## _cr06261 - Third Annual Progress Report (PRSP implementation during 2005)

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---

### Overview
- Report covers PRSP implementation during 2005, a period of improved fiscal performance and accelerated structural reform implementation but a deceleration of economic growth.
- Report focuses on listing ongoing and planned actions and provides only limited analysis of results.
- Because of the short interval since the Joint Staff Advisory Note (JSAN) of the Second APR, the present Report does not reflect much of staff advice in the last JSAN.
- This JSAN is organized in eight sections; Sections II to VI cover PRSP priority areas, Section VII provides guidance on PRSP monitoring, and Section VIII concludes.

### Enhancing Macroeconomic and Fiscal Management (Section II)
Findings
- Fiscal policy implementation and performance strengthened substantially in 2005, with better management of budget execution.
- The overall fiscal balance is estimated to have improved by about 3.8 percentage points of GDP in 2005.
- Increases occurred in oil and non-oil revenue and there was control over current spending.
- Domestically-financed investment reached its target for the first time in several years; foreign-financed investment again fell short reportedly because of insufficient domestic counterpart funds.
- Tax administration was strengthened; fiscal reporting improved; direct spending by the national oil company (SNH) on behalf of the government was phased out; quasi-fiscal losses at the public refinery (SONARA) were avoided by a combination of increases in fuel prices and transparent subsidy payments.

Staff recommendations and actions to continue
- Budget preparation
  - Commendation for accelerated development of sector strategies and Medium Term Expenditure Frameworks (MTEFs).
  - 2006 budget is broadly consistent with PRSP priorities.
  - Recommendation: link sector MTEFs in all priority sectors to a global MTEF as they become available and integrate them into the annual budget to improve alignment with the PRSP.
- Revenue and expenditure
  - Continue strengthening tax and customs administration, consolidating progress at the large taxpayer unit, increasing taxation of the informal sector, and introducing the Automated System for Customs Data.
  - Increase execution rate of investment projects by improving investment planning and project selection.
  - Prioritize strengthening payroll management given recent substantial shortcomings.
- Budget effectiveness
  - Improve and modernize budget implementation procedures, accounting and financial reporting systems, and strengthen the financial oversight framework and capacity.

Gaps in the Report
- No assessment of the quality of the 2005 investment.
- Limited discussion of issues related to the use of interim HIPC debt relief despite accelerated spending of HIPC resources in 2005.
- No in-depth discussion of 2006 macroeconomic policy intentions and the 2006 budget.

Procurement
- Actions taken under the Procurement Code (2004): implementation decree published June 2005, dissemination in provinces, manual for bids prepared and disseminated, audit of public contracts executed in 2004 launched.
- Additional actions (not discussed in the Report): adoption of standard bidding documents, adoption of a three-year action plan to strengthen Code implementation.
- Joint World Bank/government review (2005): foundations in place but implementation remains weak.
- Action plan elements: (i) capacity building program; (ii) contract administration and dispute resolution provisions; (iii) ethics and anti-corruption measures to enforce compliance with the Code; (iv) monitoring and evaluation for an annual assessment of procurement system performance.
- Staffs encourage swift implementation of this action plan.

### Strengthening Governance (Section III)
Findings
- Government adopted an updated national governance program in November 2005 and prepared a priority implementation plan emphasizing results.
- Governance priority action plan targets consolidation of efforts to strengthen the judiciary, fight corruption, and improve transparency and accountability in public finance management.
- Judicial sector actions in 2005: recruitment and training of magistrates; measures against money laundering; promulgation of a new penal procedures code in July 2005.
- External audit body (Chambre des Comptes) became functional in early 2006 but needs strengthening.

Staff recommendations and observations
- Recommend expanding Chambre des Comptes’ mandate to align with International Organization of Supreme Audit Institutions (INTOSAI) norms.
- Report would benefit from articulating the rationale and implementation strategy for decentralization.
- Identify critical constraints on decentralization: weak coordination mechanisms at national and sub-national levels and between administrations, lack of organizational framework for elected local government and communal staff, weak operational/financial/management capacities of municipalities.
- Authorities have prepared and are implementing an action plan based on the FEICOM audit report; staffs urge separation of FEICOM’s functions as a municipal bank from its role in public contract management.
- Recommend making the software designed to supervise litigation cases fully operational within the Ministries of Forestry, Finance and Justice.
- Support recent measures to clean the payroll, sanction misconduct in judiciary and procurement, and crack down on corrupt public officers, with adherence to due process.

