## _cr07285

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### Executive summary — recent developments and priorities
- Growth picked up in 2006 with rebounds in construction activities, oil output, and forestry production.
- Inflation rose reflecting higher fuel prices but was contained at about 5 percent.
- Overall fiscal position and current account balance improved in 2006.
- Emergency-related extrabudgetary spending in Q4 2006, financed directly by the national oil company, amounted to emergency one-off outlays equivalent to 0.2 percent of GDP and raised concerns about budget transparency.
- Surveillance priorities:
  - First priority: consolidate the fiscal gains of the past two years to preserve fiscal stability while raising priority spending.
  - Second priority: turn productivity growth around via decisive actions to rebuild infrastructure; deepen financial intermediation; liberalize trade; complete reform of public enterprises; and improve governance.
- PRGF-supported program performance (July–December 2006):
  - Implemented satisfactorily.
  - Most fiscal and financial targets met.
  - Quantitative performance criterion on bank financing narrowly missed because of extrabudgetary spending in late 2006.
  - Structural reforms mostly implemented as planned.
  - Publication of two EITI reports covering oil sector operations (2001–04 and 2005) contributed to transparency and public financial management effectiveness.

### Box 4 — Revenue measures undertaken in 2006 (tax, customs, administration)
- Tax policy measures:
  - Extension of excise tax at a rate of 12½ percent to passenger vehicles with engine capacity of 2000 cm3 or more.
  - Extension of excise tax at a rate of 25 percent to non-alcoholic beverages.
  - Reform of property tax to base assessment on value rather than surface area.
  - Increase in minimum tax from 1 to 1½ percent on the turnover of enterprises outside the real regime “régime du réel.”
  - Elimination of the zero-rate tariff category to conform to CEMAC tariff structure.
  - Elimination of a number of VAT and tariff exemptions.
- Customs administration:
  - Implementation of the automated system for customs data in the coastal areas (accounts for over 90 percent of customs revenue).
  - Strengthened post-clearance control mechanisms and reinforced scanner usage for container clearance.
  - Continued control of exemptions.
- Tax administration:
  - Established centers for medium-sized enterprises in Yaoundé and Douala.
  - Established control mechanisms to improve VAT and personal income tax collections.
  - Established a joint tax-customs administration unit for information exchange and joint audits.
- Role in fiscal strategy and staff assessment:
  - Authorities expect these measures and envisaged 2007 measures to put nonoil revenues on an upward path.
  - Staff urged vigilance on attaining nonoil revenue objectives and readiness to accelerate administrative measures or adopt tax policy measures if receipts fall below expectations.

### Fiscal framework, budget focus, and key fiscal indicators
- 2007 budget focus: consolidate recent fiscal gains and expand poverty-related spending; improve expenditure tracking and mobilize revenues; complete public enterprise reforms in telecommunications, water, rural finance, and air transport.
- Selected macro and fiscal indicators (selected figures from 2003–06 and program tables):
  - Real GDP: 2003: 4.0; 2004: 3.7; 2005: 2.0; 2006: 3.8.
  - Nonoil growth: 2003: 4.9; 2004: 4.9; 2005: 2.9; 2006: 3.5.
  - Consumer prices (period average): 2003: 0.6; 2004: 0.3; 2005: 2.0; 2006: 5.1.
  - Current account, incl. grants (percent of GDP): 2003: -1.8; 2004: -3.8; 2005: -3.4; 2006: -0.8.
- Key fiscal indicators (percent of GDP) — selected:
  - Total revenue and grants: 2003: 16.6; 2004: 15.4; 2005: 17.9; 2006: 46.6 (est.); table context shows 2006 Prog./Est. 46.6/46.7.
  - Fiscal revenue: 2003: 16.1; 2004: 15.2; 2005: 17.3; 2006: 18.7; 2006 est./prog. 18.7/18.9.
  - Oil revenue: 2003: 4.1; 2004: 3.9; 2005: 4.9; 2006: 6.6; 2006 est./prog. 6.6/6.7.
  - Nonoil revenue: 2003: 12.0; 2004: 11.3; 2005: 12.4; 2006: 12.1; memorandum: nonoil revenue (percent of nonoil GDP) series include 12.8, 12.1, 13.5, 13.4, 13.5.
  - Total expenditure: 2003: 15.4; 2004: 16.0; 2005: 14.4; 2006: 15.6 (one column) and 14.2 in another column.
  - Capital spending: 2003: 2.1; 2004: 2.0; 2005: 2.3; 2006: 4.0 (one column) and 2.8 in another column.
  - Overall balance, excluding grants: 2003: 0.2; 2004: -0.4; 2005: 2.2; 2006: 1.4; 2006: 2.9 in another column.
  - Nonoil primary balance (percent of nonoil GDP): 2003: -0.7; 2004: -2.1; 2005: 0.0; 2006: -2.2; 2006: -0.6 in table.

### Program monitoring, quantitative targets, and outcomes (Dec 2006–June 2007)
- Program monitored via performance criteria, quantitative and structural benchmarks (Tables 1–4); government reports data per Technical Memorandum of Understanding.
- Selected quantitative targets and outturns:
  - Ceiling on increase in net claims of the banking system on the central government: Adjusted benchmark: -8; Outturn: 61; Status: not met.
  - Floor on the non-oil primary budget balance: Adjusted benchmark: 1; Outturn: -13; Status: met (table indicates context).
  - Floor on non-oil revenue of the central government: Adjusted benchmark: 283; Outturn: 248; Status: not met.
  - Ceiling on spending on goods and services: Adjusted benchmark: 105; Outturn: 98; Status: met.
  - Ceiling on cash spending by SNH — Payments on account of the government (interventions directes): Adjusted benchmark: 0; Outturn: 0 (not met elsewhere reported as 24 in one column).
- Structural performance criteria completed and ongoing include submission and adoption of the 2007 Budget Law, implementation of the Customs Management System in Littoral Province, consolidation of Budget–Treasury IT connection (due June 30, 2007), civil service census and payroll clean-up, publication of EITI reports, and preparatory work for CAMPOST financial subsidiary.

### Fuel pricing, social impact, and SONARA (Box 5 & SNH/SONARA modalities)
- Fuel pricing complexities and measures:
  - Negative excise tax on kerosene to help the poor; adjustments to subsidize domestic refinery; ex-refinery prices held below formula levels, requiring direct budget subsidies.
  - 2006 Fund TA recommendations: simplify pricing formula, use standard VAT rate and differential excises, subject refinery to international prices and finance losses via direct budget transfers.
- Social protection recommendations:
  - Replace tax instruments and subsidies with targeted social spending; scale up existing transfer programs for cost-effective mitigation—noting more than half of budgetary costs now accrue to the top income quintile.
- SONARA transfer and contingency caps (from Technical Memorandum):
  - Quarterly payment caps to SONARA: will not exceed CFAF 7.0 billion in Q1 2007; CFAF 7.0 billion in Q2 2007; CFAF 7.0 billion in Q3 2007; CFAF 7.0 billion in Q4 2007.
  - If quarterly transfer does not fully cover subsidy, government will revise retail prices upward on a monthly basis to prevent losses; if international oil prices weaken, government will first reduce transfers to SONARA and then eliminate them completely before lowering the retail price.

### Business environment, productivity, and structural reforms
- Productivity slowdown over past 3–4 years linked to weakening human capital, unfavorable business climate, and delays in attracting investment in telecommunications, transportation, and water sectors.
- Comparative weaknesses vs. lower-middle-income economies: lower investment rate, shallower financial depth, less openness to trade (adjusted for fuel), weaker infrastructure and human capital, weaker business environment.
- Doing Business 2006 ranking: Cameroon ranked 152 (out of 175).
- Required reforms to boost investment and productivity:
  - Financial sector: improve judicial system and land registries; expand information base for risk pricing; review interest-rate limits regionally; prepare action plan to deepen financial intermediation by end-2007; ease procedures for collecting on guarantees; create a commercial tribunal; expand financial information.
  - CAMPOST restructuring: spin off financial services subsidiary under COBAC supervision by June 2007 (performance criterion).
  - Capital markets: transfer secondary market transactions on zero-coupon government debt to the bond market under Financial Markets Commission supervision.
  - Trade reform: lower common external tariffs within CEMAC; offset revenue losses by expanding income tax base and reducing reliance on exemptions.
  - Public enterprise reform: accelerate reforms in CAMAIR, CAMTEL, SNEC, and other enterprises to reduce budgetary burden and improve services.
  - Governance: appoint commission members for assets-declaration law by year-end 2007; prepare comprehensive anticorruption strategy and action plan; continue publication of corruption-related court decisions and sanctions.

### Debt relief, external financing, and debt sustainability (DSA highlights)
- Debt stock changes (end-2006 vs earlier):
  - Total public debt declined from US$ 8.9 billion (2005) to US$ 3.804 billion (2006).
  - Nominal external debt declined from US$ 6.5 billion (2005) to US$ 2.094 billion (2006).
  - Domestic debt declined from US$ 2.3 billion (2005) to US$ 1.710 billion (2006).
- DSA main conclusion:
  - After full delivery of debt relief, Cameroon faces a low risk of debt distress; external debt indicators remain below country-specific thresholds.
  - Low risk contingent on robust long-run non-oil growth, prudent fiscal and borrowing policies, full delivery of assumed debt relief, and management of litigation/domestic debt risks.
- Selected DSA numeric indicators (selected years/projections):
  - NPV of external debt in percent of GDP: 3.6 (2007), 3.8 (2008), 4.4 (2009), 4.8 (2010), 5.3 (2011), 6.3 (2012), 7.3 (2017), 11.9 (2027 in table contexts).
  - NPV of external debt in percent of exports: 13.7 (2007), 16.4 (2008), 19.5 (2009), 22.9 (2010), 26.8 (2011), 33.4 (2012), 40.5 (2017), 99.3 (2027 table entries in some scenario tables).
  - Debt service-to-exports ratio (percent): 2.8 (2007), 1.7 (2008), 1.7 (2009), 1.9 (2010), 1.7 (2011), 1.7 (2012), 1.8 (2017), 4.2 (2027).
  - Stock of public debt (percent of GDP): 2006 = 17.8; 2007 = 14.3; 2008 = 16.3 in table variants.
- Stress tests and scenarios:
  - Lower GDP growth or export growth scenarios raise debt ratios but do not breach indicative thresholds under assumptions provided.
  - Scenario of new borrowing on less concessional terms (interest rate on new borrowing 2 percentage points higher) deteriorates ratios but stays below thresholds in baseline tests.
- Risks from private creditors and litigation:
  - Of 22 commercial creditors not participating in 2003 debt buy-back, 5 resorted to litigation; two have obtained favorable judgments and seized government assets.
  - Absolute amount of claims by private creditors estimated at about US$240 million in August 2003 (about 20 percent of commercial creditor claims then) and less than 1 percent of GDP.

### Program risks, monitoring, and contingency mechanisms
- Key program risks:
  - Slow improvement of business climate jeopardizing growth and poverty reduction.
  - Sluggish nonoil revenue mobilization threatening fiscal objectives and priority spending.
  - Parliamentary elections in 2007 could create spending pressures.
- Monitoring:
  - Program monitored every six months with quantitative and structural performance criteria, benchmarks, and indicative benchmarks (MEFP, Tables 1–4).
  - Authorities requested conversion of structural benchmark on SNH spending to a continuous performance criterion to reflect commitment to zero extrabudgetary spending.
  - Program fully financed through the next review; PRGF disbursement schedule includes SDR 2.65 million on May 31, 2007 (third review) and subsequent SDR amounts for future reviews.
- Contingency mechanisms (selected from Technical Memorandum):
  - Floor on the nonoil primary balance adjusted for lower-than-programmed budget support grants or lower-than-programmed transfers to SONARA.
  - Ceiling on net claims of the banking sector on the government adjusted for higher-than-programmed oil revenue and privatization proceeds (with specified caps) and for deviations in external budget support and debt relief.
  - Higher-than-programmed oil revenue and privatization proceeds to be allocated to domestic debt repayment, buyback of external commercial debt, or financing one-off investment projects.
  - If cumulative deviations exceed 0.2 percent of 2007 GDP, government will consult IMF staff to formulate corrective policies.

### Staff appraisal, recommendations, and Board advice
- Staff findings:
  - Improvements in macroeconomic performance over the past decade are encouraging (nonoil output up since 1995; inflation overall low; fiscal position strengthened; debt relief achieved sustainability).
  - Recent productivity deceleration and uneven progress on fiscal consolidation, nonoil revenue mobilization, and expenditure control warrant attention.
- Key recommendations and priorities:
  - Consolidate fiscal gains and preserve fiscal sustainability.
  - Strengthen the business climate: improve financial intermediation; continue trade reform within CEMAC; accelerate public enterprise reforms in telecommunications, water, finance, and air transport; step up anticorruption efforts.
  - Set nonoil revenues on a steady upward path given declining oil reserves and expected trade liberalization; accelerate tax administration measures in 2007 if receipts fall short.
  - Continue attention to spending levels while promoting priority outlays; follow budgetary procedures and refrain from extrabudgetary spending.
  - Address chronic capital spending shortfalls; improve capital budget execution via timely budget presentation, adequate counterpart funds for externally financed projects, and staff training.
  - Debt management: continue to borrow on concessional terms, ensure effective use of borrowed resources, and analyze debt sustainability regularly.
- Board recommendations (staff advises):
  - Complete financing assurances review.
  - Complete the third review under the PRGF given satisfactory performance through April 2007.
  - Convert quantitative benchmark on SNH cash spending to a performance criterion.
  - Grant a waiver for nonobservance of the performance criterion on net claims of the banking system on the central government given small margin and authorities’ corrective commitments.
  - Modify end-June 2007 performance criterion on net claims of the banking system on the central government to allow for lower government deposits since oil prices are running below baseline projections.

### Development partners, PRSP, MDG context, and statistical needs
- PRSP revision under way with expected completion early 2008; PRSP articulated along seven pillars.
- World Bank–led ISN FY07–08 focuses on governance, managing for results, partnerships, and alignment with Paris Declaration; six outcomes include strengthening PRSP implementation, governance, private sector development, infrastructure, forestry/rural development, and human development.
- MDG indicators show significant challenges (examples):
  - Under-5 mortality per 1,000: 1990 = 139.0; 2004 = 149.0; 2015 target = 46.3.
  - Net primary enrollment ratio (percent): 1990 = 73.6; 2015 target = 100.0.
  - Access to improved water source (percent): 1990 = 51.0; 2004 = 58.0; later entries include 63.0, 66.0, 74.0 toward targets.
- Statistical issues and data quality:
  - Data provision remains adequate for surveillance but quality, coverage, and timeliness need improvement across national accounts, consumer prices, public finance, monetary and financial statistics, and balance of payments.
  - Priorities: improve national accounts (oil GDP treatment), expand CPI coverage to rural areas, strengthen public finance reporting on commitment basis, implement SIGEFI and SIGIPES, improve monetary statistics per MFSM, and enhance balance of payments reporting.

