## 1cmrea2024001 ## Source details **Canonical URL:** [1cmrea2024001](https://www.imf.org/-/media/files/publications/cr/2024/english/1cmrea2024001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2024/english/1cmrea2024001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2024/english/1cmrea2024001.pdf.json) --- ### Recent economic developments and program performance - Growth and inflation: - Growth: 3.6 percent (2022, Est.), 4.0 percent (2023, 4th Rev. Proj.). - Inflation: 6.3 percent (2022); projected average 6.2 percent (2023); projected 7.2 percent (2024). - Fiscal outturn and composition: - Overall fiscal deficit (payment order basis): -1.5 (2022), -1.1 (2023). - Non-oil primary balance (payment order basis): -3.9 (2022), -2.5 (2023). - Total revenue (including grants): 15.9 percent of GDP (2022), 15.9 percent (2023). - Oil revenue: 3.5 percent of GDP (2022), 2.9 percent (2023). - Non-oil revenue: 12.1 percent of GDP (2022), 12.7 percent (2023). - Program performance to end-June / end-September 2023: - Five out of six quantitative performance criteria (QPCs) met at end-June 2023. - Continuous QPC on non-accumulation of external arrears breached due to delayed EIB payments (one- and five-day delays totaling 0.003 percent of GDP); waiver requested and arrears cleared. - Six out of ten indicative targets (ITs) met at end-September 2023. - Of nine structural benchmarks (SBs) for the fifth review: three met on schedule, two implemented with delay, one expected by the Board date (prior action), three to be rescheduled or reformulated (SB2, SB3, SB6). ### IMF arrangements, extension and augmentation request - Current arrangements: - Three-year ECF/EFF arrangements approved July 2021: SDR 483 million (about US$689.5 million, or 175 percent of quota). - Total IMF financial support disbursed under the arrangement upon completion of the fifth review: SDR 427.8 million (about US$ 566.3 million) after disbursement/purchase of SDR 55.2 million (about US$73.3 million). - Extension and augmentation: - Authorities requested a 12-month extension of ECF/EFF arrangements (from July 28, 2024 to July 28, 2025). - Requested augmentation of access of 40 percent of quota over the extension: SDR 110.4 million (about US$ 147.6 million). - Staff proposal to share the increase between GRA (26.7 percent of quota; SDR 73.6 million) and PRGT (13.3 percent of quota; SDR 36.8 million). ### Macroeconomic outlook and key projections (selected) - Real sector (annual percent change): - GDP at constant prices: 3.6 (2022, Est.), 4.0 (2023, 4th Rev. Proj.), 4.0 (2024 Proj.), 4.2 (2025 Proj.), 4.3 (2026 Proj.), 4.5 (2027 Proj.). - Non-Oil GDP: 3.6 (2022), 4.1 (2023), 4.1 (2024), 4.3 (2025). - Prices: - Consumer prices (average): 6.3 (2022), 6.2 (2023), 7.2 (2024), 4.8 (2025). - Consumer prices (eop): 7.3 (2022), 5.9 (2023), 6.2 (2024), 3.7 (2025). - Money and credit: - Broad money (M2) growth: 11.4 (2022), 9.0 (2023), 9.0 (2024), 8.0 (2025). - Domestic credit to the private sector: 13.6 (2022), 10.4 (2023), 11.2 (2024), 9.2 (2025). - External sector (percent of GDP): - Current account balance (excluding official grants): -3.7 (2022), -3.3 (2023), -3.3 (2024), -3.1 (2025). - Oil exports: 7.8 (2022), 5.2 (2023), 5.5 (2024), 4.5 (2025). - Non-oil exports: 7.8 (2022), 8.2 (2023), 8.4 (2024), 8.0 (2025). - Public debt: - Stock of public debt: 45.3 (2022), 43.2 (2023), 41.8 (2024), 41.1 (2025). - External debt: 30.8 (2022), 30.7 (2023), 29.2 (2024), 29.7 (2025). ### Fiscal policy priorities and key measures - Fiscal consolidation and revenue mobilization: - 2024 budget objectives: reduce NOPB from 2.5 percent of GDP (2023) to 1.9 percent of GDP (2024). - Measures to strengthen non-oil revenue mobilization and spending rationalization, including fuel subsidy reduction. - 2024 budget measures estimated to bring CFAF 113 billion in revenue (0.4 percent of GDP). - Tax measures: phase out tax exemptions on interest from government securities, full taxation of benefits in kind, reduction of VAT exemptions on carbonated drinks, electronic invoice tracking. - Tax arrears: audit shows around CFAF 215 billion in tax arrears to be recovered over three to seven years—around CFAF 30.8 billion annually. - Fuel subsidy reform: - Total spending on fuel subsidy in 2022 estimated at around CFAF 900 billion (3.2 percent of GDP), of which CFAF 330 billion (1.1 percent of GDP) carried over to 2023. - Carryover of about CFAF 170 billion (0.5 percent of GDP) of the fuel subsidy to the 2024 budget. - Government increased pump prices by about 21 percent in February 2023. - Gradual reduction in subsidy in early 2024 would imply an increase of at least 15 percent in pump prices and reduce subsidy cost by about CFAF 140 billion (0.4 percent of GDP in 2024). - Commitments to phase out subsidy by 2025 and accompany reform with social mitigation (~CFAF 68 billion, or 0.2 percent of GDP). ### Public financial management, arrears, and public investment - Arrears and RAPs: - Audits of payment arrears over 2000–19 completed; plan to settle over 3–7 years. - LF2024 includes CFAF 50 billion to clear part of prior years’ arrears and CFAF 150 billion allocation for clearance of outstanding payments >90 days at end-2023. - Public investment management: - 2025 budget law to include an annex on Commitment Authorizations (CAs) and Payment Appropriations (PAs) aligned with MTBF (SB13, Nov. 2024). - Commitment to fully implement CA/PA system to manage multi-year capital projects. - Procurement and COLEPS: - COLEPS operational but limited registrations; SB10 aims to increase to at least 80 percent the number and total value of contracts awarded through COLEPS in key ministries between January and May 2024. ### Structural benchmarks, prior actions, and status (selected) - Prior action met: - Submission to Parliament of the 2024 Finance Act (met on November 30, 2023). - Structural benchmarks (fifth review, selected): - Met on schedule (3): SB7 (action plan to eliminate CIT holidays, Oct. 2023); new PPP framework (end-June 2023); increase VAT taxpayers by end-Oct. 2023. - Implemented with delay (2): SB1 (government payment arrears audits) and SB8 (project management units monitoring modalities). - Expected by Board date (1): Publication of governance diagnostic report (SB5) — completed and authorized for publication by Board date. - Delayed / reformulated (3): SB2 (inventory of public enterprises’ debts and clearance plan; rephased to Apr. 2024), SB3 (implementing texts of Mining Code; deadline revised), SB6 (SONARA restructuring; reformulated into SB16 focused on feasibility study due Jun. 2024). ### Financial sector resilience and banking system risks - Bank sector indicators and vulnerabilities: - NPL ratio rose to 15.4 percent of total loans by mid-2023 (from 13 percent at end-2022). - Banks' exposure to Cameroonian government increased to 35.3 percent of total assets in 2022 (from 23 percent in 2019). - Restructuring and recapitalization: - Asset shortfall of one bank filled; another bank where the government will take a majority stake still misses significant capital. - COBAC approved recapitalization plans in July 2023; substantial part of capital yet to be transferred (end-2024 deadline). - Staff position: asset shortfalls must be filled with funds meeting prudential requirements by end of the Fund program. - SRC and CDEC: - SRC: around CFAF 1 billion losses in 2022; claim portfolio ~CFAF 800 billion. Audit recommended before any extension of SRC activities; governance and sunset clause required. - CDEC: regulatory texts pending; government to ensure necessary resources and regulation as a financial institution. ### Debt sustainability, financing, and risks - Debt stocks and dynamics: - Public debt stock: 45.3 percent of GDP (end-2022), 43.2 percent (2023), 41.8 percent (2024 projected). - External debt: 30.8 percent of GDP (2022). - DSA and risk assessment: - Cameroon remains at high risk of debt distress though staff assesses debt sustainable over the medium term. - PV of public debt-to-GDP ratio above benchmark in baseline indicating high risk. - Contingent liabilities from SOEs and PPPs increase vulnerability; SENDs remain sizable. - Fund exposure and repayment capacity: - Quota: SDR 276.0 million. - Outstanding IMF credit (SDR millions, existing and prospective drawings): 966.0 (2022), 1,090.2 (2023), 1,137.1 (2024), declining thereafter per schedule. - Disbursements (SDR millions) projected: 138.0 (2022), 165.6 (2023), 110.4 (2024), 55.2 (2025). - Program financing: - Program remains fully financed with firm commitments over next 12 months and good prospects for remainder of arrangement. ### Risks, vulnerabilities, and recommended policy responses - Key downside risks (selected): - Intensification of regional conflicts (Likelihood: High) — higher inflation, food insecurity, supply disruptions, increased spending pressures. - Commodity price volatility (Likelihood: High) — unstable fiscal position, potential social unrest. - Global growth slowdown and tight financial conditions — weaker demand, slower growth, higher borrowing costs. - More frequent extreme climate events (Likelihood: Medium) — infrastructure damage, food insecurity; over three million severely food-insecure between Jan–May 2023 (5 percent increase vs same period 2022). - Sovereign debt distress and banking-sector contagion from regional exposures. - Recommended responses (verbatim emphasis and order preserved in source): - Create fiscal space through wage bill control, spending review, and revenue mobilization. - Prioritize and target public spending towards the most vulnerable people. - Reduce fuel subsidies and strengthen social mitigation. - Limit non-concessional borrowing; enforce prudential banking regulations; advance SOE restructuring (SONARA priority). - Strengthen governance, transparency, AML/CFT, and public financial management. ### Climate finance and resilience - Climate finance: - Near-term main source likely donor financing; longer-term development of capital markets and private sector engagement needed for climate investments. - NDC commitment: reduce greenhouse gas emissions by 35 percent by 2035 relative to 2010, including an unconditional target of 12 percent. - Policy integration: - Mainstream climate agenda into institutional, regulatory, and budget frameworks; prioritize adaptation in agriculture and infrastructure. - Phasing out fuel subsidy identified as supportive of mitigation efforts. ### Statistical, reporting, and capacity development requirements - Reporting and TMU highlights: - Monthly and quarterly reporting obligations with specified lags (e.g., monthly within 6 weeks; end-December data by March 15). - Detailed reporting on all loans and guarantees within six weeks after end of month; immediate reporting upon signing/guaranteeing of debt. - Definitions preserved for net domestic financing, Treasury advances, domestic/external arrears, PV calculations, and concessionality (discount rate 5 percent). - Capacity development: - CD strategy aligned with SND-30; IMF and AFRITAC providing TA on revenue, debt, PFM, governance, statistics. - AFRITAC to provide training on assessing climate risk in banking supervision in 2024. *Source: IMF staff report (CAMEROON STAFF REPORT FOR THE 2023 ARTICLE IV CONSULTATION, FIFTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY AND THE EXTENDED FUND FACILITY ARRANGEMENTS, AND REQUESTS FOR EXTENSION AND AUGMENTATION OF ACCESS, A WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION, AND MODIFICATION OF A PERFORMANCE CRITERION).* ### 110.4 million (about US$ 147.6 million) over the extension will help respond to the additional ### 1cmrea2024001 - 110.4 million (about US$ 147.6 million) over the extension will help respond to the additional ### Recent economic developments and near-term performance - Cameroon’s economic recovery continued in 2023 despite strong external headwinds. - Growth and inflation: - Growth is estimated at 3.6 percent in 2022 and is expected to reach 4 percent in 2023. - Inflation is projected to decelerate to around 6.2 percent by end-2023 from 7.3 percent at end-2022. - Fiscal performance: - The overall fiscal deficit (payment order basis) is expected to improve from 1.1 percent of GDP in 2022 to 0.7 percent in 2023. - The non-oil primary deficit is projected to improve to 2.5 percent of GDP from 3.9 percent of GDP in 2022 owing to both stronger revenues and lower fuel subsidies. - Program performance: - Five out of six quantitative performance criteria (QPCs) were met at end-June 2023. - Six out of ten indicative targets (ITs) were met at end-September 2023. - Of nine structural benchmarks (SBs) for the fifth review: three met on schedule, two implemented with delay, one expected by the Board date (prior action), and three will be rescheduled or reformulated (SB2, SB3, SB6). ### Outlook, external pressures, and program modalities - Medium-term outlook: - The medium-term outlook remains positive, provided reforms progress, and the external environment becomes more supportive. - External shocks and balance of payments: - Recent external shocks increased balance of payments needs; tightening global financial conditions raised borrowing costs and curtailed market access. - High oil prices raised the costs of subsidies and volatility complicated budget management. - IMF arrangements and requests: - The three-year ECF/EFF arrangements approved in July 2021 amount to SDR 483 million (about US$689.5 million, or 175 percent of quota). - Completion of the fifth review will allow a disbursement and purchase of SDR 55.2 million (about US$73.3 million), of which SDR 36.8 million for the EFF and SDR 18.4 million for the ECF, bringing total IMF financial support disbursed under the arrangement to SDR 427.8 million (about US$ 566.3 million). - The authorities requested a 12-month extension of the ECF/EFF arrangements (from July 28, 2024 to July 28, 2025) and an augmentation of access of 40 percent of quota over the extension for balance of payments support. - An augmentation of 110.4 million (about US$ 147.6 million) over the extension will help respond to the additional balance of payments needs created by these external shocks. ### Key macroeconomic projections and indicators (selected) - Real sector (annual percentage change): - GDP at constant prices: 3.6 (2022, Est.), 4.0 (2023, 4th Rev. Proj.), 4.0 (2024 Proj.), 4.2 (2025 Proj.), 4.3 (2026 Proj.), 4.5 (2027 Proj.), 4.5 (2028 Proj.), 4.6 (beyond table sequence). - Oil GDP at constant prices: 2.1 (2022), -1.8 (2023), 0.5 (2024), -1.3 (2025), 2.7 (2026), 1.3 (2027), 0.2 (2028), 0.2 (later). - Non-Oil GDP at constant prices: 3.6 (2022), 4.1 (2023), 4.1 (2024), 4.3 (2025), 4.3 (2026), 4.5 (2027), 4.6 (2028), 4.6–4.7 (subsequent). - Prices: - GDP deflator: 6.3 (2022), 2.7 (2023), 3.1 (2024), 2.7 (2025), 3.5 (2026), 4.0 (2027), 3.1 (2028), 2.6 and 1.7 in later projections. - Consumer prices (average): 6.3 (2022), 6.2 (2023), 7.2 (2024), 4.8 (2025), 5.9 (2026), 5.5 (2027), 4.9 (2028), 3.4 and 2.5 in later projections. - Consumer prices (eop): 7.3 (2022), 5.9 (2023), 6.2 (2024), 3.7 (2025), 5.5 (2026), 5.2 (2027), 3.6 (2028), 2.0 and 2.0 subsequently. - Money and credit: - Broad money (M2) growth: 11.4 (2022), 9.0 (2023), 9.0 (2024), 8.0 (2025), 8.4 (2026), 7.6 (2027), 7.4 (2028), 7.2 and 7.1 later. - Domestic credit to the private sector: 13.6 (2022), 10.4 (2023), 11.2 (2024), 9.2 (2025), 9.5 (2026), 7.7 (2027), 7.4 (2028), 7.2 and 7.2 subsequently. - Savings and investment (percent of GDP): - Gross national savings: 15.3 (2022), 15.6 (2023), 15.6 (2024), 16.1 (2025), 16.2 (2026), 17.0 (2027), 17.3 (2028), 18.3 and 19.1 later. - Gross domestic investment: 18.7 (2022), 18.5 (2023), 18.6 (2024), 19.2 (2025), 19.0 (2026), 19.4 (2027), 20.1 (2028), 20.9 and 21.8 later. - Public investment: 4.6 (2022), 5.0 (2023), 4.6 (2024), 5.4 (2025), 5.3 (2026), 5.9 (2027), 6.6 (2028), 7.2 and 7.5 subsequently. - Central government operations (percent of GDP): - Total revenue (including grants): 15.9 (2022), 15.9 (2023), 16.0 (2024), 15.5 (2025), 15.9 (2026), 15.5 (2027), 15.6 (2028), 15.7 and 15.8 later. - Oil revenue: 3.5 (2022), 2.9 (2023), 2.9 (2024), 2.1 (2025), 2.5 (2026), 2.0 (2027), 1.9 (2028), 1.8 and 1.7 subsequently. - Non-oil revenue: 12.1 (2022), 12.7 (2023), 12.7 (2024), 13.1 (2025), 13.1 (2026), 13.3 (2027), 13.6 (2028), 13.8 and 14.0 later. - Total expenditure: 17.1 (2022), 16.7 (2023), 16.6 (2024), 16.1 (2025), 16.3 (2026), 15.9 (2027), 16.4 (2028), 16.6 and 16.7 subsequently. - Overall fiscal balance (payment order basis, excluding grants): -1.5 (2022), -1.1 (2023), -1.0 (2024), -1.0 (2025), -0.7 (2026), -0.6 (2027), -0.9 (2028), -1.0 and -0.9 later. - Non-oil primary balance (payment order basis): -3.9 (2022), -2.5 (2023), -2.5 (2024), -1.7 (2025), -1.9 (2026), -1.3 (2027), -1.6 (2028), -1.6 and -1.6 subsequently. - External sector (percent of GDP): - Trade balance: -0.7 (2022), -1.4 (2023), -1.7 (2024), -1.6 (2025), -1.5 (2026), -1.3 (2027), -1.6 (2028), -1.7 and -1.7 later. - Oil exports: 7.8 (2022), 5.2 (2023), 5.5 (2024), 4.5 (2025), 5.1 (2026), 4.9 (2027), 4.2 (2028), 3.5 and 3.0 subsequently. - Non-oil exports: 7.8 (2022), 8.2 (2023), 8.4 (2024), 8.0 (2025), 8.5 (2026), 8.3 (2027), 8.2 (2028), 8.2 and 8.3 later. - Imports: 16.3 (2022), 14.8 (2023), 15.6 (2024), 14.1 (2025), 15.1 (2026), 14.6 (2027), 14.0 (2028), 13.4 and 13.0 subsequently. - Current account balance (excluding official grants): -3.7 (2022), -3.3 (2023), -3.3 (2024), -3.1 (2025), -2.9 (2026), -2.7 (2027), -2.8 (2028), -2.7 and -2.8 later. - Public debt: - Stock of public debt: 45.3 (2022), 43.2 (2023), 41.8 (2024), 41.1 (2025), 39.0 (2026), 36.1 (2027), 34.1 (2028), 32.6 and 31.4 subsequently. - Of which: external debt: 30.8 (2022), 30.7 (2023), 29.2 (2024), 29.7 (2025), 28.5 (2026), 27.0 (2027), 26.0 (2028), 25.5 and 25.4 later. ### Policy focus, key recommendations, and governance - Fiscal consolidation and public financial management: - Maintain a fiscal consolidation path consistent with program objectives. - Create additional room for productive investment and social spending through greater non-oil revenue mobilization, enhanced investment efficiency, improved public financial management, and gradually phasing out fuel subsidies while mitigating the impact on the vulnerable. - Improve cash management and limit spending through exceptional procedures. - Strengthen domestic non-oil revenue mobilization, enhance public expenditure efficiency and prioritization, and limit non-concessional borrowing. - Financial sector and sovereign risk: - Fragilities in the banking system have increased with banks' increased exposure to the Cameroonian government. - Authorities are urged to work with COBAC to ensure that banks reduce and account adequately for sovereign risk. - Strengthen financial sector stability and inclusion to support structural transformation and the business climate. - Structural reforms and growth: - Accelerate structural reforms to unlock growth potential, including improving the business climate, investing in human capital and infrastructure, strengthening institutions and governance, and enhancing product and labor markets by removing regulations that hinder competition. - Encourage formalization of existing firms and boost export diversification. - Governance, transparency, and anti-corruption: - Strengthen governance, transparency, and the anti-corruption framework, including the AML/CFT framework. - Publication of the governance diagnostic report is an important step forward. - Climate and fragility: - Mainstream the climate agenda in national institutional, regulatory, and budget frameworks and advance climate change mitigation and adaptation measures in line with Cameroon’s commitments under the Paris Agreement. - Address fragility and regional spillovers; implement the IMF country engagement strategy (CES) to assess drivers of fragility and resilience. ### Executive Board assessment and conditionalities - Executive Directors: - Agreed with the thrust of the staff appraisal and commended authorities for maintaining stability amid headwinds and fragilities. - Noted mixed program performance and called for strengthened program implementation and corrective measures to address missed targets. - Emphasized continuing to phase out fuel subsidies with mitigation measures, strengthen revenue mobilization, improve PFM, and implement restructuring of public oil refining company (SONARA) in a timely manner. - Reiterated the importance of CEMAC regional institution policies; completion of the sixth review will be conditional on implementation of critical policy assurances at the Union level as established in the December 2023 Union-wide background paper. *Source: IMF staff report (CAMEROON STAFF REPORT FOR THE 2023 ARTICLE IV CONSULTATION, FIFTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY AND THE EXTENDED FUND FACILITY ARRANGEMENTS, AND REQUESTS FOR EXTENSION AND AUGMENTATION OF ACCESS, A WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION, AND MODIFICATION OF A PERFORMANCE CRITERION).* ### 10. Prior Action and Structural Benchmarks _____________________________________________________ 41 ### 10. Prior Action and Structural Benchmarks ### Background and context - Cameroon is CEMAC’s largest economy and accounted for about 60 percent of net foreign assets, 40 percent of the region’s GDP, and around 55 percent of the total population in 2022. - Key development challenges and fragilities include: more than a quarter of the population living below the national poverty line; over 1 million internally displaced persons and an estimated 6.2 million people in need of humanitarian assistance in 2020; low human capital development; an unfavorable business environment with unprofitable SOEs; low financial inclusion; institutional complexity and governance weaknesses; insurgency and border conflicts; and rising frequency of climate-related natural disasters. - Cameroon’s National Development Strategy (SND-30) aims to increase the annual growth rate to 8.1 percent on average by 2030, but staff cautioned that the import substitution pillar risks inefficiencies and limited competition. ### Recent economic developments (key figures) - Real GDP growth: 3.6 percent in 2022; expected to reach 4 percent in 2023. - Inflation: projected to reach 7.2 percent on average in 2023; driven mostly by rising food prices and inflation expectations. - Current account balance: deficit improved to 3.4 percent in 2022; projected to narrow to 3.0 percent of GDP in 2023. - External position: real effective exchange rate (REER) depreciated by 3.1 percent; real exchange rate assessed as overvalued by 14.5 percent. - Fiscal: non-oil primary deficit at 3.9 percent of GDP in 2022; non-oil primary deficit expected to fall to 2.5 percent of GDP in 2023. - Financial sector indicators (mid-2023): capital adequacy ratio improving; liquidity ratios stable at 16.3 and 29.8 percent; NPL ratio rose to 15.4 percent of total loans by mid-2023 (from 13 percent at end-2022). - Banks' exposure to the Cameroonian government increased to 35.3 percent of total assets in 2022 (from 23 percent in 2019). - Food insecurity: over three million people estimated to be severely food-insecure between January and May 2023, a five percent increase compared to same period in 2022. ### Program performance and structural benchmarks (SBs) - Through June-2023: - Five out of six quantitative performance criteria (QPCs) were met. - Continuous QPC on non-accumulation of external arrears was not met due to delayed EIB payments in August and September 2023 (one- and five-day delays totaling 0.003 percent of GDP); a waiver of non-observance is requested and all arrears have been cleared. - Three indicative targets (ITs) were breached: ceilings on net accumulation of domestic payment arrears; spending through exceptional procedures; and direct interventions of the National Hydrocarbons Company (SNH). - Causes cited include security challenges, increased cash needs for fuel importer compensation due to higher-than-projected global oil prices, and weaknesses in cash management. - New measures introduced in fourth review: an IT limiting Treasury advances without budget allocation (MEFP, Table 1) and SB9 on including domestic arrears into next year’s budget; new SB to improve management of correspondents’ accounts (SB15). - Preliminary end-September 2023 data: - Six out of ten ITs were met. - Four breached ITs: net accumulation of domestic arrears; SNH direct interventions; Treasury advances without a budget allocation; share of spending through exceptional procedures. - Continuous QPC on present value (PV) of contracting and guaranteeing new external borrowing was met. - Structural benchmarks for the fifth review (nine SBs): - Met on schedule (3): SB7 (action plan to eliminate CIT holidays and promote healthy competition, October 2023); introduction of a new PPP framework (due end-June 2023; met ahead of schedule during the fourth review); increasing number of VAT taxpayers by end-October 2023 (met ahead of schedule). - Implemented with delay (2): SB1 (government payment arrears audits) and SB8 (modalities for monitoring project management units’ performance). - Expected before Board date / prior action (1): Publication of governance diagnostic report (SB5) delayed but expected before Board date. - Delayed and to be rephased (3): SB2 (inventory of public enterprises’ debts and plan for clearing them expected by April 2024); SB3 (publication of implementing texts of the Mining Code); SB6 (detailed restructuring plan for SONARA). SB6 has been reformulated into SB16 focused on a feasibility study. ### Outlook and risks - Medium-term outlook: real GDP growth expected to average 4.4 percent in the medium term, driven by agroindustry, forestry, services, and LNG production; non-oil growth rate should exceed 4 percent starting from 2023; public debt-to-GDP ratio should remain below 45 percent. - Inflation: expected to remain above the CEMAC convergence criterion in the near term but return to below 3 percent by end 2027. - Key upside/mitigating factors: contribution of the deep-sea port of Kribi (operations began October 2020), Memve’ele hydroelectric plant stabilizing power, Cameroon’s strong record of implementing macroeconomic programs, close engagement with donors, and a comprehensive capacity development (CD) program. - Downside risks: - Escalating global geopolitical tensions affecting commodity prices and imported inflation; increasing oil prices could raise fuel subsidies. - Deterioration in global growth prospects (Europe, China) affecting trade and investment. - Intensifying social tensions in run-up to 2025 presidential elections; increased violence in extreme-North and in North-West and South-West regions. - Regional stability deterioration and cross-country banking contagion due to high cross-country holdings of other CEMAC government securities. - More frequent climate disasters, with a strong El Niño posing a significant downside risk to food supplies, inflation, displacement, and social stability. ### Policy discussions: growth and climate-focused reforms - Enhancing growth potential: - Staff recommendation: prioritize horizontal policies to foster structural transformation and export diversification—investments in human capital and infrastructure; strengthen institutions and governance; enhance product and labor market flexibility; remove regulations hindering competition; encourage formalization; and strengthen private sector dialogue. - Authorities’ stance: agree on investments in human capital, infrastructure, and governance; remain supportive of import substitution as a step to scale up domestic production and enhance export prospects, while acknowledging implementation challenges. - Addressing macro-critical climate challenges: - Climate change risks could cause output losses and exacerbate poverty, inequality, food insecurity, and conflicts, increasing balance of payments and fiscal needs. - Mission recommendation: mainstream climate commitments into legal and regulatory framework and into budget processes and public investment management; address capacity constraints and operationalize institutional coordination for climate response. - Cameroon’s commitments: priority adaptation measures in agriculture and infrastructure as outlined in Nationally Determined Contributions (NDC); NDC commitment to reduce greenhouse gas emissions by 35 percent by 2035 relative to 2010, including an unconditional target of 12 percent. - Phasing out the fuel subsidy is identified as supportive of mitigation efforts. *Source: IMF staff report excerpt, “10. Prior Action and Structural Benchmarks.”