Governance challenges and indicators
- Transparency International’s Corruption Perception Index for Cameroon in 2005: 2.2 (on a scale of 0 to 10, higher is better), an improvement from 2.0 in 2000.
- Staffs urge systematic application of anticorruption laws.
- Urgent need to strengthen the judiciary via sufficient budget allocations and recruitment and training of more qualified personnel.

### Consolidating Growth and the Diversification of the Economy (Section IV)
Economic performance and causes
- GDP growth declined from 3.7 percent in 2004 to 2.6 percent in 2005.
- Report attributes deceleration mainly to compression of households’ purchasing power following the 2005 increase in VAT and excise tax rates.
- Staffs also cite supply shocks (e.g., contraction of agro-industry and forestry production) and lower-than-programmed public investment as contributing factors.
- Staffs call on authorities to redouble efforts to remove impediments to public and private investment.

Macroeconomic outlook
- Report does not include updated medium-term macroeconomic projections; the framework from the Second APR (September 2005) remains broadly appropriate.
- Medium-term outlook not fundamentally changed despite a moderate upward revision of oil output and oil exports projections for 2007 and later.

Private sector development and diversification
- Actions taken: creation of public/private partnerships in energy and agro-industry; negotiations with ALCAN for aluminum production expansion.
- Staffs encourage supply chain analysis of potential growth areas: agro-industry; manufacturing; financial services; information technology; oil, gas, mining and petrochemicals (with specific analysis of bauxite and aluminum); transport services; tourism.
- Encourage use of findings from the investment climate assessment survey (ICA) and Reports on the Observance of Standards and Codes (ROSC) to develop policies improving the business environment.
- Survey will examine impediments: taxation and trade regime, red tape, time to obtain a license and start a business, labor issues (costs, labor laws and training), collateral, arbitration, and status of the judicial system.
- Staffs concur that weak governance and poor basic infrastructure weigh heavily on the business environment.

Rural sector and agriculture
- Government updated rural strategy and elaborated an MTEF for the Ministry of Agriculture and Rural Development.
- 2005 actions: training targeted rural communities in technological innovations; strengthening capacity of private operators in selected crop production (pilot basis).
- Donor support will be sought to scale up pilots with involvement of rural producer associations.

Financial sector and capital markets
- 2005 actions: launching of activities at Douala Stock Exchange via quotation of negotiable government securities and bonds issued by the Urban Community of Douala; production of initial studies on creating a private agriculture bank; elimination of 182 microfinance establishments not complying with COBAC rules.
- COBAC gave favorable opinion to 232 compliant microfinance establishments; staffs welcome closure of non-compliant institutions and encourage effective regulation and supervision.
- Concern: CEMAC’s project to create a regional stock exchange in Libreville may pose challenges if a separate Douala exchange is established in parallel.
- Proposed agricultural bank to be established with private capital; staffs urge caution given poor record of such specialized institutions in the past.

Forestry sector
- Government committed to continue forestry reforms with development partner support; efforts to strengthen implementation welcomed.
- Staffs remain concerned that without strong supervision and tight enforcement, community forests and small logging permits may serve vested interests and fuel illegal logging to the detriment of local communities.
- Recommendation: review and clarify all aspects related to the award and use of community forests and small logging permits.

Infrastructure
- Government gives high priority to physical infrastructure and strengthening service delivery by key utilities.
- Restructuring and privatization of public enterprises providing infrastructure has gained momentum in 2005; government committed to increase public investments in infrastructure including through Public Private Partnerships (PPP).
- Staff recommendations: begin in-depth discussion of PPP models and approaches.