_Italicized source: IMF Executive Summary content unit _cr07285 — Staff report, attachments, and technical memoranda (May–June 2007).*

### Executive Summary ......................................................................................................

### Executive Summary

### Recent developments
- Economic trends in 2006 were encouraging: growth picked up as construction activities, oil output, and forestry production rebounded.
- Inflation rose, reflecting higher fuel prices, but was contained at about 5 percent.
- Cameroon’s overall fiscal position and its current account balance both improved.
- Emergency-related extrabudgetary spending in the fourth quarter of 2006, financed directly by the national oil company, amounted to emergency one-off outlays equivalent to 0.2 percent of GDP and raised concerns about budget transparency.

### Surveillance priorities and policy discussion
- First priority: consolidate the fiscal gains of the past two years to preserve fiscal stability while raising priority spending.
- Second priority: turn productivity growth around. Reviving productivity requires decisive actions to:
  - rebuild infrastructure;
  - deepen financial intermediation;
  - liberalize trade;
  - complete reform of public enterprises; and
  - improve governance.

### Program performance (PRGF-supported program)
- The PRGF-supported program was implemented satisfactorily in July–December 2006.
- Most fiscal and financial targets were met.
- The quantitative performance criterion on bank financing was narrowly missed because of extrabudgetary spending in late 2006.
- Structural reforms monitored under the program were mostly implemented as planned.
- Publication of two EITI reports covering oil sector operations (in 2001–04 and 2005, respectively) contributed to increasing transparency and effectiveness of public financial management.

### Main elements of the PRGF-supported program and 2007 budget focus
- The 2007 budget centers on consolidating the recent fiscal gains and expanding poverty-related spending.
- The program includes measures to improve expenditure tracking and further mobilize revenues.
- Key to improving the business environment in 2007 is completion of envisaged reform of public enterprises in telecommunications, water, rural finance, and air transport sectors.

### Background and medium-term challenges
- Growth picked up since 1994 but remains too low to make a significant dent in poverty; factor productivity growth is slowing.
- On the current trajectory, Cameroon is unlikely to meet the MDGs, including the target to halve poverty by 2015.
- Debt relief (completion point under enhanced HIPC and MDRI qualification) offers opportunities and challenges: Cameroon must (i) consolidate fiscal performance and preserve fiscal sustainability; and (ii) strengthen the business climate to accelerate growth.
- Political environment described as stable, though social tensions linger and debt relief has generated expectations of immediate dividends (e.g., increases in salaries and improvements in public service delivery). Parliamentary elections were scheduled for July 2007.

### Key macroeconomic indicators and fiscal developments (selected figures from 2003–06)
- Real GDP: 2003: 4.0; 2004: 3.7; 2005: 2.0; 2006: 3.8.
- Nonoil growth: 2003: 4.9; 2004: 4.9; 2005: 2.9; 2006: 3.5.
- Consumer prices (period average): 2003: 0.6; 2004: 0.3; 2005: 2.0; 2006: 5.1.
- Current account, incl. grants (percent of GDP): 2003: -1.8; 2004: -3.8; 2005: -3.4; 2006: -0.8.
- Export volume: 2003: 9.3; 2004: -0.7; 2005: -8.4; 2006: 3.4.
  - Of which nonoil: 2003: 16.1; 2004: 2.9; 2005: -8.5; 2006: 2.4.
- Import volume: 2003: 0.0; 2004: 11.2; 2005: 4.6; 2006: 6.8.
  - Of which nonoil: 2003: 13.8; 2004: 7.8; 2005: 3.2; 2006: 2.4.

- Key fiscal indicators (percent of GDP):
  - Total revenue and grants: 2003: 16.6; 2004: 15.4; 2005: 17.9; 2006: 46.6 (est.); 2006 Prog./Est. shows 46.6/46.7 in table context.
  - Fiscal revenue: 2003: 16.1; 2004: 15.2; 2005: 17.3; 2006: 18.7; 2006 est./prog. 18.7/18.9.
  - Oil revenue: 2003: 4.1; 2004: 3.9; 2005: 4.9; 2006: 6.6; 2006 est./prog. 6.6/6.7.
  - Nonoil revenue: 2003: 12.0; 2004: 11.3; 2005: 12.4; 2006: 12.1; memorandum: nonoil revenue (percent of nonoil GDP) 12.8, 12.1, 13.5, 13.4, 13.5 (series from table).
  - Total expenditure: 2003: 15.4; 2004: 16.0; 2005: 14.4; 2006: 15.6; 2006: 14.2 in one column.
  - Capital spending: 2003: 2.1; 2004: 2.0; 2005: 2.3; 2006: 4.0; 2006: 2.8 in another column.
  - Domestically financed primary expenditure: 2003: 1.4; 2004: 1.1; 2005: 1.8; 2006: 2.7; 2006: 1.8 in another column.
  - Net change in arrears: 2003: -0.4; 2004: 0.4; 2005: -0.8; 2006: -1.7; 2006: -1.8 in another column.
  - Overall balance, excluding grants: 2003: 0.2; 2004: -0.4; 2005: 2.2; 2006: 1.4; 2006: 2.9 in another column.
  - Nonoil primary balance (percent of nonoil GDP, excludes interest and foreign-financed investment): 2003: -0.7; 2004: -2.1; 2005: 0.0; 2006: -2.2; 2006: -0.6 in table.

### Structural constraints and competitiveness
- Productivity played a key role in boosting growth after the devaluation of the CFA franc in 1994, aided by structural reforms, including opening mobile telecommunications to competition, privatizations, and banking and insurance reform.
- A significant slowdown in productivity over the past 3-4 years may reflect weakening human capital (deteriorating health indicators), an unfavorable business climate, and delays in attracting new investments in telecommunications, transportation, and water sectors.
- Comparative weaknesses relative to lower-middle-income economies include lower investment rate, shallower financial depth, less openness to trade (after adjusting for fuel exports), weaker infrastructure and human capital, and weaker business environment.
- Competitiveness is hampered primarily by nonprice factors: weak investment climate and governance. World Bank Doing Business indicators show Cameroon ranked 152 (out of 175) in 2006.

*Source: IMF Executive Summary content unit _cr07285 - Executive Summary.*

### Box 4. Revenue Measures Undertaken in 2006

### _cr07285 - Box 4. Revenue Measures Undertaken in 2006

### Tax policy
- Extension of excise tax, at a rate of 12½ percent, to passenger vehicles with engine capacity of 2000 cm3 or more.
- Extension of excise tax, at a rate of 25 percent, to non-alcoholic beverages.
- Reform of property tax to base assessment on value rather than surface area.
- Increase in minimum tax from 1 to 1½ percent on the turnover of enterprises outside the real regime “régime du réel.”
- Elimination of the zero-rate tariff category in order to make the national tariff structure conform to that of the CEMAC.
- Elimination of a number of VAT and tariff exemptions.

### Customs administration
- Implementation of the automated system for customs data in the coastal areas (which accounts for over 90 percent of customs revenue).
- Strengthening of post-clearance control mechanisms and reinforcement of scanner usage for container clearance.
- Continuation of control of exemptions.

### Tax administration
- Establishment of a center for medium-sized enterprises in Yaoundé and Douala to facilitate a more efficient monitoring of this category of taxpayers.
  - Note: The tax center for large enterprises has been operational since the late 1990s.
- Establishment of control mechanisms to improve the efficiency of VAT and personal income tax collections.
- Establishment of a joint tax-customs administration unit to facilitate information exchange between the two directorates and joint audits.

### Role in fiscal strategy and staff assessment
- The authorities are convinced that tax policy measures implemented in 2006 (Box 4) and those envisaged in 2007 should contribute to setting nonoil revenues on an upward path.
- Staff urged vigilance on attaining the nonoil revenues objectives and readiness to accelerate administrative measures envisaged in 2007 and adopt tax policy measures if tax receipts fall below expectations.

*Source: _cr07285 - Box 4. Revenue Measures Undertaken in 2006*

### 24.      The authorities recognize the importance of further enhancing the business

### 24.      The authorities recognize the importance of further enhancing the business

### Business environment and productivity
- Key to boosting investment and growth is higher productivity (Box 1).
- Higher productivity will require considerable improvement in the business environment through reforms in:
  - the financial sector,
  - trade,
  - public enterprises, and
  - governance.

### Box 5. Fuel Pricing and Social Impact
- Current fuel pricing in Cameroon is complex in objectives and implementation.
- Pricing formula characteristics and recent measures:
  - Applies a negative excise tax to kerosene (designed to help the poor).
  - Adjusts prices to subsidize the domestic oil refinery.
  - Recent rise in world oil prices accompanied by measures to limit pass-through to domestic prices.
  - Customs taxes and value-added taxes (VAT) on petroleum products since 2004 have been reduced.
  - Ex-refinery prices have been held below pricing-formula levels, creating the need for direct budget subsidies to the domestic refinery.
- 2006 Fund TA mission recommendations:
  - Simplify the pricing formula by isolating pricing objectives and using a single instrument per objective.
  - Use the standard VAT rate and consider differential excise taxes to achieve desired domestic fuel prices.
  - Subject the refinery to international fuel prices to increase transparency; finance any resulting losses via direct budgetary transfers.
- Social protection recommendations:
  - Replace tax instruments and subsidies with targeted social spending to mitigate higher fuel prices’ effects on the poor.
  - Under the current budget mechanism, more than half the budgetary costs (i.e., in the form of subsidies or forgone revenue) now accrue to the top income quintile because richer households consume more kerosene and other fuel products than do poorer households.
  - Scale up existing transfer programs and develop effective social protections for more cost-effective mitigation.
- Distribution of Fuel Subsidies by Income Groups (Percent): chart shows quintiles 1–5; note: "1" indicates lower quintile.

### Box 6. New Organic Budget Law
- Current legal framework based on the 1962 ordinance with later amendments is complex; contributes to governance and budget-execution weaknesses.
- Law’s main objectives: better define government and parliament roles in the budget process and increase accountability.
- Main innovations:
  - present and execute the budget according to program rather than by administrative divisions;
  - make ministries fully accountable for their budgets, requiring decentralization of budget management, including analysis and monitoring of programs, at the line ministry level;
  - revise the framework guiding parliament’s role in the budget process;
  - improve the content and format of ex post budget audit law.
- Conditions for effectiveness (coordinated action required):
  - ensure a high degree of cooperation between ministries in preparing and executing budgets;
  - decentralize the budget structure so line ministries have appropriate power over all aspects of budget execution;
  - establish an effective and integrated management information system;
  - build a strong political commitment to the reforms.
- Implementation: provisions will be implemented over a five-year period starting in 2008.

### Financial sector
- Bold measures needed to enhance banking intermediation.
- Staff recommendations based on regional FSAP:
  - improve the judicial system and land registries;
  - expand the information base to enable banks to price risks better;
  - review limits on interest rates at the regional level to reflect market conditions.
- Authorities’ stance:
  - acknowledge policy and structural impediments and emphasize market imperfections (e.g., oligopolistic banking structure, limited rural access).
  - agreed to prepare by end-2007 an action plan to deepen financial intermediation, considering forthcoming FSAP recommendations.
  - agreed to facilitate credit access through measures to ease procedures for collecting on guarantees, create a commercial tribunal, and expand financial information (MEFP, ¶21).
- CAMPOST restructuring:
  - authorities will pursue restructuring to help bring banking services to remote areas.
  - financial services subsidiary to be spun off and brought under COBAC supervision by June 2007 (performance criterion).
- Capital markets and long-term finance:
  - development of domestic debt and equity markets important for accelerating long-term growth (MEFP, ¶22).
  - plan to transfer all secondary market transactions on zero-coupon government debt to the bond market under the supervision of the financial markets commission.

### Trade reform
- Trade liberalization will contribute to lowering the cost of doing business.
- Authorities pursuing trade reform agenda, including lowering the common external tariffs within the CEMAC (MEFP, ¶20).
- Authorities concur that lower import tariffs could stimulate growth but expressed concerns about resulting revenue losses.
- Staff recommendations to offset revenue loss:
  - expand the tax base for income taxes;
  - reduce reliance on tax exemptions to encourage investment and consumption;
  - longer run: consider reduction in top marginal income tax rates to reduce incentive for tax evasion.
- Authorities plan to prepare a medium-term plan for improving nonoil revenue mobilization.

### Public enterprise restructuring
- Reform of key public enterprises should be accelerated (MEFP, ¶24).
- Staff urged completion of pending reforms to alleviate budget burden and improve services.
- Specific enterprises:
  - CAMAIR: authorities committed to relaunch reform to improve efficiency and eliminate budgetary subsidies.
  - Reforms envisaged in telecommunications (CAMTEL) and the water sector (SNEC).

### Governance
- Anticorruption efforts to lower regulatory and judicial uncertainty and improve business climate (MEFP, ¶25).
- Planned actions:
  - appoint members to the commission implementing assets-declaration law for high public officials by year-end 2007;
  - prepare a comprehensive anticorruption strategy and accompanying action plan within donor-coordinated OECD-DAC efforts;
  - continue publication of corruption-related court decisions and administrative sanctions.

### Financing assurances review
- Cameroon has arrears to private external creditors; staff discussed financing assurances.
- Importance of resolving pending litigation with relevant creditors consistent with Cameroon’s Paris Club commitment to offer comparable treatment to nonparticipating creditors.
- Negotiations with private creditors are ongoing:
  - Cameroon offered terms comparable with the enhanced HIPC Initiative;
  - some commercial creditors agreed to forgo accumulated interest and penalties but insisted on full repayment of principal.
- Note: Of the 22 commercial creditors that did not participate in the 2003 debt buy-back operation, 5 have resorted to litigation. Two of those creditors have already received favorable judgments and have seized government assets.

### Program risks and monitoring
- Program risks identified in areas of growth, revenue mobilization, and expenditure control:
  - Slow action to improve the business climate could jeopardize growth and poverty reduction.
  - Sluggish progress in raising nonoil revenues could threaten fiscal objectives, especially goal to increase priority spending on a sustained basis.
  - Parliamentary elections in 2007 could test authorities’ ability to resist spending pressures.
- Monitoring:
  - Program monitored every six months using quantitative and structural performance criteria, benchmarks, and indicative benchmarks (MEFP, Tables 1-4).
  - Authorities requested the structural benchmark on spending by the national oil company be changed to a performance criterion, reflecting commitment to zero extrabudgetary spending.
  - Due to reduced oil revenues (decline in oil prices relative to earlier projections), authorities requested modification of end-June 2007 performance criterion on net claims of the banking system on the central government (MEFP, Table 1).
  - Program is fully financed through the next review.
- Data provision:
  - Data provision to the Fund remains adequate for surveillance, though further improvements needed.
  - Strengthening national accounts and fiscal data has occurred; balance of payments statistics quality and timeliness need improvement.
  - Authorities expressed interest in further improving and disseminating Cameroon’s macroeconomic statistics.

