published texts is provided to IMF staff - 8 Complete the audits of government payment arrears and adopt an arrears settlement plan of arrears certified by these audits — Dec-21 Communication of the audit report and the clearance plan to IMF staff - 9 Pursue the reforms aimed at extending the CUT to the BEAC: (i) present a census of government accounts ... excluding counterpart funds as of June 30, 2021 and December 31; (ii) close and repatriate the balances of these CUT accounts to the BEAC before the end of March 2022 — Mar-22 Transmission of the list of non-BEAC accounts and closed accounts and transferred to the BEAC to IMF staff - 10 Carry out a diagnostic study of the public administration pension system, together with recommendations for its improvement — May-22 A copy of this study is given to the IMF staff - 11 Strengthen the accountability of the implementing units by setting, by decree, the modalities for monitoring the performance of all programs and projects financed both from domestic and external resources — Sep-21 Decree published - 12 Adopt a legal and regulatory framework governing Public-Private Partnerships (PPP) so that all Public-Private Partnership projects follow a single framework — Jun-22 Legal and regulatory framework published - Additional Structural Benchmarks (Public enterprises, Extractive Sector, Business climate): - 13 Finalize the diagnostic studies of a few large public companies (CAMTEL, PAD, CAMWATER) — Dec-21 diagnostic studies sent to IMF staff - 14 Establish an inventory of the respective debts between the public enterprises and the State and between the public enterprises themselves at the end of 2020, and adopt a plan for the clearance of the respective debts between the State and the public enterprises — Dec-21 Inventory and plan shared with IMF staff - 15 Institutionalize, by MINFI instruction, governance by program contracts in order to improve the performance of the public enterprises concerned. Publish these program contracts and evaluation reports on the official MINFI website — Jun-22 Instruction published in the official newspapers - 16 Finalize and publish all the texts of application of the mining code of 2016 (Law n ° 2016/017 of December 14, 2016) — Mar-22 Implementation texts published - 17 Make the deposit and consignment fund operational, in particular to collect all the deposits paid by taxpayers in the context of tax disputes and thus make it possible to accelerate such restitution if necessary — Oct-21 Decree designating the officers of the deposit and consignment fund - 18 Strengthen the format of consultation between the public and private sectors by integrating thematic groups with at least semi-annual meetings to monitor the implementation of the recommendations of the Cameroon Business Forum — Mar-22 New consultation format set up and the first meeting held - 19 Revise Law No. 2013/004 of April 18, 2013 to rationalize these incentives and promote healthy competition between economic operators — Jun-22 A revised law is published ### TMU definitions and program technical parameters - Coverage and reporting: - The TMU defines quantitative performance criteria and indicative objectives from end-July 2021 until June 2022 (Table 1 of the MEFP) and structural benchmarks (Table 2 of the MEFP). - "Government" is defined consistent with GFSM 2001 and excludes local governments and the Central Bank. - Nonfinancial public enterprise treatment: from June 2017, operations between the government and public enterprises should be treated on a gross basis in the TOFE. - Revenue and expenditure definitions: - Total government resources: tax and nontax fiscal revenue and grants; recorded on a cash basis. Proceeds from sale of assets and privatizations are not government revenue. - Oil revenue: total transferable balance of the Société Nationale des Hydrocarbures (SNH), and income tax on oil companies and gas operators; recorded on a cash basis. - Non-oil revenue: all government revenue except oil revenue; VAT recorded net of VAT refunds; Pipeline fees by COTCO recorded under nontax revenue. - Privatization revenue: funds paid to the government in connection with sales, concessions, or sales of shares; must be recorded on a gross basis; costs recorded separately under expenditure. - Total government expenditure and net lending: includes wages and salaries, goods and services, transfers, interest payments, capital expenditure, and expenditure carried out without prior payment authorization; recorded on payment order basis unless indicated otherwise. - Spending advances [interventions directes] by SNH are included in government expenditure. - Social expenditure: includes education, health (including COVID-19 related expenditures), other social sectors, administered price subsidies (fuel at the pump, electricity to households), and expenditures for the Social Safety Net Program. - Balance and financing definitions: - Primary balance: total government revenue minus total government expenditure and net lending, not including interest payments. - Debt: definition aligned with Guidelines on Public Debt Limits in Fund-Supported Programs (Executive Board Decision 15688–(14/107)); includes commitments contracted or guaranteed for which values have not been received; penalties or damages awarded by a court that constitute debt are debt. - External debt: any borrowing or debt service in a currency other than the CFA franc, including debt between CEMAC countries; applies to government, relevant public enterprises, and guaranteed private debt. - Variable interest external debt (from July 29, 2021): grant component of variable-rate loans will be calculated using a program reference rate plus the spread (in basis points); PV of debt calculated using program reference rate plus fixed spread specified in the contract. - Program reference rate for the six-month USD SOFR: 0.04 percent (fixed for the duration of the program). - Spread of six-month Euro EURIBOR over six-month USD SOFR: -56 basis points. - Spread of six-month JPY OIS over six-month USD SOFR: -8 basis points. - Spread of six-month GBP SONIA over six-month USD SOFR: 1 basis point. - For currencies other than Euro, JPY, and GBP, the spread over six-month USD SOFR is 15 basis points. - For variable rates linked to benchmarks other than six-month USD SOFR, a spread reflecting the difference between the benchmark rate and six-month USD SOFR (rounded to the nearest 50 bps) will be added. - Concessional external debt: considered concessional if it comprises a grant component of at least 35 percent. - Grant component: difference between face value and present value expressed as a percentage of face value. - Present value at date contractually arranged is calculated by discounting debt service payments at the arrangement date. - Discount rate used for concessionality calculations: 5 percent. - Domestic debt: all government debts and obligations denominated in CFA francs (includes unreimbursed balances, advances from BEAC, Treasury bills and bonds, structured debt, domestic payment arrears, and SONARA’s domestic debt). - Structured debt definitions: - Structured bank debt: all claims of local banks on government, except Treasury bills and bonds. - Structured non-bank debt: government balances payable to local non-bank institutions, individuals, or CEMAC that have been securitized or under a formal reimbursement agreement. - Net domestic financing of the government: sum of (i) net bank credit to the government; and (ii) net non-bank financing. - Net bank credit: change in balance between government commitments and assets with the national banking system (includes Treasury cash resources on hand; Treasury deposits with the Central Bank excluding HIPC and C2D accounts; Caisse Autonome d'Amortissement credit balances earmarked for debt reimbursement). Government commitments include financing from the Central Bank (net IMF financing, refinancing of guaranteed bonds, Treasury paper held by the Central Bank) and financing from commercial banks. - Net non-bank financing includes: change in outstanding balance of government securities issued in CFA francs on the regional financial market and not held by the local banking system; change in outstanding structured non-bank domestic debt; privatization revenue; change in balance of correspondent bank accounts (including Account 42) and consignment accounts; change in balance of outstanding claims on government abandoned by the private sector. - Net bank credit data are provided by BEAC and should be subject to monthly reconciliation between the Treasury and the BEAC. *Source: IMF staff and country authorities (content unit: 1cmrea2021001).