* ### 25. Mobilizing climate finance is an important challenge. In the near term, the main source ### 1cmrea2024001 - 25. Mobilizing climate finance is an important challenge. In the near term, the main source ### Climate finance and authorities’ stance - Mobilizing climate finance is an important challenge; in the near term the main source of climate-related financing will likely remain donor financing. - Going forward, Cameroon needs to develop its capital markets to harvest potential private funding for climate investments and engage the private sector in supporting its climate agenda. - Authorities’ views: - Recognize need to strengthen resilience to climate change; note it is already impacting the economy and livelihoods and may further exacerbate social and economic challenges and fragility. - Cameroon is a signatory to all key international agreements on climate change; climate change is recognized under the SND-30 and other strategic documents. - Government aims to strengthen institutional capacity to implement policies to address climate change and integrate climate commitments into an appropriate legal and regulatory framework. ### Fiscal performance and consolidation (C. Building Fiscal Resilience) - Fiscal performance remained strong up to June 2023; fiscal outcome for 2023 expected to be consistent with program objectives. - Revenue performance (year-on-year during this period): - Oil revenue growth: about 13 percent. - Non-oil revenue growth: about 20 percent. - Capex execution was relatively slow; strong revenues explain NOPB overperformance relative to program target by June. - 2024 budget law objectives: - Reduce NOPB from a projected deficit of 2.5 percent in 2023 to 1.9 percent of GDP in 2024. - Supported by strengthening non-oil revenue mobilization and spending rationalization through a fuel subsidy reduction. - Potential gains estimated at around 0.4 p.p. of GDP for each measure. - Authorities’ views: - Agree on need to continue fiscal consolidation to support sustainability and stable public debt path. - Emphasize need to promote economic growth and structural transformation requiring substantial public investment. - Agree on strengthening non-oil revenue mobilization, rationalizing public spending, and improving public investment efficiency. ### Strengthening non-oil revenue mobilization - 2024 budget measures (estimated impact): - Overall measures estimated to bring about CFAF 113 billion in budget revenue (0.4 percent of GDP). - Measures include: - Tax and customs policy and administration measures; digitalization and stronger control. - Phasing out tax exemptions for businesses on interest from government securities. - Full taxation of benefits in kind. - Reduction of VAT exemptions on carbonated drinks. - Introduction of electronic invoice tracking. - Non-tax revenue measures also planned. - Medium-term actions: - Reduce number of tax exemptions and recover tax arrears. - Plan to gradually eliminate CIT holidays, audit and revise 2013 law on investment incentives (SB4 and SB7). - Improve tax arrears recovery: audit shows around CFAF 215 billion in tax arrears to be recovered over three to seven years—around CFAF 30.8 billion annually. - Continue reforms to personal income taxation and rationalize VAT exemptions, aligned with three-year plan and 2022 tax policy diagnostic recommendations. - Personal income tax statistics: - Government intends to set up a database of wages and salaries covering entire public sector and a representative sample of private sector employees (new SB11, November 2024), MEFP ¶21. - Tax arrears collection in 2024: - Government commits to preparing an action plan of the first 100 unpaid tax and customs debts, including public enterprises, to manage and recover at least 15 percent of outstanding recoverable tax arrears (outstanding as at end-June 2023) and implement 50 percent of measures in the action plan (new SB12, April 2024, MEFP ¶22). - Text Table 1 fiscal indicators (percent of GDP) — selected rows, 2022, 2023, 2024: - Total revenue and grants: 15.9, 15.9, 15.5 - Oil revenue: 3.5, 2.9, 2.1 - Non-oil revenue: 12.1, 12.7, 13.1 - Total expenditure: 17.1, 16.7, 16.1 - Capital expenditure: 4.6, 5.0, 5.4 - Overall balance: -1.1, -0.8, -0.6 - Non-oil primary balance: -3.9, -2.5, -1.7 - Authorities’ views: - Recognize need to revise tax incentives and exemptions to improve non-oil revenue mobilization and better tailor taxation to industrial development. ### Advancing fuel subsidy reform - Fuel subsidy scale and carryovers: - Total spending on fuel subsidy in 2022 estimated at around CFAF 900 billion (3.2 percent of GDP), of which CFAF 330 billion (1.1 percent of GDP) was carried over to 2023. - Carryover of about CFAF 170 billion (0.5 percent of GDP) of the fuel subsidy to the 2024 budget due to higher than projected global oil prices in 2023 and remaining 2022 bills. - Policy commitments and assumptions: - Government increased pump prices by about 21 percent in February 2023. - Committed to reducing fuel subsidy in 2024 and phasing it out by 2025 consistent with program objectives. - Gradual reduction in subsidy would imply an increase of at least 15 percent in pump prices in early 2024. - This increase would reduce cost of subsidies by about CFAF 140 billion, or 0.4 percent of GDP in 2024, given current assumptions. - To achieve program objectives, authorities commit to submitting to Parliament the 2024 budget law consistent with the fifth review macroeconomic framework (prior action). - Social mitigation: - Authorities plan to maintain the increase in social spending introduced in 2023 and consider additional measures around CFAF 68 billion, or 0.2 percent of GDP, including increases in public salaries and territorial transfers. - Over the medium term, plan to gradually increase social spending to improve social indicators. - Authorities’ views: - Agree on need to reduce fuel subsidy and limit carrying over subsidies across years. - Committed to gradually eliminating the subsidy over medium term and considering options for an automatic fuel price adjustment mechanism. - For mitigation, working on strengthening social safety nets—with World Bank support—and improving access to education and health. ### Improving Public Financial Management (PFM) - Progress and planned reforms: - Cash management: - Exceptional procedures and Treasury advances without budget allocation led to domestic payment obligations and delays in external payments in 2022-23. - Plan to limit common budget chapters (chapitres communs) to 3-5 percent starting from 2025 (SB17 and SB18, MEFP ¶45). - Minister of Finance to issue instruction, after audit, on strategy for correspondent accounts management (SB15, MEFP ¶27). - Domestic payment arrears: - Completed audit of payment arrears over 2000–19; plan to settle over three to seven years. - Key sources: salary payments CFAF 303 billion; tax arrears CFAF 216 billion; commercial debt CFAF 122 billion. - Government cross debt: - Inventory established for cross debts between public enterprises and the state at end-2020; plan for clearing them being finalized (staff proposes rephasing deadline to end-April 2024) (SB2, MEFP ¶34). - Mining code: - Draft decrees completed but adoption delayed to integrate role of SONAMINES; plan to submit draft code to parliament in March 2024 and publish by end-June 2024 (SB3, MEFP ¶35). - SONARA (National Refining Company): - Restructuring delayed pending feasibility study on options for new refinery (SB6, reformulated, MEFP ¶33). - Public procurement: - COLEPS is operational but contract registration limited. - Revised SB to increase to at least 80 percent the number and total value of contracts awarded through COLEPS in certain key ministries between January and May 2024 (SB10, MEFP ¶30). - Strengthen procurement plan quality to ensure consistency between commitment and Treasury plans (SB14, MEFP ¶30). - Public investment management (PIM): - Commit to fully implement system of commitment authorization (CA) and payment appropriations (PA) to manage multi-year capital projects. - 2025 budget law will include an annex on CAs and PAs in line with MTBF and investment project timetables (SB13, MEFP ¶29). - Authorities’ views: - Committed to strengthening PFM processes and managing fiscal risks. - Highlight progress on SONARA restructuring; agree on need to advance PFM reforms to underpin cash management, reduce domestic payment arrears, improve public spending efficiency, and strengthen SOE management. ### Debt sustainability and vulnerabilities (D.) - Debt stock and composition (end-2022): - Public debt stock: 45.3 percent of GDP at end-2022 (compared to 46.8 percent of GDP at end-2021). - External debt stock: 30.8 percent of GDP in 2022. - Domestic debt: 14.5 percent of GDP in 2022. - Risk assessment: - Cameroon remains at high risk of debt distress, but debt is sustainable over the medium term. - Risk of external debt distress is high: two out of four indicators breach thresholds under baseline scenario. - PV of public debt-to-GDP ratio is above benchmark, indicating high risk of overall debt distress. - External and public debt indicators most vulnerable to commodity shocks. - Debt stock expected to decline further in 2023 with continued growth, tight fiscal policy and CFA franc appreciation, but contingent liabilities from SOEs and PPPs expected to increase. - Debt carrying capacity and service: - Debt carrying capacity remains weak per latest Composite Index (CI) score; bond spread is above benchmark. - External debt service indicators remain above threshold but on a downward trend. - Debt service-to-revenue ratio expected to stop breaching threshold in medium term. - Downside risks: - Geopolitical tensions. - Longer-than-expected tight global financial conditions. - Delays in implementing SONARA’s debt restructuring and rehabilitation plan. - Realization of contingent liabilities. - Authorities’ intent: - Commit to limit non-concessional borrowing and implement proactive debt management. - Program ceilings on PV of newly contracted or guaranteed external public debt and ceilings on disbursement of non-concessional external debt have constrained debt accumulation. - Overall debt ceiling remained unchanged in 2023 and 2024 compared to 2022, with an adjustor to accommodate concessional infrastructure and social projects financed by the World Bank. - Plan a debt management operation to borrow longer-term external debt to clear domestic unpaid government obligations before end-2023 (footnote: authorities aim to carry out operation totaling CFAF 200 billion via a euro-denominated loan). - SENDs and project disbursement: - Authorities reducing contracted but undisbursed loans (SENDs); decree on monitoring project management units implemented with delay (SB8, August 2023). - Debt management agency assessed loan and grant agreements of 180 projects to consult development partners on cancelling non-performing SENDs and reallocating unused credit lines. - Timely disbursement according to schedule is a prerequisite to contain SENDs amid need to sign new projects for infrastructure gaps. - Authorities’ views: - Agree importance of addressing pockets of debt vulnerabilities; risk of debt distress heightened by unfavorable external developments and slow progress on domestic structural reforms. - Committed to improve debt risk assessment, intensify efforts on SOE issues, reduce fiscal risks, and progress on SONARA restructuring plan. _Italic: Source: IMF staff and country authorities (from the provided content unit)._ ### 47. Financial sector resilience needs strengthening. The mission emphasized the need for ### 1cmrea2024001 - 47. Financial sector resilience needs strengthening. The mission emphasized the need for ### Financial sector resilience: findings and required actions - Banks should: - implement COBAC’s recommendations on provisioning and capitalization; - strengthen their credit risk assessment frameworks; - diversify away from the sovereign (both Cameroonian and other CEMAC governments); - follow a strategy to reduce the high share of NPLs (15.4 percent in total gross loans in 2023Q2); - ensure that data are submitted to BEAC. - It is essential that the government: - completes the Commercial Bank of Cameroon (CBC) privatization in 2024 as planned; - finishes the resolution of the distressed banks in a timely manner. ### Restructuring of distressed banks - Progress and shortfalls: - The asset shortfall of one bank has been filled. - Another bank, in which the government will take a majority stake, still misses a significant amount. - The filling of that bank’s asset shortfall remains unclear; authorities mentioned a loan to be made to the government by the insolvent bank due to regulatory forbearance. - Staff positions and standards: - Staff emphasized that self-funding of bank capital is inconsistent with good practices and is not recognized by international regulatory standards (Basel capital framework). - Staff position: the asset shortfall must be filled with funds that meet prudential requirements by the end of the Fund program. - Discussions are ongoing with COBAC to ensure recapitalization complies with international regulatory standards. - COBAC approved recapitalization plans in July 2023, but a substantial part of the capital is yet to be transferred by both the government and private shareholders (end-2024). ### Société de Recouvrement des Créances (SRC) - Performance and risks: - The SRC experienced around CFAF 1 billion in losses in 2022, with a claim portfolio of about CFAF 800 billion. - Mission recommendations: - Conduct an audit of losses to better understand reasons for failure to recover credit. - Strengthen SRC operations to ensure robust governance, operational and budgetary independence, and strong transparency and accountability rules before any extension of SRC’s activities. - The government should commit to a sunset clause for banking assets recovery activities. ### Caisse des Dépôts et Consignations (CDEC) operationalization - Mandate and status: - CDEC is charged with collecting and managing idle bank accounts and judiciary seizures. - It is still waiting for its regulatory texts to be signed by the government. - Operational challenges and recommendations: - Agreement reached with the banking sector to limit transfers’ impact on banks’ liquidity positions. - CDEC has difficulties evaluating its claims and obtaining cooperation from some banks. - The government must ensure CDEC has the necessary financial and logistical resources to exercise responsibilities in collection, management, and security of transferred resources. - CDEC should be regulated as any financial institution. ### Supporting SMEs’ access to credit - Rationale: - Supporting SMEs’ access to credit is key to unlocking private sector-led growth. - Improving the business climate and reducing NPLs are prerequisites to increase banks’ lending confidence. - Government support priorities: - operationalization of the credit registries at BEAC and the creation of a scoring system of companies; - digitalization of the land registry and creation of a real estate collateral registry; - training of judges in corporate law and the creation of commercial courts; - operationalization of the state-backed collateral fund for small companies to facilitate access to credit (fond de garantie aux PME); - internalization of the public sector crowding out effect in the government’s bonds issuance strategy. ### Financial inclusion - Assessment: - Cameroon is lagging in terms of financial inclusion. - National Strategy for Financial Inclusion over 2023-27 launched; prepared with UNDP support. - Strategy expected to cost CFAF 38 billion. - Focus areas: traditional and digital financial inclusion and reducing the related gender gap. - Observations from Box 1 (regional perspective): - Traditional inclusion: Cameroon averages 2.2 commercial bank branches and 5 ATMs per 100,000 adults (CEMAC averages: 3.8 bank branches and 7.5 ATMs; SSA averages: 6.6 bank branches and 14.8 ATMs). - Digital inclusion: Cameroon averages 1,321 mobile money agents per 100,000 adults, above the CEMAC average of 565. - Household depositors: about 112 adults per 1,000 have a deposit account (compared: 182 in Gabon, 282 in Equatorial Guinea, 437 in SSA). - Household borrowers: 33 per 1,000 in Cameroon (Republic of Congo 30, Equatorial Guinea 35, CEMAC 21, SSA 61). - With 19 different banks present, low usage of banking services may reflect low financial literacy, sparse bank branch network, or high banking fees; a large gender gap in access to deposit accounts and loans persists. ### Authorities’ views on the financial sector - The authorities agree with proposed measures to strengthen financial sector resilience. - They share the view on the need for: - strong governance of the SRC; - providing necessary resources to CDEC; - promoting SMEs’ access to credit; - increasing financial inclusion. ### Strengthening governance, transparency and anti-corruption - Governance diagnostic: - A diagnostic of governance and corruption vulnerabilities was completed in collaboration with IMF staff (SB5, MEFP ¶44) and will be published by the Board date (prior action). - Based on priority recommendations, the government will prepare and publish an action plan to further strengthen economic governance. - Budget and decentralization measures: - Government intends to adopt a timetable for transformation of common chapters for authorizing officers and managers (SB17, MEFP ¶45). - Inclusion of appropriations for accidental and unforeseeable expenditures in allocations will be effective in the 2025 budget law, and will not exceed 3-5 percent of the budget; the budget will specify modalities for management of these allocations (SB18, MEFP ¶45). - Audits and AML/CFT: - Progress welcomed on facilitating completion and publication of spending audits; action plan published to strengthen frameworks for public expenditure audits and institutions, notably the Supreme Court's Audit Chamber. - Authorities intend to accelerate implementation of actions to strengthen the AML/CFT regime and have requested LEG TA to address main deficiencies, aiming to be removed from the Financial Action Task Force “grey list”. - Authorities stressed need for broader outreach to maintain reform momentum. ### Program modalities, financing assurances, and risks - Prior actions for the review: - Submission to Parliament of the budget law consistent with the budget framework agreed in the fifth review. - Publication of the governance diagnostic. - Regional assurances: - BEAC met its end-June 2023 NFA target and provided updated policy assurances in support of CEMAC countries’ Fund-supported programs. - A review of regional policies and assurances scheduled for IMF Executive Board discussion in December 2023. - Program monitoring: - Program performance reviews will continue semi-annually through six-monthly and continuous QPCs, quarterly ITs, and SBs. - Staff supports resetting end-March 2024 ITs and setting new end-June and end-December 2024 QPCs, end-September 2024 ITs, and resetting missed SBs. - Waiver request: - Authorities request a waiver for nonobservance of the continuous zero ceiling on accumulation of new external payments arrears following delayed debt service payments to the EIB in August and September 2023; arrears have been cleared. - Staff proposes adding a 30-day period after the payment due date before considering delayed payments as external arrears for program assessment purposes. - Extension and augmentation request: - Authorities requested a 12-month extension of the ECF/EFF arrangements (through July 28, 2025). - Requested augmentation of access of 40 percent of quota over the extension, for balance of payments support (SDR 110.4 million). - Staff proposes the increase be shared between GRA (26.7 percent of quota; SDR 73.6 million) and PRGT (13.3 percent of quota; SDR 36.8 million). - Repayment capacity and risks: - Cameroon’s current quota is SDR 276.0 million. - Under the baseline, total Fund credit outstanding peaks at over 3 percent of GDP in 2023. - Annual obligations to the Fund peak at about 2.8 percent of revenues excluding grants in 2027, well above the reference group top quartile. - Risks include global spillovers, SOEs’ contingent liabilities (e.g., delays in SONARA’s restructuring), security risks, and the need for timely budget support. - Financing assurances: - The program remains fully financed, with firm commitments over the next 12 months and good prospects for financing over the remainder of the arrangement. - Program risks and mitigation: - Fuel subsidy reforms could lead to civil unrest if not accompanied by appropriate social mitigation measures. - Delays in implementing infrastructure projects could exacerbate social and/or security tensions. - Higher oil revenue could test authorities’ ability to implement reforms ahead of elections. - Global spillovers and increased climate-related events could threaten external balances and heighten food insecurity and social tensions. - Risks are mitigated by program conditionality, donor engagement, and a comprehensive capacity development program. ### Statistical issues and capacity development - Data provision: - Data provision is broadly adequate; authorities have worked with development partners to improve quality, coverage, and timeliness of key macroeconomic data. - Developments since the last Article IV Consultation include strengthening public debt and balance of payments data and shifting budget execution reports to a commitment basis with more comprehensive coverage. - Weaknesses remain in fiscal data coverage of local government and public enterprises, including cross-debts. - Capacity Development (CD): - The CD strategy for Cameroon is well-aligned with the authorities’ economic reform strategy SND-30 objectives (Annex VI). - Cameroon has an overall good track record of implementing TA recommendations. - A revised CD strategy was discussed, taking stock of emerging priorities and Cameroon’s status as an FCS. ### Staff appraisal and macroeconomic outlook - Growth and inflation: - Real GDP growth is expected to accelerate to 4.3 percent in 2024, up from 4.0 percent in 2023. - Headline average inflation is expected to moderate from 7.2 percent in 2023 to 5.9 percent in 2024. - External sector: - The current account deficit is projected to narrow to 3.0 percent in 2023, driven by rising gas production and an improved primary income balance. - Overall assessment: - Cameroon has remained resilient, but uncertainties and risks have increased, including internal conflicts, tight global conditions, and high oil price volatility. - External position in 2022 was assessed to be modestly weaker than warranted by fundamentals and desirable policies. *Source: IMF staff report excerpt (1cmrea2024001).