Sector-specific infrastructure actions and recommendations
- Transport
  - Focus mainly on roads; adoption of a road strategy and MTEF with increased maintenance and investment funding in line with donor commitments.
  - Independent evaluation of port reform to be undertaken in first half of 2006 to assess gains and prepare follow-up actions.
  - Progress satisfactory on scission/liquidation/privatization of national air carrier CAMAIR; implementation of strategy started per recommendations of strategic option report with IFC assistance.
- Electricity
  - Concession agreement renegotiated with private operator.
  - National Energy and Poverty Reduction Action plan adopted.
  - 2006-30 least cost sector investment plan nearly finalized.
  - Staffs encourage restructuring and capacity strengthening of the regulatory agency and transparent assessment of financially sustainable sector investment needs.
- Telecommunications
  - Preparations for CAMTEL privatization proceeding; prequalification process launched in 2006.
  - Staffs recommend addressing redeployment of CAMTEL civil servants and finalizing a comprehensive financial restructuring package before the end of the bidding period.
  - Authorities’ early-2006 decision to create an asset holding company raised serious staff concern; staffs strongly recommend maintaining the privatization framework as adopted in December 2005 and caution that the asset holding company proposal risks jeopardizing the transaction.
  - Encourage restructuring and capacity strengthening of the telecommunications sector regulatory agency.
- Postal sector
  - Government engaged in restructuring CAMPOST but has yet to finalize sector policy and selection of CAMPOST management contract team.
  - Staffs encourage quick completion of liberalization and regulation strategy for the postal sector, including defining government's objective relative to the universal service obligation.

### Enhancing Social Services Delivery to Improve Standards of Living Conditions (Section V)
Education sector findings
- Performance improvements noted: increases in ratio of enrolled girls to boys; increases in gross enrollments in basic and secondary education; higher success rates in national exams at secondary levels; progress in decentralizing teacher management.
- Significant investments in education facilities at basic, secondary and technical levels.
- Institutional reforms aimed at improving governance of tertiary education observed.

Concerns and indicators
- Key performance indicators not improving as quickly as PRSP envisaged: completion rate of basic education unchanged at 56 percent since 2001.
- High repetition rates persist at around 25 percent of total basic and secondary education enrollment.
- Recent adoption of modern assessment procedures expected to help reduce repetition in primary education.

Staff recommendations on teacher employment and strategy
- Concern about government intention to convert 1,700 contractual teachers into regular civil service positions without a clear policy framework for the 12,000 remaining contractual teachers.
- Recommendation: address this issue in the education strategy document under preparation.
- Education strategy should be discussed with donors and presented to the Education Fast Track Initiative to raise funds before the end of the first half of calendar year 2006.

Health services delivery: progress and recommendations
- Report provides a balanced picture of recent progress in implementing the government’s health sector strategy, with specific details on achievements of different programs.
- Report assesses progress in implementing previous recommendations such as expanding the contracting of NGOs (e.g., for HIV prevention) and lowering the cost of treatment for AIDS patients.
- Staffs recommend intensifying measures to redress inequities in access to health services during the next year by:
  - (i) better targeting of underserved areas better;
  - (ii) further rationalizing the system of user fees and drug policies;
  - (iii) expanding risk sharing mechanisms; and
  - (iv) continuing to assign more personnel to rural areas.
- Staffs suggest launching a broad-based consultative process on a sector-wide approach (SWAP) for the health sector to guide implementation of the government’s health strategy and ensure coordination and alignment of donor assistance.

Water services: progress and institutional arrangements
- Substantial progress has been made in the provision of potable water to households, with access rates increasing over the 2001-05 period.
- Government progress in establishing a public private partnership to manage water services:
  - An asset holding company, CAMWATER, will be in charge of carrying investment responsibilities.
  - The private partner will operate the facilities and deliver services under the lease contract.
- Substantial commitments have been obtained from donors to help fund the investment and capacity strengthening programs once the concession arrangement becomes operational.
- Staffs consider that the government has put in place proper institutional arrangements.