* ### 20. Domestic payment arrears are the sum of (i) payment arrears on expenditure; (iii) payment ### 1cmrea2021001 - 20. Domestic payment arrears; quantitative program objectives ### Definitions and classification of arrears - Domestic payment arrears are the sum of: - (i) payment arrears on expenditure; - (ii) payment arrears on structured domestic debt; and - (iii) unstructured debt. - Payment arrears on expenditure: - Defined as "balances payable" for which the payment lag exceeds the regulatory period of 90 days. - Balances payable reflect the government's unpaid obligations and are defined as expenditure items for which the normal expenditure execution procedure (commitment, validation, and authorization) has been followed until they were undertaken by the public treasury, but that are still pending payment. - Balances payable under 90 days represent payments in progress. - The Treasury will monitor this information on a monthly basis to identify expenditure arrears in the stock of balances payable. - Payment arrears on structured domestic debt: - Defined as the difference between the amount due under a domestic debt arrangement (defined in paragraph 11) or the reimbursement of matured Treasury securities, bills, or bonds and the amount effectively paid after the payment deadline indicated in the agreement or after the maturity date of the Treasury securities, bills, or bonds. - Unstructured debt: - Includes unstructured debt of the CAA, which includes all balances payable and liabilities of the government transferred to the CAA that have not been subject to a reimbursement or securitization agreement. - The stock of unstructured debt is estimated at CFAF 68.0 billion at end-2020. - Domestic "floating" debt includes all government commitments for which a service was provided by a public or private service provider but that has not been subject to any budget commitment. These obligations include invoices payable and not settled to public and private enterprises, but exclude tax debt deriving from debt offsetting operations with public enterprises and the execution of externally financed public procurement agreements that have not been covered by the budget as a result of insufficient budget appropriations. - The Directorate General of Budget will conduct a monthly assessment of these commitments in collaboration with the public treasury. ### External payment arrears - External payment arrears are defined as external debt obligations of the government that have not been paid when due in accordance with the relevant contractual terms (taking into account any contractual grace periods). - This performance criterion excludes payment arrears on external financial obligations of the government that are subject to rescheduling. ### Quantitative program objectives — general - The quantitative targets (QTs) are as specified in Table 1 of the MEFP and are assessed on a cumulative basis from the beginning of the calendar year unless otherwise indicated. - Reporting cutoff: detailed data on government financial operations must be submitted on a monthly basis within six weeks from the end of the month (paragraph 26) unless another cutoff is specified. ### A. Non-Oil Primary Balance (Performance Criterion) - Definition: floor for the non-oil primary balance (based on payment order) defined as a quantitative objective in Table 1 of the MEFP. - Non-oil primary balance is the difference between the primary balance defined in paragraph 12 and oil revenue defined in paragraph 6. - Data reconciliation requirement: cumulative level of financing discrepancies in the TOFE (including errors and omissions) for a given month should not exceed 5 percent of the cumulative expenditure for that month, in absolute value. If exceeded, a comprehensive reconciliation exercise will be undertaken in consultation with IMF staff. - Adjustment: the floor will be adjusted downward (upward) by the difference if positive (if negative) between the cumulative expenditure since the beginning of the fiscal year covered by the new SDR allocations and the programmed amount of these expenses. The programmed amount of these expenses could reach CFAF 75 billion at the end of September and CFAF 150 billion at the end of December 2021. - Cutoff for reporting: monthly within six weeks from the end of the month. ### B. Net Domestic Financing of the Government Excluding Net IMF Financing (Performance Criterion) - Definition: a ceiling on net domestic financing of the government excluding net IMF financing as defined in paragraph 17. - Adjustment mechanisms: - Adjusted if (i) disbursements in connection with external budget support net of external debt service and the payment of external arrears, and (ii) the rescheduling of bilateral external debt service are lower than program forecasts. - At the end of each quarter, if disbursements of external budget support are below (above) programmed amounts, relevant quarterly ceilings will be adjusted upward (downward) commensurately, within the limit of CFAF 120 billion for each quarter of 2019. This ceiling may be reviewed depending on the rate of budget aid disbursements during the year. - At the end of each quarter, if rescheduling of bilateral external debt service is below (above) programmed amounts, corresponding quarterly ceilings will be adjusted upward (downward) pro-tanto. - Cutoff for reporting: detailed data monthly within six weeks after the end of the month. ### C. Disbursement of Non-Concessional External Debt (Performance Criterion) - Definition: a ceiling on disbursements of non-concessional external debt applicable to debt contractually arranged to finance projects; based on external debt defined in paragraph 14 and concept of concessionality in paragraph 15. - Cutoff for reporting: detailed information on disbursements must be reported within six weeks after the end of the month, indicating loan signing dates and distinguishing concessional vs non-concessional loans. ### D. Net Claims of the Central Bank on the Central Government (Performance Criterion) - Definition: a ceiling on net claims of the Central Bank on government as the difference between the Central Bank’s claims on government (excluding IMF financing) and cash and total deposits of the Treasury with the Central Bank, including the balance of the special account of unused statutory advances. - Monitoring: the balance of the special account of unused statutory advances will be regularly monitored. - Adjustment: ceiling will be adjusted if disbursements in connection with external budget support are below programmed levels. - At-quarter adjustment: if disbursements of external budget support are below (above) programmed amounts, ceilings adjusted upward (downward) commensurately, within the limit of CFAF 120 billion for each quarter of 2021. - Cutoff for reporting: BEAC must report detailed information on all financing from the Central Bank to the government and the statement on the balance of the special account of unused statutory advances within six weeks after the end of the month. ### E. Non-Accumulation of External Payment Arrears (Performance Criterion) - Definition: a ceiling of zero on the accumulation of new external payment arrears is defined as a continuous quantitative objective in Table 1 of the MEFP. - Scope: applies to accumulation of external arrears as defined in paragraph 19; the government undertakes not to accumulate any external payment arrears on its debt, with the exception of arrears subject to rescheduling. - Measurement: performance criterion measured on a cumulative basis on approval of the program and observed on an ongoing basis. - Reporting: data on balances, accumulation, and reimbursement of external arrears will be reported within six weeks after the end of each month. Any new external