* ### 71. The program remains broadly on track thanks to corrective actions and progress in ### 1cmrea2024001 - 71. The program remains broadly on track thanks to corrective actions and progress in ### Program status and review outcomes - Five out of six quantitative performance criteria (QPCs) were met. - The continuous QPC on the non-accumulation of external payment arrears was breached due to minor and temporary delays of two debt service payments. - Of the nine structural benchmarks (SBs) for the fifth review: - Three were met on schedule. - Two were implemented with delay. - One was expected to be implemented by the Board date (prior action). - Three will be rescheduled. - Staff supports the authorities’ request for: - the waiver of nonobservance of the QPC on the non-accumulation of external payment arrears, - the program extension, - access augmentation, - completion of the fifth review. - Staff proposes that the completion of the sixth review under the ECF-EFF arrangements be conditional on the implementation of critical policy assurances on NFAs at the union level established in the December 2023 union-wide background paper. ### Structural transformation, export diversification, and horizontal policies - Advancing the implementation of horizontal policies is identified as the most effective way to foster structural transformation and export diversification, and as a necessary condition for the success of any industrial policy. - Key horizontal policy gaps highlighted for Cameroon include: - investments in human capital and infrastructure, - strengthening institutions, including governance, - enhancing product and labor markets by removing regulations that hinder competition among firms, allow more market flexibility and encourage more formalization of existing firms. - The authorities should advance efforts to integrate climate considerations in Cameroon’s institutional, regulatory, and budget frameworks to support progress toward the national adaptation and mitigation objectives. ### Macroeconomic stability and fiscal policy objectives - The authorities are committed to macroeconomic stability and implementing policies consistent with the stability of the CEMAC region’s monetary arrangement, including rebuilding of BEAC’s foreign exchange reserves and supporting the BEAC and the COBAC’s efforts to strictly enforce the foreign exchange regulations. - In line with program objectives, fiscal policy will be geared towards consolidating and strengthening the public finances, namely: - reducing the non-oil primary deficit to below 2 percent of GDP in 2024, - reducing the public debt stock to 40 percent of GDP. - The authorities recognize that budget execution in 2024 will continue to face large and unsustainable pressures unless steps are taken to moderate the costs of fuel subsidies. ### Fiscal consolidation, revenue mobilization, and public expenditure management - Staying the course of fiscal consolidation requires further deep public financial reforms. - With continued gradual fiscal consolidation over the medium term, providing space for expanding transfers to vulnerable will require: - a more concerted effort to mobilize domestic non-oil revenues, including by widening the tax base, - reducing the cost of fuel subsidies, - improving the prioritization and efficiency of public expenditures. - It is critical to: - strictly limit recourse to direct interventions and exceptional spending procedures, - improve cash management, - strengthen fiscal transparency and budget credibility. ### Public sector financial management and public enterprises - Strengthening the broader public sector financial management is essential. - There is a critical need to strengthen the management of public enterprises, especially those providing essential services and infrastructure for development. - The authorities have demonstrated a strong commitment to reducing debt vulnerabilities including by restructuring SONARA’s debt. ### Public debt sustainability and borrowing policy - Cameroon’s public debt is sustainable although the country remains at high risk of debt distress. - Staff welcomes the authorities’ commitment to limiting non-concessional borrowing and the continued adherence to the fiscal consolidation and structural reform efforts, a prudential borrowing policy. ### Banking sector fragilities and financial stability risks - Fragilities in the banking system have increased. - NPL ratios are rising. - Banks' exposure to the Cameroonian government increased to 35.3 percent of total assets in 2022, up from 23 percent in 2019, crowding out credit to the private sector and presenting risks for financial stability. - The increasing sovereign-bank nexus calls for measures to limit a further build-up in concentration risk. - The authorities should work with COBAC to ensure that banks reduce and account adequately for sovereign risk. ### Governance, transparency, and AML/CFT - The authorities’ efforts to promote transparency and good governance and reduce corruption risks are welcome. - The publication of the governance diagnostic will be an important step forward (prior action). - Staff underlined the importance of continuing to work with international bodies responsible for transparency and financial integrity and to accelerate implementation of actions aimed at strengthening the AML/CFT regime, particularly to support anti-corruption efforts. *Source: IMF country document* ### 80. The next Article IV Consultation is expected to take place within 24 months in ### Cameroon: Economic and Financial Developments and Program Indicators ### Real sector developments (2017–23 and projections) - Growth: - GDP at constant prices: 3.6 (2022 est.), 4.0 (2023 4th Rev.), 4.0 (2024 proj.), 4.2 (2025 proj.), 4.3 (2026 proj.), 4.5 (2027 proj.), 4.5 (2028 proj.), 4.5, 4.6 (later projections noted). - Oil GDP at constant prices: 2.1 (2022 est.), -1.8 (2023 4th Rev.), 0.5 (2024 proj.), -1.3 (2025 proj.), 0.7 (2026 proj.), 1.3 (2027 proj.), 0.2 (2028 proj.), 0.2, 0.2. - Non-oil GDP at constant prices: 3.6 (2022 est.), 4.1 (2023 4th Rev.), 4.1 (2024 proj.), 4.3 (2025 proj.), 4.3 (2026 proj.), 4.5 (2027 proj.), 4.6 (2028 proj.), 4.6, 4.7. - Prices: - GDP deflator: 6.3 (2022 est.), 2.7 (2023 4th Rev.), 3.1 (2024 proj.), 2.7 (2025 proj.), 3.5 (2026 proj.), 4.0 (2027 proj.), 3.1 (2028 proj.), 2.6, 1.7. - Consumer prices (average): 6.3 (2022), 6.2 (2023), 7.2 (2024), 4.8 (2025), 5.9 (2026), 5.5 (2027), 4.9 (2028), 3.4, 2.5. - Consumer prices (eop): 7.3 (2022), 5.9 (2023), 6.2 (2024), 3.7 (2025), 5.5 (2026), 5.2 (2027), 3.6 (2028), 2.0, 2.0. ### Fiscal developments (2017–23 and projections) - Nominal GDP (market prices, CFAF billions): 27,702 (2022 est.), 29,457 (2023 4th Rev.), 29,704 (2024 proj.), 31,521 (2025 proj.), 32,063 (2026 proj.), 34,822 (2027 proj.), 37,515 (2028 proj.), 40,216, 42,770. - Total revenue (including grants) and composition (CFAF billions): - Total revenue and grants: 4,417 (2022 est.), 4,696 (2023 4th Rev.), 4,743 (2024 proj.), 4,878 (2025 proj.), 5,106 (2026 proj.), 5,409 (2027 proj.), 5,843 (2028 proj.), 6,315, 6,741. - Total revenue: 4,313 (2022), 4,595 (2023), 4,644 (2024), 4,782 (2025), 5,009 (2026), 5,328 (2027), 5,799 (2028), 6,275, 6,720. - Oil sector revenue: 973.8 (2022), 842 (2023), 870 (2024), 966 (2025), 881 (2026), 069 (2027), 169 (2028), 870, 9724 (noting formatting in source). - Non-oil sector revenue: 3,339 (2022), 3,754 (2023), 3,774 (2024), 4,114 (2025), 4,200 (2026), 4,636 (2027), 5,100 (2028), 5,566, 5,996. - Expenditure and balances (CFAF billions): - Total expenditure: 4,725 (2022), 4,923 (2023), 4,937 (2024), 5,082 (2025), 5,227 (2026), 5,546 (2027), 6,135 (2028), 6,668, 7,123. - Current expenditure: 3,448 (2022), 3,400 (2023), 3,506 (2024), 3,289 (2025), 3,494 (2026), 3,428 (2027), 3,596 (2028), 3,775, 3,930. - Capital expenditure: 1,279 (2022), 1,470 (2023), 1,379 (2024), 1,713 (2025), 1,690 (2026), 2,037 (2027), 2,489 (2028), 2,893, 3,194. - Overall balance (payment order basis) excluding grants: -412 (2022), -327 (2023), -294 (2024), -301 (2025), -218 (2026), -218 (2027), -336 (2028), -393, -404. - Overall balance (payment order basis) including grants: -308 (2022), -226 (2023), -194 (2024), -204 (2025), -121 (2026), -137 (2027), -292 (2028), -353, -382. - Overall balance (cash basis) excluding grants: -436 (2022), -702 (2023), -678 (2024), -556 (2025), -438 (2026), -388 (2027), -506 (2028), -393, -404. - Overall balance (cash basis) including grants: -332 (2022), -601 (2023), -579 (2024), -459 (2025), -341 (2026), -307 (2027), -462 (2028), -353, -382. - Financing and arrears: - Financing (total): 332 (2022), 335 (2023), 393 (2024), 325 (2025), 89 (2026), 203 (2027), 462 (2028), 353, 382. - External financing, net: 310 (2022), 296 (2023), 291 (2024), 184 (2025), 264 (2026), 287 (2027), 398 (2028), 432, 583. - Amortization: -589 (2022), -704 (2023), -704 (2024), -660 (2025), -643 (2026), -657 (2027), -623 (2028), -654, -572. - Domestic financing, net and central bank/net non-bank breakdown provided in tables (exact figures preserved in source tables). - Key fiscal ratios (percent of GDP): - Total revenue and grants: 15.9 (2022), 15.9 (2023), 16.0 (2024), 15.5 (2025), 15.9 (2026), 15.5 (2027), 15.6 (2028), 15.7, 15.8. - Total expenditure: 17.1 (2022), 16.7 (2023), 16.6 (2024), 16.1 (2025), 16.3 (2026), 15.9 (2027), 16.4 (2028), 16.6, 16.7. - Overall balance (payment order basis) excluding grants: -1.5 (2022), -1.1 (2023), -1.0 (2024), -1.0 (2025), -0.7 (2026), -0.6 (2027), -0.9 (2028), -1.0, -0.9. - Non-oil primary balance (payment order basis): -3.9 (2022), -2.5 (2023), -2.5 (2024), -1.7 (2025), -1.9 (2026), -1.3 (2027), -1.6 (2028), -1.6, -1.6. ### External sector and balance of payments (2022–28) - Current account: - Current account balance (CFAF billions): -941 (2022), -863 (2023), -884 (2024), -958 (2025), -896 (2026), -866 (2027), -1,036 (2028), -1,084, -1,160. - Current account balance (percent of GDP) including grants: -3.4 (2022), -2.9 (2023), -3.0 (2024), -3.0 (2025), -2.8 (2026), -2.5 (2027), -2.8 (2028), -2.7, -2.7. - Excluding grants: -3.7 (2022), -3.3 (2023), -3.3 (2024), -3.1 (2025), -2.9 (2026), -2.7 (2027), -2.8 (2028), -2.7, -2.8. - Trade and exports: - Trade balance (CFAF billions): -197 (2022), -424 (2023), -513 (2024), -491 (2025), -484 (2026), -470 (2027), -607 (2028), -666, -720. - Exports, goods (CFAF billions): 4,322 (2022), 3,944 (2023), 4,135 (2024), 3,940 (2025), 4,371 (2026), 4,600 (2027), 4,641 (2028), 4,709, 4,860. - Oil and oil products exports: 2,163 (2022), 1,536 (2023), 1,645 (2024), 1,415 (2025), 1,648 (2026), 1,702 (2027), 1,569 (2028), 1,409, 1,289. - Non-oil exports: 2,159 (2022), 2,408 (2023), 2,490 (2024), 2,525 (2025), 2,724 (2026), 2,898 (2027), 3,072 (2028), 3,300, 3,571. - Imports, goods (CFAF billions): -4,519 (2022), -4,367 (2023), -4,648 (2024), -4,431 (2025), -4,856 (2026), -5,070 (2027), -5,248 (2028), -5,375, -5,580. - Capital and financial account: - Capital and financial account balance (CFAF billions): 1,421 (2022), 898 (2023), 893 (2024), 901 (2025), 984 (2026), 1,034 (2027), 1,237 (2028), 1,329, 1,517. - Financial account details include official capital, borrowing, amortization, and foreign direct investment flows (exact figures in source tables). - Terms of trade and commodity prices: - Terms of trade (percent change): -10.6 (2022), -7.6 (2023), -2.2 (2024), -1.6 (2025), 1.6 (2026), 0.5 (2027), -4.4 (2028), -5.5, -4.5. - Oil price ($US dollars per barrel): 96.47 (2022), 75.38 (2023), 80.56 (2024), 69.87 (2025), 79.97 (2026), 76.07 (2027), 72.76 (2028), 69.96, 67.5. ### Monetary sector (2022–28) - Broad money and components (CFAF billions): - Broad money: 8,157 (2022), 8,893 (2023), 8,893 (2024), 9,603 (2025), 9,643 (2026), 10,379 (2027), 11,148 (2028), 11,947, 12,794. - Net foreign assets: 3,193 (2022), 3,432 (2023), 3,327 (2024), 3,494 (2025), 3,609 (2026), 3,867 (2027), 4,098 (2028), 4,373, 4,761. - Net domestic assets: 4,964 (2022), 5,461 (2023), 5,566 (2024), 6,109 (2025), 6,034 (2026), 6,512 (2027), 7,050 (2028), 7,574, 8,033. - Credit: - Domestic credit: 6,126 (2022), 6,954 (2023), 6,983 (2024), 7,509 (2025), 7,478 (2026), 7,925 (2027), 8,134 (2028), 8,664, 9,249. - Credit to the private sector: 3,742 (2022), 4,131 (2023), 4,161 (2024), 4,510 (2025), 4,556 (2026), 4,907 (2027), 5,270 (2028), 5,649, 6,056. - Monetary growth and contributions: - Broad money (annual percentage change): 11.4 (2022), 9.0 (2023), 9.0 (2024), 8.0 (2025), 8.4 (2026), 7.6 (2027), 7.4 (2028), 7.2, 7.1. - Contribution to growth of broad money (percentage points): Net foreign assets 7.7 (2022), 2.9 (2023), 1.6 (2024), 0.7 (2025), 3.2 (2026), 2.7 (2027), 2.2 (2028), 2.5, 3.2; Net domestic assets 3.6 (2022), 6.1 (2023), 7.4 (2024), 7.3 (2025), 5.3 (2026), 5.0 (2027), 5.2 (2028), 4.7, 3.8. ### Capacity to repay the Fund and Fund exposures (2022–44) - Quota: 276,000,000 SDRs. - Outstanding IMF credit (SDR millions, existing and prospective drawings): 966.0 (2022), 1,090.2 (2023), 1,137.1 (2024), 1,095.7 (2025), 936.6 (2026), 752.6 (2027), 583.3 (2028), 412.8 (2029), 265.0 (2030), 159.5 (2031), 83.4 (2032), 29.4 (2033), 4.9 (2034), 0.0 (2035–2044). - Outstanding IMF credit (CFAF billions): 804.0 (2022), 880.2 (2023), 914.0 (2024), 882.6 (2025), 756.2 (2026), 610.9 (2027), 477.0 (2028), 337.6 (2029), 216.7 (2030), 130.4 (2031), 68.2 (2032), 24.4 (2033), 4.1 (2034), 0.0 (2035–2044). - Net use of Fund credit (SDR millions) and disbursements/repayments schedule provided: - Net use of Fund credit: 138.0 (2022), 124.2 (2023), 46.9 (2024), -41.4 (2025), -159.2 (2026), -184.0 (2027), -169.3 (2028), -170.5 (2029), -147.8 (2030), -105.5 (2031), -76.1 (2032), -54.0 (2033), -24.5 (2034), -4.9 (2035), 0.0 (2036–2044). - Disbursements (SDR millions): 138.0 (2022), 165.6 (2023), 110.4 (2024), 55.2 (2025), 0.0 thereafter as per table. - Repayments and repurchases (SDR millions): 0.0 (2022), 41.4 (2023), 63.5 (2024), 96.6 (2025), 159.2 (2026), 184.0 (2027), 169.3 (2028), 170.5 (2029), 147.8 (2030), 105.5 (2031), 76.1 (2032), 54.0 (2033), 24.5 (2034), 4.9 (2035). - Fund obligations and ratios (selected): - Outstanding based on prospective credit as percent of quota: 350.0 (2022), 395.0 (2023), 412.0 (2024), 397.0 (2025), 339.3 (2026), 272.7 (2027), 211.3 (2028), 149.6 (2029), 96.0 (2030), 57.8 (2031), 30.2 (2032), 10.7 (2033), 1.8 (2034), 0.0 (2035–2044). - Outstanding as percent of government revenue and exports presented in tables (exact figures preserved). ### Program financing, disbursements, and external financing needs (2021–28) - Proposed ECF and EFF disbursement schedule and cumulative totals (SDR millions and percent of quota): - Executive Board approval 7/29/2021: Total 45.0 (15.0 ECF; 30.0 EFF); 124.2 (41.4 ECF; 82.8 EFF) appears in table rows reflecting tranches and reviews. - Series of reviews with amounts: 30.0; 20.0; 20.0; 20.0; 20.0; 20.0; 20.0; 20.0 across specified review dates, summing to Total 215.0 (71.7 ECF; 143.3 EFF) and Total in SDR (359.3; 197.8 ECF; 395.6 EFF) per table totals. - External financing needs and sources (CFAF billions): - Total Financing Requirements: 178 (2023), 218 (2024), 179 (2025), 179 (2026), 618 (2027), 119 (2028), 832 (later horizon), 088, 2088 (table formatting preserved). - Current Account Deficit: 884 (2023), 896 (2024), 866 (2025), 1,036 (2026), 1,084 (2027), 1,160 (2028). - Amortization of PPG Debt: 737 (2023), 694 (2024), 735 (2025), 752 (2026), 803 (2027), 710 (2028). - Gross Reserves Accumulation: 161 (2023), 289 (2024), 195 (2025), 739 (2026), 621 (2027), 219 (2028). - Financing sources include IMF Financing: 136 (2023), 89 (2024), 44 (2025), 0 (later years) and other multilateral/bilateral sources with amounts specified (ECF 45, EFF 91, Budget Support and others as in table). - Financing gap and additional/exceptional financing: Financing Gap 186 (2023), 253 (2024), 104 (2025), 000 (later) with Additional/Exceptional Financing Sources matching those amounts and IMF/other allocations as listed. ### Program quantitative performance criteria and indicative targets (selected) - Quantitative Performance Criteria (QPC) and Indicative Targets (IT) for end-Sept 2024 and end-Dec 2024 (selected outcomes and status indicators preserved as in table): - Floor on the non-oil primary fiscal balance (payment order basis): QPC End-Sept 24: -331 (Est.); Performance: -233 Met; Adjusted IT End-Dec 24: -474; Est. Performance QPC/IT entries and subsequent targets provided with statuses such as Met. - Ceiling on the net domestic financing of the central government (excluding IMF financing): QPC End-Sept 24: 132; Est. Performance: 67 Met; Adjusted IT/ QPC entries and subsequent targets with Met/Not met statuses reported. - Ceiling on net borrowing of the central government from the central bank (excluding IMF financing) and ceiling on disbursement of non-concessional external debt have targets and assessment statuses listed (figures preserved in the table). - Continuous QPC: Ceiling on accumulation of new external payments arrears: 0 (zero ceiling applies until the end of the arrangement); status indicated as Not met for specified dates. - Indicative targets include Floor on non-oil revenue, Ceiling on net accumulation of domestic payment arrears, Floor for poverty-reducing social spending, Ceiling on direct interventions of SNH, Share of spending executed through exceptional procedures, Ceiling on Treasury advances without a budget allocation; numerical targets and performance labels (Met / Not met) are included in the table. - Memorandum and technical notes: - Notes clarify terms defined in the TMU, adjustments to ceilings if external budgetary assistance differs from forecasts, applicability of standard continuous performance criteria, and specific definitions for arrears and advances. *Source: IMF staff report tables, figures, and notes as provided in the source content.* ### 1. Cumulative external budget support, excluding IMF (earliest ### 1cmrea2024001 - 1. Cumulative external budget support, excluding IMF (earliest ### Key Figures - Cumulative external budget support, excluding IMF (earliest disbursement): 232368231290187878164 - Balance of the special account for the unused statutory advances: 5050501111111 - Reporting dates shown: End-Mar 24; End-Jun 24; End June-23; End-Sept 23; End-Dec 23 ### Prior Action and Structural Benchmarks — Public finance and debt management - Prior Action: Submit to Parliament the 2024 Finance Act in line with the macroeconomic and budgetary framework of the 5th reviews. - Status: Met - Completion date / Comment: This prior action was met on November 30, 2023. - Structural Benchmark: Complete the audits of government payment arrears and adopt an arrears settlement plan certified by these audits. - Completion date: Sept. 23 - Indicator / Status: Submission of the Audit Report and Arrears Clearance Plan to IMF Staff. Not met, implemented with delay. - Comment: Audits of the State’s arrears have been completed, and a plan has been adopted to settle the arrears over 3-7 years. - Structural Benchmark: Establish an inventory of the respective debts between the public enterprises and the Government and between the public enterprises themselves, as at end-2020, and adopt a plan for the clearance of the respective debts between the Government and public enterprises. - Completion date: Sept. 23; Revised Deadline: Apr 24 - Indicator / Status: Inventory and clearance plan shared with IMF Staff. Not met. - Comment: Inventories drawn up; clearance plan between government and public enterprises will not be completed until April 2024. - Structural Benchmark: Include in the budget law of year N+1 a budgetary allocation for the clearance of outstanding unpaid obligations (RAPs) of more than 90 days at the end of year N. - Deadline: Dec. 23 - Indicator: Allocations in the 2024 initial budget law. - Purpose: Limit outstanding amounts of more than 90 days at the end of the fiscal year. ### Extractive Sector and SONAMINES / SONARA - Structural Benchmark: Finalize and publish all implementation texts of the 2016 Mining Code (law n° 2016/017 of December 14, 2016). - Completion date: Sept. 23; Revised Deadline: June 24 - Indicator / Status: Implementing texts published. Not met. - Comment: Implementing texts not finalized. Creation of national mining company, SONAMINES, required review and formulation of a new code to be submitted to Parliament in March 2024; implementing texts to follow adoption. - Prior Action / Structural Benchmark (SONARA): - Prior: SONARA Restructuring Plan — Elaborate a restructuring plan for SONARA, including industrial and financial options under consideration. - Completion date: Sept. 23 - Indicator / Status: Elaborate and submit to IMF staff the new restructuring plan for SONARA. Not met. - Comment: Restructuring plan completed and validated by the IMC, but the in-depth technical-economic and financial feasibility study of option 3 (complex refinery with hydrocracking) not finalized and submitted to IMF staff. - New Structural Benchmark (Replaces SB6): Implementation of the SONARA Restructuring Plan — Carry out the in-depth technical-economic and financial feasibility study of option no.3 validated by the President of the Republic related to a refinery complex with a hydrocracking unit, accompanied by the plans and design of the new refinery. - Deadline: June 2024 - Indicator: Conduct and submit the study report to IMF staff. ### Business Climate, Governance, and Anti-Corruption - Structural Benchmark: Revise Law No. 2013/004 of April 18, 2013, to rationalize incentives and promote healthy competition between economic operators. - Completion date: Dec. 23; Revised Deadline: Nov. 24 - Indicator: Revised Act published. - Comment: Revision delayed to allow intermediate step (SB7), which has now been met. - Prior Action / Structural Benchmark: Publish a diagnostic of governance vulnerabilities, particularly with regard to corruption (focusing on fiscal governance; supervision of the financial sector; market regulation; the rule of law; and AML/CFT). - Completion date: Sept. 23 - Indicator / Status: Publication of the report. Not met. - Comment: Government completed a diagnostic in collaboration with the IMF and has authorized publication of the report by the Board date. - Structural Benchmark: Formulate an action plan with recommendations to eliminate CIT holidays (including the minimum tax) to promote healthy competition between economic operators, excluding agriculture, livestock, and fishery sectors. - Completion date: Oct. 23 - Indicator: Action plan submitted to IMF staff. - Status: Met. - Comment: Action plan prepared as intermediate step to revision of Law No. 2013/004. ### Project, Public Investment, and Procurement Management - Structural Benchmark: Implementation the decree of October 2021 governing project management units. - Completion date: Aug. 23 - Indicator: Publication of a decree specifying the procedures for monitoring the performance of project management units. - Status: Not met, implemented with delay. - Comment: Introduced to improve project and debt management; deadline revised to August 2023; implemented in November 2023. - Structural Benchmark: Public Investment Management (PIM) — Increase to at least 80% the number and total value of contracts awarded through the COLEPS in some key ministries between January and May 2024, to monitor awarding of public contracts at central services. - Deadline: May 24 - Indicator: Report on the number and value of online procurement contracts from January to May 2024 (as a percentage of total) submitted to IMF staff. - Comment: COLEPS operational, but limited number of procurement projects registered; new formulation of this SB proposed. - Structural Benchmark: Develop comprehensive and realistic public procurement plans allowing development of commitment plans consistent with monthly cash flow plans. - Deadline: May 25 - Indicator: Prepare and publish an annual report for 2024, assessing consistency between commitment and cash plans based on work of the Treasury Committee (CTRB) and its Secretariat. ### Revenue Mobilization and Tax Arrears - New Structural Benchmark: Create a dataset of wages and salaries suitable for simulating IRPP calculations, covering the entire public sector and a representative sample of private sector employees. - Deadline: Nov. 24 - Indicator: Share the database with IMF staff. - Comment: Long-standing technical assistance recommendation; key for assessing IRPP reform impacts on income and equity. - New Structural Benchmark: Prepare a detailed action plan, including the first 100 outstanding tax and customs debts (including state-owned enterprises), to manage and recover at least 15 percent of the outstanding recoverable tax arrears (outstanding as at end-June 2023) and implement 50 percent of the measures included in the action plan. - Deadline: April 24 - Indicator: Submit to IMF staff a detailed and sequenced action plan. - Comment: Tax arrears a significant problem per March 2022 IMF technical assistance; measure aims to improve tax revenue collection and transparency. ### Public Financial Management and Cash Management - New Structural Benchmark: Take into account in the budget the commitment authorizations (CAs) and payment appropriations (PAs) that comply with the MTBF and are consistent with the timetable for the implementation of investment projects. - Deadline: Nov. 24 - Indicator: Inclusion in the budget of an annex on CAs and PAs that comply with the MTBF and are consistent with the timetable for implementation of investment projects (from the 2025 budget). Draft budget law to be presented to IMF staff. - Comment: Aims to address weaknesses in public investment management and multi-year project management. - New Structural Benchmark: Minister of Finance to issue an instruction, following an audit, to strengthen the management of correspondent accounts with provisions on closure of illegal accounts, clearance of existing arrears, and cash management rules consistent with annual budget law requirements. - Deadline: Dec. 24 - Indicator: Submit the instruction to IMF staff. - Comment: Aims to strengthen cash management of correspondent accounts. - New Structural Benchmark: Adopt a timetable for the transformation of the common chapters into allocations for authorizing officers of ministries and managers in the context of the reform of the devolution of the authorization. - Deadline: May 24 - Indicator: Validated timetable for transforming common chapters into allocations is sent to IMF staff. - Comment: Improve transparency in use of "common chapters". - New Structural Benchmark: Include appropriations for accidental and unforeseeable expenses in endowments in the 2025 draft budget law, which do not exceed 3-5 percent of the budget, and specify modalities for managing the endowment. - Deadline: Nov. 24 - Indicator: The 2025 draft budget law, presenting the appropriations