### Fostering Regional Integration (CEMAC)
- Report notes steps to support regional integration, including compliance with the multilateral surveillance criteria and Cameroon’s support for connecting the CEMAC road network, electricity grids, and telecoms networks; however, these regional connections remain at an early stage.
- Report notes that the common external tariff has been reduced to four categories with a maximum of rate of 20 percent.
- Staffs view this action as still under discussion at the regional level and urge authorities to move forward on this measure, which has long been advocated by the staff of the Bank and the Fund.
- Report provides a preliminary analysis of the impact on the Cameroonian economy of the forthcoming Economic Partnership Agreement (EPA) between the EU and the CEMAC, focusing on the potential adverse impact on Cameroonian industry and government revenue of lower import tariffs.
- Staffs recommend deepening future analysis to consider the benefits of the reform.
- Staffs urge Cameroonian authorities to capitalize on its leadership position to further advance regional trade integration.

### Institutional and statistical PRSP monitoring
- Government actions to strengthen PRSP implementation:
  - Generalize the use the MTEF in the 2007 budget preparation to enhance PRSP implementation.
  - Organize regular consultations with private sector and civil society and prepare a national workshop on the economy (“états généraux”), scheduled during the first semester of 2006, to launch the debate on the post completion point growth strategy as a higher volume of resources would be made available through the HIPC and MDRI initiative.
  - Enhance leadership in aligning and harmonizing donor support on PRSP pillars on the basis of the Paris Declaration on Aid Effectiveness.
  - Plan to develop a new partnership framework based on the ongoing independent aid assessment.
- These inputs, along with newly adopted or revised sector strategies, would serve as critical input in the formulation of the second PRSP.
- Staffs commend efforts to assess poverty and living conditions based on:
  - recent survey on employment and the informal sector (EESI),
  - Demographic and Health Survey (DHS),
  - attempts to assess changes in household income based on GDP growth, the level of public wages and trends in the prices of important agricultural goods.
- Report draws on DHS and EESI to assess changes in access to housing, services (water, electricity, cooking gas) and ownership of durable goods (bicycles, radio, television).
- Report attempts to characterize urban poverty amid a growing trend towards urbanization.
- Staffs welcome ongoing efforts to strengthen the program of statistical surveys and participatory monitoring mechanisms and the ongoing study on a formal methodology for participatory monitoring.

### Conclusion: progress, priorities, and implementation challenges
- Progress in PRSP implementation accelerated somewhat in 2005 as the government intensified efforts in fiscal policy, governance, structural reforms, and social policies.
- Prospects for 2006 are encouraging provided the government continues to build on 2005 progress and strengthens implementation to achieve more tangible results on the ground.
- Staffs note the critical importance of the following issues:
  - (i) the elaboration and implementation of a public financial management action plan, in concert with the donor public finance platform;
  - (ii) the implementation of the National Governance Action plan;
  - (iii) the acceleration of public enterprise restructuring/privatization program;
  - (iv) the improvement in the execution of public investments; and
  - (iv) the strengthening of the provision of basic social services through better targeting of actions and expenditure and the implementation of the improved evaluation methods in primary education for sustained reduction of repetition rates.

### Issues for Discussion by the Board
- Fiscal policy and public finance:
  - Concerted efforts were made in 2005 to improve Cameroon’s fiscal position, in sharp contrast with the slippages registered in 2004.
  - Priority going forward is further strengthening tax and customs administrations, improving accounting and financial reporting systems, and reinforcing the financial oversight framework and capacity.
  - Directors might wish to discuss measures to prevent fiscal slippages from reoccurring.
- Governance:
  - Improving governance is a PRSP pillar and arguably the most critical challenge facing Cameroon.
  - Government has started to crack down on corruption—by sacking, indicting, and imprisoning senior public officials—and stressed commitment to enhance and sustain these efforts in the post-HIPC completion point period.
  - Directors might wish to discuss and provide guidance on improving governance in Cameroon.
- Donor partnership:
  - Cameroon’s relationship with the donor community has been weak and the government is working to strengthen this relationship and build a partnership for development.
  - An independent body is developing a partnership framework for consideration by the government and donors.
  - Directors might wish to provide insights into this process.