### Staff appraisal (findings and recommendations)
- Positive past performance:
  - Improvements in macroeconomic performance over the past decade are encouraging.
  - Nonoil output increased since 1995, inflation overall has been low, fiscal position generally strengthened, and debt relief brought debt to a sustainable level.
- Need to consolidate gains:
  - Progress has been uneven, with swings in pace of fiscal consolidation, nonoil revenue mobilization, and expenditure control.
  - Growth pickup not strong enough to significantly reduce poverty; recent productivity deceleration is a concern.
- Key forward-looking priorities:
  - consolidate recent fiscal gains and preserve fiscal sustainability;
  - strengthen the business climate to accelerate growth.
- Revenue and spending guidance:
  - Set nonoil revenues on a steady upward path given declining oil reserves and expected trade liberalization; administrative measures to expand tax base are essential.
  - Authorities should be vigilant about meeting nonoil revenue objectives and be ready to accelerate tax administration measures in 2007 or adopt policy measures if receipts fall short.
  - Continue attention to spending levels while promoting priority outlays; follow budgetary procedures and refrain from extrabudgetary spending.
  - Address chronic capital spending shortfalls; enhance capital budget execution through timely budget presentation to parliament, allocation of adequate counterpart funds to externally-financed projects, and staff training.
- Expenditure quality:
  - Contain and then eliminate over time budgetary subsidies to create fiscal space for priority spending.
  - Reinforce tracking of budget execution, strengthen interlinkages between the budget and the treasury.
  - Authorities’ intention to prepare a medium-term action plan to improve budget management is welcome.
- Debt management:
  - Continue to borrow on concessional terms, ensure effective use of borrowed resources, and analyze debt sustainability regularly.
  - Fund review under Lending into Arrears policy finds Cameroon making good-faith efforts to reach agreements with commercial creditors and pursuing appropriate policies.
- Actions to strengthen business environment (decisive):
  - Improve financial intermediation (ease procedures for collecting on guarantees; create a commercial tribunal; build on FSAP recommendations and prepare an action plan).
  - Continue trade reform within CEMAC, including lowering common external tariffs.
  - Accelerate public enterprise reforms in telecommunications, water, finance, and air transport to reduce budgetary burden and free resources for productive uses.
  - Step up anticorruption efforts to lower uncertainty in regulatory and judicial environment and improve the business climate.

### Board recommendations (staff advises)
- Complete the financing assurances review, given current external creditor relations offer sufficient financing assurances for the Fund-supported program.
- Complete the third review under the PRGF, in view of satisfactory performance through April 2007 and commitments made through the rest of 2007.
- Convert the quantitative benchmark on cash spending by SNH to a performance criterion, reflecting authorities’ commitment to refrain from extrabudgetary spending.
- Grant a waiver for the nonobservance of the performance criterion on net claims of the banking system on the central government, given the small margin by which the target was missed and authorities’ commitment to uphold future targets.
- Modify the end-June 2007 performance criterion on net claims of the banking system on the central government to allow for lower government deposits since oil prices are running below baseline projections.

*Source: _cr07285 - 24.      The authorities recognize the importance of further enhancing the business*

### 43.      Staff proposes that the next Article IV consultation with Cameroon take place

### _cr07285 - 43.      Staff proposes that the next Article IV consultation with Cameroon take place

### Recommendation on Article IV consultation
- Staff proposes that the next Article IV consultation with Cameroon take place within 24 months, subject to the provisions of the decision on consultation cycles in program countries.

### Output, prices, savings, and investment (high-level findings and projections)
- Real GDP (annual percentage change) series shown for 2002–2008 disaggregated into Oil, Nonoil, and Total (chart).
- Consumer prices (Twelve-month percentage change) series provided (Jan-02 to Jun-08) (chart).
- Savings and Investment Balance (Percent of GDP) series for 2002–2008 showing Domestic investment, Private investment, Government savings, Private domestic savings, Government investment (chart).

### External sector developments and prospects (high-level findings and projections)
- Trade and Current Account Balance (Percent of GDP) series for 2002–2008 showing Trade balance and Current account balance (including grants) (chart).
- Export and Import Volumes (Index, 1989/90 = 100) series for 2002–2008 showing Export volume, Non-oil export volume, Oil export volume, Import volume (chart).
- Balance of Payments (Percent of GDP) series for 2002–2008 (chart).
- Export and Import Prices (Index in CFA franc terms, 1989/90 = 100) for 2002, 2005, 2008 showing Terms of trade, Export price, Import price, Non-oil export price (chart).
- Real and Nominal Effective Exchange Rate (Index, 2000=100) monthly series Jan-1993 to Jan-2006 showing Real effective exchange rate and Nominal effective exchange rate (chart).

### Fiscal developments and prospects (high-level findings and projections)
- Fiscal charts for 2002–2008 include:
  - Overall balance, excluding grants (Percent of GDP).
  - Non-oil primary balance (Percent of GDP).
  - Oil revenue, Non-oil revenue (percent of non-oil GDP), Total revenue (Percent of GDP).
  - Total expenditure, Noninterest current expenditure, Capital expenditure (Percent of GDP).
- Note: Capital expenditure series excludes restructuring expenditures (1/).

### Table 1 — Selected economic and financial indicators, 2004–08 (selected entries)
- GDP at constant prices: 2004 = 3.7; 2005 = 2.0; 2006 = 3.5; 2007 (Est.) = 3.8; 2008 (Prog.) = 4.0; 2008 (Proj.) = 4.2; 2008 (Proj.) = 4.9
  - Oil: 2004 = -9.3; 2005 = -9.7; 2006 = 8.8; 2007 = 6.9; 2008 = 3.6; 2008 = 0.6; 2008 = 0.7
  - Non-oil: 2004 = 4.9; 2005 = 2.9; 2006 = 3.1; 2007 = 3.5; 2008 = 4.0; 2008 = 4.4; 2008 = 5.2
- GDP deflator: 2004 = 1.5; 2005 = 4.7; 2006 = 5.2; 2007 = 3.7; 2008 = 2.2; 2008 = 1.2; 2008 = 1.9
- Consumer prices (12-month average): 2004 = 0.3; 2005 = 2.0; 2006 = 4.6; 2007 = 5.1; 2008 = 1.9; 2008 = 1.8; 2008 = 1.8
- Nominal GDP (billions of CFA francs): 2004 = 8,334; 2005 = 8,901; 2006 = 9,687; 2007 = 9,581; 2008 (Est.) = 10,296; 2008 (Prog.) = 10,095; 2008 (Proj.) = 10,794
  - Oil: 2004 = 541; 2005 = 714; 2006 = 948; 2007 = 946; 2008 = 988; 2008 = 727; 2008 = 799
  - Non-oil: 2004 = 7,792; 2005 = 8,187; 2006 = 8,739; 2007 = 8,634; 2008 = 9,308; 2008 = 9,368; 2008 = 9,995
- Oil output (thousands of barrels a day): 2004 = 89; 2005 = 82; 2006 = 88; 2007 = 87; 2008 = 91; 2008 = 88; 2008 = 86
- Export volume: 2004 = -0.7; 2005 = -8.4; 2006 = 3.5; 2007 = 3.4; 2008 = 5.7; 2008 = 4.2; 2008 = 3.6
- Import volume: 2004 = 11.2; 2005 = 4.6; 2006 = 5.3; 2007 = 6.8; 2008 = 5.5; 2008 = 5.4; 2008 = 5.5
- Average oil export price (U.S. dollars per barrel): 2004 = 34.95; 2005 = 50.46; 2006 = 60.76; 2007 = 61.66; 2008 = 62.55; 2008 = 50.05; 2008 = 54.8
- Terms of trade: 2004 = -2.2; 2005 = 18.0; 2006 = 12.7; 2007 = 14.0; 2008 = -0.1; 2008 = -14.6; 2008 = 0.4
- Net domestic assets (in percent of broad money at the beginning of the period): 2004 = 0.3; 2005 = -5.3; 2006 = -14.8; 2007 = -24.8; 2008 = -9.3; 2008 = -0.4; 2008 = -5.0
- Credit to the private sector (end of period, annual percentage change): 2004 = 1.4; 2005 = 10.9; 2006 = 4.8; 2007 = 3.2; 2008 = 8.0; 2008 = 6.8; 2008 = 8.5
- Broad money (M2, annual percentage change): 2004 = 7.3; 2005 = 4.2; 2006 = 11.0; 2007 = 9.3; 2008 = 7.1; 2008 = 6.7; 2008 = 7.7
- Central government total revenue (percent of GDP): 2004 = 15.2; 2005 = 17.3; 2006 = 18.7; 2007 = 18.9; 2008 = 19.0; 2008 = 17.7; 2008 = 17.9
  - Oil revenue (percent of GDP): 2004 = 3.9; 2005 = 4.9; 2006 = 6.6; 2007 = 6.7; 2008 = 6.7; 2008 = 5.2; 2008 = 5.2
  - Non-oil revenue (percent of GDP): 2004 = 11.3; 2005 = 12.4; 2006 = 12.1; 2007 = 12.2; 2008 = 12.3; 2008 = 12.6; 2008 = 12.7
- Total expenditure (percent of GDP): 2004 = 16.0; 2005 = 14.4; 2006 = 15.6; 2007 = 14.2; 2008 = 16.5; 2008 = 16.8; 2008 = 16.8
- Fiscal balance (excluding grants, percent of GDP): 2004 = -0.8; 2005 = 3.0; 2006 = 3.1; 2007 = 4.6; 2008 = 2.6; 2008 = 1.0; 2008 = 1.0
- Primary balance (percent of GDP): 2004 = 1.9; 2005 = 4.9; 2006 = 4.6; 2007 = 6.2; 2008 = 4.1; 2008 = 2.5; 2008 = 3.0
- Non-oil primary balance (percent of non-oil GDP): 2004 = -2.1; 2005 = 0.0; 2006 = -2.2; 2007 = -0.6; 2008 = -2.9; 2008 = -2.8; 2008 = -2.4
- Current account balance (including grants, percent of GDP): 2004 = -3.8; 2005 = -3.4; 2006 = -0.4; 2007 = -0.8; 2008 = -0.1; 2008 = -2.8; 2008 = -3.9
- Gross official reserves (billions of CFA francs): 2004 = 9.3; 2005 = 8.6; 2006 = 10.7; 2007 = 10.4; 2008 = 9.0; 2008 = 8.7; 2008 = 13.1
- Stock of public debt (percent of GDP): 2004 = 61.3; 2005 = 52.7; 2006 = 17.8; 2007 = 14.3; 2008 = 16.3; 2008 = 12.4; 2008 = 11.7
- NPV of external debt after HIPC, bilateral relief beyond HIPC, and MDRI (percent of GDP): 2004 = 26.3; 2005 = 11.1; 2006 = 9.1; 2007 = 3.6; 2008 = 11.2; 2008 = 3.8; 2008 = 4.4
- External debt service (percent of exports of goods and services): 2004 = 7.1; 2005 = 6.7; 2006 = 3.4; 2007 = 13.7; 2008 = 0.8; 2008 = 16.4; 2008 = 19.5
- External debt service (as a percent of government revenue): 2004 = 10.8; 2005 = 9.2; 2006 = 4.5; 2007 = 4.5; 2008 = 0.8; 2008 = 2.7; 2008 = 2.8

### Table 2 — Balance of Payments, 2004–10 (selected entries, billions of CFA francs and percent of GDP)
- Current account balance (Billions of CFA francs): 2004 = -319; 2005 = -300; 2006 = -38; 2007 = -72; 2008 = -15; 2009 (Proj.) = -285; 2010 (Proj.) = -417; 2011 (Proj.) = -567; 2012 (Proj.) = -705
- Trade balance (Billions of CFA francs): 2004 = -301; 2005 = 71; 2006 = 191; 2007 = 190; 2008 = 204; 2009 = -100; 2010 = -132; 2011 = -268; 2012 = -365
- Exports, f.o.b. (Billions of CFA francs): 2004 = 1,362; 2005 = 1,509; 2006 = 1,791; 2007 = 1,825; 2008 = 1,891; 2009 = 1,651; 2010 = 1,733; 2011 = 1,690; 2012 = 1,710
  - Oil and oil products (Billions of CFA francs): 2004 = 574; 2005 = 763; 2006 = 975; 2007 = 983; 2008 = 1,059; 2009 = 784; 2010 = 837; 2011 = 762; 2012 = 739
  - Non-oil sector (Billions of CFA francs): 2004 = 789; 2005 = 746; 2006 = 816; 2007 = 842; 2008 = 832; 2009 = 867; 2010 = 896; 2011 = 929; 2012 = 972
- Imports, f.o.b. (Billions of CFA francs): 2004 = -1,392; 2005 = -1,492; 2006 = -1,599; 2007 = -1,635; 2008 = -1,687; 2009 = -1,751; 2010 = -1,865; 2011 = -1,958; 2012 = -2,075
- Services (net): 2004 = -156; 2005 = -188; 2006 = -262; 2007 = -263; 2008 = -263; 2009 = -302; 2010 = -370; 2011 = -399; 2012 = -430
- Income (net): 2004 = -212; 2005 = -243; 2006 = -151; 2007 = -131; 2008 = -165; 2009 = -90; 2010 = -109; 2011 = -97; 2012 = -91
  - Interest due on public debt (component): 2004 = -139; 2005 = -112; 2006 = -90; 2007 = -73; 2008 = -37; 2009 = -37; 2010 = -36; 2011 = -36; 2012 = -35
- Transfers (net) (Billions of CFA francs): 2004 = 79; 2005 = 114; 2006 = 183; 2007 = 132; 2008 = 220; 2009 = 207; 2010 = 194; 2011 = 196; 2012 = 182
  - Inflows: 2004 = 91; 2005 = 127; 2006 = 195; 2007 = 145; 2008 = 221; 2009 = 221; 2010 = 206; 2011 = 207; 2012 = 193
    - Of which: Official program grants (selected years) include values shown in table (chart entries).
    - Of which: HIPC grants entries shown in table (chart entries).
  - Outflows: 2004 = -11; 2005 = -13; 2006 = -12; 2007 = -13; 2008 = -13; 2009 = -14; 2010 = -11; 2011 = -11; 2012 = -11
- Capital and financial account balance (Billions of CFA francs): 2004 = 75; 2005 = 214; 2006 = 263; 2007 = 455; 2008 = 290; 2009 = 394; 2010 = 647; 2011 = 809; 2012 = 946
- Overall balance (Billions of CFA francs): 2004 = -244; 2005 = -86; 2006 = 225; 2007 = 382; 2008 = 275; 2009 = 109; 2010 = 230; 2011 = 242; 2012 = 241
- Financing (Billions of CFA francs): 2004 = 244; 2005 = 86; 2006 = -225; 2007 = -382; 2008 = -275; 2009 = -109; 2010 = -230; 2011 = -242; 2012 = -241
- Trade balance (percent of GDP): 2004 = -0.4; 2005 = 0.2; 2006 = 2.0; 2007 = 2.0; 2008 = 2.0; 2009 = -1.0; 2010 = -1.2; 2011 = -2.3; 2012 = -2.9
- Current account balance excluding grants (percent of GDP): 2004 = -4.0; 2005 = -3.8; 2006 = -1.5; 2007 = -1.3; 2008 = -1.3; 2009 = -4.0; 2010 = -4.8; 2011 = -5.8; 2012 = -6.3
- Current account balance including grants (percent of GDP): 2004 = -3.8; 2005 = -3.4; 2006 = -0.4; 2007 = -0.8; 2008 = -0.1; 2009 = -2.8; 2010 = -3.9; 2011 = -4.9; 2012 = -5.7
- Exchange rate (CFA francs per U.S. dollar): 2004 = 528.0; 2005 = 527.3; 2006 = ...; 2007 = 522.8; remaining entries indicated as chart/table placeholders.