for accidental and unforeseeable expenditures in endowments and specifying modalities for managing the endowment, is transmitted to the IMF staff. - Comment: Aims to improve transparency in use of "common chapters". ### Risk Assessment Matrix — Key Risks, Likelihood, Impacts, and Recommended Responses - Intensification of regional conflict(s). - Likelihood: High - Impact if realized: - Higher inflation and increased food insecurity. - Supply chain disruptions affecting businesses. - Increased spending pressures (including fuel subsidies) and extension of tax exemptions jeopardizing fiscal strategy. - Recommended policy response: - Create fiscal space through wage bill control, spending review, and revenue mobilization. - Prioritize and target public spending towards the most vulnerable people. - Review and reprioritize tax exemptions for programs with higher economic and social impact. - Commodity price volatility. - Likelihood: High - Impact if realized: - Worsening or improvement in terms of trade depending on commodity price direction (timber and cocoa cited). - Unstable fiscal position and potential social unrest. - Recommended policy response: - Review export promotion incentives to encourage higher growth and diversification. - Prioritize and target public spending towards the most vulnerable people. - Global growth slowdown / weaker demand from trade partners. - Impact if realized: - Slower growth, worsening current account; weaker demand could cool inflation. - Recommended policy response: - Adjust fiscal policy to anchor expectations. - Prioritize and target public spending towards the most vulnerable people. - Monitor macro-financial risks. - Persistently high inflation. - Likelihood: Medium - Impact if realized: - Impact on vulnerable populations and food insecurity. - Increase in risk premia and heightened financial sector instability risk. - Recommended policy response: - Regional central bank remain vigilant and adjust monetary stance as needed. - Accelerate reforms to strengthen resilience of the financial sector. - Sovereign debt distress. - Likelihood: Medium - Impact if realized: - Capital outflows and increases in borrowing costs. - Recommended policy response: - Enhance banking supervision and enforce prudential regulations. - Create fiscal space to absorb shocks. - Advance SOE restructuring and PFM reforms. - Social discontent. - Likelihood: Medium [to High] - Impact if realized: - Social unrest could delay fiscal adjustment, exacerbate internal tensions, disrupt agricultural production, and delay investment projects. - Recommended policy response: - Review and reprioritize public spending towards programs with higher economic and social impact. - Create fiscal space to tackle financial vulnerabilities. - Mobilize additional grants and concessional loans from partners to cover prioritized needs. - Deepening geoeconomic fragmentation. - Likelihood: High - Impact if realized: - Reconfiguration of trade and FDI, supply disruptions, higher input costs, financial instability, and lower potential growth. - Recommended policy response: - Accelerate labor and product market reforms to support diversification of exports and extend trade relations. - Cybersecurity and digital infrastructure risks. - Likelihood: Medium - Impact if realized: - Impact on public services that rely on digital infrastructure. - Recommended policy response: - Create contingent plans for cyberattacks. - More frequent extreme climate events. - Likelihood: Medium - Impact if realized: - Severe damage to infrastructure, supply disruptions, lower growth, and increased food insecurity; note: over three million people estimated severely food-insecure between January and May 2023, a 5 percent increase compared to same period in 2022. - Recommended policy response: - Improve capacity for monitoring and assessing climate policies and strengthen early warning systems. - Address infrastructure gaps and regional income/development disparities and institute appropriate social safety nets. - Disorderly energy transition. - Likelihood: Low - Impact if realized: - Energy supply disruptions and stranded assets. - Recommended policy response: - Energy sector reform. - Regional stability risks (including events in Gabon). - Likelihood: Medium to High - Impact if realized: - Increased sovereign financing costs; intraregional banks’ exposure and potential banking-sector contagion. - Recommended policy response: - Address bank vulnerability/advance bank restructuring. - Advance reforms supporting public debt sustainability. *Source: Cameroon — Table 10. Prior Action and Structural Benchmarks; Annex I. Risk Assessment Matrix.* ### Annex II. Drivers of Inflation in Cameroon ### Annex II. Drivers of Inflation in Cameroon ### Summary of methodology - A Modified Phillips Curve is estimated by OLS on quarterly data to decompose annualized quarter-over-quarter (QoQ) inflation (흅흅풕풕) into: - inflation expectations (흅흅풕풕풆풆 = 흅흅풕풕−ퟏퟏ), - output gap (푦푦푡 − 푦푦푡∗), - one-period change in the log of the Nominal Effective Exchange Rate (∆푵푵푵푵푵푵푵푵푡), - Euro Area core inflation (흅흅풕풕푵푵푬푬,풄풄풄풄풄풄풆풆), - oil price inflation (흅흅풕풕푶푶풊풊푶푶), - food inflation (흅흅풕풕푭푭풄풄풄풄푭푭). - Potential output is estimated via a Solow decomposition (changes in capital stock, structural employment, and total factor productivity). - Contributions of the exchange rate, Euro Area core inflation, and oil price inflation are labelled as external factors; the output gap is labelled as internal factors. - Several robustness checks performed (not presented). ### Key regression fit and coefficients - R-squared: 0.82 - Estimated coefficients (standard errors in parentheses; *** = 1% significance, ** = 5% significance): - μ: 0.474** (0.204) - α: 0.444*** (0.159) - β: 0.781*** (0.267) - γ: -0.424*** (0.102) - δ: 0.039** (0.015) - ϑ: 0.008*** (0.003) - θ: 0.228*** (0.079) ### Main empirical findings on drivers of inflation - The modified Phillips Curve has a good fit (R2 = 0.82) and high statistical significance for coefficients, indicating informative decomposition of inflation drivers. - Largest contributors: - Inflation expectations (α = 0.444***): assuming backward-looking expectations, a one percent increase in inflation expectations raises current inflation by 0.44 percent. Post-pandemic, expectations are an important driver; inflation expectations help explain inflation reaching 7.4 percent QoQ in annualized terms in 2022Q4. - Food inflation (θ = 0.228***): a one percent increase in food inflation raises overall inflation by 0.23 percent, with stronger effects since the end of the COVID-19 pandemic. - External factors (sum of exchange rate effect, Euro Area core inflation, and oil price inflation) had a small contribution over 2002Q4-2019Q4 but grew in importance post-pandemic, explaining a significant share of post-pandemic inflation. - Internal factors (output gap) had a subdued contribution pre-pandemic but have been significant and negative post-pandemic. - Residuals (other omitted variables) are relatively small in the recent period. ### Demand versus supply shocks (SVAR analysis) - A bivariate Structural VAR (Bayesian estimation; sign restrictions) with annualized QoQ real GDP growth (품품풕풕) and annualized QoQ inflation (흅흅풕풕) is used. - Positive demand shock: increases real GDP and inflation. - Positive supply shock: increases real GDP and decreases inflation. - Over 2000Q1-2022Q4, demand and supply shocks have had roughly equal aggregate influence, alternatively pushing inflation up or down. - Recent periods: - 2016–2019: inflation was mostly driven down by negative demand shocks while output growth decelerated and the output gap moved from +0.31 percent in 2015Q4 to -0.29 percent in 2017Q4. - 2020–2022 (COVID-19 pandemic): demand shocks remained negative as consumption froze; supply shocks pushed inflation up due to supply chain disruptions. - Post-pandemic recovery: both demand and supply shocks pushed inflation up as supply of goods and services lagged recovering demand. ### Policy-relevant implications (derived from empirical results) - Anchoring inflation expectations is crucial given the large pass-through (α = 0.444***) from expectations to current inflation. - Food-price stabilization policies and measures to limit domestic pass-through of imported food inflation can materially reduce headline inflation (θ = 0.228***). - External vulnerability management (exchange rate, external inflation, oil prices) matters more post-pandemic as external factors' contribution has increased. - Monitoring and addressing negative output gap dynamics and supply-side bottlenecks is important to limit adverse contributions from internal and supply-side factors. - A combination of monetary and targeted fiscal/structural measures to restore price stability should prioritize expectation management, food market interventions, and easing supply constraints. ### Selected related quantitative facts from the same source document (contextual) - Inflation reached 7.4 percent QoQ in annualized terms in 2022Q4. - Output gap: +0.31 percent in 2015Q4 and -0.29 percent in 2017Q4 (period used to illustrate demand-driven disinflation). - The SVAR historical decomposition uses median results from 10,000 draws. *Source: IMF Staff Calculation; Annex II. Drivers of Inflation in Cameroon (excerpt).* ### 2023. They are considering options to all automatic price ### 1cmrea2024001 - 2023. They are considering options to all automatic price adjustments to reflect global market price fluctuations ### Treasury Single Account (TSA) and cash management - Complete the Treasury Single Account reform — Ongoing: authorities have inventoried all the accounts to be transferred to the TSA and intend to gradually transfer the funds to the TSA once the BEAC platform is available—a step that is not in the Cameroonian authorities’ control. - Improve cash management and budget execution: - Prepare credible monthly cash flow plans consistent with both the commitment and public procurement plans. - Use streamlined processes for urgent expenditures with quarterly regularization of such expenditures. - Strictly limit recourse to direct interventions and exceptional spending procedures; exceptional procedures should be limited to a few urgent spending items defined by law, with clear and transparent procedures for implementation and reporting. - Address persistent underestimation of spending needs and commitments, and excessive use of exceptional procedures. ### State-Owned Enterprises (SOEs) and SONARA - Address financial and fiscal risks associated with SOEs: - (i) Strengthen efforts to restructure SONARA without delays based on a thorough cost-benefit analysis of all available options. - (ii) Complete diagnostic studies of three large public SOEs. - (iii) Clear government cross-debts with SOEs and clear government arrears. - (iv) Enhance SOEs’ monitoring and oversight; reform policies to level the playing fields across sectors. - Ongoing actions: - 2021 IMF TA provided an in-depth diagnostic of SOEs covering governance, transparency, financial relations with government, and budgetary risk control. - Authorities completed diagnostic studies of three large SOEs—PAD, CAMTEL, and CAMWATER—and intend to implement key recommendations. - Government continuing steps to place SONARA on a sound financial footing; in September 2022 government approved a framework for restructuring SONARA and the terms of reference (TOR) for technical studies and a business plan. - Restructuring of bank debts [has been finalized]; authorities aim to conclude negotiations on restructuring debt vis-à-vis traders (suppliers of crude oil and finished oil products) under the same conditions as those concluded with the banks. ### Debt sustainability and external borrowing - Limit non-concessional borrowing — Ongoing: - Cameroon is subject to a program ceiling on the PV of newly contracted or guaranteed external public debt, with an adjustor for World Bank projects in 2023. ### Financial sector policies - Strengthen the banking sector: - (i) Address the three problem banks and rising non-performing loans (NPLs). - (ii) Enhance cooperation with the regional supervisor COBAC. - (iii) Revise the business model of the public SME bank. - Ongoing progress: - Restructuring of distressed Cameroonian banks is ongoing: the asset shortfall of one bank has been filled; another bank, in which the government will take a majority stake, still misses a significant amount. - COBAC approved the recapitalization plans in July 2023, but a substantial part of the capital is yet to be transferred by both the government and private shareholders (end-2024). - Enhance financial intermediation: - (i) Update the mobile banking legal framework. - (ii) Strengthen supervision of microfinancial institutions (MFIs). - (iii) Implement the central information database for banks and large MFIs. - Ongoing actions: - Authorities expanded the creditor database to MFIs. - The national movable security directory (RNSM) is operational. - The New National Strategy for Financial Inclusion 2022-2025 has been launched. ### Private sector development - Improve the business environment: - (i) Strengthen dialogue with the private sector and civil society. - (ii) Reduce bureaucratic impediments particularly in paying tax and intra-CEMAC trading. - (iii) Protect property and investor rights. - (v) Enhance financial inclusion. - Status: Ongoing, with good progress in simplification of tax procedures. - Government intensified consultation formats between public and private sectors; private sector requests more frequent and earlier consultations, especially on the budget. ### Good governance and anti-corruption - Publish COVID-19 related audit and continue implementation of governance-related commitments made under the RCF: - Cameroon implemented governance commitments under the Rapid Credit Facility (RCF), notably publication of audit reports on COVID-related expenditures. - The 2021 COVID-19 expenditure report was published on March 30, 2023. - Authorities developed and published an action plan to strengthen frameworks for preparing, publishing, and monitoring public expenditure audits, including recommendations to strengthen the Supreme Court's Audit Chamber. - Promote transparency and reduce corruption risks: - Authorities launched, with LEG technical assistance, and will publish a comprehensive diagnostic of the country's vulnerabilities in governance and anti-corruption. ### Country Engagement Strategy and program context - IMF engagement and financing history: - After the 2017 Extended Credit Facility (ECF) arrangement ended in September 2020, Cameroon received two disbursements under Rapid Credit Facility (RCF) totaling SDR 276 million, equivalent to about US$382 million or 100 percent of quota. - Three-year arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) approved in July 2021 amount to SDR 483 million (about US$689.5 million, or 175 percent of quota). - Authorities have requested a 12-month extension and augmentation of the ECF/EFF arrangements (through July 28, 2025) to allow more time to implement policies and reforms foreseen under the program. - Strategic focus: - Preserve macroeconomic stability, build on gains under the ECF-EFF, support governance and transparency reforms, and be mindful of capacity constraints and setback risks. - Long-term engagement should boost donor confidence to implement policies addressing developmental needs; substantial additional resources and collaborative efforts will be needed. ### Background, sources and consequences of fragility - Growth and shocks: - Cameroon’s recovery from COVID-19 was supported by higher oil prices and non-oil production in 2021; recovery continued into 2022 amid Russia’s war in Ukraine, inflationary pressures, supply chain disruptions, and tight global financial conditions. - Real GDP growth has averaged around 4 percent in recent decades. - Humanitarian and social statistics: - According to UNHCR (June 2021), Cameroon was hosting about two million persons of concern to UNHCR, including one million IDPs, 460,000 refugees and asylum-seekers, and 466,000 IDP returnees. - Estimates indicate that over three million people were severely food-insecure between January and May 2023, a five percent increase compared to the same period in 2022. - Structural and fiscal features: - Public spending remains centralized with high security expenditure and low social and investment spending compared to peers. - Investment spending averaged 18.6 percent of GDP in 2010–22, below the Sub-Saharan Africa (SSA) average of 21.6 percent, the CEMAC average of 28.7 percent, and less than half the lower middle-income countries (LMICs) average of 40.2 percent. - More than a quarter of Cameroon’s population still live below the national poverty line; many lack access to clean water and sanitation, education, and health. - Institutional and governance vulnerabilities: - Identified vulnerabilities in governance and anti-corruption frameworks; a governance diagnostic is underway in consultation with IMF staff under the Fund’s 2018 enhanced governance framework. - Judicial system constrained by human and budgetary resources, overlaps between customary and civil law, and inconsistent land, mining, and forest laws. - Climate and environmental risks: - Climate change poses an imminent threat given dependence on natural resource exports and large agricultural employment; recent floods and droughts have damaged infrastructure and harvests and caused displacements. - In the absence of adaptation reforms, climate shocks could undermine GDP growth and further reduce fiscal space. *Source: IMF staff summary and country engagement strategy for Cameroon contained in the provided document.* ### 13. Long-term sustainable development requires inclusive institutions that provide public ### 13. Long-term sustainable development requires inclusive institutions that provide public services and incentives for private investment. ### Reform priorities and state-building - Balance efforts to improve state institutions, accountability and governance with improving private sector incentives. - Political stability and security are essential for economic and social development; key areas needing increased focus: - Decentralization: - Implement a durable decentralized fiscal framework for political stability, security, and development. - Accelerate fiscal decentralization by enhancing revenue mobilization; introducing a surcharge system for regional assemblies; implementing fiscal equalization to mitigate regional disparities; improving the flow of funds to municipalities and regions; establishing conditional capital and performance-oriented grants; enhancing intergovernmental coordination; and strengthening accountability mechanisms. - Security: - Greater security supports growth by boosting business and consumer confidence, facilitating production, and allowing government delivery of public services and infrastructure. - Stronger territorial control facilitates enforcement of taxation, regulations, and other institutional reform efforts that set conditions for inclusive growth. - Mobilizing support for reforms: - Build state capacity to increase resilience and enable inclusive, job-rich growth. - State legitimacy increases when it provides a stable environment for economic activity and job creation, improves delivery of services (security, social services, infrastructure), reduces poverty and inequality, and is transparent and accountable. - In a fragile context remain nimble to exploit windows of opportunity or reassess approaches if new constraints emerge. ### Sustainable-growth priorities and macroeconomic framework - Maintain macroeconomic and financial stability by: - Preserving a prudent fiscal stance, building fiscal space for social and productive spending, and strengthening medium-term fiscal and debt sustainability. - Mobilize domestic revenue and strengthen public financial management (PFM) through: - Implementing effective tax policies and containing exemptions, improving spending efficiency, cash management, managing fiscal risks from SOEs, and public debt management. - Increase social spending and infrastructure investment by: - Mobilizing additional resources, including from development partners. - Improving public investment efficiency and transparency, with greater emphasis on human capital development and productive investment spending. - Strengthen governance and transparency by: - Progressing on national anti-corruption strategies and strengthening the AML/CFT framework and enforcement capacity. - Promote financial inclusion while protecting financial stability. - Improve the business environment to attract private investment by providing well-designed legal, institutional, and governance frameworks. ### Program engagement with the IMF - Current arrangements: - Cameroon is supported by a three-year arrangement under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF). - The current arrangements were approved in July 2021 for SDR 483 million (about US$689.5 million, or 175 percent of quota). - These followed the 2017 ECF, which ended in September 2020, and two disbursements under the Rapid Credit Facility (RCF) totaling SDR 276 million, equivalent to about US$382 million or 100 percent of Cameroon’s quota. - The ECF/EFF-supported program has helped maintain macroeconomic stability and support structural reform implementation. - Reform traction and areas needing more attention: - Achievements: enhanced revenue mobilization and rationalizing expenditures, especially the fuel subsidy bill; governance reforms including amending the procurement legal framework and improving the framework for spending audits. - Areas needing intensified attention: boosting non-oil revenue, enhancing public financial management, and improving the business environment. - Constraints and lessons: - Constraints include (i) difficulties implementing change given the complex politico-administrative environment; (ii) nonprioritized targeting of reforms affecting reform momentum; (iii) governance gaps and lack of transparency leading to low public support. - Engagement should consider political absorptive capacity and institutional capacity constraints and incentivize both government and private sector. - Specific considerations: - Calibrate the pace of reform based on Cameroon’s capacity and available resources. - Coordinate with development partners, including the UN, AfDB, World Bank, and main bilateral donors. - Ensure closer synergies between program advice and capacity development (CD). - Greater focus on institution building, governance, and transparency. ### Capacity development (CD) support and priorities - Current CD delivery: - IMF headquarters and the Central Africa Regional Technical Assistance Center (AFRITAC Center) provide CD activities. - CD activities to date have focused on revenue administration, tax policy, debt and expenditure management, governance, and the compilation and dissemination of statistics. - CD has contributed to formulation and implementation of policies and reforms, notably the current ECF-EFF program. - The CEMAC Commission has defined reforms organized around five pillars to underpin Fund-supported programs with CEMAC members, aiming for more diversified, inclusive, private sector-led growth and enhanced governance. - CD strategy and objectives: - Support improving government revenue mobilization, raising efficiency, effectiveness, and transparency of public expenditure, strengthening debt management capacity and medium-term debt strategy (MTDS), and enhancing statistics compilation and timely dissemination of macroeconomic statistics. - Emerging and future CD priorities: - Governance and anti-corruption efforts, financial inclusion strategy, building resilience to climate change, reinforcing financial integrity (AML/CFT), and gender budgeting. - Further in-depth diagnostics could be needed in some areas. - Increased assistance likely needed to bolster more integrated and robust government and securities markets. - AFRITAC plans to provide training in on-site banking supervision methodology for assessing climate risk in 2024. - CD on emerging priorities will dovetail with assistance from other institutions and bilateral donors. - Coordination and fragility analysis: - Expand dialogue with partners and integrate fragility analysis with policy advice and CD to identify partner-provided assistance and tailor IMF work to dovetail with such assistance. ### Partnerships, outreach, and engagement modalities - Need for substantial additional resources and collaborative efforts to ensure synergies with other partners, including World Bank, African Development Bank, EU, UN, Islamic Development Bank, and bilateral donors. - The Resident Representative office will: - Play a key role in coordination, maintaining momentum of policies and reforms, strengthening ownership of reform, enhancing inter-ministerial coordination, and raising public awareness and support for program objectives. - Inform stakeholders on Cameroon’s progress under the program. - Development partner coordination: - IMF team maintains close engagement with World Bank and AfDB, coordinating on budget support, development projects, macroeconomic outlook, risks, debt sustainability analysis, and capacity development (public financial management, SOE management, social safety nets). - The team regularly discusses financing needs and financing options with partners. - Some bilateral partners (Switzerland, Canada, UK) are deeply involved in the Anglophone peace process and provide broader political perspectives. - Private sector and civil society engagement: - The country team continues to engage private sector and civil society organizations during missions to better understand business climate. - Strategic partnerships to deepen: - The Global Center on Adaptation (GCA) to catalyze private climate finance for adaptation and mitigation. - The European Union (EU) and Agence France de Développement (AFD) in the context of the Cameroon Green and Resilient Cameroon (CASEVE) program. - The World Food Programme on food