*Source: _cr06261 - Third Annual Progress Report (PRSP implementation during 2005).*

### 1.      In February 2006, the authorities submitted their Third Annual Progress Report

### _cr06261 - 1.      In February 2006, the authorities submitted their Third Annual Progress Report

### Overview
- The Report covers PRSP implementation during 2005, a period of improved fiscal performance and accelerated structural reform implementation but a deceleration of economic growth.
- The Report focuses on listing ongoing and planned actions and provides only limited analysis of results.
- Because of the short interval since the Joint Staff Advisory Note (JSAN) of the Second APR, the present Report does not reflect much of staff advice in the last JSAN.
- This JSAN is organized in eight sections; Sections II to VI cover PRSP priority areas, Section VII provides guidance on PRSP monitoring, and Section VIII concludes.

### Enhancing Macroeconomic and Fiscal Management (Section II)
Findings
- Fiscal policy implementation and performance strengthened substantially in 2005, with better management of budget execution.
- The overall fiscal balance is estimated to have improved by about 3.8 percentage points of GDP in 2005.
- Increases occurred in oil and non-oil revenue and there was control over current spending.
- Domestically-financed investment reached its target for the first time in several years; foreign-financed investment again fell short reportedly because of insufficient domestic counterpart funds.
- Tax administration was strengthened; fiscal reporting improved; direct spending by the national oil company (SNH) on behalf of the government was phased out; quasi-fiscal losses at the public refinery (SONARA) were avoided by a combination of increases in fuel prices and transparent subsidy payments.

Staff recommendations and actions to continue
- Budget preparation
  - Commendation for accelerated development of sector strategies and Medium Term Expenditure Frameworks (MTEFs).
  - 2006 budget is broadly consistent with PRSP priorities.
  - Recommendation: link sector MTEFs in all priority sectors to a global MTEF as they become available and integrate them into the annual budget to improve alignment with the PRSP.
- Revenue and expenditure
  - Continue strengthening tax and customs administration, consolidating progress at the large taxpayer unit, increasing taxation of the informal sector, and introducing the Automated System for Customs Data.
  - Increase execution rate of investment projects by improving investment planning and project selection.
  - Prioritize strengthening payroll management given recent substantial shortcomings.
- Budget effectiveness
  - Improve and modernize budget implementation procedures, accounting and financial reporting systems, and strengthen the financial oversight framework and capacity.

Gaps in the Report
- No assessment of the quality of the 2005 investment.
- Limited discussion of issues related to the use of interim HIPC debt relief despite accelerated spending of HIPC resources in 2005.
- No in-depth discussion of 2006 macroeconomic policy intentions and the 2006 budget.

Procurement
- Actions taken under the Procurement Code (2004): implementation decree published June 2005, dissemination in provinces, manual for bids prepared and disseminated, audit of public contracts executed in 2004 launched.
- Additional actions (not discussed in the Report): adoption of standard bidding documents, adoption of a three-year action plan to strengthen Code implementation.
- Joint World Bank/government review (2005): foundations in place but implementation remains weak.
- Action plan elements: (i) capacity building program; (ii) contract administration and dispute resolution provisions; (iii) ethics and anti-corruption measures to enforce compliance with the Code; (iv) monitoring and evaluation for an annual assessment of procurement system performance.
- Staffs encourage swift implementation of this action plan.

### Strengthening Governance (Section III)
Findings
- Government adopted an updated national governance program in November 2005 and prepared a priority implementation plan emphasizing results.
- Governance priority action plan targets consolidation of efforts to strengthen the judiciary, fight corruption, and improve transparency and accountability in public finance management.
- Judicial sector actions in 2005: recruitment and training of magistrates; measures against money laundering; promulgation of a new penal procedures code in July 2005.
- External audit body (Chambre des Comptes) became functional in early 2006 but needs strengthening.

Staff recommendations and observations
- Recommend expanding Chambre des Comptes’ mandate to align with International Organization of Supreme Audit Institutions (INTOSAI) norms.
- Report would benefit from articulating the rationale and implementation strategy for decentralization.
- Identify critical constraints on decentralization: weak coordination mechanisms at national and sub-national levels and between administrations, lack of organizational framework for elected local government and communal staff, weak operational/financial/management capacities of municipalities.
- Authorities have prepared and are implementing an action plan based on the FEICOM audit report; staffs urge separation of FEICOM’s functions as a municipal bank from its role in public contract management.
- Recommend making the software designed to supervise litigation cases fully operational within the Ministries of Forestry, Finance and Justice.
- Support recent measures to clean the payroll, sanction misconduct in judiciary and procurement, and crack down on corrupt public officers, with adherence to due process.