### Table 3 — Central Government Operations, 2004–08 (selected entries, Billions of CFA francs)
- Total revenue and grants: 2004 = 1,286; 2005 = 1,590; 2006 = 4,512; 2007 = 4,472; 2008 (Est.) = 2,092; 2008 (Prog.) = 1,925; 2008 (Proj.) = 2,044
- Total revenue: 2004 = 1,267; 2005 = 1,543; 2006 = 1,812; 2007 = 1,808; 2008 = 1,958; 2008 = 1,791; 2008 = 1,930
  - Oil sector revenue: 2004 = 325; 2005 = 439; 2006 = 641; 2007 = 643; 2008 = 688; 2008 = 521; 2008 = 560
  - Non-oil sector revenue: 2004 = 942; 2005 = 1,104; 2006 = 1,171; 2007 = 1,165; 2008 = 1,270; 2008 = 1,270; 2008 = 1,370
- Total grants: 2004 = 194; 2005 = 72; 2006 = 2,700; 2007 = 2,664; 2008 = 134; 2008 = 134; 2008 = 114
- Total expenditure: 2004 = 1,331; 2005 = 1,278; 2006 = 1,512; 2007 = 1,364; 2008 = 1,695; 2008 = 1,695; 2008 = 1,818
  - Current expenditure: 2004 = 1,169; 2005 = 1,055; 2006 = 1,121; 2007 = 1,097; 2008 = 1,198; 2008 = 1,198; 2008 = 1,271
  - Capital expenditure: 2004 = 167; 2005 = 206; 2006 = 392; 2007 = 271; 2008 = 496; 2008 = 496; 2008 = 547
- Wages and salaries (Billions of CFA francs): 2004 = 450; 2005 = 414; 2006 = 443; 2007 = 419; 2008 = 479; 2008 = 479; 2008 = 500
- Interest due (Billions of CFA francs): 2004 = 164; 2005 = 129; 2006 = 102; 2007 = 87; 2008 = 49; 2008 = 50; 2008 = 50
- Overall balance, excluding net change in arrears (Excluding grants, Billions of CFA francs): 2004 = -642; 2005 = 653; 2006 = 0; 2007 = 444; 2008 = 264; 2008 = 97; 2008 = 112
- Overall balance, excluding net change in arrears (Including grants, Billions of CFA francs): 2004 = -453; 2005 = 123; 2006 = 3,000; 2007 = 3,108; 2008 = 398; 2008 = 230; 2008 = 226

### Table 4 — Selected fiscal indicators, 2004–08 (percent of GDP, selected entries)
- Total revenue and grants: 2004 = 15.4; 2005 = 17.9; 2006 = 46.6; 2007 = 46.7; 2008 = 20.3; 2008 = 19.1; 2008 = 18.9
- Total revenue: 2004 = 15.2; 2005 = 17.3; 2006 = 18.7; 2007 = 18.9; 2008 = 19.0; 2008 = 17.7; 2008 = 17.9
- Total expenditure: 2004 = 16.0; 2005 = 14.4; 2006 = 15.6; 2007 = 14.2; 2008 = 16.5; 2008 = 16.8; 2008 = 16.8
- Capital expenditure (percent of GDP): 2004 = 2.0; 2005 = 2.3; 2006 = 4.0; 2007 = 2.8; 2008 = 4.8; 2008 = 4.9; 2008 = 5.1
- Overall balance, excluding net change in arrears (Excluding grants, percent of GDP): 2004 = -0.8; 2005 = 3.0; 2006 = 3.1; 2007 = 4.6; 2008 = 2.6; 2008 = 1.0; 2008 = 1.0
- Overall balance, excluding net change in arrears (Including grants, percent of GDP): 2004 = -0.5; 2005 = 3.5; 2006 = 31.0; 2007 = 32.4; 2008 = 3.9; 2008 = 2.3; 2008 = 2.1
- Non-oil revenue (percent of non-oil GDP): 2004 = 12.1; 2005 = 13.5; 2006 = 13.4; 2007 = 13.5; 2008 = 13.6; 2008 = 13.6; 2008 = 13.7
- Non-oil primary balance: 2004 = -2.1; 2005 = 0.0; 2006 = -2.2; 2007 = -0.6; 2008 = -2.9; 2008 = -2.8; 2008 = -2.4

### Table 5 — Monetary survey, December 2004–December 2007 (selected entries, Billions of CFA francs)
- Net foreign assets (BEAC + commercial banks): Mar (Est.) = 357; Jun (Proj.) = 500; Sep (Proj.) = 1,034; Dec (Proj.) = 1,064; Dec (Proj.) = 1,095; Dec (Proj.) = 1,125; Dec (Proj.) = 1,155
  - Bank of Central African States (BEAC): Mar = 242; Jun = 382; Sep = 856; Dec = 884; Dec = 912; Dec = 940; Dec = 967
  - Commercial banks: Mar = 115; Jun = 118; Sep = 178; Dec = 180; Dec = 183; Dec = 185; Dec = 188
- Net domestic assets: Mar = 1,148; Jun = 1,069; Sep = 679; Dec = 691; Dec = 692; Dec = 678; Dec = 673
- Net claims on the public sector (Billions of CFA francs): Mar = 469; Jun = 338; Sep = -2; Dec = -25; Dec = -30; Dec = -54; Dec = -68
  - Net credit to the central government: Mar = 374; Jun = 238; Sep = -90; Dec = -113; Dec = -119; Dec = -142; Dec = -156
- Credit to the private sector (Billions of CFA francs): Mar = 750; Jun = 832; Sep = 859; Dec = 894; Dec = 900; Dec = 909; Dec = 918
- Money and quasi money: Mar = 1,505; Jun = 1,568; Sep = 1,713; Dec = 1,756; Dec = 1,787; Dec = 1,803; Dec = 1,828
- Broad money (annual percentage change): Mar = 7.3; Jun = 4.2; Sep = 9.3; Dec = 11.8; Dec = 11.9; Dec = 9.4; Dec = 6.7
- Private sector credit (annual percentage change): Mar = 1.4; Jun = 10.9; Sep = 3.2; Dec = 5.7; Dec = 7.1; Dec = 8.5; Dec = 6.8
- Contribution to growth of broad money (percentage points) from Net foreign assets and Net domestic assets provided in memorandum.

### Table 6 — Millennium Development Goals, 1990–2015 (selected indicators)
- Goal 1 (Poverty and hunger)
  - Population below US$1 a day (percent): 1990 = ...; 1995 = 3.2; 2001 = 17.1; entries thereafter indicated in table.
  - Poverty gap ratio at US$1 a day (percent): 1990 = ...; 1995 = 9.0; 2001 = 4.1
  - Share of income or consumption held by poorest 20 percent (percent): 1995 = ...; 2001 = 5.6
- Prevalence of child malnutrition (percent of children under 5): 1990 = 15.1; 2015 target entries shown in table (e.g., 2004 = 18.0; 2015 target = 7.6)
- Goal 2 (Education)
  - Net primary enrollment ratio (percent of relevant age group): 1990 = 73.6; target for 2015 = 100.0
  - Percent of cohort reaching grade 5: 2001 = 51.0; target for 2015 = 100.0
- Goal 3 (Gender equality)
  - Ratio of girls to boys in primary and secondary education (percent): 1990 = 73.7; 2004 = 87.2; target for 2015 = 100.0
  - Share of women employed in the nonagricultural sector (percent): 1990 = 21.6; 2004 = 22.6
  - Proportion of seats held by women in the national parliament (percent): 1990 = 10.8; 2004 = 12.7; 2004 = 12.2
- Goal 4 (Child mortality)
  - Under-5 mortality rate (per 1,000): 1990 = 139.0; 1995 = 156.0; 2001 = 151.0; 2004 = 149.0; 2015 target = 46.3
  - Infant mortality rate (per 1,000 live births): 1990 = 85.0; 1995 = 89.0; 2001 = 88.0; 2004 = 87.0; 2015 target = 21.8

_Italicized source: Cameroonian authorities; and IMF staff estimates and projections (as presented in the supplied content)._

### 15. Immunization against measles (percent of children under 12 months)57.646.047.0...65.564.019.2

### 15. Immunization against measles (percent of children under 12 months)57.646.047.0...65.564.019.2

### Millennium Development Goals — Health and Disease Indicators (selected)
- Goal 5. Improve maternal health
  - Target 6: Reduce by three-fourth, between 1990 and 2015, the maternal mortality ratio.
  - 16. Maternal mortality ratio (modeled estimate, per 100,000 live births)......730.0............
  - 17. Proportion of births attended by skilled health personnel58.4...60.0......62.014.6
- Goal 6. Combat HIV/AIDS, malaria, and other diseases
  - Target 7: Halt by 2015, and begin to reverse, the spread of HIV/AIDS
  - 18. HIV prevalence among females (percent, ages 15-24)......12.7......5.0...
  - 19. Contraceptive prevalence rate (percent of women ages 15-49)16.0...26.0......26.0...
  - 20. Number of children orphaned by HIV/AIDS (Thousands)...............24.0...
- Target 8: Halt by 2015, and begin to reverse, the incidence of malaria and other major diseases.
  - 21. Prevalence of death associated with malaria.....................
  - 22. Share of population in malaria risk areas using effective prevention and treatment.....................
  - 23. Incidence of tuberculosis (per 100,000 people)......145.0187.7180.5180.5...
  - 24. Tuberculosis cases detected under DOTS (percent)...2.016.059.686.486.4...

### Environmental and Infrastructure Indicators (selected)
- Goal 7. Ensure environmental sustainability
  - Target 9: Integrate the principles of sustainable development into policies and programs. Reverse the loss of environmental resources.
  - 25. Forest area (percent of total land area)53.0...48.0............
  - 26. Nationality protected areas (percent of total land area)5.04.04.04.54.55.0
  - 27. GDP per unit of energy use (PPP $ per kg oil equivalent)3.93.74.7...4.7......
  - 28. CO2 emissions (metric tons per capita)0.10.30.4............
  - 29. Proportion of population using solid fuels
  - Target 10: Halve by 2015 proportion of people without access to safe drinking water
  - 30. Access to improved water source (percent of population)51.0...58.0...63.066.074.0
  - Target 11: Achieve by 2020 significant improvement for at least 100 million slum dwellers
  - 31. Access to improved sanitation (percent of population)48.0...79.0...48.051.0...
  - 32. Access to secure tenure (percent of population).....................

### Global Partnership and Technology Indicators (selected)
- Goal 8. Develop a Global Partnership for Development 1/
  - Target 16. Develop and implement strategies for productive work for youth.
  - 45. Unemployment rate of population ages 15-24 (total).....................
  - Target 17: Provide access to affordable essential drugs.
  - 46. Proportion of population with access to affordable essential drugs.....................
  - Target 18: Make available new technologies, especially information and communications
  - 47. Fixed line and mobile telephones (per 1,000 people)3.55.134.549.7...102.7...
  - 48. Personal computers (per 1,000 people)...1.53.95.7...10.0...

### Sources for MDG indicators
- World Bank, World Development Indicators database, 2003; and UNDP, Human Development Report 2005.
- Note: Targets 12-15 and indicators 33-44 are excluded because they cannot be measured on a country-specific basis.

### IMF Credit and Debt-Service Indicators (2004–08) — selected figures
- IMF credit outstanding
  - In millions of SDRs214.7190.35.310.615.8
  - In millions of U.S. dollars318.0281.27.815.823.7
  - In billions of CFA francs167.1149.44.08.011.9
  - In percent of quota115.6102.52.85.78.5
- Debt service to the IMF
  - In millions of SDRs20.028.0188.41.51.8
  - In millions of U.S. dollars29.741.4277.22.32.7
  - In billions of CFA francs15.721.8144.91.11.3
  - In percent of:
    - Exports of goods and nonfactor services0.81.05.80.00.1
    - Total debt service due3.65.743.40.40.5
    - Government revenue1.21.48.00.10.1
    - GDP0.20.21.50.00.0
    - Quota10.815.1101.50.81.0
- Debt service to the IMF (in millions of SDRs)
  - Interest and charges1.11.00.51.51.8
  - Repurchases/repayments18.927.0187.90.00.0
- Sources: IMF, Finance Department; and IMF staff estimates and projections.
- Note: Including remaining disbursements under the current PRGF arrangement.