arrears should be reported immediately to the Fund. ### F. Non-Concessional External Debt Contracted or Guaranteed by the Government (Performance Criterion) - Definition: a ceiling on new non-concessional external debt contracted or guaranteed by the government as a continuous quantitative objective in Table 1 of the MEFP; uses external debt concept in paragraph 14 and concessionality in paragraph 15. - Applicability: includes debt guaranteed by the government that constitutes contingent public liabilities and applies to public enterprises that receive transfers from the government; excludes borrowing arranged in CFA francs on the CEMAC regional market, regular short-term supplier loans, regular import credits, IMF loans, or debt relief/rescheduling. - Debt relief/rescheduling definitions: - Debt relief: restructuring with existing creditor that reduces the net present value of the debt. - Debt rescheduling: operations that spread average weighted maturities without increasing net present value. - Timebound ceiling: from the date of the program to December 2022, the ceiling on new non-concessional external debt contracted or guaranteed by the government will be set at zero. - Adjustments: - Debt for Macro-critical projects: - In 2021, ceiling adjusted upward to a maximum of CFAF230 billion exclusively for projects specified in the authorities’ project list (Table 1) and contracted or guaranteed after program approval. - If external debt contracted or guaranteed by the government between January 1st 2021 and the date of program approval and linked to specific projects exceeds CFAF 70 billion, the ceiling would be adjusted downward accordingly. - For the first quarter of 2022, until modified by the Executive Board, the 2022 ceiling will be adjusted upward up to a maximum determined by the difference (i) CFAF 230 billion, and (ii) the amount of the adjustor applied at end-December 2021, exclusively for projects specified in the authorities’ project list (Table 1). - Debt for debt management operations: - Ceiling adjusted upward to accommodate debt management operations that result in an improvement of the overall debt profile as determined by the DSA. - This includes non-concessional budget support for debt management operations, including from France and the AFDB. - Ceiling adjusted upward to accommodate non-concessional budget support approved up to a maximum of CFAF 110 billion for 2021 and CFAF 174 billion for 2022. - Cutoff for reporting: detailed information on all loans (conditions and creditors) contracted by the government and guarantees must be reported within six weeks after the end of the month; any signing or guaranteeing of debt should be reported immediately to the Fund. ### Other indicative quantitative targets - A. Non-Oil Revenue: - A floor on non-oil revenue as defined in paragraph 7 is an indicative objective in Table 1 of the MEFP. - B. 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 covered by the Treasury are defined in paragraph 18 and do not include unstructured floating debt not covered by the Treasury. - C. Social Expenditure: - A floor on social expenditure pursuant to paragraph 11 is an indicative objective in Table 1 of the MEFP. - Reporting cutoff for these indicators: data on the government's financial position as presented in the TOFE, detailed listing of revenue highlighting oil revenue, domestic payment arrears, and status of social expenditure execution must be reported within six weeks after the end of the month. - D. Share of Exceptional Expenditure in Total Authorized Expenditure Not Including Debt: - A ceiling on the share of exceptional expenditure in total authorized expenditure not including debt is an indicative objective in Table 1 of the MEFP. - Definition: ratio between exceptional expenditure (expenditure excluding debt service paid without prior authorization, including cash advances and provisional commitments) and total authorized expenditure, excluding debt service, that is domestically financed (including wages). - Monitoring: exceptional expenditure will be monitored regularly. - Cutoff for reporting: monthly accounting statements showing the amount of cash advances, provisional budget commitments, and advance funds must be reported to IMF staff within three weeks after the end of each month. - Authorized expenditure presented in Table M1 of the TOFE will be used to compute this ratio. *Source: 1cmrea2021001 - section text on domestic payment arrears and quantitative program objectives* ### 50. The quantitative data on the government's quantitative and indicative objectives will be ### 1cmrea2021001 - 50. The quantitative data on the government's quantitative and indicative objectives will be ### Reporting requirements and data sharing - The quantitative data on the government's quantitative and indicative objectives will be reported to IMF staff with the periodicity described in Table 1. All data revisions will be reported promptly to IMF staff. - The authorities undertake to report to IMF staff any information or data not specifically addressed in this TMU, but required for program implementation, and to keep IMF staff abreast of the situation in terms of achieving the program objectives. - Key reporting schedules and lags (selected entries from Table 2): - The summary situation of Treasury Operations (La situation résumée des Operations du Trésor (SROT)): Ministry of Finance (MINFI)/DGTC; Monthly; Reporting lag: 6 weeks. - The table of government financial operations (TOFE) and customary annex tables: MINFI/DP; Monthly; 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: Ministry of Economy and Finance (MINEFIN)/DGB; Monthly; Reporting lag: 6 weeks. - Status of balances payable for the current fiscal year (orders unpaid) distinguishing those over 90 days: MINFI/DGT; Monthly; Reporting lag: 6 weeks. - Domestic debt reimbursement status: MINFI/CAA; Monthly; Reporting lag: 6 weeks. - Statistics on external debt contracted and guaranteed (detailed listing etc.): MINFI/CAA; Monthly; Reporting lag: 4 weeks. The signing or guaranteeing of external debt, and the occurrence of external payment arrears must be reported immediately to the IMF. - Monthly monitoring report on calls for funds and effective disbursements: CAA/MINEPAT; Monthly; Reporting lag: 4 weeks. - Data on the implementation of the public investment program, including a detailed listing of financing sources: MINFI/Ministry of Economy, Planning and Regional Development (MINEPAT)/CAA; Quarterly; Reporting lag: 6 weeks. - Monthly accounting statements showing amount of cash advances, advance funds, and balance of provisional budget commitments: MINFI; Monthly; Reporting lag: 6 weeks. - Publish the oil product price structure: MINFI/CSPH; Monthly; Reporting lag: First week of the current month. - Prices, consumption, and taxation of oil products—detailed components and breakdowns: MINFI/CTR/CSPH; Monthly; Reporting lag: 6 weeks. - Monthly statement of correspondent accounts (including Account 42) and consignment deposits with the Treasury broken down into major categories: MINFI/DGT; Monthly; Reporting lag: 6 weeks. - Provide revenue forecasts for the Directorate General of Taxes; Directorate General of Customs; and Directorate General of Budget by type of tax on an annual basis and on a monthly basis, and outturn as compared with forecasts: DGI, DGD, DGB; Monthly; Reporting lag: 6 weeks. - Preliminary annual balance of payments data: MINFI; Annual; Reporting lag: 9 months. - Foreign trade statistics: MINFI/INS; Monthly; Reporting lag: 6 weeks. - Any revision of the balance of payments data: BEAC/MINFI; On revision; Reporting lag: 2 weeks. - Provisional national accounts and any revision: INS; Annual; Reporting lag: 6 months. - Quarterly National Accounts: INS; Quarterly; Reporting lag: 3 months. - Disaggregated consumer price indices for the cities of Douala and Yaoundé: INS; Monthly; Reporting lag: 4 weeks. - Consumer price indices disaggregated by city, product and at the national level: INS; Monthly; Reporting lag: 6 weeks. - Any official report or study devoted to Cameroon’s economy, from its date of publication or 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. - Report on the implementation of