insecurity, including responses for crisis-affected populations in insecure regions and long-term community resilience actions. - UNHCR and IOM on economic issues related to migrants, internally displaced persons (IDPs), and refugees and on the broader economic impact of humanitarian crises. ### Risks to closer Fund engagement and mitigation - Major risks: - Enduring capacity constraints and complex decision-making processes; complex institutional frameworks that could delay reform implementation. - Significant deficiencies in macroeconomic institutions delaying implementation. - External shocks, including the prolonged security crisis in Europe, may hinder timely donor support and continue to affect food and oil prices. - Risks of further political instability in the region, heightened spillovers from neighboring countries, and renewed resistance to reform in the runup to elections. - Distributional and social risks: - Subsidy reform without mitigating measures to compensate vulnerable social groups and those losing from reforms—especially groups able to mobilize violence—could jeopardize reforms and undermine trust. - Importance of designing an effective communication plan to explain longer-run benefits of reforms (e.g., making space for public investment, health, and education). - Mitigating factors: - Authorities’ strong ownership and careful tailoring of the reform agenda to fragilities and capacity constraints. - Cameroon’s track record of reform implementation achieved by: (i) strong ownership of the reform agenda by the authorities; (ii) careful prioritization and sequencing of reforms considering institutional and capacity constraints; (iii) close integration between program design and CD support; and (iv) close coordination with development partners and other CD providers. - IMF engagement should continue to be guided by these principles. ### Program performance and requests (from the Letter of Intent, December 6, 2023) - Program context: - Government continuing implementation of the 2021-24 Economic and Financial Program supported by the IMF’s ECF and EFF in a difficult economic and security context, further exacerbated by the Russia-Ukraine conflict and geopolitical tensions in the Middle East. - Government adopted an economic recovery program in line with the regional economic and financial reform program (PREF-CEMAC) and the maintenance of regional external stability. - External risks: - Tight global financial conditions and increased oil price volatility; the outlook remains positive despite uncertainties. - Program performance through end-September 2023: - As at end-June 2023, five of six quantitative performance criteria were met; the continuous criterion on the non-accumulation of external arrears was not met. - Three of five indicative targets were not met: the ceiling on the net accumulation of arrears of domestic payments; direct interventions by the National Hydrocarbons Company; and the share of expenditure executed under exceptional procedures. - Preliminary data for end-September 2023: six out of ten indicative targets were met; four were breached. Breached ITs: program ceilings on net accumulation of domestic arrears; SNH direct interventions; Treasury advances without a budget allocation; and share of spending through exceptional procedures. - A continuous QPC on PV of contracting and guaranteeing of new external borrowing was met. - Structural benchmark progress (fifth review): - Three of nine structural benchmarks due for the fifth review were met by the deadline: - Increase the number of taxable persons for VAT purposes from 13,500 at end-December 2022 to 14,850 as at end-October 2023 (implemented ahead of schedule). - Structural benchmark on Public-Private Partnerships (PPPs) (end-June 2023). - Structural benchmark on an action plan including recommendations to eliminate the corporate tax break (end-October 2023). - Of the remaining six benchmarks: - Two were completed late: publication of the decree specifying terms and conditions for monitoring performance of project management units (structural benchmark no. 8, August 2023); audits of the government's payment arrears and related clearance plan (structural benchmark no. 1, September 2023). - One is expected to be implemented by the IMF Board date (prior action). - Three will be deferred or reformulated: - Inventory of debts owed by public enterprises to the government and to each other at end-2020 drawn up, but government–public enterprise debt clearance plan not yet adopted (structural benchmark no. 2, September 2023). - Action plan for restructuring/rehabilitation of SONARA developed; feasibility study for operationalization of the chosen option is underway covering technical, economic, and financial aspects; report to be submitted to IMF staff (reformulated structural benchmark no. 16, June 2024). - Publication of implementing texts of the Mining Code delayed (structural benchmark no. 3, September 2023). - Use of SDR allocation: - Government used CFAF 120 billion in 2021-22 and CFAF 80 billion in 2023—96 percent of the allocation—to mitigate socio-economic effects of the crisis. - Request for program extension and additional access: - Government requests a 12-month extension (until July 28, 2025) of the ECF/EFF arrangements with an increase in access amounting to 40 percent of quota (SDR 110.4 million). - Request that the increase in access be shared between resources from the General Resources Account (GRA) (26.7 percent of quota; SDR 73.6 million) and the Poverty Reduction and Growth Trust (PRGT) (13.3 percent of quota; SDR 36.8 million). - Review and disbursement requests: - Attached Memorandum of Economic and Financial Policies (MEFP) supplements prior MEFPs and defines quantitative criteria, indicative targets, and structural benchmarks through end-2024. - Government requests conclusion of the fifth reviews of the ECF-EFF supported arrangements and the disbursement and purchase of SDR 18.4 million and SDR 36.8 million, respectively. - Government requests IMF Executive Board approval of changes to program targets for end-March 2024 and new targets for June, September, and December 2024. *Source: 1cmrea2024001 - 13. Long-term sustainable development requires inclusive institutions that provide public services and incentives for private investment (IMF).* ### 9. The government is convinced that the policies and measures presented in the MEFP are ### 1cmrea2024001 - 9. The government is convinced that the policies and measures presented in the MEFP are ### Government commitment and program monitoring - The government considers the policies and measures in the MEFP adequate to achieve program targets and is committed to accelerate implementation of reforms and to take any additional measures required. - The government will consult with the IMF on additional measures or before revising measures in the MEFP in accordance with the IMF policy on such consultations. - To facilitate program monitoring, the government will report the information required to IMF staff by the prescribed deadlines in accordance with the attached Technical Memorandum of Understanding (TMU). - The government agrees to the publication of this letter, the MEFP, the TMU, and the IMF staff report on this program. ### Recent economic developments (findings) - Growth: - Real GDP growth increased from 3.6 percent in 2022 to an expected 4.0 percent in 2023. - Inflation: - Average inflation reached 6.3 percent at end-2022 and is expected to reach 7.2 percent by end-2023, driven mainly by food prices. - External balance: - Current account deficit narrowed to 3.4 percent of GDP in 2022. - The current account deficit is expected to reduce to 3.0 percent at end-2023 due to higher gas production and an improved primary income balance. - Budgetary outcomes: - Non-oil primary deficit was 3.9 percent of GDP in 2022 (partly because about CFAF 480 billion of fuel subsidy costs were deferred to 2023 and 2024). - Non-oil primary deficit is expected to be 2.5 percent of GDP in 2023. - Public debt and contingent liabilities: - Public debt expected to decline from 45.3 percent at end-2022 to 41.8 percent of GDP at end-2023. - External public debt expected to fall from 30.8 percent in 2022 to 29.4 percent of GDP in 2023. - Contingent liabilities associated with public enterprises and PPPs expected to increase from 11.5 percent in 2022 to 14 percent of GDP in 2023. ### Program implementation (findings and corrective actions) - Quantitative performance: - Five of the six quantitative performance criteria as at end-June 2023 were met. - Three of five indicative targets were not met: ceilings for net accumulation of arrears of domestic payments; direct interventions by SNH; share of expenditure carried out under exceptional procedures. - Government plans to postpone payment of the balance of the fuel subsidy until 2024. - Corrective measures proposed in July 2023 include requiring all expenses to be covered by the budget before payment. - September 2023 preliminary data: - Six out of ten indicative targets were met; four ITs were breached (net accumulation of domestic arrears; SNH direct interventions; Treasury advances without a budget allocation; share of spending through exceptional procedures). - A continuous QPC on PV of contracting and guaranteeing of new external borrowing was met. - Structural benchmarks: - Three of nine structural benchmarks due for the fifth review were met by the deadline: - Increase number of taxable persons for VAT from 13,500 as at end-December 2022 to 14,850 as at end-October 2023 (implemented ahead of schedule). - PPP structural benchmark (end-June 2023). - Action plan with recommendations to eliminate the corporate tax break (end-October 2023). - Two benchmarks completed late: publication of decree for monitoring project management units (structural benchmark no. 8, August 2023); audits of government payment arrears and related clearance plan (structural benchmark no. 1, September 2023). - One prior action delayed: report on diagnosis of governance vulnerabilities (structural benchmark no. 5, September 2023). - Deferred/reformulated benchmarks: - Inventory of debts owed by public enterprises drawn up but debt clearance plan not adopted (structural benchmark no. 2, rephased to April 2024). - Action plan for restructuring/rehabilitation of SONARA developed; feasibility study underway and report to IMF staff (new Structural Benchmark no. 16, June 2024). - Publication of implementing texts of the Mining Code (Structural Benchmark No. 3, rephased to June 2024). ### Macroeconomic framework and outlook (projections) - Growth and inflation: - Real GDP growth expected to accelerate from 4.0 percent in 2023 to 4.3 percent in 2024 and over the medium term. - Average inflation projected to decline from 7.2 percent in 2023 to around 5 percent by end-2025, and below 3% over the medium term. - External sector: - Current account deficit (including grants) narrowed from 3.7 percent of GDP in 2022 to 3.4 percent of GDP in 2023. - Medium-term policies aim to stabilize the current account deficit (including grants) below 3 percent of GDP. - Medium-term fiscal objective: - Mobilize domestic non-oil revenues to around 13.3 percent of GDP in 2025, compared to 12.1 percent in 2022. - Focus on expenditure rationalization and reduction of fuel subsidies by 2025 to keep public debt on a sustainable path. ### Fiscal resilience and revenue mobilization (policy measures and targets) - 2024 fiscal stance: - Fiscal consolidation remains the priority; 2024 budget law aims to reduce the non-oil primary deficit from 2.5 percent in 2023 to 1.9 percent of GDP in 2024. - Maintain overall deficit (on a commitment basis) at 0.4 percent of GDP in 2024. - Mobilize domestic revenues from 12.7 percent in 2023 to 13.1 percent of GDP in 2024. - Reduce current primary expenditure from around 10.7 percent to 9.9 percent of GDP. - DGI and DGD revenue measures: - DGI three-year plan (2023-25) forecasts an increase in tax revenues of CFAF 62.5 billion in 2024 through broadened tax base and strengthened controls. - DGD reform program provides for an increase in customs revenues of CFAF 30 billion, including a new mechanism for collection of duties and taxes on imported phones and readjustment of export taxation on certain products. - Strengthen collaboration between DGI and DGD through the FUSION platform. - Tax incentives and exemptions: - Action plan prepared with recommendations to eliminate the corporate tax break (structural benchmark no. 7, October 2023). - Revision of Law No. 2013/004 of 2013 planned to streamline incentives in October 2024 (structural benchmark no. 4, December 2023, deferred to November 2024). - Gradual rationalization of VAT exemptions to generate additional revenues of 0.05 percent of GDP (measures to be reinforced by administrative improvements and included in the 2025 budget law). - Personal income tax and arrears collection: - New structural benchmark no. 11 (November 2024): set up a database of wages and salaries covering the entire public sector and a representative sample of private sector employees to simulate IRPP calculations. - New structural benchmark no. 12 (April 2024): prepare a detailed action plan of the first 100 unpaid tax and customs debts (including public enterprises) to manage and recover at least 15 percent of outstanding recoverable tax arrears (outstanding as at end-June 2023) and implement 50 percent of measures in the action plan. ### Fuel subsidy policy (measures and fiscal impact) - The government intends to gradually eliminate fuel subsidies by 2025. - Short-term measures: - Plan to implement a new mechanism allowing automatic adjustments of pump prices to reflect international price fluctuations. - A gradual reduction of subsidies in early 2024 would imply an increase of around 15 percent in pump prices. - This increase would reduce the budgetary cost of subsidies by about CFAF 140 billion, or 0.4 percent of GDP in 2024, given current assumptions. - Social mitigation: - Fuel price policy adjustments should be accompanied by measures to mitigate social and economic impacts, including strengthening social safety nets and improving access to basic public services (education and health). - Government plans to maintain and gradually increase the social spending introduced in 2023. *Source: Attachment I. Supplementary Memorandum of Economic and Financial Policies in 2023-24, December 2023.* ### 25. The government is continuing its efforts to strengthen public financial management ### 25. The government is continuing its efforts to strengthen public financial management ### Public financial management (PFM) assessments and program of measures - The government finalized the third PEFA review (following 2007 and 2017) with support from the European Union; and finalized a Public Expenditure Review (PER) with support from the World Bank. Both reviews will be published by end-December 2023. - These assessments will form the basis for a new program of structural measures with a detailed action plan to strengthen PFM, to be finalized by June 2024 at the latest. ### Improving sincerity and execution of the budget; liquidity management - Treasury correspondents to be subject to an annual disbursement plan consistent with the budgetary policy underlying the budget law. - Improved quarterly projections of public spending to limit Treasury advances, release of funds and advance payments (régies d’avance). - Continued cap on Treasury advances without a budget allocation: limited to CFAF 15 billion per quarter in cases of extreme urgency (indicative target; Table 1). - New structural benchmark no. 15 (December 2024): Minister of Finance to issue an instruction, following an audit, on implementing a strategy to strengthen management of correspondent accounts, with provisions on: - closure of illegal accounts; - clearance of existing arrears; and - cash management rules consistent with the annual budget law. ### Quality of public spending and quasi-fiscal risks - System set up for reconciling and evaluating SNH's direct interventions to improve transparency. - Actuarial study of the public service pension system to be carried out by end December 2024, using its recommendations to ensure pension scheme viability and reduce quasi-fiscal risks. ### Public investment management (PIMA recommendations) - Government implementing a program to enhance effectiveness of the public investment program; signed texts governing project management units (structural benchmark no. 8, August 2023). - 2025 budget law to include an annex on Commitment Authorizations (CAs) and Payment Appropriations (PAs) aligned with the Medium-Term Budgetary Framework (MTBF) and project implementation timetables (new structural benchmark no. 13, November 2024). - Effort to control management of CAs/PAs to better manage multi-annual investment projects. ### Public procurement and contracting - Structural benchmark no. 10 (May 2024): commit to increasing to at least 80 percent the number and total value of contracts awarded through COLEPS in key ministries (infrastructure, education, health, posts, and telecommunications) between January and May 2024 to monitor awarding at central services level. - Ensure operationalization of the public procurement tracking system. ### Arrears, domestic payments, and outstanding unpaid obligations (RAP) - Audits of the State's payment arrears completed; adopted plan for clearance over three to seven years (structural benchmark no. 1, September 2023). - LF2024 includes an allocation of CFAF 50 billion to clear part of prior years’ arrears. - LF2024 includes a budgetary allocation of CFAF 150 billion for clearance of outstanding payments of more than 90 days at end-2023 (structural benchmark no. 9, December 2023). - New structural benchmark no. 14 (May 2025): prepare comprehensive and realistic public procurement plans to allow development of commitment plans consistent with monthly cash flow plans. - Objective: contain waiting times for suppliers within 90 days of the date of settlement of the expenditure and limit excessive year-end commitments. - DGTCFM to prepare and update an issuance schedule to improve cash management and keep RAPs within 90 days. ### Wage debt and payroll management - LF2024 includes an allocation of 193 billion CFAF to deal with salary arrears due to state employees. - Government undertakes to include at least 144 billion CFAF in the 2025 budget law to clear arrears of the wage debt. - Implementation of SIGIPES 2 (pay and career management software) from January 2024 to institute automatic promotion procedures, reducing future arrears accumulation. - Digitalization and acceleration of onboarding for new agents to reduce waiting time before first pay. - Prudent recruitment policy adopted, based primarily on replacements for retiring employees, to control the wage bill. ### Public enterprise management: SONARA, cross-debts, mining sector - SONARA restructuring: in-depth technical-economic and financial feasibility study of option no.3 (complex refinery with hydrocracking unit) and associated plans/designs, validated by the President (structural benchmark no. 6 reformulated to new structural benchmark no. 16, June 2024). Activity delayed but to be completed by June 2024. - Inventory of cross-debts between public enterprises and the government as of end-2020 drawn up; debt clearance plan between government and public enterprises not yet adopted. Inventory of cross-debts among public enterprises as at end-2020 is ongoing (structural benchmark no. 2 rephased to April 2024). - New Mining Code draft law submitted to Parliament in November 2023; implementing texts of the Mining Code not finalized on time (structural benchmark no. 3, deferred to June 2024). Creation of national mining company SONAMINES required formulation of a new code; implementing texts to be published following adoption. ### Debt sustainability and undisbursed committed balances (SENDs) - Debt policy focuses on slowing new external borrowing and favoring concessional loans; non-concessional borrowing limited to priority projects with proven socioeconomic and financial cost-effectiveness. - Management operation planned before end-2023 to reduce outstanding domestic obligations. - Government plans to reduce SENDs from CFAF 3,673 billion as at end-2022 to CFAF 3,548.1 billion as at end-2023. - Estimated level at CFAF 3,484.1 billion at end-September 2023, plus loan agreements to be signed by end-2023 of about CFAF 577 billion and planned disbursements of CFAF 641 billion. - Inventory of loan and grant agreements for 180 projects completed; consultations with development partners to reverse non-performing SENDs or reallocate unused funding. ### Financial sector resilience, bank resolution, and inclusion - Government supports regional efforts to rebuild BEAC’s foreign reserves and enforces foreign exchange regulations under its jurisdiction (including public enterprises, new concession contracts, revenue-sharing agreements with extractive sector, and the Petroleum Code). - Continue reforms to strengthen financial sector stability, including compliance with prudential standards and COBAC recommendations. - Bank resolution: COBAC authorized in July 2023 government and historical shareholders to take equity positions in two troubled banks per restructuring plans. Government to provide schedule for disbursement of remaining capital tranches latest end-December 31, 2024 (deadline agreed with COBAC). - Government committed to fill a significant asset shortfall in one bank by signing a commitment in the form of compensation via non-payment of taxes over five (5) years deposited in an escrow account; if taxes collected insufficient, government will cover instalments through the State budget. - Privatization of CBC (Commercial Bank of Cameroon) to be completed in 2024. - Measures to support SME credit access include: - establishment of various credit registers and balance sheet registers and creation of a rating system associated with the BEAC; - digitization of the land registry to enable a register of real estate securities; - training judges in commercial affairs and creation of competent commercial courts; - establishment of a government guarantee fund for SMEs; - consideration of crowding-out effects of public securities issuance in issuance strategy. ### Debt Collection Corporation (SRC) and state depository corporation (CDEC) - Audit of significant losses recorded by SRC in 2022; strengthen governance and transparency prior to expansion; ensure adequate resources. - Regulatory texts to launch CDEC to be signed as soon as possible to avoid delays in transfer of funds. Government to ensure: - funds vested in the CDEC and held by other actors are transferred to its books during the first half of 2024; - deposits and consignments provided by law of April 14, 2008, are made directly and exclusively with the CDEC from the first quarter of 2024. - State depository corporation (CDEC) to enter into prior discussions with COSUMAF regarding asset management. ### Financial inclusion and AML/CFT - Financial inclusion strategy finalized in February 2023 with action plan for 2023-2027; work with development partners to implement plan and increase low banking penetration while reducing gender inequalities. - AML/CFT: since MER adoption in October 2021 (published March 2022), progress made by increasing resources for the Financial Intelligence Unit and strengthening capacities of investigative and judicial authorities. - In June 2023, government committed to work with FATF and GABAC to implement an action plan after addition to the grey list. ### Governance, transparency, and public finance reforms - Diagnosis of economic governance developed with IMF (missed structural benchmark no. 5, September 2023, prior action). - Reform of common chapters of the State budget to reduce accidental and unforeseeable expenditure to between 3 and 5 percent of the State budget by 2025. - New structural benchmark no. 17 (May 2024): adopt timetable for transformation of common chapters for benefit of authorizing officers and managers. - New structural benchmark no. 18 (November 2024): include appropriations for accidental and unforeseeable expenditure in 2025 budget law at 3-5 percent and specify management modalities. - Progress on EITI compliance: 2020 EITI Reconciliation Report published December 2022; 2021 Report published September 2023; validation under 2019 EITI Standard launched October 2023 despite challenges on 15 corrective actions. ### Program modalities, requests, and review timetable - Government requests extension of ECF/EFF arrangements from 36 months to 48 months (until July 28, 2025), an increase in access of 40 percent of quota (SDR 110.4 million), split between GRA resources (26.7 percent of quota; SDR 73.6 million) and PRGT resources (13.3 percent of quota; SDR 36.8 million). - Requests a waiver for breach of continuous performance criterion on non-accumulation of external arrears and modifications to program targets for end-March 2024, and new end-June and end-December 2024 QPCs, and end-September 2024 ITs. - Program to be monitored at semiannual reviews using performance criteria, indicative targets, and structural benchmarks defined in Tables 1 and 2 and the Technical Memorandum of Understanding. - Review timetable: - Sixth review (end-December 2023 targets) expected from June 15, 2024. - Seventh review (end-June 2024 targets) expected from December 15, 2024. - Eighth review (end-December 2024 targets) expected from June 3, 2025. *Source: 1cmrea2024001 - 25. The government is continuing its efforts to strengthen public financial management* ### 1. Cumulative external budget support, excluding IMF (earliest ### 1cmrea2024001 - 1. Cumulative external budget support, excluding IMF (earliest ### Key quantitative items (from top of source) - Cumulative external budget support, excluding IMF (earliest disbursement): 232368231290187878164 - Balance of the special account for the unused statutory advances: 5050501111111 - Reporting periods referenced: End-Mar 24End-Jun 24End June-23End-Sept 23End-Dec 23 ### Prior actions