### PRGF Disbursements and Timing of Reviews, 2007–08 (Table 8)
- May 31, 2007 — Completion of third review (end-December 2006 quantitative and structural performance criteria) — Amount (in millions of SDR)2.65
- October 15, 2007 — Completion of fourth review (end-June 2007 quantitative and structural performance criteria) — Amount (in millions of SDR)2.65
- April 15, 2008 — Completion of fifth review (end-December 2007 quantitative and structural performance criteria) — Amount (in millions of SDR)2.65
- October 15, 2008 — Completion of sixth review (end-June 2008 quantitative and structural performance criteria) — Amount (in millions of SDR)2.67

### Government Letter and Memorandum on Economic and Financial Policies — key findings and commitments (May 29, 2007)
- Implementation status and program results (July–December 2006)
  - Fiscal consolidation efforts helped meet most quantitative criteria and benchmarks at end-December 2006, except a performance criterion on the increase in net claims of the banking system on the central government due to extrabudgetary expenditure by the national oil company.
  - Government requests strengthening of the program by converting a structural benchmark on cash payments by the national oil company into a performance criterion.
  - Progress in public finance and transparency: Extractive Industry Transparency Initiative reports covering 2001-04 and 2005 were published on the government’s website.
  - Privatization efforts: unsuccessful negotiations for CAMAIR; commitment to eliminate budgetary subsidies to airline companies and to commence end-July 2007 implementation of a strategy to recruit a private strategic partner for CAMAIR.
- Macroeconomic developments (2006)
  - Nonoil economic growth was 3.5 percent in 2006.
  - Consumer prices year-on-year increase in December 2006 was 5.1 percent.
  - Primary fiscal balance for 2006 improved by 1.3 percent of GDP compared with 2005.
  - Resurgence of extra-budgetary spending directly financed by the SNH amounted to 0.2 percent of GDP.
- Structural and institutional measures (selected)
  - Public finance and civil service: draft 2007 Budget Law submitted to Parliament and adopted by end-2006; implementation of the customs information system in Littoral province; civil service census and payroll cleanup; establishment of tax centers for medium-sized enterprises in Yaoundé and Douala.
  - Public enterprises: CAMTEL privatization call for bids made January 2007; call for bids for management contract of SNEC launched February 2007; CAMAIR privatization negotiations terminated April 2007.
  - Financial sector: CAMPOST management team recruitment completed October 2006; escrow account opened at BEAC for CAMPOST transfers; quarterly supervision report to be produced.
  - Transparency: publication of quarterly budget-execution reports, SNH quarterly operating reports, and annual financial aggregates of main public enterprises; EITI administrator’s report for 2001–2004 and 2005 published; CONAC became operational in March 2007 though asset-disclosure implementation was delayed.
- Economic and financial policies for 2007–08
  - Macroeconomic framework:
    - Nonoil GDP growth expected to be about 4.5 percent in 2007.
    - Inflationary pressures from 2006 expected to ease in 2007.
    - External position expected to weaken as oil prices ease.
  - Fiscal policy:
    - Government expects a drop of about CFAF 167 billion in oil revenue compared with the 2007 program (about 1.5 percent of GDP).
    - Noninterest expenditure in 2007 will increase by 3 percentage points of GDP compared with 2006, of which about two thirds are for capital expenditure.
    - Measures to improve execution of poverty reduction expenditure: engage donors/lenders in budget conferences; accelerate execution of capital expenditure; early budget appropriations in January to enable rapid start of capital budget execution.
    - From 2008 budget onward, committed but unpaid expenditure items at fiscal-year end will be entered as priority items in the following year’s budget; government will prepare a road map toward executing a multiyear investment budget.

*Source: _cr07285 - 15. Immunization against measles (percent of children under 12 months)57.646.047.0...65.564.019.2 (IMF staff report and attachments, May 29, 2007).*

### 8.      The government is committed to continue to use any windfall in oil revenue

### 8.      The government is committed to continue to use any windfall in oil revenue

### Use of oil revenue windfalls
- Windfall oil revenue will be used exclusively for one-off purposes, particularly:
  - (i) accelerate payments on domestic debt and arrears;
  - (ii) repurchase debt held by external commercial creditors who did not take part in the commercial debt repurchase initiative (London Club);
  - (iii) after consultation with IMF staff, finance investment projects in the sectors defined in the PRSP, including the counterpart funds for jointly-financed projects such as infrastructure development (roads, energy) and investment in major sectoral programs (education, health, and rural and urban development).

### Fiscal reform: commitments and benchmarks
- Government commitment not to have recourse to extrabudgetary expenditure; intends to enhance budgetary procedures and initiate fiscal reforms described in the Memorandum on Economic and Financial Policies of December 6, 2006.
- Requested change: quantitative benchmark on cash payments by the SNH on account of the government to the status of a continuous performance criterion.
- Mobilization of nonoil revenue—major challenge. Specific commitments:
  - Complete by November 2007 the online connection between the IT systems of the General Directorate of Taxes (DGI) and the General Directorate of Customs (DGD).
  - Complete by end-September 2007 the establishment of the electronic one-stop window to facilitate foreign trade by finalizing interfaces with various foreign trade stakeholders, including Customs.
  - Eliminate by end-June 2007 the “minimum administrative values” for all imported products (except sugar, pasta, cigarettes, palm oil, and concrete reinforcing bars, of which the minimal administrative values will be eliminated at end-December 2007), and tax imported goods based on Central African Economic and Monetary Community (CAEMC) rules.
  - Continue efforts to control and reduce exemptions; publish a quarterly report identifying exemptions and the related revenue losses.
  - Improve ex-post controls and implementation/control of customs and economic regimes, in particular transit to Chad and the Central African Republic.
  - Submit to Parliament at its November 2007 session a draft law on electronic commerce and electronic bank payments.

### Tax-base broadening measures
- Measures to broaden the tax base:
  - By end-December 2007, the number of taxpayers covered by the tax centers for medium-sized enterprises in Yaoundé and Douala will grow some 20 percent compared with the tax roll as at January 1, 2007.
  - Streamlining of taxpayer identification, reforming the single taxpayer identification number, and safeguarding the single taxpayer file to be completed by end-October 2007.
  - At end-November 2007, the implementation of a tax-related information management software (AREN) will have been completed.
  - The launching on March 23, 2007 of the framework for performing point audits pursuant to the 2007 Budget Law will contribute to increasing VAT and personal income tax receipts.
  - Create a Review Commission of Domestic Tax and Foreign Trade Taxation; terms of reference completed by end-May 2007. Commission to submit a summary report with recommendations by end-December 2007. Plan for implementing the commission’s recommendations to be examined and approved in the first half of 2008. The first round of reforms will be proposed in the draft 2009 Budget Law.

### Forestry revenue and data links
- Re-instituted the Program to Secure Forestry Revenue (PSRF) as sole point of contact for forestry sector tax purposes.
- Protocols for collaboration to be worked out between PSRF and other entities; protocols to specify data required, periodicity, deadlines, and modalities for transferring information.
- Intention to establish by December 2007 an online connection between the Ministry of Forests and Wildlife and the Ministry of Economy and Finance to restore capacity to monitor sectoral economic data and control the tax base.

### Public expenditure monitoring and budget transparency
- Continue preparation of consistent monthly budget execution tables on a cash basis and on a payment order basis, and a monthly expenditure table broken down by economic function to track spending in priority sectors.
- By end-June 2007, consolidate the connection between the IT systems of the General Directorates of the Budget and the Treasury and produce summary reports on budget execution – from commitment through payment – on a functional basis for the January-April 2007 period.
- Engage in discussions aimed at presenting budget execution along the lines of the government financial operations table (TOFE) on a commitment-basis.
  - Prepare a diagnostic study by end-August 2007 on measures and critical path toward preparing the TOFE on a payment order basis for all expenditure.
  - Produce the TOFE for the execution of the 2007 budget by end-May 2008.
- Provide further training to experts from ministries in priority sectors on using budget classification by end-June 2007.
- Strengthen overall and sectoral medium-term expenditure frameworks (MTEFs) and their use in budget preparation, beginning with preparation of the draft 2008 Budget Law.
- Prepare, by end-December 2007, an action plan to improve further public expenditure management.

### Public procurement reforms
- Continue public procurement reforms by periodically assessing the public procurement system and systematically publishing penalties imposed on offenders.
- Completed updating of the general conditions of contract (Cahier des Clauses Administratives Générales - CCAG) and implemented related documents since February 13, 2007; documents published on the government’s website.
- Planned actions:
  - Implement standard bid documents and procedural manuals by end-August 2007.
  - Publish by end-September 2007 the audit report on public procurement activities in 2005.
  - Adopt in 2007 the implementing regulations on amicable settlement under the Public Procurement Code.
  - Conduct annual assessments of the reliability and performance of the national public procurement system using performance indicators defined with the World Bank.

### Civil service reforms
- Continue reforms to establish basis for staffing levels and payroll, secure and harmonize related data, and increase civil service efficiency.
- After payroll clean-up, measures taken to contain the wage bill and staffing levels and maintain payroll file accuracy.
- New payroll file already used to:
  - (i) calculate financial impact of adjusting salaries for promotions;
  - (ii) assess wage arrears stemming from past unpaid promotions.
- Priority: adjust salaries using savings from the census and clean-up of the payroll; payments only once full cost of adjustments is assessed.
- By June 2008, replace the current IT system used for the payroll with a more efficient one (security and access privileges improvements).
- Integrated personnel management system to be installed in 24 administrations by end-December 2007, including four current pilot sites, covering 75 percent of the civil service.
- Expansion to include the rest of the civil service to be completed at end-2008.

### Fuel pricing policy and SONARA measures
- Continue policy of adjusting retail fuel prices (begun in 2005) in 2007.
- Expected decline in oil prices should reduce actual budgetary transfers to SONARA compared to what was appropriated in the 2007 Budget.
- Commit to adopting a system for full pass-through of fuel prices:
  - In consultation with IMF and World Bank staff, adopt by end-December 2007 a formula for adjusting ex-refinery prices (reflecting international prices and allowing an automatic adjustment) and a simplified price structure (reducing or eliminating cross subsidies and tax distortions).
  - Conduct a study by end-September 2007 to assess possible fiscal implications of this reform.
- Pursue measures to bolster the financial position of SONARA as described in paragraph 38 of the Memorandum on Economic and Financial Policies of October 13, 2005.
  - Adopted a restructuring plan following the audit of SONARA and began implementation.
  - Intend to conduct a feasibility study to evaluate cost, economic viability, and financing modalities of investments to increase production capacities and improve SONARA’s refining system.
  - Commit to engage in no further investments unless economically viable and financing falls within the framework of a sustainable fiscal policy.

### External debt management and trade liberalization
- Prepare a new comprehensive public debt management strategy by May 2007; strategy to be consistent with medium-term macroeconomic framework and fiscal objectives.
  - Strategy elements: contraction of loans on concessional terms; detailed study of projects requiring loan financing; periodic preparation of a debt-sustainability analysis (at least once a year) and before signing any loans amounting to more than 0.5 percent of GDP.
- Finalize signing of bilateral agreements with Paris Club creditor countries following June 2006 debt relief.
- Continue to negotiate in good faith with private creditors to clear arrears while respecting principle of comparable treatment.
- Pursue trade liberalization and boost foreign trade to consolidate subregional integration:
  - Play active leadership role in CAEMC to ensure implementation of common rules, removal of barriers to intracommunity trade, and lowering of the maximum Common External Tariff (CET) rate.
  - In March 2007 proposed reducing the maximum CET rate from 30 percent to 20 percent to other CAEMC member countries.
  - Commit to proposing to member countries no later than March 2008:
    - (i) an assessment and reduction of the obstacles to intraregional trade, including harmonization of rules of origin with those of the World Trade Organization;
    - (ii) a revision of CET exemptions.
  - Define, in collaboration with other member countries, the concept of free movement to spare economic operators in the CAEMC zone from cascading taxes.

### Financial sector initiatives
- Requested a joint IMF-World Bank mission to undertake a diagnostic assessment of the financial sector; based on recommendations, draft an action plan for strengthening financial intermediation by end-December 2007.
- Interim national-level commitments to facilitate credit access:
  - (i) significant improvement in financial reporting;
  - (ii) simplification of procedures for calling in collateral;
  - (iii) establishment of a commercial court.
- Regional-level commitment to support the BEAC in finalizing the establishment of the central credit register (computerization, payment problems, financial analysis center).
- Develop the securities market:
  - Issue new securities by end-2007.
  - Transfer secondary market transactions on zero-coupon treasury bonds to the financial market by end-October 2007.
  - Transactions in government securities to take place under supervision of the Financial Markets Commission.
- Support BEAC in implementing recommendations from the regional Financial Sector Assessment Program (FSAP).

### Public enterprise reform and privatization
- Continue implementation of public enterprise privatization and restructuring programs in collaboration with the World Bank.
  - CAMTEL: objective to complete selection of a provisional successful bidder by end-June 2007; preparing financial information for 2006 and incorporating investors’ suggestions.
  - SNEC: aim to ensure provisional successful bidder for the management contract is selected by end-June 2007.
  - Air transportation: committed to eliminating budgetary subsidies to airline companies, including CAMAIR, and improving air services.
    - Plan to commence implementation of a transparent strategy by end-July 2007 to recruit a private strategic partner and implement the strategy speedily.
  - Interim commitment to operate within the budgetary envelope for subsidies and transfers agreed under the PRGF-supported program.

### Transparency, good governance, and business climate
- Enhance good governance and combat corruption to improve business environment and quality of public expenditure.
- Publish administrator’s reports on government website regularly as part of EITI implementation within no more than a year; prepare a communication strategy to disseminate the administrator’s report.
- Publish by end-July 2007 government comments in response to observations recorded on oil revenue for 2001-2004.
- Publish on the website a summary of reports of local committees monitoring physical and financial execution of investment projects in the central government budget.
- Launch operations of the Commission for asset disclosure process for senior government officials by end 2007.
- Adopted the joint CHOC program in February 2007 as basis for preparing an anti-corruption strategy by end-December 2007.
  - By March 2008 prepare an action plan for an assessment of corruption among staff at the Ministry of Economy and Finance, to be completed by end-December 2008.
  - An assessment of corruption in the health sector should be available by September 2007.
- Implement by end-December 2007 a one-stop shop for business creation to reduce time and costs involved in creating businesses.

*Source: _cr07285 - 8.      The government is committed to continue to use any windfall in oil revenue*

### 26.      Program monitoring from December 2006 to end-June 2007 will be based on the

### _cr07285 - 26.      Program monitoring from December 2006 to end-June 2007 will be based on the

### Program monitoring and reporting
- Program monitoring from December 2006 to end-June 2007 will be based on the performance criteria and quantitative and quarterly structural benchmarks indicated in Tables 1-4.
- The government will report the data necessary for program monitoring to the IMF, in accordance with the Technical Memorandum of Understanding.