expenditure of the special allocations account (CAS) COVID-19: MINFI/DGB; Bi-annually; Reporting lag: 3 months. - CAS-COVID-19 expenditure audit report: MINFI/DGB; Annually; Reporting lag: 6 months. ### Projects under the new non-concessional borrowing limit for 2021 - Table 1: List of Projects Under the New Non-concessional Borrowing Limit for 2021 - 1 Project to acquire 25 wagons* - 2 East entrance Douala road, Phase II* - 3 Completion of the Olembe Sports Complex in Yaounde* - 4 Edéa-Kribi road rehabilitation project (110 km) and development of the Lolabé-Campo section (39 km) - 5 Construction of 225 KV electrical transmission line for the supply of Kribi industrial port complex - 6 Construction of 225kv Ebolowa Kribi and 90 KV Mbalmayo-Mekin power lines and related works - 7 EBOLOWA-AKOM II- KRIBI road construction project - 8 OLOUNOU-OVENG- Gabon border-Bridge road construction project on the Kom river - 9 Douala international airport rehabilitation project, additional financing component B - 10 Electrification of 200 localities by Solar Photovoltaic Systems - 11 Extension at the national level of the Intelligent video surveillance system (phase 2) - Note: *Projects included in the list of projects under the new non-concessional borrowing limit for 2020 (ECF fifth review). ### Debt sustainability assessment — headline ratings and judgment - Risk ratings: - Risk of external debt distress: High - Overall risk of debt distress: High - Granularity in the risk rating: Sustainability - Application of judgement: No - Summary judgment: - Cameroon is at high risk of external and overall public debt distress. Three out of four external debt indicators breach the thresholds under the baseline scenario, with a particularly large and sustained breach for the external debt service-to-exports ratio. - The PV of public debt-to-GDP ratio is also above the benchmark. - Despite worsened risk signals driven by tighter thresholds associated with the updated Composite Indicator (CI), Cameroon’s overall debt profile has improved compared to the previous DSA, and levels of debt and debt service are below those sustained in the recent past. - CI score: Cameroon’s CI score based on the April 2021 WEO and the 2019 World Bank CPIA data is 2.65, signaling a weak debt-carrying capacity. - Vulnerabilities and risks: - Downside risks include more protracted and severe disruptions due to the pandemic, unsuccessful restructuring of SONARA’s debt, and resurgence of socio-political tensions. - Upside factor: stronger exports driven by rising international oil prices could reduce Cameroon’s debt service burden. - Policy priorities given high risk: - Gradual fiscal consolidation in line with crisis mitigation efforts. - Limited reliance on non-concessional borrowing. - Further strengthening public debt management. - Prudent management of SOEs. ### Public debt coverage and SOE debt considerations - Public debt coverage: - Coverage unchanged since previous DSA. Public debt coverage includes debt of the central government, expenditure floats and arrears, guarantees, debt of a public oil company SONARA and contingent liabilities linked to some other state-owned enterprises (SOEs). - DSA does not cover local government debt as local governments are not allowed to borrow from financial markets and most of their debt is on domestic suppliers including SOEs. - Other elements in the general government excluded due to lack of data; authorities considering enhancing data collection. - External debt is mainly defined based on currency but adjusted for residency where data is available. - SOE debt not included in DSA: - Total SOE debt estimated at around 12.6 percent of GDP in the previous DSA (based on 2020 budget law annex). - About 1.5 percent of GDP is owed to the government. - DSA includes SONARA’s debt amounting to 3.1 percent of GDP. - Remaining stock of SOE debt not accounted in the debt stock could amount to 8.0 percent of GDP. - Authorities' estimate of SOE debt not included in the DSA is about 1 percent of GDP (Text Table 3). - Staff and authorities will clarify this gap via planned audit on cross-debts among SOEs and between SOEs and the state, and gradually expand the perimeter. - Contingent liability stress test assumptions (Text Table 2): - SOE debt not included in the debt stock: 8.0 percent of GDP (as of end-2020). - Capital stock of PPPs: about 7.0 percent of GDP, corresponding to a contingent liability of 2.4 percent of GDP (35 percent of the total PPP stock). - Contingent liabilities from financial markets: set at the minimum value of 5 percent of GDP (default). - Aggregated addition to stress test from uncovered elements: - Total (2+3+4+5) (in percent of GDP): 15.4. ### Evolution and composition of public debt (selected figures) - End-2020 aggregates (staff estimates): - Total public and publicly guaranteed (PPG) debt: CFAF 10,511 billion (45.8 percent of GDP). - External debt stock: CFAF 7,143 billion (31.1 percent of GDP). - Domestic debt: CFAF 3,368 billion (14.7 percent of GDP). - Drivers: - Domestic debt increase driven by large issuances of treasury bills (BTA) and government bonds (OTA). - Public debt composition notes: - Share of float and arrears declined from about 33 percent in 2017 to 16.3 percent in 2020. - Share of BEAC statutory advances represented 17.1 percent at end-2020. - Average maturity of domestic debt (excluding the float and SONARA’s debt): 3.9 years. - Average weighted interest rate on domestic debt: 3.0 percent. ### External debt composition (selected figures) - As of end-2020: - Multilateral debt: 38.6 percent of total PPG external debt. - In bilateral debt, debt owed to China represents 62 percent of total bilateral debt. - Around 40 percent of external debt is on concessional terms. - 39 percent of external debt is denominated in Euros. - Average maturity for external debt (excluding SONARA’s debt): 9.1 years. - Weighted average interest rate for external debt: 2.5 percent. - Around 26 percent of external debt has a flexible interest rate. - Commercial debt includes a Eurobond (CFAF 450 billion) issued in 2015. - Notation: - Includes a loan from Poly Technologies / Exim Bank of China (CFAF 37.5 billion) which had been accounted as commercial debt in the previous DSA. ### Stock of contracted-but-undisbursed debt (SENDs) - End-2020 SENDs: CFAF 3,147 billion (decline from CFAF 3,470 billion in the previous year). - Remaining stock comprises exclusively external SENDs as domestically financed SENDs were disbursed in July 2020. - Share breakdown (end-2020): - Multilateral SENDs: 56 percent. - Bilateral SENDs: 26 percent. - Commercial SENDs: 18 percent. - China: largest creditor in bilateral SENDs, accounting for about 20 percent of total SENDs stock. - Authorities have taken steps to enhance monitoring and management of SENDs, reducing overall and problematic SENDs; further efforts warranted to reassess and cancel SENDs associated with old and non-performing projects. *Prepared by the staff of the International Monetary Fund (IMF) and the International Development Association (IDA). July 16, 2021* ### 8. No new sovereign external arrears were accumulated si nce September 2020. T he DSA ### 1cmrea2021001 - 8. No new sovereign external arrears were accumulated since September 2020. The DSA ### Arrears and debt stock - No sovereign external arrears as of end-2020. - External arrears included in the DSA: - SONARA and other SOEs: CFAF 246.5 billion and CFAF 8.32 billion as of end-2020 respectively. - Domestic arrears estimated at CFAF 547 billion as of end-2020. - Stock of contracted-but-undisbursed debt (SENDs) series (Bn CFAF, % GDP) included in source table: - 2016: 393620.3 - 2017: 432821.3 - 2018: 404318.8 - 2019: 347015.2 - 2020 (Prel.): 14713.7 - SENDs composition (Bn CFAF, % GDP): - Domestic: 2811.5 - External 1/: 365518.9 - o/w multilateral: 13467.0 - o/w bilateral: 17839.2 - o/w commercial: 5262.7 - Problematic SENDs estimated at CFAF 1,926 billion as of end-2020. ### Public debt management capacity and governance - Capacity considered adequate for IMF debt limits policy but needs further improvements. - Recent improvements: - National Public Debt Committee (CNDP) examines all project financing proposals and PPP-financed