and structural benchmarks — Public finance and debt management - Prior Action: Submit to Parliament the 2024 Finance Act in line with the macroeconomic and budgetary framework of the 5th reviews. - Status: Met - Comments: This prior action was met on November 30, 2023. - Structural Benchmark (Sept. 23): Complete the audits of government payment arrears and adopt an arrears settlement plan certified by these audits. - Indicator/Status: Submission of the Audit Report and Arrears Clearance Plan to IMF Staff. Not met, implemented with delay. - Comments: Audits of the State’s arrears have been completed, and a plan has been adopted to settle the arrears over 3-7 years. - Structural Benchmark (Sept. 23 / Apr 24 revised): Establish an inventory of the respective debts between the public enterprises and the Government and between the public enterprises themselves, as at end-2020, and adopt a plan for the clearance of the respective debts between the Government and public enterprises. - Indicator/Status: Inventory and clearance plan shared with IMF Staff. Not met. - Comments: The inventories have been drawn up, however, a plan for the clearance of the respective debts between the government and public enterprises will not be completed until April 2024. - Structural Benchmark (Dec. 23 / Nov. 24 revised): Revise Law No. 2013/004 of April 18, 2013, to rationalize incentives and promote healthy competition between economic operators. - Indicator/Status: Revised Act published. (Revised deadline Nov. 24) - Comments: The revision was delayed to allow an intermediate step (SB7), which has now been met. - Structural Benchmark (Dec. 23): Include in the budget law of year N+1 a budgetary allocation for the clearance of outstanding unpaid obligations (RAPs) of more than 90 days at the end of year N. - Indicator/Status: Allocations in the 2024 initial budget law. - Comments: Purpose is to limit outstanding amounts of more than 90 days at year-end. ### Prior actions and structural benchmarks — Extractive Sector - Structural Benchmark (Sept. 23 / June 24 revised): Finalize and publish all implementation texts of the 2016 Mining Code (law n° 2016/017 of December 14, 2016). - Indicator/Status: Implementing texts published. Not met. - Comments: Implementing texts have not been finalized. Creation of SONAMINES and need to review and formulate a new code to be submitted to Parliament in March 2024; following adoption, implementing texts of the new mining code will be published. ### Prior actions and structural benchmarks — Business Climate - Structural Benchmark (Oct. 23): Formulate an action plan with recommendations to eliminate CIT holidays (including the minimum tax) to promote healthy competition between economic operators, excluding companies operating in the agriculture, livestock, and fishery sectors. - Indicator/Status: Action plan submitted to IMF staff. Met. - Comments: Preparation of an action plan with recommendations to eliminate the corporate tax break was an intermediate step to the revision of Law No. 2013/004 (SB4). - Structural Benchmark (Dec. 23 / Nov. 24 revised): Revise Law No. 2013/004 of April 18, 2013 (see above). ### Prior actions and structural benchmarks — Good Governance and Anti-Corruption - Prior Action / Structural Benchmark (Sept. 23): Publish a diagnostic of governance vulnerabilities, particularly with regard to corruption, including the functions of the State most relevant to economic activity: (i) fiscal governance; (ii) supervision of the financial sector; (iii) market regulation; (iv) the rule of law; and (v) AML/CFT. - Indicator/Status: Publication of the report. Not met. - Comments: The government completed a diagnostic in collaboration with the IMF and has authorized publication of the report by the Board date. ### Prior actions and structural benchmarks — SONARA / Energy sector - Structural Benchmark (Sept. 23): SONARA Restructuring Plan: Elaborate a restructuring plan for SONARA, including industrial and financial options under consideration. - Indicator/Status: Elaborate and submit to IMF staff the new restructuring plan for SONARA. Not met. - Comments: Restructuring plan completed and validated by the IMC, but the in-depth technical-economic and financial feasibility study of option 3 (complex refinery with a hydrocracking unit) not finalized and submitted to IMF staff. Replaced by New SB16. - New Structural Benchmark (June 2024): Implementation of the SONARA Restructuring Plan — Carry out the in-depth technical-economic and financial feasibility study of option no.3 validated by the President of the Republic related to a refinery complex with a hydrocracking unit, accompanied by the plans and design of the new refinery. - Indicator/Status: Conduct and submit the study report to IMF staff. - Comments: This new SB replaces SB6, which has not been met. ### Project and Debt Management - Structural Benchmark (Aug. 23, implemented in Nov. 2023): Implementation of the decree of October 2021 governing project management units. - Indicator/Status: Publication of a decree specifying the procedures for monitoring the performance of project management units. Not met, implemented with delay. - Comments: Introduced to improve project and debt management; deadline revised to August 2023 in the fourth review and implemented in November 2023. ### Public Investment Management (PIM) - Structural Benchmark (May 24): Increase to at least 80% the number and total value of contracts awarded through the COLEPS (Cameroon Online E-Procurement System) in some key ministries (infrastructure, education, health, posts, and telecommunications) between January and May 2024, in order to monitor the awarding of public contracts at the level of central services. - Indicator/Status: Report on the number and value of online procurement contracts from January to May 2024 (as a percentage of total) submitted to IMF staff. - Comments: COLEPS is operational but only a limited number of procurement projects are registered; a new formulation of this SB is proposed. ### New Structural Benchmarks — Revenue mobilization - SB11 (Nov. 24): Create a dataset of wages and salaries suitable for simulating IRPP calculations comprising both the entire public sector and a representative sample of private sector employees. - Indicator/Status: Share the database with IMF staff. - Comments: Long-standing technical assistance recommendation; key role in assessing impact of possible IRPP reforms on income and equity. - SB12 (April 24): Prepare a detailed action plan, including the first 100 outstanding tax and customs debts, including state-owned enterprises, to manage and recover at least 15 percent of the outstanding recoverable tax arrears (outstanding as at end-June 2023) and implement 50 percent of the measures included in the action plan. - Indicator/Status: Submit to IMF staff a detailed and sequenced action plan. - Comments: Tax arrears are a significant problem; measure aims to improve tax revenue collection and transparency. ### New Structural Benchmarks — Public Financial Management - SB13 (Nov. 24): Take into account in the budget the commitment authorizations (CAs) and payment appropriations (PAs) that comply with the MTBF and are consistent with the timetable for the implementation of investment projects. - Indicator/Status: Inclusion in the budget of an annex on CAs and PAs that comply with the MTBF and are consistent with the timetable for the implementation of investment projects (from the 2025 budget). Draft budget law to be presented to IMF staff. - Comments: Addresses weaknesses in public investment management, including multi-year projects. - SB14 (May 25): Develop comprehensive and realistic public procurement plans, which should allow for the development of commitment plans consistent with monthly cash flow plans. - Indicator/Status: Prepare and publish an annual report for 2024, assessing consistency between commitment and cash plans and based on the work of the Treasury Committee (CTRB) and its Secretariat. - Comments: Strengthen management of public expenditures, particularly public procurement of investment projects. - SB15 (Dec. 24): Minister of Finance to issue an instruction, following an audit, to strengthen the management of correspondent accounts with provisions on the closure of illegal accounts, the clearance of existing arrears, and relevant cash management rules consistent with the requirements of the annual budget law. - Indicator/Status: Submit the instruction to IMF staff. - Comments: Aims to strengthen cash management of correspondent accounts. ### Governance and Transparency - SB17 (May 24): Adopt a timetable for the transformation of the common chapters for the benefit of the authorizing officers of the ministries and the managers concerned in the context of the reform of the devolution of the authorization. - Indicator/Status: Validated timetable for transforming common chapters into allocations is sent to IMF staff. - Comments: Aims to improve transparency in the use of "common chapters". - SB18 (Nov. 24): Include the appropriations for accidental and unforeseeable expenses in endowments in the 2025 draft budget law, which do not exceed 3-5 percent of the budget, and specify the modalities for managing the endowment. - Indicator/Status: The 2025 draft budget law, presenting the appropriations for accidental and unforeseeable expenditures in endowments and specifying the modalities for managing the endowment, is transmitted to the IMF staff. - Comments: Aims to improve transparency in the use of "common chapters". ### Definitions and program framework (TMU excerpts) - TMU scope: Quantitative performance criteria and indicative objectives for Cameroon’s program under the ECF and EFF over 2021-25; framework and cutoff dates for reporting to IMF staff. - Government definition: Central government of the Republic of Cameroon as per GFSM 2001 (paragraphs 2.48–50); excludes local governments, the Central Bank, and public entities with autonomous legal status not included in the TOFE. - Nonfinancial public enterprise: Commercial or industrial unit fully or partially owned by the central government that sells goods and services to the public on a large scale; from June 2017, operations between the government and these public enterprises are to be treated on a gross basis in the TOFE. - Revenue definitions: - Total government resources: tax and nontax fiscal revenue (GFSM 2001) and grants; recorded on a cash basis. Proceeds from sale of assets and privatizations are not considered government revenue. - Oil revenue: total transferable balance of SNH, and income tax on oil companies and gas operators; recorded on a cash basis. - Non-oil revenue: all government (tax and nontax) revenue excluding oil revenue; VAT recorded net of VAT refunds; COTCO pipeline fees recorded under nontax revenue. - Privatization revenue: funds paid to government from sale/transfer of public enterprise management or sale of government shares; recorded gross; transaction costs recorded under expenditure. - Expenditure definitions: - Total government expenditure and net lending: includes wages and salaries, goods and services, transfers, interest payments, capital expenditure; recorded on payment order basis unless otherwise indicated; includes expenditure carried out without prior payment authorization and pending regularization. - Direct interventions by SNH: included in government expenditure (emergency payments on behalf of government for sovereignty and security outlays). - Social expenditure: includes education, health (including COVID-19 related), other social sectors, administered price subsidies (fuel at the pump, electricity to households), gas subsidy, and expenditures for the Social Safety Net Program. - Balance and financing: - Primary balance: difference between total government revenue (paragraph 5) and total government expenditure and net lending (paragraph 9), not including interest payments on external and domestic debt. - Debt definitions: Aligns with Guidelines on Public Debt Limits in Fund-Supported Programs (Executive Board Decision 16919– (20/103) adopted October 28, 2020); includes commitments contracted or guaranteed where values not received; arrears, penalties and judicially awarded damages arising from failure to make payment under contractual obligations that constitute debt are debt. - External debt: any borrowing or debt service in a currency other than the CFA franc; includes CEMAC country debt and BDEAC debt; performance criteria apply to government external debt, public enterprises receiving transfers, other public entities with government stakes >50 percent, and guaranteed private debt constituting contingent liability. - Concessional external debt: debt considered concessional if it comprises a grant component of at least 35 percent. The grant component is the difference between face value and present value (PV) of the loan (PV calculated at the date debt is contractually arranged using a discount rate of 5 percent). Concessionality calculations reflect maturity, grace period, schedule of maturities, commitment fees, and management fees. *Source: 1cmrea2024001 - 1. Cumulative external budget support, excluding IMF (earliest (PDF chapter/section) — excerpts of Table 2 and TMU provided in the source content).* ### 16. Domestic debt is defined as all government’s debts and obligations denominated in CFA ### 1cmrea2024001 - 16. Domestic debt is defined as all government’s debts and obligations denominated in CFA ### Definitions of domestic and structured debt - Domestic debt: all government’s debts and obligations denominated in CFA francs. Includes unreimbursed balances, advances from the Bank of Central African States, Treasury bills and bonds, structured debt, domestic payment arrears, and SONARA’s domestic debt. - Structured debt: debt subject to a formal agreement or securitization. - Structured bank debt: all claims of local banks on government, with the exception of Treasury bills and bonds. - Structured non-bank debt: all government's balances payable to local non-bank institutions, individuals, or the CEMAC that have been securitized or subject to a formal reimbursement agreement according to a clearly defined schedule. - Net domestic financing of the government = (i) net bank credit to the government; and (ii) net non-bank financing. ### Net bank credit (exact composition and measurement) - Net bank credit to the government = change in the balance between the government’s commitments and assets with the national banking system. - Government assets included: - (i) the Treasury’s cash resources on hand; - (ii) Treasury deposits with the Central Bank, not including the Heavily Indebted Poor Counties (HIPC) account and the Debt Reduction and Development Contract (C2D) account; - (iii) the credit balance of the accounts of the Caisse Autonome d'Amortissement (CAA) with commercial banks earmarked for reimbursement of the government's debt obligations. - Government commitments included: - (i) financing from the Central Bank; net IMF financing (disbursements net of reimbursements), refinancing of guaranteed bonds, and Treasury paper held by the Central Bank; - (ii) financing from commercial banks, specifically loans and direct advances; and Treasury securities, bills, and bonds held by local banks. - Net bank credit is calculated based on data provided by the Bank of Central African States (BEAC) and is subject to monthly reconciliation between the Treasury and the BEAC. ### Net non-bank financing (components and calculation) - Net non-bank financing includes: - (i) change in the outstanding balance of government securities (Treasury bills and bonds) issued in CFA francs on the regional financial market and not held by the local banking system; - (ii) change in the outstanding balance of structured non-bank domestic debt; - (iii) privatization revenue; - (iv) change in the balance of correspondent bank accounts (including Account 42) and consignment accounts; - (v) change in the balance of outstanding claims on government abandoned by the private sector. - Government’s net non-bank financing is calculated by the public treasury. ### Domestic and external payment arrears (definitions and stocks) - Domestic payment arrears = sum of: - (i) payment arrears on expenditure; - (ii) payment arrears on structured domestic debt; - (iii) unstructured debt. - Payment arrears on expenditure: "balances payable" for which payment lag exceeds the regulatory period of 90 days. Balances payable under 90 days represent payments in progress. Treasury monitors monthly to identify expenditure arrears in the stock of balances payable. - Payment arrears on structured domestic debt: difference between the amount due under a domestic debt arrangement or the reimbursement of matured Treasury securities, bills, or bonds and the amount effectively paid after the payment deadline or maturity. - Unstructured debt: - i. Unstructured debt of the CAA: 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 53.3 billion at end-September 2023. - ii. Domestic "floating” debt: government commitments for which a service was provided but not subject to any budget commitment; includes invoices payable and not settled to public and private enterprises but excludes tax debt from debt offsetting with public enterprises and execution of externally financed public procurement not covered by the budget due to insufficient appropriations. Directorate General of Budget will conduct monthly assessment with the public treasury. - External payment arrears: external debt obligations of the government (principal and interest) not paid 30 days after the due date specified in the underlying agreement, taking into account any contractual grace periods. Excludes payment arrears on external financial obligations subject to rescheduling. ### Treasury advances - Treasury advances: payments made by the Treasury in the absence of a commitment or payment order issued by the relevant authorizing officer at the General Directorate of Budget (DGB) and regularized retroactively. ### Quantitative Program Objectives (overview and reporting deadlines) - Quantitative targets (QTs) in Table 1 of the MEFP are assessed on a cumulative basis from the beginning of the calendar year unless otherwise indicated. - Cutoff and reporting deadlines: - Detailed data on government financial operations (primary balance, oil revenue, miscellaneous expenditure) submitted monthly within six weeks from end of month, except end-December data which will be submitted by March 15 of the following year due to Law No 2018/012 allowing a complementary period of 30 days. - Detailed data on net domestic financing (bank and non-bank), status of budget support disbursements, reimbursement of external debt service, and status of external arrears submitted monthly within six weeks after end of month. - Detailed information on disbursements of external debt contracted by the government reported within six weeks after end of month, indicating loan signing date and distinction between concessional and non-concessional. - 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 end of month. - Data on balances, accumulation, and reimbursement of external arrears reported within six weeks after end of each month; any new external arrears to be reported immediately to the Fund. ### Specific performance criteria, ceilings, and adjustors - A. Non-Oil Primary Balance - A floor for the non-oil primary balance (based on payment order) is a quantitative objective. Non-oil primary balance = primary balance (paragraph 12) minus oil revenue (paragraph 6). - Cumulative level of financing discrepancies in the TOFE 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. - B. Net Domestic Financing of the Government Excluding Net IMF Financing - A ceiling on net domestic financing excluding net IMF financing is a quantitative objective. Net domestic financing excluding net IMF financing = net domestic financing defined in paragraph 16, not including net IMF financing. - Adjustment: At quarter end, if disbursements of external budget support are below (above) programmed amounts, relevant quarterly ceilings adjusted upward (downward) commensurately, within the limit of CFAF 120 billion for each quarter of 2023 and 2024. Ceiling may be reviewed depending on budget aid disbursement rate. - At quarter end, if rescheduling of bilateral external debt service is below (above) programmed amounts, corresponding quarterly ceilings adjusted upward (downward) pro-tanto. - C. Disbursement of Non-Concessional External Debt - A ceiling on disbursements of non-concessional external debt (for project financing) is a quantitative objective. Uses external debt definition (paragraph 14) and concessionality concept (paragraph 15). - Exemption: debt contracted or disbursed under the debt management operation for clearance of domestic arrears is exempt (limited to the amount of new borrowing related to that operation and subject to demonstration of improved liquidity and/or solvency indicators without adversely affecting risk rating). - D. Net Claims of the Central Bank on the Central Government - A ceiling on net claims of the Central Bank on government is a quantitative objective. Defined as Central Bank’s claims on government excluding IMF financing (unpaid balances of consolidated statutory advances, refinancing of guaranteed bonds, Treasury securities held by the Central Bank) minus cash and total deposits of the Treasury with the Central Bank, including the balance of the special account of unused statutory advances. - Ceiling includes agreed use of the 2021 SDR allocation. - Adjustment: At quarter end, if disbursements of external budget support are below (above) programmed amounts, relevant quarterly ceilings adjusted upward (downward) commensurately, within the limit of CFAF 120 billion for each quarter of 2023 and 2024. - E. Non-Accumulation of External Payment Arrears - Ceiling of zero on accumulation of new external payment arrears is a continuous quantitative objective. Applies to external arrears as defined in paragraph 20. Government undertakes not to accumulate any external payment arrears on its debt, except arrears subject to rescheduling. Measured cumulatively on approval of the program. - F. PV of External Debt Contracted or Guaranteed by the Government and Certain Other Public Entities - A performance criterion (ceiling) applies to the PV of new external debt contracted or guaranteed by the government and certain other public entities, including debt for which value not yet received and private debt with official guarantees. Applicable to external debt as defined in paragraph 14 and contingent public liabilities as defined in paragraph 13. - Exclusions: borrowing arranged in CFA francs, Treasury bills and bonds issued in CFA francs on the CEMAC regional market, regular short-term supplier loans, regular import credits, loans from the IMF, budget support loans from the World Bank, and debt relief or rescheduling. New debt for debt management operations improving overall debt profile (paragraph 29) is exempt. - PV calculation: discount future stream of payments of debt service due on the debt. For debts with grant element ≤ zero, PV = nominal value. Discount rate = unified discount rate of 5 percent (Executive Board Decision No. 15248-(13/97)). - For variable-rate debts of the form benchmark + fixed spread: PV calculated using program reference rate plus the fixed spread (in basis points) specified in the debt contract. - Program reference rate for 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 interest rates on currencies other than Euro, JPY, and GBP, the spread over six-month USD SOFR = 15 basis points. - Where variable rate linked to a benchmark other than six-month USD SOFR, a spread reflecting the difference between the benchmark and six-month USD SOFR (rounded to the nearest 50 bps) will be added. - Adjustment mechanisms: - Adjustor upward (downward) by the amount budget support exceeds (falls short of) projections. Any adjustment capped at 10 percent of the external debt ceiling set in PV terms and must be consistent with maintaining debt sustainability. - External debt ceiling in PV terms adjusted upward by full PV amount of any project financing dedicated to COVID-19 vaccine interventions not anticipated when setting the performance criterion; authorities will consult IMF staff before contracting/guaranteeing such loans. - An adjustor of up to 5 percent of the external debt ceiling in PV terms applies if deviations are prompted by changes in financing terms (interest, maturity, grace period, payment schedule, upfront commissions, management fees). Adjustor cannot be used when deviations are prompted by an increase in nominal amount of total debt contracted or guaranteed. - If PV of World Bank loans signed in 2023 is greater than PV of World Bank loans signed in 2022 (CFAF 179.4 billion), the ceiling will be adjusted upward pro-tanto, capped at a maximum of CFAF 182.5 billion (PV) in 2023, according to identified projects. ### Program exchange rates (Table 1, exact values) - CFA franc per currency unit / Currency units per US Dollar: - US Dollar: 617.546 / 1.00 - Euro: 655.957 / 0.9414 - AfDB XUA: 821.855 / 0.7514 - STG Pound: 745.254 / 0.8286 - Japanese Yen: 4.655 / 132.650 - Chinese Yuan: 88.398 / 6.986 *Source: IMF technical memorandum content provided.