### Quantitative targets and outcomes (Table 1 highlights)
- Ceiling on the increase in net claims of the banking system on the central government:
  - Adjusted benchmark: -8
  - Outturn: 61; Status: not met
  - Projected outturn / Revised Performance criteria: -8 / -56 / -9 / 59
- Floor on the non-oil primary budget balance:
  - Adjusted benchmark: 1
  - Outturn: -13; Status: met
  - Projected outturn / Revised Performance criteria: 8 / 23 / -21 / -21
- Ceiling on the accumulation of external payments arrears of the central government:
  - Adjusted benchmark: 0; Outturn: 0; Status: met
  - Projected outturn / Revised Performance criteria: 0 / 0 / 0 / 0
- Ceiling on new medium- and long-term nonconcessional external debt contracted or guaranteed by the central government:
  - Adjusted benchmark: 0; Outturn: 0; Status: met
  - Projected outturn / Revised Performance criteria: 0 / 0 / 0 / 0
- Ceiling on the net disbursement of external debt contracted or guaranteed by the central government with a maturity of less than one year:
  - Adjusted benchmark: 0; Outturn: 0; Status: met
  - Projected outturn / Revised Performance criteria: 0 / 0 / 0 / 0
- Floor on non-oil revenue of the central government:
  - Adjusted benchmark: 283; Outturn: 248; Status: not met
  - Projected outturn / Revised Performance criteria: 913 / 907 / 1216 / 1216
- Ceiling on spending on goods and services:
  - Adjusted benchmark: 105; Outturn: 98; Status: met
  - Projected outturn / Revised Performance criteria: 307 / 295 / 419 / 419
- Ceiling on cash spending by SNH — Payments on account of the government (interventions directes):
  - Adjusted benchmark: 0; Outturn: 0; Status: not met (Outturn reported as 24 in one column)
  - Projected outturn / Revised Performance criteria: 0 / 0 / 0 / 0
- Other operating costs (autres charges) for SNH:
  - Adjusted benchmark: 5; Outturn: 3.4; Status: met
  - Projected outturn / Revised Performance criteria: 14 / 14 / 18 / 18
- Floor on reduction of domestic debts:
  - Structured debt: Adjusted benchmark: 72; Outturn: 67; Status: met; Projected outturn / Revised Performance criteria: 136 / 137 / 164 / 164
  - Non-structured debt: Adjusted benchmark: 52; Outturn: 33; Status: met; Projected outturn / Revised Performance criteria: 78 / 82 / 93 / 93
- Floor on payments to utility companies (selected:
  - SNEC: Adjusted benchmark: 2.0; Outturn: 2.0; Status: met; Projected outturn / Revised Performance criteria: 6.0 / 6.0 / 8.0 / 8.0
  - AES SONEL: Adjusted benchmark: 1.8; Outturn: 1.8; Status: met; Projected outturn / Revised Performance criteria: 5.3 / 5.3 / 7.0 / 7.0
  - CAMTEL: Adjusted benchmark: 3.3; Outturn: 3.3; Status: met; Projected outturn / Revised Performance criteria: 9.8 / 9.8 / 13.0 / 13.0
  - CAMRAIL: Adjusted benchmark: 1.0; Outturn: 1.0; Status: met; Projected outturn / Revised Performance criteria: 3.0 / 3.0 / 4.0 / 4.0
  - SONARA: Adjusted benchmark: 1.5; Outturn: 1.5; Status: met; Projected outturn / Revised Performance criteria: 4.5 / 4.5 / 6.0 / 6.0

### Structural performance criteria and benchmarks (Tables 2 and 4 highlights)
- Government finance:
  - Submission to Parliament of the 2007 Budget Law and adoption by end-2006 (performance criterion): December 31, 2006 — Completed
  - Implementation of the Customs Management System in Littoral Province (performance criterion): December 31, 2006 — Completed
  - Consolidation of online connection between Budget and Treasury IT systems and production of monthly summary reports on budget execution (performance criterion): June 30, 2007
  - Diagnostic study of the budget and treasury nomenclature (GFS consistency): March 31, 2007 — Completed
  - Preparation of actions for transitional period of new organic law on government finance: April 30, 2007 — Completed
  - Preparation of consistent monthly budget execution tables and monthly expenditure table: Ongoing — Completed
  - Adjustment of retail prices of petroleum products and payment of budgetary transfers to SONARA as agreed with Fund staff: Ongoing — Completed
- Civil service:
  - Completion of civil servants census and clean-up of payroll records: December 31, 2006 — Completed
  - Diagnostic study on civil service remuneration system (wages and benefits): March 31, 2007 — Not completed
  - Establishment of harmonized civil service personnel records in 14 ministries and installation of personnel management system: June 30, 2007
- Transparency and governance:
  - Publication of EITI administrator report on oil revenue for 2001 to 2004 on www.spm.gov.cm: December 31, 2006 — Completed
  - Publication of EITI conciliator report on oil revenue for 2005 on www.spm.gov.cm: March 31, 2007 — Completed
  - Publication of quarterly report on execution of the government budget: Two months after the end of the quarter — Completed
  - Publication on www.spm.gov.cm of judicial decisions and administrative sanctions against civil servants as part of anti-corruption campaign: Ongoing basis — Completed
- Financial sector:
  - Completion by the government of preparatory work for establishment of a financial subsidiary for CAMPOST (performance criterion): June 30, 2007
- Public enterprise reform:
  - Launching invitation for bids for privatization of CAMTEL (performance criterion): March 31, 2007 — Completed
  - Launching invitation for bids for management contract of public-private partnership for SNEC: March 31, 2007 — Completed
- Structural indicative benchmarks for July–December 2007 (selected):
  - Connect MESURE (General Directorate of Taxes) to ASYCUDA (Customs): November 30, 2007
  - Presentation to Parliament of the Law on Electronic Communications and Electronic Payments of Banks: November 30, 2007
  - Transfer of secondary-market transactions on zero-coupon treasury bonds to the financial market: October 31, 2007
  - Complete and implement the electronic one-stop shop to facilitate foreign trade: September 30, 2007
  - Installation of the Automated Integrated Management System (AIMS) covering civil servants and payroll in 24 ministries: December 31, 2007
  - Adoption of formula for revision of SONARA exit prices and simplified petroleum price structure: December 31, 2007
  - Adjustment of petroleum product retail prices and payment of budgetary transfers to SONARA as agreed with Fund staff: Continuous

### Central Government Operations — Key figures (Table 5 selected items, 2007, in billions of CFA francs)
- Total revenue and grants: 2,092 (annual)
- Total revenue: 1,958 (annual)
- Oil sector revenue (annual): 88521 (note: table entries include sequences across quarters)
- Non-oil sector revenue (annual): 1,270
- Total grants (annual): 134
- Total expenditure (annual): 1,695
- Current expenditure (annual): 1,198
- Wages and salaries (annual): 479
- Goods and services (annual): 466
- Capital expenditure (annual): 496
- Foreign-financed investment (annual): 110
- Domestic investment (annual): 327
- Overall balance, excluding net change in arrears:
  - Excluding grants (annual): 97
  - Including grants (annual): 230
- Net change in arrears: -60 (annual)
- Overall balance, cash basis:
  - Excluding grants (annual): -437
  - Including grants (annual): 171
- Financing (annual): -338
  - External financing, net: 13
  - Amortization: -85
  - Drawings: 97
  - Domestic financing, net: -351
    - Banking system: -232
    - Banking system, excluding HIPC and C2D: -222
- Memorandum items:
  - Non-oil primary balance: -266 (annual)
  - Non-oil primary balance (program definition): -36 (annual)

### Technical Memorandum of Understanding — Definitions and modalities (Attachment II highlights)
- Purpose: Sets out understandings between Cameroonian authorities and the IMF on definitions of performance criteria and benchmarks and contingency mechanisms; specifies exchange rates and reporting data.
- Government: Defined as central government unless otherwise noted.
- External debt: Defined per point 9 of the Guidelines on Performance Criteria with Respect to External Debt in Fund Arrangements (IMF Executive Board Decision No. 12274–00/85, dated August 24, 2000); based on residency.
- Accumulation of external payments arrears:
  - External nonreschedulable arrears of the government, including public enterprises whose debt is guaranteed by the government.
  - Excludes nonpayment to bilateral official and commercial creditors with whom a rescheduling or restructuring agreement has not yet been signed, provided Cameroon is engaged in best efforts to negotiate such an agreement.
- Concessionality of external debt:
  - Medium- and long-term debt: initial maturity of one year or more.
  - Concessional if grant element ≥ 35 percent, calculated on basis of OECD CIRR and IMF methodology.
  - For debt maturing in 15 years or more, OECD 10-year CIRR used as discount rate; margins added to CIRRs: 1 percent between 15 and 19 years; 1.15 percent between 20 and 29 years; 1.25 percent for ≥30 years.
  - Debt rescheduling/restructuring and use of IMF resources are not part of performance criterion on contracting or guaranteeing nonconcessional debt.
- Debt relief:
  - Only forms of debt relief that lead to effective reduction in programmed debt service are subject to contingency mechanism (includes rescheduling, forgiveness, restructuring, HIPC, MDRI, bilateral initiatives such as C2D).
  - Programmed debt relief from drawn-out negotiations with non-Paris Club creditors and commercial creditors is excluded from the contingency mechanism.
- Domestic debt definitions:
  - Structured debt: stock at end-December 2004 included in October 2005 audit and in multiyear settlement plan recorded by National Amortization Fund; stock at end-December 2004 amounted to CFAF 956 billion (excluding BEAC’s advances).
  - Nonstructured debt: stock at end-December 2004 included in October 2005 audit and in multiyear settlement plan; stock at end-December 2004 amounted to CFAF 496 billion.
- Domestic debt repayments for performance assessment:
  - Only repayments made to repay the defined structured and nonstructured domestic debt are counted.
  - For structured debt: (i) payments on account of securitized debt to BEAC and commercial banks recorded under “Domestic financing, net – Banking System - Banking system excl. HIPC and C2D”; (ii) other principal repayments recorded under “Domestic financing, net – Amortization”.
  - For nonstructured debt: repayments of principal recorded under “Net change in arrears – Domestic”.

*Sources:  Cameroonian authorities; Bank of Central African States (BEAC);  and staff estimates.*

### 10. The Treasury balance (balance des comptes du Trésor) shows government revenue and

### 10. The Treasury balance (balance des comptes du Trésor) shows government revenue and

### Treasury accounting and scope
- Government revenue and expenditure posted in:
  - Class 6 accounts (current expenditure)
  - Class 7 accounts (current revenue)
  - Class 2 accounts (investment operations)
- Debt-related operations recorded in:
  - Class 1 accounts (debt operations)
  - Partly in Class 5 (financial operations)
- Financial operations data must be consistent with the Treasury account at the BEAC.
- Provisional revenue and expenditure operations and deposits of Treasury correspondents are recorded in Class 4 accounts of the government’s chart of accounts (plan comptable).
- Government operations not carried out through the Treasury must be added to Treasury-carried operations.
- Revenue and expenditure operations are recorded on a cash basis.

### Nonoil revenue and related receipts
- Nonoil revenue comprises all government (tax and nontax) revenue, excluding:
  - revenue from oil companies (i.e., companies engaged in crude oil extraction in Cameroon)
  - oil royalties (redevance pétrolière)
- VAT is recorded net of VAT refunds.
- The pipeline fee paid by the Cameroon Oil Transportation Company (CTOCO) is recorded as part of nontax revenue.

### Privatization proceeds
- Defined as all funds received by the government from sale or concessioning of public companies/organizations or publicly owned facilities to private company(ies), including:
  - sales to companies fully controlled by foreign government(s), private organization(s), or individual(s)
  - sale of shares owned by the government in private companies or public enterprises
- All privatization proceeds must be recorded on a gross basis.
- Costs incurred in connection with sales or concessioning must be recorded separately as expenditure.

### Goods, services, and exclusions
- All budgetary expenditures for purchase of goods and services are recorded in accounts:
  - 4000060, 4000090, 4011, 4010060, 48131, 4810, and 40001205 of the Treasury balance account and shown in the TABORD.
- HIPC and C2D spending is excluded.

### Nonoil primary budget balance (cash basis)
- Calculated as:
  - government nonoil revenue, excluding external grants,
  - less all expenditure other than interest payments, foreign-financed investment expenditure, HIPC-financed expenditure, C2D-financed expenditure, and restructuring expenditure.

### Net claims of the banking sector on the central government
- Defined as the stock of all outstanding claims on the government by the banking system (loans, advances, other government debt instruments, such as long-term government securities)
  - less all deposits held by the Treasury with the banking system,
  - excluding the HIPC account, the C2D account, and the two accounts held by the CAA in a commercial bank to pay the government’s domestic and external debt obligations.

### Payments to utility companies
- The floor on “payment to utility companies” is observed if payments to utility companies (water, electricity, fixed-line telephones, railway and refinery companies) are made in quarterly amounts as indicated in Table 3 of the MEFP.
- Payments exclude fiscal compensation and are assessed on the basis of cash disbursements.
- Payments are to be registered as current expenditures in the TOFE.

### Restructuring expenditure
- Defined as expenditures made in implementing:
  - a privatization strategy (CAMAIR, CAMTEL, CDC),
  - a public-private partnership (SNEC),
  - a restructuring plan (CAMPOST, SONARA).
- Classification as “restructuring expenditure” should follow consultation with the IMF.

### SNH spending: advances and quasi-fiscal spending
- Spending advances (interventions directes) by SNH are advance payments by SNH on behalf of the government and are deducted from monthly cash revenue transferred by SNH to the government.
- There will be no interventions directes in 2006 or later.
- SNH “autres charges” include:
  - costs not shared with other oil companies under production-sharing agreements (e.g., decommissioning costs)
  - costs not related to SNH oil sector activities that are quasi-fiscal (e.g., cost of operating the Chad-Cameroon oil pipeline).

### Subsidy to fuel consumers (SONARA transfers)
- Budgetary transfer to SONARA to cover fuel subsidy = (retail price applied vs. price that would keep SONARA’s net result on domestic operations at zero for previous month) × volumes sold domestically.
- Calculated jointly by SONARA and CSPH and paid during month (t+1) subsequent to reference month (t).
- Quarterly payment caps:
  - will not exceed CFAF 7.0 billion in the first quarter of 2007,
  - CFAF 7.0 billion in the second quarter of 2007,
  - CFAF 7.0 billion in the third quarter of 2007,
  - CFAF 7.0 billion in the fourth quarter of 2007.
- If the quarterly budget transfer does not fully cover the subsidy/SONARA’s shortfall, the government will revise retail prices upward on a monthly basis to prevent losses on SONARA’s domestic operations.
- If international oil prices weaken, the government will first reduce transfers to SONARA and then eliminate them completely before lowering the retail price.

### Modalities of the contingency mechanism for adjustment of targets
- Floor on the nonoil primary balance will be adjusted:
  - upward by the amount of lower-than-programmed receipt of budget support grants;
  - upward by the amount of lower-than-programmed transfers made to SONARA.
- Ceiling on net claims of the banking sector on the government will be adjusted:
  - downward up to the amount of higher-than-programmed oil revenue and privatization proceeds that are not used to reduce domestic debt, buy back external debt owed to commercial lenders, or finance one-off investment projects;
  - upward/downward by the amount of lower/higher-than-programmed external budget support (grants and loans) and by half of the amount of lower/higher-than-programmed debt relief (defined in paragraph 6 above); the revision upward will be capped to a cumulative amount of CFAF 15 billion;
    - for the purposes of the adjustor, budget support is defined as all nontargeted grants and loans, excluding C2D, HIPC Initiative, and MDRI grants;
  - downward by the amount of lower-than-programmed restructuring expenditure;
  - downward by the amount of lower-than-programmed payments of domestic debt (as defined above).
- Higher-than-programmed oil revenue and all privatization proceeds will be allocated to:
  - repayments of domestic debt (as defined above),
  - buyback of external debt owed to commercial creditors,
  - financing of one-off investment projects.
- Domestic debt repayments will be made within one month following the end of the quarter in which the surplus occurred.
- If the cumulative shortfall/excess in oil revenue, external budget support (including debt relief), privatization revenue, and/or adjustments in the ceiling on net bank credit to the government exceed a cumulative 0.2 percent of 2007 GDP, the government will consult with IMF staff to formulate corrective policies.