Governance challenges and indicators
- Transparency International’s Corruption Perception Index for Cameroon in 2005: 2.2 (on a scale of 0 to 10, higher is better), an improvement from 2.0 in 2000.
- Staffs urge systematic application of anticorruption laws.
- Urgent need to strengthen the judiciary via sufficient budget allocations and recruitment and training of more qualified personnel.

### Consolidating Growth and the Diversification of the Economy (Section IV)
Economic performance and causes
- GDP growth declined from 3.7 percent in 2004 to 2.6 percent in 2005.
- Report attributes deceleration mainly to compression of households’ purchasing power following the 2005 increase in VAT and excise tax rates.
- Staffs also cite supply shocks (e.g., contraction of agro-industry and forestry production) and lower-than-programmed public investment as contributing factors.
- Staffs call on authorities to redouble efforts to remove impediments to public and private investment.

Macroeconomic outlook
- Report does not include updated medium-term macroeconomic projections; the framework from the Second APR (September 2005) remains broadly appropriate.
- Medium-term outlook not fundamentally changed despite a moderate upward revision of oil output and oil exports projections for 2007 and later.

Private sector development and diversification
- Actions taken: creation of public/private partnerships in energy and agro-industry; negotiations with ALCAN for aluminum production expansion.
- Staffs encourage supply chain analysis of potential growth areas: agro-industry; manufacturing; financial services; information technology; oil, gas, mining and petrochemicals (with specific analysis of bauxite and aluminum); transport services; tourism.
- Encourage use of findings from the investment climate assessment survey (ICA) and Reports on the Observance of Standards and Codes (ROSC) to develop policies improving the business environment.
- Survey will examine impediments: taxation and trade regime, red tape, time to obtain a license and start a business, labor issues (costs, labor laws and training), collateral, arbitration, and status of the judicial system.
- Staffs concur that weak governance and poor basic infrastructure weigh heavily on the business environment.

Rural sector and agriculture
- Government updated rural strategy and elaborated an MTEF for the Ministry of Agriculture and Rural Development.
- 2005 actions: training targeted rural communities in technological innovations; strengthening capacity of private operators in selected crop production (pilot basis).
- Donor support will be sought to scale up pilots with involvement of rural producer associations.

Financial sector and capital markets
- 2005 actions: launching of activities at Douala Stock Exchange via quotation of negotiable government securities and bonds issued by the Urban Community of Douala; production of initial studies on creating a private agriculture bank; elimination of 182 microfinance establishments not complying with COBAC rules.
- COBAC gave favorable opinion to 232 compliant microfinance establishments; staffs welcome closure of non-compliant institutions and encourage effective regulation and supervision.
- Concern: CEMAC’s project to create a regional stock exchange in Libreville may pose challenges if a separate Douala exchange is established in parallel.
- Proposed agricultural bank to be established with private capital; staffs urge caution given poor record of such specialized institutions in the past.

Forestry sector
- Government committed to continue forestry reforms with development partner support; efforts to strengthen implementation welcomed.
- Staffs remain concerned that without strong supervision and tight enforcement, community forests and small logging permits may serve vested interests and fuel illegal logging to the detriment of local communities.
- Recommendation: review and clarify all aspects related to the award and use of community forests and small logging permits.

Infrastructure
- Government gives high priority to physical infrastructure and strengthening service delivery by key utilities.
- Restructuring and privatization of public enterprises providing infrastructure has gained momentum in 2005; government committed to increase public investments in infrastructure including through Public Private Partnerships (PPP).
- Staff recommendations: begin in-depth discussion of PPP models and approaches.