projects; signing of a new loan is granted only with unconditional approval. - Procedures and responsibilities clarified in a manual published in 2019. - Remaining weaknesses and recommended improvements: - CNDP engagement often delayed until late in the debt contracting process. - Debt policy not firmly anchored by a medium-term debt management framework, causing significant discrepancies between announced plans and actual financing. - Further efforts warranted to: - Strengthen active engagement of the CNDP. - Enhance effectiveness of the medium-term public debt strategy (MTDS), including improved estimates of financing needs, development of consistent annual borrowing plans, and an enhanced communication strategy to facilitate creditors’ understanding of the authorities’ debt management objectives. ### External private sector debt - Private external debt increased to US$ 1,403 million at end-2019. - Most private external debt is in direct investments held by foreign parent companies and official institutions. ### Macroeconomic forecast and program assumptions - Revision to 2020 estimates relative to previous DSA: - Real GDP growth revised from -2.8 percent to -1.5 percent. - Overall fiscal deficit (payment order basis, excluding grants) narrowed from -4.6 percent to -3.4 percent of GDP. - Current account balance (including grants) improved from -5.4 percent to -3.7 percent of GDP. - Baseline projection assumptions: - Implementation of national vaccine deployment plan covering at least 5 million people in the year and 15 million people (60 percent of the population) by end-2022. - IMF program policy parameters focus on: - (i) mitigating the impact of the pandemic; - (ii) reinforcing good governance and strengthening transparency and anti-corruption; - (iii) accelerating structural fiscal reforms; - (iv) strengthening debt management; - (v) improving the business environment and accelerating private-sector-led economic diversification. - Gradual fiscal consolidation via revenue measures (streamlining tax exemptions, recovering tax arrears) and containing current spending broadly at current level. - Resulting in gradual medium-term recovery, higher export bases, stronger revenue mobilization in the long run. Box 1 — Medium and Long-Term Macroeconomic Assumptions - Medium Term, 2021-2025: - Real GDP growth projected to average 4.7 percent. - Annual inflation projected to remain around 2.0 percent. - Overall fiscal balance projected to average -2.4 percent of GDP (payment order basis, excluding grants). - Revenue-to-GDP ratio (excluding grants) projected to average 15.5 percent. - Current account balance (including grants) projected to average -3.4 percent of GDP. - Long Term, 2026-2041: - Real GDP growth projected to average 5.8 percent. - Revenue-to-GDP ratio (excluding grants) projected to average 17.9 percent. - Exports of goods and services projected to decline from an average of 17.6 percent of GDP in 2021-25 to around 15.8 percent of GDP in the long term. Text Table 6 — Key macroeconomic assumptions (selected rows) - Real GDP growth (percent): - 2016-2019 Current: 4.0 - 2020 Current: -1.5 - 2021-2025 Current: 4.7 - 2026-2041 Current: 5.8 - Inflation, GDP deflator (percent): - 2016-2019 Current: 1.7 - 2020 Current: 2.0 - 2021-2025 Current: 2.0 - 2026-2041 Current: 1.9 - Overall fiscal balance excluding grants, payment order basis (percent of GDP): - 2016-2019 Current: -4.6 - 2020 Current: -3.4 - 2021-2025 Current: -2.4 - 2026-2041 Current: -1.6 - Total revenue excluding grants (percent of GDP): - 2016-2019 Current: 15.0 - 2020 Current: 13.6 - 2021-2025 Current: 15.5 - 2026-2041 Current: 17.9 - Current account balance including grants (percent of GDP): - 2016-2019 Current: -3.4 - 2020 Current: -3.7 - 2021-2025 Current: -3.4 - 2026-2041 Current: -2.1 - Exports of goods and services (percent of GDP): - 2016-2019 Current: 19.2 - 2020 Current: 15.7 - 2021-2025 Current: 17.6 - 2026-2041 Current: 15.8 - Oil price (US dollars per barrel): - 2016-2019 Current: 56.34 - 2020 Current: 41.35 - 2021-2025 Current: 53.6 - 2026-2041 Current: 50.5 ### Financing assumptions and IMF support - Public gross financing needs over 2021-2024 estimated at CFAF 8,282 billion (31.0 percent of GDP), with an average 53 percent assumed to be financed externally. - DSSI extension request reflected; expected debt service relief of CFAF 166.4 billion over January to December 2021 (CFAF 83.4 billion estimated to be deferred in July to December period). - DSA includes issuance of a new Eurobond amounting CFAF 450 billion in 2021 to repurchase the maturing Eurobond. - Proposed IMF financing: CFAF 375 billion (SDR 483 million, 175 percent of quota). - Prospective budget support from donors: CFAF 474 billion in 2021-2024. - External project financing projected based on the budget; mix of disbursements from 2022 assumed to follow composition of SENDs as of end-2020, shifting toward commercial borrowing after 2023. - Financing terms for new external debt unchanged from previous DSA. - Domestic financing (excluding the BEAC loan) projected to shift progressively towards more medium-to-long-term borrowing. - Discount rate remains at 5 percent. Footnote details on Eurobond (from source): - Newly issued Eurobond denominated in Euros (EUR 685 million), 12 years maturity, 5.95% coupon rate. - Authorities repurchased 79.42 percent of outstanding old Eurobond with proceeds. - Nominal value of repurchase (CFAF 328.3 bn) accounted as principal repayments; redemption premium and accrued interest (total CFAF 63.5 bn) accounted as interest payments. - Remaining proceeds, with related budget savings (CFAF 37.5 billion), are expected to finance projects in 2022. - Remaining old Eurobond (estimated at CFAF 93 billion) assumed to be repaid in equal tranches in 2023-2025. ### SONARA debt restructuring and assumptions - Rescheduled debt service projections agreed with local banks in September and November 2020: - Short-term credits: CFAF 155 billion at end-2020 to be repaid over coming 24 months. - Medium-term credits: CFAF 132 billion at end-2020 to be repaid over coming 84 months. - Letters of credit by domestic banks (CFAF 90.3 billion at end-2020) excluded from SONARA’s debt stock given short-term revolving nature. - Restructuring of debt held by external creditors including oil traders not assumed in baseline (ongoing negotiations). - Short-term debt from external oil traders classified as arrears. - Portion of SONARA’s medium and long term external debt due for repayment in 2020 (around CFAF 31 billion) classified as arrears. - Operational assumptions: - SONARA continues functioning as importer of refined oil, gradually recovering production capacity starting 2024 and reaching 60 percent of pre-crisis level in 2027. - Among SONARA’s revenue, only financing expenses (CFAF 20 billion per year) and net income are assumed to be used for debt service and accounted as part of fiscal revenue in DSA. - Cost of potential reconstruction of refinery not incorporated in baseline. ### Debt sustainability results and risks - Cameroon’s CI score and classification: - CI score based on April 2021 WEO projections and 2019 World Bank CPIA: 2.65, signaling a weak debt carrying capacity (downgrade). - Due to downgrade, thresholds for external debt burden indicators and benchmark for PV of total public debt have been lowered. - External debt distress assessment: - External risk of debt distress assessed high as three indicators breach thresholds under baseline. - External debt service-to-exports ratio and external debt service-to-revenue ratio breach respective thresholds; the former shows a large and sustained breach. - Significant increases in debt service payments in 2021 driven by redemption of maturing Eurobond. - PV of external debt-to-exports shows a one-time marginal breach in 2021 before declining below threshold afterward. - Stress test outcomes: - Under stress tests, thresholds for all four external indicators are breached. - Export shock is the most extreme for: - PV of debt-to-GDP, - PV of debt-to-exports, - Debt service-to-exports ratios. - Debt service-to-revenue most extreme shock: one-time 30 percent nominal depreciation raises ratio to as high as 22.3 percent in 