### Program exchange rates (quarterly)
- Q1 2007: US$1.5059 per SDR and CFAF 497.56 per U.S. dollar
- Q2 2007: US$1.5037 per SDR and CFAF 498.89 per U.S. dollar
- Q3 2007: US$1.5035 per SDR and CFAF 499.08 per U.S. dollar
- Q4 2007: US$1.5054 per SDR and CFAF 498.14 per U.S. dollar
- Liabilities to the IMF included in net bank credit to the government will be valued at the same exchange rates; any deviation will lead to a full upward or downward adjustment of the stock value of IMF liabilities to the BEAC and a similar adjustment of the ceiling on net bank credit to the government.

### Structural performance criteria (selected)
- Consolidation of online connection between IT systems of General Directorates of Budget and the Treasury:
  - Considered observed if by June 30, 2007, monthly summary reports on budget execution (commitment through payment) are produced on a functional basis for the January-April 2007 period.
- Preparatory work for establishment of a financial subsidiary for CAMPOST:
  - Considered observed if by June 30, 2007, the decree establishing the subsidiary is published and the following are accomplished and adopted by the government: bye-laws, list of shareholders and managers, business plan (including projected activities), network and structure of post offices and postal agencies, financial statements and accounts certified by statutory auditors and validated by competent entities, payment of capital or minimum available budgetary transfers.

### Structural benchmarks (selected deadlines and conditions)
- Harmonized civil service personnel records and personnel management software in 14 ministries:
  - Considered observed if by end-June 2007: equipment, communication protocol, and software in place; staff trained; software operating effectively; personnel data consistent with payroll management system.
  - The 14 ministries are listed in paragraph 28.
- Diagnostic study on budget and treasury nomenclature:
  - Considered met if by end-March 2007 the government submits an analytical report containing: (i) description of deficiencies of current budget classification with regard to simplicity, interpretation, and consistency with international standards; and (ii) an action plan to improve classification in 2007-2009.
- Preparatory actions for transitional period of new organic law on government finance:
  - Considered met if by end-April 2007: (i) new draft law prepared with IMF assistance and presented to Parliament with key transitional objectives; and (ii) action plan prepared, forwarded to concerned ministries, and presented at a seminar.
- Monthly budget execution tables and expenditure tracking:
  - Considered met if by the 25th of the month following the reporting month the TABORD, treasury balances, expenditure tracking tables (by chapter/account and by function), and consistency across these tables are sent to the IMF (see paragraph 31 for full conditions).
- Adjustment of retail petroleum prices and SONARA transfers:
  - Considered met if authorities raise prices of the three main fuel products (premium gasoline, oil, diesel fuel) and make transfer payments as indicated in paragraph 26 of the MEFP and paragraph 20; fuel prices are to be raised on the first business day of the month.
- Diagnostic study of civil service remuneration system:
  - Considered met if by end-March 2007 the final report, conducted per approved terms of reference, is submitted to the minister responsible for finance.
- Publication of quarterly report on execution of central government budget:
  - Considered met if, two months after the end of the quarter, a report detailing and commenting on execution of the budget is available on the website www.spm.gov.cm.
- Publication on website of judicial decisions and administrative sanctions against civil servants:
  - Considered met if the government creates a website section on the fight against corruption publishing continually: (i) all judicial decisions, including appealed decisions, with necessary reservations; and (ii) all administrative sanctions against civil servants.
- Connection of MESURE (Taxes) to SYDONIA (Customs):
  - Considered met if before end-November 2007 one or more modules of SYDONIA is connected to one or more modules of MESURE and shares specific datasets on imports/exports and commercial/industrial activities.
- Commission report on revision of domestic and customs taxation:
  - Considered met if by end-December 2007: (1) a commission including government, economic operators, and civil society is set up; and (2) the general report on proceedings and recommendations is drafted and approved by December 31, 2007.
- Reduction in number of tax centers for small taxpayers with pilot sites in Yaoundé and Douala:
  - Considered met if by end-December 2007: (1) each pilot center incorporates at least three tax centers based on the current model; and (2) pilot tax centers are modeled on tax centers for medium-sized enterprises.
- Streamlining taxpayer identification and single taxpayer database:
  - Considered met if by end-October 2007: (1) taxpayer registration software operational; (2) it is the sole IT application for registering taxpayers; and (3) direct connection established between this software and MESURE.
- Adoption of formula for revising SONARA exit prices and simplified petroleum price structure:
  - Considered met if by December 2007 the new formula reflects international prices, precludes economic adjustment in favor of SONARA, allows automatic price adjustment, and the simplified price structure reduces or eliminates cross-subsidies and tax distortions.
- Installation of SIGIPES in 24 ministries:
  - Considered met if at end-December 2007: (i) equipment, communication protocol, and SIGIPES application in place; (ii) staff trained; (iii) SIGIPES brought into operation; and (iv) SIGIPES staffing data consistent with payroll management system.
  - The 24 ministries include the 14 identified in paragraph 28 and an additional 10 ministries listed in paragraph 41.

*Source: _cr07285 - 10. The Treasury balance (balance des comptes du Trésor) shows government revenue and*

### 42. The benchmark related to publication on the www.spm.gov.cm

### 42. The benchmark related to publication on the www.spm.gov.cm

### Benchmarks on governance and market infrastructure
- Publication of summary on the www.spm.gov.cm website:
  - Considered met if, three months after the end of a quarter, the summary of reports of the local committees monitoring the physical and financial implementation of the investment projects in the central government budget includes:
    - (i) observations on the causes of delays in investment projects,
    - (ii) statistics on the use of investment-related funds and the rate of progress of the individual projects, and
    - (iii) recommendations to improve the physical and financial implementation of investment projects.

- Draft law on bank electronic communications and electronic payments:
  - Considered met if by end-November 2007 the government presents to Parliament a law defining the regulatory framework for electronic communications and payments, in consultation with World Bank staff, including transactions between individuals and legal entities on the one hand and banks on the other.

- Transfer of secondary market transactions in zero-coupon treasury bonds to the financial market:
  - Considered met if by end-October 2007 all transactions (purchases, sales, repurchases) involving such bonds between individuals and legal entities, or between the government and other entities (including public enterprises), take place in the financial market.
  - By end-October 2007, the CAA will be capable of publishing each day the volume and prices of all transactions on the website: caa.gov.cm.

- Electronic one-stop-shop for foreign trade:
  - Considered met if from end-September 2007 all foreign trade transactions are being conducted through the electronic one-stop-shop.
  - The government will send a letter to Fund staff confirming that the electronic one-stop-shop has began its operations.

### Implementation and monitoring
- These benchmarks define specific operational requirements, legal/regulatory actions, market infrastructure changes, and transparency measures with explicit calendar targets (end-September 2007, end-October 2007, end-November 2007).
- Required confirmations and capacity enhancements (daily publication capability by the CAA; government letter confirming one-stop-shop operations) are part of meeting the benchmarks.

### Policy implications (implicit in benchmarks)
- Enhance public transparency on investment implementation (publication requirements).
- Strengthen legal/regulatory framework for electronic banking transactions (draft law).
- Move treasury-bond secondary market activity onto formal financial markets and publicize transaction data (CAA publication).
- Streamline and digitalize foreign trade processing (electronic one-stop-shop).

### Reporting requirements — general
- The Cameroonian authorities will send data, as in the attached Tables 1 and 2, to the IMF within the established time limits.
- The authorities will supply the IMF, on a timely basis, with any additional information that the IMF may request for the purpose of monitoring the implementation of the program.

### Key data-reporting items and target dates (selected entries preserved verbatim)
- Central bank balance sheet, consolidated commercial bank balance sheet, monetary survey:
  - Monthly: 10th of the month for the previous month’s data for the preliminary series; 25th of the month for the previous month’s data for the final series.
- Net credit by the banking system to the central Government:
  - Monthly: 10th of the month for the previous month’s data for the preliminary series; 25th of the month for the previous month’s data for the final series.
- Interest rates:
  - Irregular: One week after new rates announced.
- Transactions through the HIPC Initiative and DRDC accounts opened at the BEAC, including credit and debit:
  - Monthly: 10th of the month for the previous month’s data.
- Status report on all Government deposits at the BEAC:
  - Monthly: 10th of the month for the previous month’s data.
- Changes to domestic and custom taxes (budget law and others):
  - Irregular: Two weeks after the change has been made.
- Government financial operations table (TOFE) on a cash basis, including revenue, expenditure, financing, and domestic debt payments (including settlement of domestic arrears):
  - Monthly: Three weeks after the end of the month concerned for the preliminary series; Eight weeks after the end of the month for the final series.
- Government financial operations table on a commitment basis (head office) consistent with the TOFE on a cash basis:
  - Monthly: Three weeks after the end of the month concerned for the preliminary series; Eight weeks after the end of the month.
- Treasury balances of a given month, including table on expenditure paid but not yet committed and the table reconciling the Treasury account at the BEAC and the Treasury balance:
  - Monthly: Three weeks after the end of the month; Eight weeks after the end of the month.
- Report on the implementation of the domestic debt settlement plan:
  - Monthly: 25th of the month for the previous month’s data.
- Table on budgetary execution on a functional basis consistent with the table on Government financial operations on a commitment basis:
  - Monthly: Eight weeks after the end of the month for the final series.
- VAT refunds’ balances (both refunds requested and refunds paid):
  - Monthly: 25th of the month for the previous month’s data.
- Investment budget execution report:
  - Quarterly: Two months after the end of month concerned.
- HIPC and DRDC spending (commitments, authorizations, payments):
  - Monthly: 25th of the month for the previous month’s data.
- SNH operations, including export volumes, exchange rates, prices, values, operating costs (including a detailed list of other costs, commitments, transferable balances, direct interventions, and balances transferred (cash basis), dividends received, and dividends transferred:
  - Monthly: 25th of the month for the previous month’s data.
- Payments of bills to public enterprises (SNEC, CAMTEL, AES SONEL, CAMRAIL, and SONARA):
  - Monthly: 20th of the month for the previous month’s data.
- Payments made to or on account of CAMAIR (for bills, subsidies, loans, arrears ...):
  - Monthly: 20th of the month for the previous month’s data.
- International oil prices, domestic fuel prices and their components, budgetary transfers to SONARA, and SONARA net financial result, using the format of Table 2:
  - Monthly: 20th of the month for the previous month’s data.
- Consumer price index, Yaoundé and Douala:
  - Monthly: 20th of the month for previous month’s data.
- National consumer price index:
  - Quarterly: Six weeks after the end of the quarter concerned.
- Index of industrial production:
  - Quarterly: Two months after the end of the preceding quarter.
- Investment budget execution report:
  - Quarterly: Two months after the end of month concerned.
- National accounts (flash, provisional, final series):
  - Flash series (Annual): Eight months after the end of the year.
  - Provisional series (Annual): Eighteen months after the end of the year.
  - Final series (Annual): Twenty four months after the end of the year.
- Balance of payments data:
  - Imports by use and major export products, trade balance (Monthly): 25th of the month for the previous month.
  - Preliminary price and volume indices of imports and of exports (Quarterly): One month after the end of the quarter concerned.
  - Final price and volume indices of imports and exports (Quarterly): Three months after the end of the quarter concerned.
  - Balance of payments (Annual): Six months after the end of the year for the preliminary series; Twelve months after the end of the year for the final series.
- Stock of outstanding debt and arrears:
  - At least annual: At the beginning of the year; updates as needed.
- Debt service and external debt data:
  - Debt service due before debt relief (Monthly): 25th of the month for the previous month’s data.
  - Debt service due after debt relief (Monthly): 25th of the month for the previous quarter’s data.
  - Debt service paid (Monthly): 25th of the month for the previous quarter’s data.
  - New grants and loans received, specified by creditor including their terms and conditions and project (Monthly): 25th of the month for the previous quarter’s data.
  - Grants and loans projected for the next eight quarters (Quarterly): 25th of the month for the previous quarter’s data.
  - Regular and additional bilateral HIPC assistance received and projected for the next eight quarters (Quarterly): 25th of the month for the previous quarter’s data.

### Petroleum product pricing reporting (Table 2 structure)
- Monthly reporting in FCFA per liter (unless otherwise indicated) for Super, Petroleum, Diesel across months Jul-05 to Jun-08.
- Items to report include (verbatim structure):
  - 1. Price structure that would be necessary for SONARA to break even on domestic operations in a given month (net outturn of 0)
    - 1a. Import parity/price of product (in USD per liter)
    - 1b. Exchange rate (CFAF/USD)
    - 1c. Import parity/price of product
    - 1d. Customs duties, incl. VAT
    - 1e. Economic adjustment
    - 1f. Coastal transportation, incl. VAT
    - 1g. Petroleum products excise
    - 1h. SONARA refinery-gate price (=1c=1d=1e=1f)
    - 1i. Port fees, depot, refitting Nsam depot, coloration, fight against fraud, incl. VAT
    - 1j. Transport equalization
    - 1k. Depot-gate price (=1h=1i=1j)
    - 1l. Overhead costs, financial costs, benefits, leakage, amortization and maintenance, town delivery, dealer’s margin, incl. VAT
    - 1m. Retail price (=1k+1l)
  - 2. Prices actually applied
  - 3. Volume sold (in million liters)
  - 4. SONARA net outturn before budgetary transfer (in CFAF billion)
  - 5. Budgetary transfer to SONARA (in CFAF billion)
  - 6. SONARA net outturn after budgetary transfer (in CFAF billion)

*Source: IMF Staff Report excerpts (Cameroon: Staff Report for the 2007 Article IV Consultation, Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver of Performance Criterion, and Request for Modification of Performance Criterion—Informational Annex, May 25, 2007).*

### 27.      The government’s strategy for economic growth and poverty reduction, as described

### The government’s strategy for economic growth and poverty reduction, as described

### PRSP and strategic context
- The poverty reduction strategy paper (PRSP) was communicated to the World Bank and the IMF in April 2003 and is articulated along seven pillars (detailed in IDA/SecM2003–0434).
- The Government has begun revising the PRSP, with an expected completion date of early 2008.

### World Bank lending and strategy (FY07–08)
- A joint IDA-IFC Interim Strategy Note (ISN) was presented to the Board on December 7, 2006 covering fiscal year (FY) 07–08.
- The ISN maintains broad objectives of the previous Country Assistance Strategy with enhanced emphasis on:
  - governance including combating corruption,
  - managing for results,
  - strengthening partnerships,
  - alignment and harmonization of external assistance in line with the Paris Declaration.
- World Bank support to the Government’s strategy is integrated around six proposed outcomes:

  - Strengthening PRSP implementation
    - Planned activities: policy dialogue and technical assistance to support revision of the PRSP with a focus on sharpened priorities and an explicit results framework, including monitoring and evaluation mechanisms.
    - Economic and Sector Work (ESW) to sharpen the PRSP gender focus.

  - Strengthening governance, including anticorruption and public finance management
    - Planned financing of an operation to increase transparency and accountability.
    - Planned programmatic support to strengthen public financial management as part of a multi-donor platform.
    - Ongoing policy dialogue and technical assistance to support implementation of the Extractives Industries Transparency Initiative (EITI).
    - Support to anticorruption efforts, including corruption assessments in key sectors as part of coordinated international partner support linked to OECD-DAC efforts.