* ### 43. The detailed information on all loans (conditions and creditors) contracted by the ### 43. The detailed information on all loans (conditions and creditors) contracted by the government must be reported within six weeks after the end of the month. The same obligation is applicable to guarantees issued by the government. This criterion is monitored continuously by the authorities and any signing or guaranteeing of debt should be reported immediately to the Fund. ### Reporting obligations for loans and guarantees - All detailed information on loans contracted by the government (conditions and creditors) must be reported within six weeks after the end of the month. - The same reporting obligation applies to guarantees issued by the government. - This criterion is monitored continuously by the authorities. - Any signing or guaranteeing of debt should be reported immediately to the Fund. ### Other indicative quantitative targets (overview) - The document defines several indicative objectives in Table 1 of the MEFP covering: - G. Non-Oil Revenue - H. Accumulations of Domestic Payment Arrears - I. Social Expenditure - J. Share of Exceptional Expenditure in Total Authorized Expenditure Not Including Debt - K. Treasury Advances Without a Budget Allocation ### G. Non-Oil Revenue - A floor on non-oil revenue as defined in paragraph 7 is defined as an indicative objective in Table 1 of the MEFP. ### H. Accumulations of Domestic Payment Arrears - A ceiling on net accumulations of domestic payment arrears is defined as an indicative objective in Table 1 of the MEFP. - Domestic payment arrears covered by the Treasury are defined in paragraph 19 and do not include unstructured floating debt not covered by the Treasury. - As an exception, at end-September 2023 and end-December 2023 this ceiling will include payments in progress defined as balances payable under 90 days in paragraph 19. ### I. Social Expenditure - A floor on social expenditure pursuant to paragraph 11 is defined as an indicative objective in Table 1 of the MEFP. - These expenditure items will be monitored regularly in connection with program implementation. ### Cutoff Dates for Reporting Information (government financial position) - The data on the government's financial position as presented in the table of government financial operations, the detailed listing of revenue highlighting oil revenue, domestic payment arrears, and the status of social expenditure execution must be reported within six weeks after the end of the month with the exception of end-December data as indicated in paragraph 25. ### J. 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 defined as an indicative objective in Table 1 of the MEFP. - This criterion will be calculated based on the 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). - Exceptional expenditure will be monitored regularly as part of program implementation. ### Cutoff Dates for Reporting of Information (exceptional expenditure) - 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 table of government financial operations will be used to compute this ratio. ### K. Treasury Advances Without a Budget Allocation - A ceiling on Treasury advances without a budget allocation is defined as an indicative target in Table 1 of the MEFP and will be tested on a quarterly basis. - Treasury advances are defined in paragraph 21. ### Cutoff Dates for Reporting of Information (Treasury advances) - Monthly accounting statements showing the amount of Treasury advances must be reported to IMF staff within six weeks after the end of each month. *Source: 1cmrea2024001 - 43. The detailed information on all loans (conditions and creditors) contracted by the (PDF chapter/section).* ### 52. The quantitative data on the government’s quantitative and indicative objectives will ### 1cmrea2024001 - 52. The quantitative data on the government’s quantitative and indicative objectives will ### Data Reporting Requirements (Table 1: Summary) - Reporting obligations for government quantitative and indicative objectives must be provided to IMF staff with the periodicity described in Table 1 and all data revisions reported promptly. - Authorities will report any information or data not specifically addressed in this TMU but required for program implementation and keep IMF staff abreast of progress toward program objectives. - Key government finance reporting items, responsible institutions, frequency, and reporting lags (exact entries preserved): - The summary situation of Treasury Operations (La situation résumée des Operations du Trésor (SROT)), including statement of unpaid orders of more than 90 days or less than 90 days, as well as statement of the correspondent accounts. - Responsible institution: Ministry of Finance (MINFI)/DGTC - Frequency: Monthly - Reporting lag: 6 weeks - The table of government financial operations (TOFE) and customary annex tables; (data on execution of investments financed with external grants and loans must be available in a timely manner so that the quantitative targets of the program can be determined in a timely manner. If information on physical execution of externally financed projects is not available, information on requests to draw funds from the donors will be used). - Responsible institution: MINFI/DP - Frequency: Monthly - Reporting lag: 6 weeks, except for end-December for which data will be reported by March 15 of the following year - 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). - Responsible institution: MINFI/BEAC - Frequency: Monthly - Reporting lag: 6 weeks - Implementation status of social expenditure defined in Paragraph 11. - Responsible institution: Ministry of Finance (MINFI)/DGB - Frequency: Monthly - Reporting lag: 6 weeks - Domestic debt reimbursement status. - Responsible institution: MINFI/CAA - Frequency: Monthly - Reporting lag: 6 weeks - Statistics on external debt contracted and guaranteed (detailed listing of external debt service matured/paid, list of new loans specifying the financial conditions, loans guaranteed and external arrears, and list of contracts in the process of negotiation). - Responsible institution: MINFI/CAA - Frequency: Monthly - Reporting lag: 4 weeks - Additional requirement: The signing or guaranteeing of external debt, and the occurrence of external payment arrears must be reported immediately to the IMF. - Monthly structured bank and non-bank debt service forecast and actual payments - Responsible institution: MINFI/CAA - Frequency: Monthly - Reporting lag: 6 weeks - Monthly monitoring report on calls for funds and effective disbursements. - Responsible institutions: CAA/MINEPAT - Frequency: Monthly - Reporting lag: 4 weeks - Data on the implementation of the public investment program, including a detailed listing of financing sources. - Responsible institutions: MINFI/Ministry of Economy, Planning and Regional Development (MINEPAT)/CAA - Frequency: Quarterly - Reporting lag: 6 weeks - Monthly accounting statements showing the amount of cash advances, advance funds, and the balance of provisional budget commitments. - Responsible institution: MINFI - Frequency: Monthly - Reporting lag: 6 weeks - Monthly accounting statements showing the amount of Treasury (cash) advances without a budget allocation. - Responsible institution: MINFI - Frequency: Monthly - Reporting lag: 6 weeks - Publish the oil product price structure. - Responsible institutions: MINFI/CSPH - Frequency: Monthly - Reporting lag: First week of the current month - Prices, consumption, and taxation of oil products, including: - (i) the current price structure for the month in question; - (ii) the detailed calculation of the price structure based on the free on board price to obtain the retail price; - (iii) volumes purchased and distributed for consumption by the oil distributor (SONARA and marketers), with the distinction between retail sales and sales to industries; and - (iv) a breakdown of tax revenue on petroleum products—customs duty, excise tax on petroleum products (TSPP), and value-added tax (VAT)—and support for the refinery and the situation of shortfalls and overpayments. - Responsible institutions: MINFI/CTR/CSPH - Frequency: 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. - Responsible institutions: DGI, DGD, DGB - Frequency: Monthly - Reporting lag: 6 weeks - VAT refund balance (refund requests, payments made, and VAT refund account status). - Responsible institution: MINFI/DGI - Frequency: Monthly - Reporting lag: 6 weeks - DGI/DGD joint quarterly collaboration reports indicating, in particular, the results in terms of identification of fraud and collection of additional revenue. - Responsible institutions: DGI/DGD - Frequency: Quarterly - Reporting lag: 6 weeks - The situation of the SNH, including the volumes exported, the prices, the exchange rates, the costs of operations, the direct interventions, the commitments towards the State, the balance transferable to the Treasury. - Responsible institution: MINFI - Frequency: Quarterly - Reporting lag: 6 weeks - Include the total amount of oil revenue from the national oil company SNH and direct interventions in the monthly table of government financial operations (TOFE). - Responsible institution: MINFI - Frequency: Monthly - Reporting lag: 6 weeks - Accounting and budgetary extract indicating the status of payment of State invoices to public service companies (ENEO, CAMWATER, CAMTEL, SONARA CAMPOST, SIC) - Responsible institution: MINFI - Frequency: Quarterly - Reporting lag: 6 weeks - Publish quarterly budget execution report - Responsible institution: MINFI - Frequency: Quarterly - Reporting lag: 8 weeks - Fiscal Performance Indicators as indicated in Table 2 - Responsible institutions: MINFI/DGI - Frequency: Quarterly - Reporting lag: 6 weeks - Monetary sector reporting (selected items): - Consolidated balance sheets of monetary institutions - Responsible institution: BEAC - Frequency: Monthly - Reporting lag: 6 weeks - Provisional data on the integrated monetary survey - Responsible institution: BEAC - Frequency: Monthly - Reporting lag: 6 weeks - Final data on the integrated monetary survey - Responsible institution: BEAC - Frequency: Monthly - Reporting lag: 10 weeks - Net government position - Responsible institution: BEAC - Frequency: Monthly - Reporting lag: 6 weeks - The situation of the balance of the special account of undisbursed statutory advances - Responsible institution: BEAC - Frequency: Monthly - Reporting lag: 6 weeks - The key rate and the credit and debit interest rates - Responsible institution: BEAC - Frequency: Monthly - Reporting lag: 6 weeks - Balance of payments and real sector reporting (selected items and lags preserved): - Preliminary annual balance of payments data. - Responsible institution: MINFI - Frequency: Annual - Reporting lag: 9 months - Foreign trade statistics. - Responsible institutions: MINFI/INS - Frequency: Monthly - Reporting lag: 6 weeks - Any revision of the balance of payments data (including services, private transfers, official transfers, and capital transactions). - Responsible institutions: BEAC/MINFI - On revision: Reporting lag 2 weeks - Provisional national accounts and any revision of the national accounts. - Responsible institution: INS - Frequency: Annual - Reporting lag: 6 months - Quarterly National Accounts. - Responsible institution: INS - Frequency: Quarterly - Reporting lag: 3 months - Disaggregated consumer price indices for the cities of Douala and Yaoundé - Responsible institution: INS - Frequency: Monthly - Reporting lag: 4 weeks - Consumer price indices disaggregated by city, product and at the national level. - Responsible institution: INS - Frequency: Monthly - Reporting lag: 6 weeks - Structural reforms and other data: - Any official report or study devoted to Cameroon’s economy, from its date of publication or finalization. - Responsible institution: MINEPAT - Reporting lag: 2 weeks - Any decision, decree, law, order, or circular having economic or financial implications, from its publication date or effective date. - Responsible institutions: MINFI/MINEPAT - Reporting lag: 2 weeks - Report on the implementation of expenditure of the special allocations account (CAS) COVID-19 - Responsible institutions: MINFI/DGB - Frequency: Bi-annually - Reporting lag: 3 months - CAS-COVID-19 expenditure audit report - Responsible institutions: MINFI/DGB - Frequency: Annually - Reporting lag: 6 months - Data on SNH interventions - Responsible institution: MINFI/DGB - Frequency: Quarterly - Reporting lag: 6 weeks ### Fiscal Performance Indicators (Table 2: selected structure) - Table 2 lists Fiscal Performance Indicators by tax administration units and tax types (structure preserved): - DGE – Directorate for Large Enterprises: VAT; CIT; Tax on industrial and commercial profits; Salary deductions - CIMES – Center for Taxes on Medium Enterprises: VAT; CIT; Tax on industrial and commercial profits; Salary deductions - CDI – Divisional Tax Center: CIT; Tax on industrial and commercial profits; Salary deductions; Withholding tax ### Relations with the Fund and Financial Operations (selected figures) - Membership and quotas: - Quota: 276.00 (SDR Million) 100.00 percent of quota - IMF's Holdings of Currency (Holdings Rate): 357.73 129.61 - Reserve Tranche Position: 1.35 0.49 - SDR Department: - Net cumulative allocation: 441.80 100.00 - Holdings: 218.64 49.49 - Outstanding Purchases and Loans: - RCF Loans: 276.00 100.00 (%Quota) - ECF Arrangements: 469.20 170.00 (%Quota) - Extended Arrangements: 82.80 30.00 (%Quota) - Latest Financial Commitments (selected): - EFF Jul 29, 2021 – Jul 28, 2024: Amount Approved 322.00 (SDR Million); Amount Drawn 248.4 (SDR Million) - ECF Jul 29, 2021 – Jul 28, 2024: Amount Approved 161.00; Amount Drawn 124.2 - Outright Loans RCF Oct 21, 2020 commitment drawn Oct 23, 2020: Amount Approved 110.40; Amount Drawn 110.40 - Outright Loans RCF May 04, 2020 commitment drawn May 06, 2020: Amount Approved 165.60; Amount Drawn 165.60 - Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs): forthcoming by year (layout preserved) - Principal: 41.40 63.48 96.60 159.2 - Charges/Interest: 2.0 15.2 30.1 30.1 29.7 - Total: 2.04 56.62 93.58 126.67 188.84 ### Debt Relief, HIPC, MDRI, and Safeguards - HIPC Initiative: - Decision point date: Oct 2000 - Assistance committed by all creditors (US$ Million) 1,267.00 - Of which IMF assistance (US$ million) 37.04 (SDR equivalent in millions) 28.62 - Completion point date: Apr 2006 - Disbursement of IMF assistance (SDR Million): Assistance disbursed to the member 28.62 - Interim assistance 11.25 - Completion point balance 17.37 - Additional disbursement of interest income 5.05 - Total disbursements 33.67 - MDRI-eligible debt (SDR Million): 173.26 - Financed by MDRI Trust: 149.17 - Remaining HIPC resources: 24.09 - Safeguards: 2022 safeguards assessment found that BEAC maintained strong governance arrangements; significant senior executive turnover since then and a safeguards monitoring mission is planned before end-2023. ### Statistical Issues and Data Adequacy - General assessment: - Data provision is broadly adequate; authorities have improved quality, coverage, and timeliness of key macroeconomic data. - Significant developments include strengthening public debt and balance of payments data, and shift of budget execution reports to commitment basis with more comprehensive coverage. - Important weaknesses remain in coverage of local government and public enterprises, including cross-debts. - Real sector: - National accounts rebased to 2005 in July 2017 and to 2016 in December 2020 by INS. - INS compiles quarterly GDP time series and publishes monthly CPI (base year 2011). - Government finance statistics improvements: - (i) Budget execution data on commitment basis produced monthly since January 2018, with greater transparency on oil sector revenue and expenditure interventions and better monitoring of payment floats. - (ii) Annexes of the budget law now include the Livre Vert on public enterprises and a report on Tax Expenditures. - (iii) Authorities adopted six CEMAC Directives related to public financial management but full implementation delayed beyond January 1, 2022. - Remaining fiscal data weaknesses: - (i) Lack of information on the financial situation of local governments; - (ii) Poor monitoring of cross-debts in the public sector and of public enterprise debt; - (iii) Lack of comprehensive and timely financial information on public enterprises. - Monetary and financial statistics issues: - Monetary statistics reported by BEAC monthly in SRFs with delays up to two months. - Long delay in publication of interest rates offered by financial institutions; depository corporation survey excludes deposit taking microfinance institutions. - Balance of payments and external debt: - BoP data quality improved with annual reporting and quarterly reporting since 2017, but significant delays remain. - External debt data collected by CAA improved and is now of high quality for public and explicitly guaranteed debt. - Cameroon: Table of Common Indicators Required for Surveillance (As of November, 2022) — selected latest observation dates preserved: - Exchange rates: Date of latest observation Nov 2023; Date received Nov 2023; Frequency D; Frequency of reporting D; Frequency of publication Daily, on BEAC website - International reserve assets and liabilities: Date of latest observation Sep 2023; Date received Nov 2023; Frequency M M M - Interest rates: Date of latest observation Sep 2021; Date received Oct 2021; Frequency M M M - Consumer price index (main cities): Date of latest observation Sep 2023; Date received Nov 2023; Frequency M M M - Revenue, Expenditure, Balance and Composition of Financing – Central government: Date of latest observation August 2023; Date received Oct. 2023; Frequency M; Frequency of reporting M; Frequency of publication Partial data published quarterly - Gross external debt: Date of latest observation Sep 2021; Date received Nov 2021; Frequency Q Q Q - International investment position: Date of latest observation Dec 2021; Date received Sep 2022; Frequency Y Y Y ### Debt Sustainability Analysis — Key Findings and Policy Recommendations - Joint Bank-Fund DSA assessments: - Risk of external debt distress: High - Overall risk of debt distress: High - Granularity in the risk rating: Sustainable - Application of judgement: No - Summary observations: - Cameroon remains at high risk of debt distress while overall debt sustainability indicators have been broadly stable compared to the previous DSA report published in February 2023. - Negative influences: Larger contingent liabilities and rising interest rates negatively affect DSA indicators. - Positive influences: Higher energy prices, stronger exchange rate, and the extension and augmentation of the current program provide positive effects. - Debt carrying capacity remains weak as suggested by the Composite Index (CI) score of 2.61 (calculated based on the October 2023 World Economic Outlook and the 2022 Country Policy and Institutional Assessment). - External debt stock indicators lie below thresholds, but external debt service indicators remain above thresholds though on a downward trend supported by authorities’ active debt management. - Staff maintains assessment that Cameroon’s debt is sustainable given the authorities’ commitment to program objectives, including fiscal consolidation efforts and active debt management. - Key downside risks (listed): - Continuing war in Ukraine and escalation of geopolitical tensions which could set back the global recovery; - Prolonged tight global financial conditions leading to deterioration of financing environment and higher borrowing costs; - High volatility of global energy prices causing uncertainty on exports and fiscal revenue; - Rising social tensions amidst higher inflation and upcoming presidential election; - Deterioration in regional stability with spillovers to Cameroon; - More frequent climate disasters such as flooding; - Realization of contingent liabilities, such as State-Owned Enterprises (SOEs) and Public-Private Partnership (PPP) projects, which could weigh on DSA baseline indicators. - Policy recommendations to mitigate risks (verbatim emphasis and order preserved): - First, keeping public debt dynamics on a sustainable path requires continued efforts in fiscal consolidation, including a further reduction in fuel subsidies and increased revenue mobilization. - Second, the authorities should closely monitor their debt service and strengthen the management of their debt portfolio to minimize interest rate risks. - Third, vulnerable export-related debt indicators point to the need for export promotion. Reform momentum to improve the domestic business and investment environment should be further accelerated, boosting exports and inviting more foreign direct investment inflows. - Lastly, management of SOEs and PPP projects should be strengthened to reduce risks related to contingent liabilities. *Source: STAFF REPORT FOR THE 2023 ARTICLE IV CONSULTATION, FIFTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY AND THE EXTENDED FUND FACILITY ARRANGEMENTS — INFORMATIONAL ANNEX (December 7, 2023).* ### 1. Debt coverage has remained unchanged since the previous DSA (Text Table 1). Public debt ### 1cmrea2024001 - 1. Debt coverage has remained unchanged since the previous DSA (Text Table 1). Public debt ### Debt coverage and perimeter - Public debt coverage, as agreed with the authorities in the Technical Memorandum of Understanding (TMU), includes: - debt of the central government, - expenditure floats and arrears, - guarantees, - debt of a public oil company SONARA, - external arrears of other state-owned enterprises (SOEs). - The DSA does not cover: - debt of local governments (not allowed to borrow from financial markets), which is mostly owed to domestic suppliers, including SOEs, and is yet to be further verified. - other elements of the general government such as social security funds or extra budgetary funds. - External debt is mainly defined based on currency denomination but is adjusted for residency where data are available. ### SOE debt, PPPs, and contingent liability treatment - Domestic debt of SOEs other than SONARA is not included in the DSA’s debt baseline perimeter but is treated as contingent liabilities. - Progress in SOE debt reporting: - As of June-2023 (authorities’ report via CAA): SOEs’ external and domestic debt (excluding cross-debt to SOEs and the State) totaled CFAF 511.0 billion and CFAF 375.6 billion, compared to CFAF 522.8 billion and CFAF 392.2 billion one half year earlier. - SONARA accounted for around 82.1 percent of external debt and 68.6 percent of domestic debt among listed SOEs. - Contingent liability stress test parameters (updated): - PPP capital stock reported at 4,931 billion or about 16.6 percent of GDP as of June 2023. - In the DSA exercise, the PPP value corresponds to a contingent liability of 5.8 percent of GDP. - Shock scenario for remaining uncovered SOE debt set at 3 percent of GDP. - Contingent liabilities from financial markets set at the minimum value of 5 percent of GDP (representing average cost to the government of a financial crisis in a LIC since 1980). - Estimates of other elements not covered are currently not available. ### Evolution and composition of public debt (key stocks and shares) - Overall public debt moderation: - Staff estimate of total public and publicly guaranteed (PPG) debt: CFAF 12,556 billion (45.3 percent of GDP) as of end-2022, compared to 46.8 percent of GDP at end-2021. - External debt stock estimated at CFAF 8,528 billion (30.8 percent of GDP) and domestic debt at CFAF 4,028 billion (14.5 percent of GDP) (end-2022). - Text Table 3 (selected figures, staff estimates): - Total Public Debt (staff estimate) 2022 (Prel.): 12,556 (45.3 percent of GDP). - Debt of the central government 2022 (Prel.): 11,915 (43.0 percent of GDP). - Total External 2022 (Prel.): 8,528 (30.8 percent of GDP). - Total Domestic 2022 (Prel.): 4,028 (14.5 percent of GDP). - Debt of SOEs (unguaranteed) (staff estimate) 2022 (Prel.): 706 (3.0 percent of GDP). - SONARA (staff estimate) 2022 (Prel.): 698 (3.0 percent of GDP). - SONARA external (incl. arrears) 2022 (Prel.): 370 (1.6 percent of GDP). - SONARA domestic 2022 (Prel.): 328 (1.4 percent of GDP). - External debt composition (Text Table 4, shares as of June-2023): - Multilateral: 45.9 percent of total PPG external debt as of June-2023 (compared to 34.4 percent as of end-2019). - World Bank loans accounted for 37.9 percent of multilateral loans or 17.4 of total external debt during the same period. - Bilateral and commercial debts have been declining. - Of total PPG external debt (staff estimate) shares (Jun-23): Multilateral 45.9; Bilateral 38.3; Commercial 11.6. - Eurobond share noted as 6.5 percent in Jun-23. - Unguaranteed SOE debt (incl. arrears) share in Jun-23: 4.0 percent; SONARA 3.9 percent. - Average maturity and weighted cost (as of June 2023): - Average maturity of public debt: 8.1 years. - Respective maturities: external debt 9.3 years, domestic debt 4.8 years. - Weighted cost for debt: 2.3 percent in June 2023 (compared to 2.4 percent one year ago). ### Contracted-but-undisbursed debt (SENDs), guaranteed debt, and arrears - Stock of SENDs (excluding budget support): - CFAF 3,542.8 billion as of June 2023, compared to CFAF 3,673.2 billion at end-2022 and CFAF 3,681.4 billion at end-2021. - Text Table 5 shows SENDs Jun-2023: 3,542 (11.9 percent of GDP). - External SENDs Jun-2023: 3,405 (11.9 percent of GDP). - Of external SENDs Jun-2023: multilateral 2,309.7, bilateral 623.2, commercial 112.4 (billions of CFAF and percent shares as in Text Table 5). - Stock of guaranteed debt and unguaranteed SOE debt: - Outstanding stock of guaranteed debt declined to CFAF 9.9 billion as of June 2023 from CFAF 21.3 billion at end-2021 or CFAF 13.1 billion at end-2022. - Unguaranteed SOE debt as agreed in the TMU (SONARA debt and other SOEs’ external debt including external arrears) also declined somewhat in the first half of 2023. - Arrears and QPC breaches: - There were temporary breaches of the ceiling on the accumulation of external payment arrears (QPC) with minor and short delays of debt service to a creditor in 2023. - As of end-August 2023, there were no outstanding external debt payment arrears. - Measures introduced: SB and revised IT, debt management operation to borrow long-term external debt to pay down domestic arrears, and tightened domestic financing conditions. ### Debt management capacity and recommendations - Current capacity: - Cameroon’s capacity to monitor and manage public debt for IMF debt limits policy purposes is adequate, with improvements over time. - All project financing proposals and PPP projects are examined by the National Public Debt Committee (CNDP); signing of a new loan agreement requires unconditional approval. - Procedures and responsibilities clarified in a manual published in 2019. - Remaining weaknesses and recommended enhancements: - CNDP engagement is often delayed until late in the debt contracting process. - Debt policy not yet firmly anchored by a medium-term debt management framework, causing discrepancies between announced plans and actual financing. - Recommendations include: - Strengthen active engagement of the CNDP. - Enhance effectiveness of the medium-term public debt strategy (MTDS). - Improve estimates of financing needs and develop consistent annual borrowing plans. - Enhance communication strategy to facilitate creditors’ understanding of authorities’ debt management objectives. ### Macroeconomic context and outlook underpinning the DSA - Recent macroeconomic performance (2022): - Real GDP growth: 3.6 percent in 2022 (stable compared to previous year). - Average inflation: 6.3 percent in 2022 (from 2.3 percent one year earlier). - Overall fiscal deficit (payment order basis, excluding grants): declined to 1.5 percent in 2022. - Current account deficit: narrowed to 3.4 percent of GDP in 2022. - Forecasts and medium-term outlook: - Real GDP growth projected at 4.0 percent in 2023, supported by non-oil GDP growth. - Inflation projected average in 2023: 7.2 percent, before returning to around 3 percent in the medium term. - Medium-term growth expected to average around 4.3 percent; CPI inflation projected to stabilize around 3 percent. - Baseline subject to downside risks including prolonged war in Ukraine, escalation of geopolitical tensions, elevated import prices, supply chain disruptions, domestic security situation, and slow reforms. - Program implementation and reforms: - Of nine structural benchmarks (SBs) for the fifth review: three met on schedule, two implemented with delay, one expected by Board date (prior action), and three to be rescheduled or reformulated. - Authorities committed to contingency measures including a revised budget. - Debt sustainability risks could be mitigated by strengthened public debt management and reduced reliance on non-concessional borrowing. *Source: IMF staff report text provided for Content unit 1cmrea2024001.