2022. - Historical scenarios point to exploding PV of debt-to-GDP and PV of debt-to-exports, reflecting large historical current account deficits. - Public debt distress assessment: - Overall risk of public debt distress assessed high as PV of debt-to-GDP breaches benchmark under baseline. - PV of debt-to-GDP projected to decline gradually but remain above benchmark until 2024. - PV of debt-to-revenue and debt service-to-revenue ratios projected to decline gradually. - Most extreme shock for public indicators is combined contingent liabilities, under which PV of debt-to-GDP stays above benchmark throughout projection period. - Historical scenario projects an explosive path for PV of debt-to-revenue driven by large historical primary deficits. - Market module: - Market financing tool indicates low risks from market financing pressures. - Cameroon’s maximum three-year gross financing needs estimated at 9 percent of GDP, below suggested benchmark of 14 percent. - Cameroon’s EMBI spread: 355 (as of June 14), below benchmark (570). - Overall assessment: - Despite worsened risk signals, Cameroon’s overall debt profile has slightly improved compared to previous DSA due to Eurobond refinancing and less-than-anticipated deterioration in fiscal and external balances. - Cameroon is at high risk of debt distress, but debt is assessed sustainable: - External risk of debt distress high (three out of four indicators breach thresholds). - PV of public debt-to-GDP ratio above benchmark indicating high risk of overall debt distress. - Nonetheless, debt considered sustainable given improvements since last DSA and debt and debt service levels below those sustained in recent past. ### Country classification details and tailored stress tests - CI classification thresholds and components (selected entries): - Final CI Score: 2.651 - CI rating: Weak - Components contributions (selection): - CPIA contribution: 1.265 (48%) - Real growth rate contribution: 0.100 (4%) - Import coverage of reserves contribution: 1.174 (44%) - World economic growth contribution: 0.416 (16%) - Tailored stress tests include: - Market financing shock. - Commodity price shock (due to outstanding Eurobond and exports of fuel and other commodities making up more than 50 percent of total exports). - Standardized contingent liability stress test based on quantified contingent liabilities. _Italic: IMF staff calculations and Cameroonian authorities sources as presented in the DSA content unit._ ### 24. This rating is vulnerable to a range of risks. Key downs ide r isks include a more protr acted and ### 1cmrea2021001 - 24. This rating is vulnerable to a range of risks. Key downs ide r isks include a more protr acted and ### Key risks to the rating and debt sustainability - Key downside risks include: - a more protracted and severe COVID-19 shock; - less-than-expected exports; - resurgence of socio-political tensions; - unsuccessful restructuring of SONARA’s debt. - Other risks: - realization of contingent liabilities from bank restructuring; - contingent liabilities from SOEs not included in the baseline of the DSA; - accelerations in disbursements due to the large stock of SENDs. - Upside channel: - stronger exports driven by rising international oil prices could reduce Cameroon’s debt service burden. ### Policy recommendations and fiscal strategy - Significant efforts are warranted to ensure debt remains on a downward trajectory and sustainability is strengthened. - Recommended actions: - a gradual fiscal consolidation in line with crisis mitigation efforts; - steadfast implementation of structural fiscal reforms; - a prudent borrowing policy skewed towards concessional loans. - Risks of alternative borrowing: - allowing for new non-concessional borrowing would further weaken debt sustainability and undermine efforts to secure international community support, particularly given G20 agreement on debt service suspension on bilateral government loans for low-income countries. - Structural and institutional priorities: - improve competitiveness and achieve economic diversification, given vulnerable debt indicators expressed as a proportion of exports; - strengthen and accelerate SONARA’s debt restructuring while fundamentally building its financial viability; - maintain sound management of the SENDs. ### Authorities’ views - Authorities viewed Cameroon’s debt sustainability outlook more positively than staff. - They highlighted that Cameroon’s debt carrying capacity remains adequate despite the decline in the CI score. - They noted that stronger mid- and long-term growth and a successful completion of SONARA’s debt restructuring, with the Eurobond refinancing, would substantially improve Cameroon’s overall debt profile. - Authorities agreed on the need for prudent debt management to safeguard debt sustainability, including: - limiting non-concessional borrowing to critical projects where concessional financing is not available; - reassessing and canceling SENDs related to old and non-performing projects; - strengthening controls on SOEs to reduce fiscal risks. ### DSA stress tests and scenario notes (figures and captions) - Figure captions indicate presentation of multiple scenarios, including: - "Without Eurobond refinancing"; - "Historical scenario"; - "Most extreme shock 1/Baseline/Threshold". - Notes on stress test mechanics: - All additional financing needs generated by shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA. - Default terms of marginal debt are based on baseline 10-year projections. - "The most extreme stress test is the test that yields the highest ratio in or before 2031." - Commodity price shock magnitudes are based on the commodity prices outlook prepared by the IMF research department. - Borrowing assumption snapshots (as presented): - Shares of marginal debt: External PPG MLT debt 100% - Avg. nominal interest rate on new borrowing in USD 1.9% - USD Discount rate 5.0% - Avg. maturity (incl. grace period) 23 - Avg. grace period 55 (for Market financing box: Avg. grace period 55) - Avg. nominal interest rate on new borrowing in USD 1.9% (repeated) ### Selected DSA projections and sustainability indicators (Table 1 excerpts) - External debt (nominal) 2018–2041 (in percent of GDP, selected years shown): - 2018: 30.4 - 2019: 33.5 - 2020: 35.0 - 2021: 35.9 - 2022: 35.5 - 2023: 34.9 - 2024: 34.2 - 2025: 33.5 - 2026: 32.7 - 2031: 28.2 - 2041: 18.7 - Of which: public and publicly guaranteed (PPG) (percent of GDP): - 2018: 28.6 - 2019: 29.9 - 2020: 31.1 - 2021: 32.3 - 2022: 31.8 - 2023: 31.3 - 2024: 30.6 - 2025: 29.9 - 2026: 29.3 - 2031: 25.5 - 2041: 17.1 - Change in external debt: - 2018: 2.7 - 2019: 3.0 - 2020: 1.5 - 2021: 0.9 - 2022: -0.4 - 2023: -0.6 - 2024: -0.6 - 2025: -0.8 - 2026: -0.7 - 2031: -1.4 - 2041: -0.8 - Identified net debt-creating flows (selected): - 2019: 1.8 - 2020: 1.5 - 2021: 0.9 - 2022: -0.4 - 2023: -0.8 - 2024: -1.2 - 2025: -1.6 - 2026: -2.0 - 2031: -2.0 - Non-interest current account deficit (percent of GDP): - 2018: 2.5 - 2019: 3.3 - 2020: 2.5 - 2021: 2.8 - 2022: 2.3 - 2023: 2.3 - 2024: 2.1 - 2025: 1.8 - 2026: 1.5 - 2031: 1.2 - 2041: 1.4 - Exports (percent of GDP): - 2018: 18.9 - 2019: 19.8 - 2020: 15.7 - 2021: 17.6 - 2022: 18.0 - 2023: 17.5 - 2024: 17.5 - 2025: 17.5 - 2026: 17.5 - 2031: 16.3 - 2041: 14.3 - Imports (percent of GDP): - 2018: 21.8 - 2019: 23.3 - 2020: 18.2 - 2021: 20.9 - 2022: 21.5 - 2023: 20.9 - 2024: 20.7 - 2025: 20.5 - 2026: 20.1 - 2031: 18.7 - 2041: 16.8 - Net current transfers (negative = inflow) (percent of GDP): - 2018: -1.2 - 2019: -1.3 - 2020: -1.1 - 2021: -1.2 - 2022: -1.3 - 2023: -1.2 - 2024: -1.2 - 2025: -1.2 - 2026: -1.2 - 2031: -1.2 - 2041: -1.4 - Net FDI (negative = inflow) (percent of GDP): - 2018: -1.7 - 2019: -2.3 - 2020: -1.4 - 2021: -1.9 - 2022: -2.4 - 2023: -2.5 - 2024: -2.7 - 2025: -2.7 - 2026: -2.7 - 2031: -2.5 - 2041: -1.9 - Endogenous debt dynamics (contributions, percent of GDP): - Contribution from nominal interest rate (example values): 2018: 1.1; 2019: 1.1; 2020: 1.2; 2021: 1.2; 2022: 1.2; 2023: 1.1; 2024: 1.1; 2025: 1.1; 2026: 1.0; 2031: 0.9; 2041: 0.6 - Contribution from real GDP growth (example values): 2018: -1.0; 2019: -1.1; 2020: 0.5; 2021: -1.1; 2022: -1.5; 2023: -1.6; 2024: -1.7; 2025: -1.7; 