Sector-specific infrastructure actions and recommendations
- Transport
  - Focus mainly on roads; adoption of a road strategy and MTEF with increased maintenance and investment funding in line with donor commitments.
  - Independent evaluation of port reform to be undertaken in first half of 2006 to assess gains and prepare follow-up actions.
  - Progress satisfactory on scission/liquidation/privatization of national air carrier CAMAIR; implementation of strategy started per recommendations of strategic option report with IFC assistance.
- Electricity
  - Concession agreement renegotiated with private operator.
  - National Energy and Poverty Reduction Action plan adopted.
  - 2006-30 least cost sector investment plan nearly finalized.
  - Staffs encourage restructuring and capacity strengthening of the regulatory agency and transparent assessment of financially sustainable sector investment needs.
- Telecommunications
  - Preparations for CAMTEL privatization proceeding; prequalification process launched in 2006.
  - Staffs recommend addressing redeployment of CAMTEL civil servants and finalizing a comprehensive financial restructuring package before the end of the bidding period.
  - Authorities’ early-2006 decision to create an asset holding company raised serious staff concern; staffs strongly recommend maintaining the privatization framework as adopted in December 2005 and caution that the asset holding company proposal risks jeopardizing the transaction.
  - Encourage restructuring and capacity strengthening of the telecommunications sector regulatory agency.
- Postal sector
  - Government engaged in restructuring CAMPOST but has yet to finalize sector policy and selection of CAMPOST management contract team.
  - Staffs encourage quick completion of liberalization and regulation strategy for the postal sector, including defining government's objective relative to the universal service obligation.

### Enhancing Social Services Delivery to Improve Standards of Living Conditions (Section V)
Education sector findings
- Performance improvements noted: increases in ratio of enrolled girls to boys; increases in gross enrollments in basic and secondary education; higher success rates in national exams at secondary levels; progress in decentralizing teacher management.
- Significant investments in education facilities at basic, secondary and technical levels.
- Institutional reforms aimed at improving governance of tertiary education observed.

Concerns and indicators
- Key performance indicators not improving as quickly as PRSP envisaged: completion rate of basic education unchanged at 56 percent since 2001.
- High repetition rates persist at around 25 percent of total basic and secondary education enrollment.
- Recent adoption of modern assessment procedures expected to help reduce repetition in primary education.

Staff recommendations on teacher employment and strategy
- Concern about government intention to convert 1,700 contractual teachers into regular civil service positions without a clear policy framework for the 12,000 remaining contractual teachers.
- Recommendation: address this issue in the education strategy document under preparation.
- Education strategy should be discussed with donors and presented to the Education Fast Track Initiative to raise funds before the end of the first half of calendar year 2006.

*IMF Joint Staff Advisory Note on the Third Annual Progress Report (PRSP implementation during 2005).*

### 18.      With respect to health services delivery, the Report provides a balanced picture of

### _cr06261 - 18.      With respect to health services delivery, the Report provides a balanced picture of

### Health services delivery: progress and recommendations
- Report provides a balanced picture of recent progress in implementing the government’s health sector strategy, with specific details on achievements of different programs.
- Report assesses progress in implementing previous recommendations such as:
  - expanding the contracting of NGOs (e.g., for HIV prevention)
  - lowering the cost of treatment for AIDS patients
- Staffs recommend intensifying measures to redress inequities in access to health services during the next year by:
  - (i) better targeting of underserved areas better;
  - (ii) further rationalizing the system of user fees and drug policies;
  - (iii) expanding risk sharing mechanisms; and
  - (iv) continuing to assign more personnel to rural areas.
- Staffs suggest launching a broad-based consultative process on a sector-wide approach (SWAP) for the health sector to guide implementation of the government’s health strategy and ensure coordination and alignment of donor assistance.

### Water services: progress and institutional arrangements
- Substantial progress has been made in the provision of potable water to households, with access rates increasing over the 2001-05 period.
- Staffs welcome progress and urge the government to sustain efforts to make further improvement.
- Government progress in establishing a public private partnership to manage water services:
  - An asset holding company, CAMWATER, will be in charge of carrying investment responsibilities.
  - The private partner will operate the facilities and deliver services under the lease contract.
- Substantial commitments have been obtained from donors to help fund the investment and capacity strengthening programs once the concession arrangement becomes operational.
- Staffs consider that the government has put in place proper institutional arrangements.