* ### Box 1. Cameroon: Medium- and Long-Term Macroeconomic Assumptions ### Box 1. Cameroon: Medium- and Long-Term Macroeconomic Assumptions ### Medium term (2023–2027): growth, inflation, fiscal and external outlook - Real GDP growth - Projected to average 4.3 percent in the medium term (2023-2027), revised down by 0.1 percentage point from the previous DSA; downward revision driven by projected oil GDP growth but partially offset by a better outlook for the gas sector. - Comparison: average growth was 4.4 percent in the pre-Covid period (2011-2019). - Growth-supporting sectors: agro-industries, forestry, and services. - Projection assumes continued implementation—some with delays—of growth-enhancing reforms under the IMF program (lifting business impediments via regular private sector consultation; revising the law on private investment incentives; revamping customs and port systems). - Inflation - Average annual inflation projected to stay elevated around 7.2 percent in 2023 and moderate to 5.9 percent in 2024, with an upward revision in both 2023 and 2024. - Inflation expected to subside further thereafter and decline gradually, approaching 2.0 percent in the long term (below the CEMAC convergence criterion of 3 percent and compared to the average inflation of 1.8 percent during 2010-2019). - Drivers of moderation: BEAC’s efforts to curb inflation, fiscal consolidation by Cameroonian authorities, and the fixed exchange rate with the Euro in the monetary union. - Fiscal outlook - Fiscal balance expected to improve gradually after the deficit narrowed more than expected in 2022 due to under-spending. - 2023: continued revenue gains but potential pressure on expenditure from carryover of fuel-subsidy cost from 2022 and likely carryover of a substantial portion of subsidies from 2023 to 2024. - Authorities adopted a three-year plan (2023-25) for modernizing the fiscal system and are working on tax policy measures based on the 2022 IMF FAD diagnostic. - Commitment to reduce the non-oil primary deficit further in 2024 to below 2 percent of GDP. - Fiscal deficit (excluding grants, payment order basis) expected to average 0.9 percent of GDP (2024-2028). - Current account and FDI - Current account balance expected to improve gradually, around 2.5-3.0 percent of GDP in the medium term (improved in 2022 as higher oil and non-oil commodity exports outweighed import increases). - Net FDI inflows expected to recover and average 2.3 percent of GDP in the medium term (close to the level observed in 2019). - Policy emphasis: continued fiscal consolidation, improving business environment, enhancing governance to attract foreign investment. - Reform example: revising law No 2013/004 of April 18, 2013 (SB5) to rationalize incentives and promote competition. ### Long term (2028–2042): structural assumptions and projections - Real GDP growth - Long-term growth expected to remain stable at 4.8 percent. - Projection predicated on successful—albeit delayed—implementation of Cameroon’s national development strategy, SND-30, to boost growth via structural reforms, stronger SOE management and oversight, and economic diversification. - SND-30 also aims to accelerate infrastructure projects in transport and electricity to reduce production costs and trade barriers. - Fiscal revenue and consolidation - Fiscal revenue projected to increase with implementation of the Medium-Term Revenue Strategy (MTRS). - Baseline assumes gradual fiscal consolidation continues beyond the program horizon. - Exports and external outlook - Exports of goods and services projected to decline as a share of GDP in the medium term reflecting falling domestic oil production; projection improved somewhat from last review due to higher projected global energy prices. - Current account expected to continue improving in the medium term amid rising natural gas production and more dynamic non-oil exports. - Export diversification—by product and destination, including more intensive regional trade under AfCFTA—expected to underpin export performance over the long run. ### Baseline policy assumptions embedded in projections - IMF-supported program and PPAs (World Bank SDFP) parameters: - Gradual fiscal consolidation path reflecting revenue measures: strengthening tax and customs administration, streamlining tax exemptions, recovering tax arrears. - Fuel subsidy assumption: gradual reduction to zero in 2025 through regular increases in domestic pump prices, after the hike in 2023 and earlier 2024. - Continued implementation of PPAs on fiscal risk management and on contracting of non-concessional debt. - Expected outcome: create space to support higher-impact economic and social spending, strengthen public investment, and support a gradual medium-term recovery and stronger long-run revenue mobilization. - Share of non-concessional loans - The share of non-concessional loans accounts for around 20 percent of the stock of SEND. ### Financing assumptions, SONARA, and debt management - Public gross financing needs and financing mix - Public gross financing needs over 2023-25 estimated at around CFAF 4,700 billion (15.8 percent of 2023 GDP), with around 70 percent assumed to be financed externally. - DSA reflects IMF financing of CFAF 436 billion and prospective donor budget support amounting to CFAF 215.3 billion in 2023-2025 (program extension and augmentation). - External project financing is based on the budget; mix of new disbursements assumed to follow composition of SENDs as of end-2022; after 2025 composition gradually shifts towards commercial borrowing with a decreasing grant element. - Financing terms for IDA updated to account for new IDA 20 instruments; domestic financing assumptions reflect gradually increasing share of longer maturity bonds per authorities’ MTDS. - 2023: issuance of ECMR2023 with four tranches diversified treasury bonds. - Three credit rating agencies downgraded Cameroon’s bond rating in response to delayed payments to a lender in 2023; political developments in Gabon had spillover effects on Cameroon’s bond market (yield trading higher in September). - Underlying financing assumption updated to reflect a tighter-than-before financing environment. - Authorities aim to carry out a debt management operation before end-2023 to pay down unpaid obligations and reduce short- to medium-term public debt service pressure and enhance capacity to clear domestic arrears (assumed in current projection). - SONARA (refinery) assumptions and restructuring - Financing assumption regarding SONARA not revised from last DSA because restructuring plan details are not finalized. - SONARA reached agreement with its main supplier in September 2022 to pay down its debt (one step after restructuring with domestic banks in October 2021). - Three remaining suppliers expected to sign by end-2023 (two negotiations completed, one in process). - Restructuring outline and action plan for SONARA rephased from September 2023 to June 2024. - Baseline assumption: projected zero net income for SONARA (instead of mild positive income per SONARA’s own projection); cost of potential reconstruction of refinery operation not incorporated in baseline. ### Realism tool, projections risk signals, and financing metrics - Realism tool findings - Projected three-year fiscal adjustment considered achievable given distribution of LIC fiscal adjustments under past IMF programs. - Growth projection deviates from paths implied by projected fiscal consolidation; projections may not fully capture other growth drivers (post-COVID rebound, stronger net exports from higher oil and non-oil commodity products). - Debt and market metrics - Public gross financing needs: maximum three-year gross financing needs estimated at 6 percent of GDP (lower than suggested benchmark of 14 percent). - EMBI spread: latest available EMBI spread for Cameroon 1005 bps as of November 22, 2023 (above benchmark 570 bps), signaling market financing pressures. - Financing assumption update reflects tighter financing environment and use of debt management operations to address arrears. - Key financing numbers cited - Public gross financing needs (2023-25): CFAF 4,700 billion (15.8 percent of 2023 GDP). - IMF financing included in DSA: CFAF 436 billion. - Prospective donor budget support: CFAF 215.3 billion (2023-2025). - Share of non-concessional loans in SEND stock: around 20 percent. ### Debt sustainability assessment and stress tests - Country classification - Debt-carrying capacity remains weak. Composite Indicator (CI) score based on October 2023 WEO projections and 2022 World Bank CPIA score is 2.61, signaling a weak debt-carrying capacity. - External debt sustainability - External risk of debt distress assessed to remain high: two indicators breach thresholds under the baseline (external debt service-to-exports ratio and external debt service-to-revenue ratio) for a prolonged period, though both show gradual downward paths. - Upticks at the longer end reflect a jump in projected debt service related to the maturing Eurobond. - Most extreme stress scenarios breach thresholds for all four external indicators; the commodity price shock is the most extreme across all external debt indicators. - Historical scenario points to exploding PV of debt-to-exports reflecting large historical current account deficit; differs from baseline which assumes current account improvement driven by dynamic non-oil exports and moderate imports. - Public debt sustainability - Public debt distress risk assessed to remain high: PV of debt-to-GDP ratio breaches benchmark under the baseline in 2023 (temporal breach), projected to fall below benchmark in 2024 onwards. - PV of debt-to-revenue ratio and debt service-to-revenue ratio projected to decline gradually. - Most extreme shock for public debt indicators (PV of debt-to-GDP, PV of debt-to-revenue, debt-service-to-revenue) is the commodity price shock. - Historical scenario projects explosive paths for PV of debt-to-GDP and PV of debt-to-revenue driven by large historical primary deficits relative to projections. - Tailored stress tests and shock specifics - Standardized stress tests applied with additional tailored tests: market financing shock and commodity price shock (reflecting outstanding Eurobond and commodity-export dependence). - Commodity price shock assumptions: initial price drop of 51 percent for fuel products and 34 percent for other agricultural commodities; mitigating factor of 14 percent for fuel products; gap assumed to close in six years. - Market module and risk signals - Despite maximum three-year gross financing needs estimated at 6 percent of GDP (below 14 percent benchmark), EMBI spread breach (1005 bps) signals continued market financing pressures. ### Overall risk rating and staff assessment - Overall assessment - Cameroon continues to be in a high risk of debt distress, but staff maintains that Cameroon’s debt remains sustainable given authorities’ commitment to program objectives, fiscal consolidation efforts, and active debt management. - External debt stock indicators lie below thresholds and external debt service indicators have improved due to active debt management. - Debt service-to-exports and debt service-to-revenue ratios, while above thresholds, are expected to trend downward. - Compared to previous DSA, debt indicators improved somewhat amid stronger currency and more favorable commodity price outlooks. - Staff view: likelihood that Cameroon will not be able to meet its current and future financial obligations is low. *Source: IMF staff calculations and Cameroonian authorities as presented in the Box 1 text.* ### 28. The risks are tilted to the downside. On the external front, an escalation of geopolitical tensions ### The risks are tilted to the downside. ### Downside risks and vulnerabilities - On the external front, an escalation of geopolitical tensions could set back the global recovery and prolong supply chain disruptions, putting pressure on the external balance. - Longer-than-expected tight global financial conditions could lead to deterioration of financing environment and higher borrowing costs. - The high volatility of global energy prices could introduce uncertainty to both exports and fiscal revenue. - On the domestic front, high inflation could intensify socio-economic tensions, while continuing fuel subsidy could reduce fiscal space and derail Cameroon’s fiscal consolidation efforts. - Delayed in implementing SONARA’s debt restructuring and rehabilitation plan would jeopardize debt sustainability. - Regional security conflicts—if not well contained—could also compound the fiscal challenges. - Other risks include realization of contingent liabilities from bank restructuring and from SOEs not included in the DSA baseline, and an acceleration in disbursements due to the large stock of SENDs. ### Policy recommendations and reform priorities to preserve debt sustainability - Keep public debt dynamics on a sustainable path through a gradual fiscal consolidation. - Contain the fiscal deficit in the short term to ensure debt sustainability. - Implement structural fiscal reforms, including further reducing the fuel subsidies and enhancing revenue mobilization. - Pursue a prudent borrowing policy skewed towards concessional loans and limiting reliance on non-concessional borrowing. - Strengthen the management of the SENDs. - Redirect resources with targeted spending; use windfall oil revenue gains for areas such as protecting the most vulnerable and prioritizing growth-enhancing public investment. - Closely monitor debt servicing costs and actively manage the debt portfolio to minimize interest rate risks. - Improve competitiveness and achieve economic diversification to address vulnerable export-related debt indicators. - Accelerate reform momentum to improve the domestic business and investment environment, invite more FDI, and boost exports. - Strengthen the management of SOEs to reduce risks related to contingent liabilities. *Source: IMF country chapter text.* ### 30. The authorities agree that it is critical to continue to address various pockets of debt ### 1cmrea2024001 - 30. The authorities agree that it is critical to continue to address various pockets of debt ### Debt vulnerabilities and authorities’ commitments - The authorities agree it is critical to continue to address various pockets of debt vulnerabilities amid a heightened risk of debt distress due to an unfavorable external environment and slow progress in domestic structural reforms. - Commitments and dependencies: - Remain committed to an improvement of Cameroon’s debt risk assessment, which will depend on continued active debt management, exports, and budgetary revenue performance, as well as the country’s CI score (debt carrying capacity). - Highlighted the need to make more efforts to address SOE issues and reducing fiscal risks. - With regard to SONARA’s debt restructuring, the authorities remained committed, based on the rephased timeline, to make progress on the restructuring plan. ### Stress tests and scenario design - The stress tests indicate the most extreme shock is the commodity price shock. - Key methodological points: - All additional financing needs generated by the 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 defined as the test that yields the highest ratio in or before 2033; one-off breaches are presented when relevant but are treated mechanically in certain presentations. ### Selected indicators and projections (high-level) - External debt (nominal) (In percent of GDP): - 2023: 31.9 - 2028: 27.6 - 2033: 25.4 - 2043: 20.3 - Fiscal and macro developments (text highlights from the Statement): - Real GDP growth: expected to grow by 4 percent in 2023, up from 3.6 percent in 2022. - Inflation: average inflation expected to reach 7.2 percent at end-2023. - Non-oil primary deficit: contained at 3.9 percent of GDP in 2022; should narrow to 2.5 percent of GDP in 2023. - Factors supporting debt dynamics: stronger growth, appreciation of the CFA franc, higher oil prices, and ongoing fiscal consolidation have helped reduce the debt-to-GDP ratio. ### Policy implications and priorities - Maintain and strengthen active debt management to reduce debt distress risks. - Improve exports and budgetary revenue performance to support debt sustainability and the country’s CI score. - Address SOE governance and contingent liabilities to reduce fiscal risks. - Advance SONARA debt restructuring according to the rephased timeline to limit fiscal and contingent liability risks. - Continue structural reforms to improve resilience to external shocks and support sustained growth. *Source: IMF staff report content (1cmrea2024001 - 30.)* ### 45.3 percent at end-2022 to 41.8 at end-2023. ### 1cmrea2024001 - 45.3 percent at end-2022 to 41.8 at end-2023 ### Macroeconomic outlook and external sector - 45.3 percent at end-2022 to 41.8 at end-2023. - In the external sector: - The current account deficit contracted to 3.4 percent of GDP in 2022 on account notably of higher oil and gas prices. - The deficit is expected to decline further to 3 percent at end-2023 reflecting increased gas production and a stronger primary income balance. - Real GDP growth and inflation prospects: - Real GDP growth: 3.9 percent in 2023 to 4.3 percent in 2024, and over the medium-term. - Average inflation: recede from 7.2 percent in 2023 to 5 percent in 2024 and settle below 3 percent in the medium-term. - Current account: should continue improving and stabilize below 3 percent over the medium-term. ### Program performance (implementation to end-June 2023) - Quantitative performance: - Five of the six quantitative performance criteria (QPC) have been met at end-June 2023. - The QPC on the accumulation of external arrears was not observed due to a minor and temporary technical delay; authorities requested a waiver of non-observance. - Indicative targets: - Three of the five indicative targets (ITs) have been met at end-June 2023. - Missed ITs relate to: - ceilings on direct coverage of government security expenditures by the National Hydrocarbons Company (SNH), - the share of spending using exceptional procedures, - the accumulation of domestic arrears. - Remedial measures: improved monitoring of expenditures related to SNH direct financial interventions; reduction of expenditures subject to exceptional procedures to the strict minimum. - Structural benchmarks: - Three of nine structural benchmarks under the fifth reviews were timely met: - increase in the number of VAT taxpayers (implemented ahead of schedule), - structural benchmark on PPP (Public-Private Partnerships), - structural benchmark on an action plan including recommendations to eliminate the corporate tax break. - Authorities accelerated implementation of delayed structural benchmarks, including publication of the governance report (one of the prior actions met for the review). ### Medium-term macroeconomic policies and structural reforms - Development agenda: - Under the ECF/EFF-supported program, authorities will pursue their ambitious development agenda in line with the SND-30 and accelerate industrial transformation to boost domestic production and promote exports. - Fiscal resilience and debt sustainability: - Policy intent: sustain reforms to expand fiscal space for priority spending while preserving fiscal and debt sustainability; bring overall fiscal deficit and the non-oil primary deficit to sustainable levels. - Revenue mobilization: - Tax to GDP ratio target: from 12.7 percent in 2023 to about 13.3 percent of GDP in 2024. - Measures: enhance mobilization of non-oil revenue, better control outstanding payment obligations, reduce fuel subsidies, modernize tax and customs administration, broaden tax base, strengthen tax compliance, fight fraud and tax evasion, revisit tax incentives and exemptions. - Customs measures: increase import duties on telephones, readjust taxation of export products with high potential, improve exchange of information with the Central Bank, commercial banks, and tax administration. - Fuel subsidies: - Gradual removal of fuel subsidies by 2025 (if no major external shock occurs). - An additional price increase planned for the beginning of 2024, which will help reduce the fiscal cost of the subsidies to about 0.4 percent of GDP. - Mitigation measures: strengthen social safety nets, improve access to basic public health and education services. - Public financial management reforms: improve credibility and transparency of budget execution, enhance fiscal discipline, reduce domestic payment delays, improve procurement, and increase efficiency of public investment projects. - SOE governance: improve governance and management of SOEs to limit fiscal risks; restructuring of SONARA remains a top priority with envisaged reforms to be finalized by June 2024. - Debt policy: limit new external borrowing, favor concessional borrowing; restrict non-concessional debt to high priority projects with proven socioeconomic returns and no available concessional financing. ### Financial sector resilience, governance, and inclusion - Financial stability and supervision: - Support regional efforts to preserve financial stability, including rebuilding BEAC’s foreign exchange reserves. - Enforce compliance with foreign exchange regulation and petroleum code by public enterprises, and revenue sharing agreements with extractive industries. - Strengthen banking sector resilience: compliance with prudential standards and COBAC regulations and recommendations. - Restructuring of banks in difficulty is on-going; COBAC authorized in July 2023 the Government and historic shareholders to proceed with capital infusion of the two banks in difficulty in accordance with approved restructuring plans. - Financial inclusion: - Financial inclusion strategy finalized in February 2023 with an action plan for 2023-2027. - Government working with development partners to implement the plan to increase the economy's low banking rate while reducing gender inequalities in financial sector operations. - Private sector development measures: - Improve business environment and facilitate access to credit for SMEs. - Planned actions: establishment of credit registers and creation of a rating system associated with BEAC, digitalization of land registry for a register of real estate securities, training of judges in commercial affairs, creation of competent commercial courts, and establishment of a guarantee fund. ### Governance, transparency, and AML/CFT - Governance and transparency: - Diagnostic of economic governance completed in collaboration with the IMF and published. - Use diagnostic to assess additional policy measures to address macro critical vulnerabilities. - Progress towards EITI compliance: - Published EITI Reconciliation reports for 2021 and 2022. - Validation process under the 2019 EITI Standard launched in October 2023 despite difficulties implementing 15 corrective measures prescribed by the EITI Board of Directors. - AML/CFT: - Progress on actions from the Mutual Evaluation Report adopted in October 2021: increased resources for the financial intelligence unit; strengthened capacities of investigative authorities and judicial bodies. - Commitment to work with the Financial Action Task Force (FATF) and the Action Group against Money Laundering in Central Africa (GABAC) to implement an action plan to strengthen AML/CFT effectiveness. ### Program request and conclusion - Under the ECF/EFF-supported program, authorities report significant reforms to preserve macroeconomic stability and consolidate foundations for inclusive growth. - Authorities seek Directors’ support for: - completion of the fifth reviews, - extension of the program by 12 months to July 2025, - augmentation of access of 40 percent of quota. - Authorities request Directors’ favorable consideration of these requests. *Source: 1cmrea2024001 - 45.3 percent at end-2022 to 41.8 at end-2023.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1cmrea2024001.pdf_