2026: -1.7; 2031: -1.6; 2041: -1.0 - Residual (percent of GDP): - 2018: 3.5 - 2019: 1.2 - 2020: 0.0 - 2021: 0.0 - 2022: 0.0 - 2023: 0.2 - 2024: 0.6 - 2025: 0.8 - 2026: 1.2 - 2031: 0.6 - 2041: 0.2 - Sustainability indicators (selected): - PV of PPG external debt-to-GDP ratio (selected projections): 26.1, 25.4, 24.4, 23.5, 22.8, 22.1, 21.6, 19.0, 13.1 - PV of PPG external debt-to-exports ratio (selected projections): 166.3, 143.9, 135.2, 133.9, 130.4, 126.0, 123.7, 116.5, 92.0 - PPG debt service-to-exports ratio (selected years): 17.3, 19.3, 10.0, 19.0, 15.1, 15.1, 13.7, 12.1, 11.2, 11.8, 8.5 - PPG debt service-to-revenue ratio (selected years): 20.8, 25.2, 11.5, 23.1, 17.8, 16.9, 14.7, 12.6, 11.2, 10.7, 6.6 - Gross external financing need (Billion of U.S. dollars): - 2018: 2.6 - 2019: 3.0 - 2020: 1.6 - 2021: 2.4 - 2022: 1.8 - 2023: 1.7 - 2024: 1.5 - 2025: 1.3 - 2026: 1.0 - 2031: 1.3 - 2041: 2.2 ### Key macroeconomic assumptions (selected) - Real GDP growth (in percent): - 2018: 4.1 - 2019: 3.7 - 2020: -1.5 - 2021: 3.6 - 2022: 4.6 - 2023: 4.9 - 2024: 5.3 - 2025: 5.4 - 2026: 5.6 - 2031: 5.8 - 2041: 5.8 - Average projection: 4.0 and 5.3 (table shows two columns labeled 2041 and Average 8/) - GDP deflator in US dollar terms (change in percent): - 2018: 6.3 - 2019: -2.8 - 2020: 4.0 - 2021: 8.9 - 2022: 3.3 - 2023: 2.3 - 2024: 1.9 - 2025: 2.1 - 2026: 1.9 - 2031: 1.9 - 2041: 1.9 - Average projection entries: 0.6 and 2.7 (table formatting) - Effective interest rate (percent) 4/: - 2018: 4.5 - 2019: 3.5 - 2020: 3.7 - 2021: 3.8 - 2022: 3.6 - 2023: 3.4 - 2024: 3.4 - 2025: 3.3 - 2026: 3.3 - 2031: 3.2 - 2041: 3.1 - Average entries: 3.5 and 3.4 - Growth of exports of G&S (US dollar terms, in percent): - 2018: 12.3 - 2019: 5.5 - 2020: -18.8 - 2021: 26.6 - 2022: 10.4 - 2023: 4.5 - 2024: 6.8 - 2025: 7.9 - 2026: 7.5 - 2031: 6.1 - 2041: 6.6 - Average entries: 1.9 and 8.6 - Growth of imports of G&S (US dollar terms, in percent): - 2018: 16.9 - 2019: 7.6 - 2020: -19.9 - 2021: 29.3 - 2022: 11.0 - 2023: 4.7 - 2024: 6.3 - 2025: 6.1 - 2026: 5.8 - 2031: 6.7 - 2041: 6.7 - Average entries: 2.2 and 8.5 - Grant element of new public sector borrowing (in percent) (selected): - 2021: 23.6 - 2022: 37.0 - 2023: 36.2 - 2024: 34.5 - 2025: 34.4 - 2026: 31.2 - 2031: 30.6 - 2041: 27.7 - Average entry: 31.9 ### Memorandum and other items (selected) - PV of external debt (examples shown): - 2021: 30.0 - 2022: 29.0 - 2023: 28.0 - 2024: 27.1 - 2025: 26.4 - 2026: 25.7 - 2027: 25.1 - 2029: 21.7 - 2031: 14.7 - In percent of exports (PV of external debt): - 2021: 190.8 - 2022: 164.6 - 2023: 155.3 - 2024: 154.6 - 2025: 151.2 - 2026: 146.7 - 2027: 143.4 - 2029: 132.8 - 2031: 103.2 - Total external debt service-to-exports ratio: - 2018: 23.0 - 2019: 25.0 - 2020: 19.3 - 2021: 25.4 - 2022: 20.9 - 2023: 20.3 - 2024: 18.9 - 2025: 17.3 - 2026: 16.3 - 2031: 16.1 - 2041: 11.4 - PV of PPG external debt (in Billion of US dollars) (selected): - 2018: 10.4 - 2019: 11.4 - 2020: 11.9 - 2021: 12.3 - 2022: 12.8 - 2023: 13.3 - 2024: 14.0 - 2025: 17.9 - 2026: 26.2 - Nominal GDP (Billion of US dollars) (selected): - entries include: 39, 39, 40, 45, 49, 52, 56, 60, 65, 94, 200 (table formatting shows values across years) *Sources: Country authorities; and staff estimates and projections.* ### 2. Cameroon: ### 2. Cameroon: ### Public sector debt projections (Baseline Scenario, 2018–2041) - Public sector debt (percent of GDP) - 2018: 39.6 - 2019: 42.3 - 2020: 45.8 - 2021: 46.2 - 2022: 45.6 - 2023: 44.4 - 2024: 43.1 - 2025: 41.0 - 2026: 39.2 - 2031: 33.2 - 2041: 26.8 - Historical average (column): 30.2 - Projections average (column): 39.8 - Of which: external debt (percent of GDP) - 2018: 28.6 - 2019: 29.9 - 2020: 31.1 - 2021: 32.3 - 2022: 31.8 - 2023: 31.3 - 2024: 30.6 - 2025: 29.9 - 2026: 29.3 - 2031: 25.5 - 2041: 17.1 - Historical average: 20.5 - Projections average: 29.3 - Change in public sector debt (percent of GDP) - 2018: 1.9 - 2019: 2.7 - 2020: 3.5 - 2021: 0.4 - 2022: -0.6 - 2023: -1.1 - 2024: -1.3 - 2025: -2.1 - 2026: -1.9 - 2031: -1.2 - 2041: -0.3 - Identified debt-creating flows (percent of GDP) - 2018: -0.4 - 2019: 1.3 - 2020: 0.1 - 2021: 0.7 - 2022: -0.3 - 2023: -1.0 - 2024: -1.3 - 2025: -2.1 - 2026: -1.8 - 2031: -1.2 - 2041: -0.3 - Historical average: 1.9 - Projections average: -1.1 - Primary deficit (percent of GDP) - 2018: 1.3 - 2019: 2.0 - 2020: 2.1 - 2021: 2.1 - 2022: 1.5 - 2023: 0.9 - 2024: 0.7 - 2025: 0.0 - 2026: 0.2 - 2031: 0.6 - 2041: 0.9 - Historical average: 2.9 - Projections average: 0.8 - Revenue and grants (percent of GDP) - 2018: 16.2 - 2019: 15.8 - 2020: 13.8 - 2021: 14.7 - 2022: 15.7 - 2023: 16.1 - 2024: 16.6 - 2025: 17.2 - 2026: 17.8 - 2031: 18.1 - 2041: 18.5 - Historical average: 15.8 - Projections average: 17.1 - Grants (of revenue and grants): 2018: 0.4; 2019: 0.6; 2020: 0.2; 2021: 0.3; 2022: 0.4; 2023: 0.4; 2024: 0.4; 2025: 0.3; 2026: 0.3; 2031: 0.1; 2041: 0.1 - Primary (noninterest) expenditure (percent of GDP) - 2018: 17.5 - 2019: 17.7 - 2020: 15.9 - 2021: 16.9 - 2022: 17.2 - 2023: 17.0 - 2024: 17.3 - 2025: 17.2 - 2026: 17.9 - 2031: 18.7 - 2041: 19.4 - Historical average: 18.6 - Projections average: 17.9 ### Automatic debt dynamics and other contributors - Automatic debt dynamics (percent of GDP) - 2018: -0.4 - 2019: -0.9 - 2020: -2.0 - 2021: -1.4 - 2022: -1.8 - 2023: -1.9 - 2024: -2.0 - 2025: -2.0 - 2026: -2.0 - 2031: -1.7 - 2041: -1.2 - Contribution from interest rate/growth differential (percent of GDP) - 2018: -1.5 - 2019: -1.4 - 2020: 0.9 - 2021: -1.4 - 2022: -1.8 - 2023: -1.9 - 2024: -2.0 - 2025: -2.0 - 2026: -2.0 - 2031: -1.7 - 2041: -1.2 - Contribution from average real interest rate: 2018: -0.1; 2019: 0.0; 2020: 0.2; 2021: 0.2; 2022: 0.2; 2023: 0.2; 2024: 0.2; 2025: 0.2; 2026: 0.1; 2031: 0.1; 2041: 0.3 - Contribution from real GDP growth: 2018: -1.5; 2019: -1.4; 2020: 0.7; 2021: -1.6; 2022: -2.0; 2023: -2.1; 2024: -2.2; 2025: -2.2; 2026: -2.2; 2031: -1.9; 2041: -1.5 - Contribution from real exchange rate depreciation (percent of GDP) - 2018: 1.2 - 2019: 0.5 - 2020: -2.9 - 2021–2041: data truncated in source excerpt ("...") - Other identified debt-creating flows (percent of GDP) - 2018: -1.4 - 2019: 0.2 - 2020–2041: 0.0 (many years) - Historical average: -0.1 - Projections average: 0.0 - Privatization receipts (negative): all years shown: 0.0 - Recognition of contingent liabilities: all years shown: 0.0 - Debt relief (HIPC and other): 2019: -0.1; other years: 0.0 - Other debt creating or reducing flow (please specify): 2018: -1.4; 2019: 0.3; subsequent years: 0.0 - Residual (percent of GDP) - 2018: 2.4 - 2019: 1.4 - 2020: 3.4 - 2021: -0.3 - 2022: -0.2 - 2023: -0.1 - 2024–2031: 0.0 - Historical average: 1.2 - Projections average: -0.1 ### Key sustainability indicators and financing metrics - PV of public debt-to-GDP ratio (selected projection years from sensitivity tables) - Projection series shows values such as 39.2, 39.1, 38.1, 36.7, 35.3, 33.2, 31.5, 26.7, 22.9 (specific year alignment in table excerpt truncated) - PV of public debt-to-revenue and grants ratio (selected values) - 284.2, 265.1, 242.1, 227.8, 212.4, 193.3, 177.4, 147.6, 124.0 (selected years in table excerpt) - Debt service-to-revenue and grants ratio (percent) - 20.3, 24.3, 49.4, 44.6, 40.9, 40.6, 37.7, 34.3, 31.8, 24.3, 21.9 - Gross financing need (percent of GDP) - 4.8, 7.8, 8.9, 8.7, 7.9, 7.4, 7.0, 5.9, 5.8, 4.9, 5.0 ### Key macroeconomic and fiscal assumptions (selected) - Real GDP growth (percent) - 2018: 4.1 - 2019: 3.7 - 2020: -1.5 - 2021: 3.6 - 2022: 4.6 - 2023: 4.9 - 2024: 5.3 - 2025: 5.4 - 2026: 5.6 - 2031: 5.8 - 2041: 5.8 - Historical average: 4.0 - Projections average: 5.3 - Average nominal interest rate on external debt (percent) - 2018: 3.0 - 2019: 2.8 - 2020: 2.1 - 2021: 2.1 - 2022: 2.1 - 2023: 1.8 - 2024: 1.8 - 2025: 1.7 - 2026: 1.7 - 2031: 1.8 - 2041: 1.9 - Historical average: 2.8 - Projections average: 1.8 - Average real interest rate on domestic debt (percent) - 2018: -1.6 - 2019: -2.5 - 2020: -0.5 - 2021: 0.6 - 2022: 1.0 - 2023: 1.5 - 2024: 2.0 - 2025: 1.8 - 2026: 2.1 - 2031: 2.5 - 2041: 3.3 - Historical average: -1.7 - Projections average: 1.9 - Inflation rate (GDP deflator, percent) - 2018: 1.6 - 2019: 2.5 - 2020: 2.0 - 2021: 2.0 - 2022: 1.9 - 2023: 2.0 - 