### Fostering regional integration (CEMAC)
- Report notes steps to support regional integration, including compliance with the multilateral surveillance criteria and Cameroon’s support for connecting the CEMAC road network, electricity grids, and telecoms networks; however, these regional connections remain at an early stage.
- Report notes that the common external tariff has been reduced to four categories with a maximum of rate of 20 percent.
- Staffs view this action as still under discussion at the regional level and urge authorities to move forward on this measure, which has long been advocated by the staff of the Bank and the Fund.
- Report provides a preliminary analysis of the impact on the Cameroonian economy of the forthcoming Economic Partnership Agreement (EPA) between the EU and the CEMAC, focusing on the potential adverse impact on Cameroonian industry and government revenue of lower import tariffs.
- Staffs recommend deepening future analysis to consider the benefits of the reform.
- Staffs urge Cameroonian authorities to capitalize on its leadership position to further advance regional trade integration.

### Institutional and statistical PRSP monitoring
- Government actions to strengthen PRSP implementation:
  - Generalize the use the MTEF in the 2007 budget preparation to enhance PRSP implementation.
  - Organize regular consultations with private sector and civil society and prepare a national workshop on the economy (“états généraux”), scheduled during the first semester of 2006, to launch the debate on the post completion point growth strategy as a higher volume of resources would be made available through the HIPC and MDRI initiative.
  - Enhance leadership in aligning and harmonizing donor support on PRSP pillars on the basis of the Paris Declaration on Aid Effectiveness.
  - Plan to develop a new partnership framework based on the ongoing independent aid assessment.
- These inputs, along with newly adopted or revised sector strategies, would serve as critical input in the formulation of the second PRSP.
- Staffs commend efforts to assess poverty and living conditions based on:
  - recent survey on employment and the informal sector (EESI),
  - Demographic and Health Survey (DHS),
  - attempts to assess changes in household income based on GDP growth, the level of public wages and trends in the prices of important agricultural goods.
- Report draws on DHS and EESI to assess changes in access to housing, services (water, electricity, cooking gas) and ownership of durable goods (bicycles, radio, television).
- Report attempts to characterize urban poverty amid a growing trend towards urbanization.
- Staffs welcome ongoing efforts to strengthen the program of statistical surveys and participatory monitoring mechanisms and the ongoing study on a formal methodology for participatory monitoring.

### Conclusion: progress, priorities, and implementation challenges
- Progress in PRSP implementation accelerated somewhat in 2005 as the government intensified efforts in fiscal policy, governance, structural reforms, and social policies.
- Prospects for 2006 are encouraging provided the government continues to build on 2005 progress and strengthens implementation to achieve more tangible results on the ground.
- Staffs note the critical importance of the following issues:
  - (i) the elaboration and implementation of a public financial management action plan, in concert with the donor public finance platform;
  - (ii) the implementation of the National Governance Action plan;
  - (iii) the acceleration of public enterprise restructuring/privatization program;
  - (iv) the improvement in the execution of public investments; and
  - (iv) the strengthening of the provision of basic social services through better targeting of actions and expenditure and the implementation of the improved evaluation methods in primary education for sustained reduction of repetition rates.

### Issues for Discussion by the Board
- Fiscal policy and public finance:
  - Concerted efforts were made in 2005 to improve Cameroon’s fiscal position, in sharp contrast with the slippages registered in 2004.
  - Priority going forward is further strengthening tax and customs administrations, improving accounting and financial reporting systems, and reinforcing the financial oversight framework and capacity.
  - Directors might wish to discuss measures to prevent fiscal slippages from reoccurring.
- Governance:
  - Improving governance is a PRSP pillar and arguably the most critical challenge facing Cameroon.
  - Government has started to crack down on corruption—by sacking, indicting, and imprisoning senior public officials—and stressed commitment to enhance and sustain these efforts in the post-HIPC completion point period.
  - Directors might wish to discuss and provide guidance on improving governance in Cameroon.
- Donor partnership:
  - Cameroon’s relationship with the donor community has been weak and the government is working to strengthen this relationship and build a partnership for development.
  - An independent body is developing a partnership framework for consideration by the government and donors.
  - Directors might wish to provide insights into this process.

*Source: _cr06261 - 18.      With respect to health services delivery, the Report provides a balanced picture of*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06261.pdf_