2024: 1.8 - 2025: 2.1 - 2026: 2.0 - 2031: 1.9 - 2041: 1.9 - Historical average: 1.8 - Projections average: 1.9 - Growth of real primary spending (deflated by GDP deflator, percent) - 2018: -4.0 - 2019: 5.2 - 2020: -11.7 - 2021: 9.8 - 2022: 6.6 - 2023: 3.8 - 2024: 7.2 - 2025: 4.3 - 2026: 10.4 - 2031: 6.1 - 2041: 5.9 - Historical average: 4.6 - Projections average: 6.8 - Primary deficit that stabilizes the debt-to-GDP ratio (percent of GDP) - 2018: -0.6 - 2019: -0.7 - 2020: -1.4 - 2021: 1.8 - 2022: 2.1 - 2023: 2.1 - 2024: 2.0 - 2025: 2.1 - 2026: 2.0 - 2031: 1.8 - 2041: 1.2 - Historical average: -0.9 - Projections average: 1.9 ### Sensitivity analysis (Public and Publicly Guaranteed External Debt, 2021–2031; and Public Debt, 2021–2031) - Baseline and scenario indicators are reported across multiple tests (Alternative Scenarios A1; Bound Tests B1–B6; Tailored Tests C1–C4). - Selected baseline and scenario outcomes (extracts from tables): - Baseline (2021–2031) PV of debt-to-GDP and related ratios show declining paths under baseline but breach indicators under several adverse scenarios (bold values in tables indicate benchmark/threshold breaches in source). - Examples of scenario outcomes (percent): A1 historical averages: series such as 25, 26, 26, 27, 28, 29, 31, 33, 34, 36, 36 (for a specific indicator in Table 3); tailored tests C1–C4 produce elevated ratios (e.g., C1 combined contingent liabilities: 25, 30, 30, 29, 30, 29, 29, 28, 28, 27). - Table 4 scenario extracts for public debt (percent of GDP): Baseline 2021: 39; 2022: 38; 2023: 37; 2024: 35; 2025: 33; 2026: 32; 2027: 31; 2028: 29; 2029: 28; 2030: 27; 2031: 27. - PV of Debt-to-Revenue Ratio examples (percent): Baseline series 265, 242, 228, 212, 193, 177, 172, 167, 160, 153, 148; alternative scenarios and bound tests produce higher ratios (e.g., B1, B2, C1 with peaks above 300 in some years). ### Recent developments and outlook (staff statement highlights) - COVID-19 impact and fiscal outcomes - GDP growth turned negative in 2020. - Fiscal deficit contained to 3.6 percent of GDP in 2020. - Public debt "has increased somewhat but remains under control" (text phrase). - Current account deficit slightly decreased due to stronger-than-expected non-oil exports. - Money supply increase driven mainly by a sharp increase in credit to public sector. - Growth outlook and drivers - Average annual growth of the oil sector over 2022–26 expected to be close to zero. - Non-oil sector growth projected to recover from 2021 and reach 5 percent in 2023. - Recovery supported by SND30 implementation, large infrastructure projects (notably in energy), and trading partner recovery. - Vaccine deployment: 0.3 percent of GDP dedicated under the 2021 revised budget for vaccination costs. - Financing request and program - Authorities requesting three-year arrangements under ECF and EFF covering 2021–2024 to address protracted balance of payments needs and support reforms. ### Policies and reforms for the period ahead - Overall objectives - Build fiscal buffers, safeguard debt sustainability, enhance governance, advance structural reforms, and protect the most vulnerable. - Authorities ready to consider contingent measures, in consultation with Fund staff, given risks from the pandemic, oil price developments, and commodity price volatility. - Continued reliance on Fund technical assistance for revenue mobilization, public financial management, and debt management. - Fiscal policy and reforms (medium term) - Target: reach an overall budget deficit of 1.6 percent of GDP by 2024 to achieve regional convergence criterion. - Revenue mobilization measures: - Combat tax fraud and evasion; enhance tax and customs administrations and policies; ensure integrity of taxpayer files and IT systems. - Conduct a diagnostic study of fiscal policy with Fund technical assistance. - Intensify collection of tax and customs arrears from SOEs; enhance control over under-reporting risks. - Step up efforts to broaden the tax base, notably in the transport sector; streamline tax expenditure. - Intensify campaign on enforcement of state revenue for non-tax revenues. - Public financial management and expenditure efficiency: - Improve quality of public spending, enhance cash management, operationalize the Treasury single account (TSA) in conjunction with BEAC. - Digitalize budgetary procedures and limit exceptional procedures. - Firmly control transfers and subsidies to SOEs; pursue civil service payroll reform. - Publish quarterly reports on budget execution and implement the Code of Transparency and Good Governance and the financial regime of the state and other public entities per CEMAC guidelines. - Reinforce public investment efficiency: improve investment project selection, planning, and execution. - Debt policy and management of contingent liabilities - Commitment to a prudent borrowing strategy; strictly limit signing of non-concessional loans to priority projects when concessional resources unavailable and adhere to program debt limits. - Strengthen debt management framework and conduct active debt management to bring country back to a moderate risk classification of debt distress. - Medium-term debt strategy for 2021–23 to preserve debt sustainability and proceed with disbursements for committed but undisbursed loans (SENDs). - Strengthen management and governance of SOEs to limit fiscal risks; accelerate SONARA’s debt restructuring. - Conduct audit of highly indebted SOEs and assess financial viability for CAMTEL, CAMWATER, and the Douala Autonomous Port. - Regional monetary policy and financial sector stability - Preserve stability of the monetary arrangement and rebuild BEAC reserves. - Ensure extractive industries comply with foreign exchange regulations before signing new contracts; ensure new petroleum code complies with CEMAC foreign exchange regulations. - Strengthen financial sector stability and reduce non-performing loans in support of COBAC mandate. - Bolstering structural reforms - Advance SND30 structural reforms to reduce poverty and inequalities and lay foundations for sustained inclusive growth. - Promote good governance, strengthen transparency, and tackle corruption: - Improve anti-corruption legal and institutional frameworks; enhance strategy for combating corruption (preventive and repressive). - Enforce asset declaration obligations for public officials; strengthen autonomy of CONAC. - Improve business climate: strengthen compliance with EITI principles and AML/CFT standards; accelerate reforms to support private sector development and economic diversification. ### Prior actions and transparency measures (staff statement, July 29, 2021) - Prior actions completed: - Submission to the National Assembly of a revised budget bill for 2021 aligned with program objectives. - Publication of a report on execution of COVID-19-related expenditures during the 2020 budget year (Directorate General of Budget website). - Publication on ARMP website of lists of a total of 383 Covid-19 related contracts awarded from October 20, 2020 to end-June 2021, including beneficial ownership; contracts total CFAF 54.1 billion. - Submission to IMF, Prime Minister, Senate, and National Assembly of the audit by the audit bench of the Supreme Court (Chambre des Comptes) of fiscal year 2020 COVID-19 expenses. - Implementation notes: - Ongoing tenders to be published once awarded as authorities commit to publish all procurements’ results including beneficial owners. *Sources: Country authorities; and staff estimates and projections.* ### Conclusion ### Conclusion ### Authorities' Commitment - Our Cameroonian authorities reiterate their commitment to the program objectives to strengthen macroeconomic stability, firm up inclusive growth and contribute to enhancing CEMAC’s external stability and economic prospects. ### Relationship with the Fund and Financing Requests - The authorities highly value the strong relationship with the Fund and look forward to Executive Directors’ support to their requests for ECF and EFF arrangements to support their efforts, cover part of their financing gap and catalyze additional resources. *Source: 1cmrea2021001 - Conclusion* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1cmrea2021001.pdf_