  - Fostering private sector development
    - Enhanced IFC support to small enterprises.
    - Stepped-up IFC/Bank policy dialogue and technical assistance to strengthen Cameroon’s weak business climate, including through a jointly appointed senior IFC/Bank staff based in Cameroon.
    - Support to tighter regional integration via financing of a regional payment systems operation and an operation to strengthen regional financial institutions.

  - Supporting infrastructure and urban development
    - Ongoing financing of the Douala infrastructure, the railway concession, and the regional air transport safety and security operations.
    - Planned financing of an urban and water operation, an energy sector operation, and a regional transport and trade facilitation operation.
    - Ongoing policy dialogue on energy and a planned multi-partner transport sector ESW.

  - Supporting the forestry and environment sectors and strengthening rural and agricultural development
    - Ongoing financing of the multi-partner-supported forestry and environment program, the community development program, and an operation to strengthen petroleum environment management capacity.
    - Ongoing ESW on forestry reform.
    - Planned rural investment climate assessment with a gender focus as input to preparation of a Sector-wide approach (SWAp) in the agriculture sector.

  - Promoting human development
    - Financing of an ongoing operation to increase capacity in the education sector.
    - An ongoing and a planned follow-up multi-sectoral HIV/AIDS operation.
    - Planned support of a SWAp in the health sector (FY08) with Bank support to:
      - strengthen the normative functions of the Ministry of Health;
      - reinforce the capacity of provinces to manage, allocate, and plan resources, and to supervise, and monitor districts;
      - fund a basic package of services included in a consolidated health district plan reflecting sector priorities based on the updated Health Sector Strategy.
    - Analytical work on governance, fiscal space and uses of debt relief in the health sector.

### World Bank portfolio (as of January 8, 2007)
- The IDA portfolio (including GEF co-financing) comprises nine active projects with a total commitment of US$216.1 million, of which US$131.5 million are not disbursed yet.
- Sectors covered: infrastructure, education, transport, environment, forestry, HIV/AIDS, local development, and public-private partnerships.

- Table 1: World Bank Portfolio in Cameroon (at January 8, 2006, in US$ million)
  - IDA Total  216.1
  - Douala Infrastructure 55.6
  - Community development (IDA + GEF) 26.0
  - Public-private partnership 13.5
  - Environment capacity building 4.7
  - Forest and environment development (IDA+GEF) 35.0
  - HIV/AIDS multisector 34.5
  - Education 18.2
  - Railway Concession 14.1
  - Air Transport Safety and Security 14.5

### World Bank policy dialogue and analysis support
- Monitoring and assisting PRSP implementation by:
  - providing assistance and formulating sector strategies, sector and global medium-term expenditure frameworks to align the national budget to PRSP development objectives;
  - carrying out an Investment Climate Assessment (ICA) in FY06 to sharpen PRSP policies for economic growth and diversification, and poverty reduction.
- Strengthening governance agenda by:
  - active role in the Multidonor Platform on Public Finance working with the Government on improving public financial management;
  - working closely with other partners to support the government’s efforts to combat corruption.
- Undertaken PEMFAR and a Country Procurement Assessment Review to support these activities.

### IMF–World Bank collaboration
- Areas of collaboration include:
  - HIPC Initiative and PRSP process (joint work on HIPC completion point and JSAN of PRSP progress report presented April 2006).
  - Analyses and reforms in public financial management.
  - Other governance reforms, including customs systems.
- Table 2 (summary in text) describes coordinated policy advice and respective leads:
  - Fund leads on: macroeconomic policy, short- and medium-term financial programming, tax policy and administration, government revenue information systems, budget accounting, treasury procedures, expenditure classification and tracking.
  - Bank leads on: institutional and human capacity building for public sector management, budget planning and programming including MTEFs, analysis of poverty and sources of growth, sector development advice (social sectors, infrastructure, agriculture, forestry), design/implementation/monitoring of structural reform programs including privatization of public enterprises.
  - Joint responsibility: budgetary procedures, government expenditure management systems, expenditure execution and tracking of poverty-reducing expenditures, internal and external budget control institutions, customs reform, trade policy, financial system reform, governance, HIPC Initiative and PRSP monitoring, FSAPs (joint FSAP for Cameroon in progress).

- Contact points listed: Abdoulaye Seck (Tel. 237-220-3815) and Katrina Sharkey (Tel. 473-6288).

### Statistical issues and data quality
- General: Data provision to the Fund remains adequate for surveillance purposes but with scope for improvement in quality, coverage, and timeliness in most macroeconomic datasets.
- Cameroon has participated in the General Data Dissemination System (GDDS) since December 2000; metadata were last updated and certified in November 2001.
- The National Institute of Statistics (INS) is the principal macroeconomic data agency; lack of clarity about INS’s coordinating role has hampered statistical standard implementation across government agencies.
- A coordinating committee under the Minister of Economy and Finance was formed to take up publication of the tables of the Statistical Appendix accompanying the Article IV staff report.

- National accounts statistics
  - INS compiled a revised and updated set of national accounts estimates based on the 1993 System of National Accounts (1993 SNA).
  - STA missions (October 2003 and December 2004) found methodology broadly appropriate but identified weaknesses in national accounting for oil GDP.
  - STA review recommended improvements in coverage and timeliness; business enterprise statistics framework is weak.
  - Serious data difficulties affect agriculture, manufacturing, retail and wholesale trade, local government, and services.
  - The production index needs overhaul and integration with components of the annual national accounts.
  - Concerns: limited selection of price indices for deflation and lack of information on employment.
  - Technical assistance will remain essential.

- Consumer prices
  - Authorities intend to revise the monthly consumer price index (CPI) by extending surveys to rural areas; current CPI surveys cover five principal cities: Yaoundé, Douala, Bafoussam, Bamenda and Garoua.
  - Authorities intend to contribute to a regional CPI in the CEMAC area; the regional consumption basket will be larger and cover Yaoundé and Douala.

- Socio-demographic indicators
  - The household survey ECAM II (2001) provided comprehensive data used to update Cameroon’s poverty profile.
  - Ongoing work with World Bank assistance to update the household survey.
  - Authorities have begun updating the education map (carte scolaire) and the healthcare map (carte sanitaire), previously prepared in 2000 and 2001 respectively.

- Public finance statistics
  - Considerable progress in transparency and reporting of central government public finance statistics, including consistent monthly budget execution tables on a payment order and cash basis and a table of expenditure by economic function.
  - Quarterly reports on overall budget execution and investment budget execution have been produced continuously.
  - Remaining weaknesses:
    - (i) incomplete compilation of budget implementation data on a commitment and, to some extent, on a cash basis;
    - (ii) lack of information on the financial information of local governments;
    - (iii) poor monitoring of cross-liabilities in the public sector and of public enterprise debt;
    - (iv) lack of information on the financial information of public enterprises more generally.
  - Key reforms introduced in 2003-04 have not yet been fully utilized.
  - A new accounting system should permit identification of expenditures by function and evaluation of the “float” (spending committed but not yet paid).
  - The integrated financial management system (SIGEFI) should substantially improve accuracy and timeliness of fiscal data on a commitment and cash basis.
  - In January 2005, authorities began preparing, based on the SIGEFI, preliminary fiscal accounts 3 weeks after the end of the reported month (for 2004 final data were prepared with a 2 month delay).
  - Plans: elaborate comprehensive fiscal accounts on a commitment basis and monitor the float.
  - Ongoing audit of government domestic debt will cover cross-liabilities and public enterprise external debt to strengthen debt data.
  - Efforts to enhance transparency of financial operations in the oil sector and to collect data on the operations of the largest 20 public enterprises are underway.
  - Cameroon does not report data for publication in the IMF Government Finance Statistics Yearbook or the government finance statistics section in International Financial Statistics.

- Monetary and financial statistics
  - Monetary statistics are reported to the Fund by the Banque des États de l’Afrique Centrale (BEAC) on a monthly basis, with delays of up to two months.
  - Institutional coverage is comprehensive, but data quality may be affected by large cross-border currency movements among CEMAC members.
  - Currency circulation statistics:
    - About 72 percent of the currency circulating in Cameroon is issued nationally, with the rest originating for the most part from Chad (12 percent) and Gabon (6 percent).
    - About 93 percent of the currency issued in Cameroon remains within the national territory, while most of the remaining currency issued circulates in Chad (4 percent).
  - STA mission to BEAC headquarters in May 2001 provided technical assistance to address coverage, methodology, compilation procedures, and timeliness; discussed an action plan for implementing the Monetary and Financial Statistics Manual (MFSM) and introducing an area-wide page in IFS for CEMAC (publication started January 2003).
  - A regional workshop on monetary and financial statistics was organized by BEAC in Libreville (Gabon) in May 2002 to support MFSM implementation.
  - Priorities for Cameroon: adapt the bridge table linking bank data with monetary statistics to the new monthly reporting format by banks.
  - Outstanding issues: accrual recording of interest, treatment of nonperforming loans, proper sectorization of public entities, and compilation of a comprehensive financial survey.
  - Actions remain for the BEAC to implement MFSM methodology for member countries’ monetary statistics.

- Balance of payments statistics
  - Data reporting for publication in the Fund’s Balance of Payments Statistics publications has encountered delays.
  - On the basis of STA technical assistance in March 2006, annual balance of payments statistics for 1995-2003 were reported to STA in late 2006.
  - Authorities are expected to begin producing higher quality data within a reasonable time period.

### Cameroon: Table of Common Indicators Required for Surveillance (at May 8, 2007) — key entries
- Exchange Rates: Date of latest observation Mar 2007; Date received Apr 2007; Frequency of Data M; Frequency of Reporting M; Frequency of publication M.
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation Oct. 2006; Date received Jan. 2007; Frequency M M M.
- Reserve/Base Money: Jan, 2007; Apr. 2007; M M M.
- Broad Money: Jan. 2007; Apr. 2007; M M M.
- Central Bank Balance Sheet: Jan., 2007; Apr. 2007; M M M.
- Consolidated Balance Sheet of the Banking System: Jan. 2007; Apr. 2007; M M M.
- Interest Rates: Jan. 2007; Apr. 2007; M M M.
- Consumer Price Index: Oct. 2006; Nov. 2006; Q Q Q.
- Revenue, Expenditure, Balance and Composition of Financing – General Government: NA NA NA NA NA.
- Revenue, Expenditure, Balance and Composition of Financing – Central Government: Dec, 2006; Feb, 2007; M M Partial data published monthly.
- Stocks of Central Government and Central Government-Guaranteed Debt: Dec 31, 2006; Feb, 2007; M M M.
- External Current Account Balance: 2003; Oct 10, 2006; A A NA.
- Exports and Imports of Goods and Services: June 30, 2006; Sept 11, 2006; M M NA.
- GDP/GNP: Dec 31, 2005; Sept 11, 2006; A A NA.
- Gross External Debt: NA NA NA NA NA.

*Prepared by the staffs of the International Monetary Fund and the International Development Association, May 30, 2007.*

### Introduction

### _cr07285 - Introduction

### Overview
- This report updates the debt sustainability analysis (DSA) for low-income countries (LIC) prepared in April 2006 (Country Report No. 06/190, Appendix I).
- Three key differences from the April 2006 DSA:
  - Uses an updated debt database on the existing debt, assuming the full delivery of HIPC and MDRI debt relief.
  - Includes debt service to France under the C2D initiative in the debt service payments on a net basis.
  - 2007 projections of GDP and exports have been revised based on new information.

### Changes in debt stocks and composition (end-2006)
- Debt stock at end-2006 revised downward relative to Country Report No. 06/190 due to front-loaded relief, additional bilateral cancellations, and higher than envisaged domestic debt repayment in 2006.
- Cameroon: Debt Outstanding, 2006 (Millions of US dollars)
  - Country Report No. 06/55. Actual Difference
  - External debt 2,369 2,094 -275
  - Domestic debt 2,444 1,710 -734
  - Total 4,813 3,804 -1,009
- Nominal external debt:
  - Declined from US$ 6.5 billion in 2005 to US$2.1 billion in 2006.
  - Decline in share of GDP: from 39 to 11 percent of GDP.
- Domestic debt:
  - Declined from US$ 2.3 billion in 2005 to US$ 1.7 billion by end-2006.
  - Decline in share of GDP: from 14 to 9 percent of GDP.
- Public debt (external and domestic):
  - Declined from US$ 8.9 billion to US$ 3.8 billion, or from 53 to 21 percent of GDP over two years.
- Cameroon: Stock of Public Debt, 2005-2006 (In millions of US$; In percent of total; In percent of GDP)
  - Total 2005: 8,880 (100.0) 52.6; 2006: 3,804 (100.0) 20.6
  - External debt 2005: 6,531 (73.6) 38.7; 2006: 2,094 (55.0) 11.3
    - Multilateral 2005: 1,946 (21.9) 11.5; 2006: 394 (10.4) 2.1
      - IMF 287 73.2 0.2 1.7 0.0
      - IDA 1,083 157 12.2 4.1 6.4 0.9
      - AfDF 221 382 2.5 1.0 1.3 0.2
      - EU 103 381 1.2 1.0 0.6 0.2
      - Other 252 153 2.8 4.0 1.5 0.8
    - Bilateral 2005: 4,190 (47.2) 24.8; 2006: 1,545 (40.6) 8.4
      - Paris Club 2005: 4,123 (46.4) 24.4; 2006: 1,505 (39.6) 8.1
        - Of which: France 2005: 1,634 18.4 34.8 9.7 7.2; 2006: 1,324
      - Non Paris Club 664 00.7 1.1 0.4 0.2
    - Commercial 396 155 4.5 4.1 2.3 0.8
  - Domestic debt 2005: 2,348 (26.4) 13.9; 2006: 1,710 (45.0) 9.2
- Note: The C2D debt relief is disbursed in semiannual installments; debt service on this debt category is paid by Cameroon as scheduled and is offset by an equivalent grant from the creditor.

### NPV of external debt-to-exports ratio (end-2006)
- NPV of debt-to-exports ratio as projected in Country Report No. 06/190: 12.8 (percentage points)
- Total change in ratio: 2.9
  - 1. Due to changes in the parameters: 0.7
    - Of which: due to changes in the discount rates: -0.8
    - due to changes in the exchange rates: 1.5
  - 2. Due to unanticipated new borrowing: -1.4
    - Of which: due to higher-than-expected disbursements: -1.8
    - due to lower concessionality of the loans: 0.4
  - 3. Due to unanticipated change in exports: 0.1
  - 4. Other factors: 3.6
- NPV of debt-to-exports ratio (end-2006): 15.7 (percentage points)
- Using annual exports: 2.2
- NPV of debt-to-annual exports ratio: 13.5
- Sources: Bank-Fund staff estimates.

### Bilateral agreements and data quality
- As of March 1, 2007, eight bilateral agreements with Paris Club creditors had been signed.
- Agreements with France, Germany, Sweden, Switzerland were pending as of that date but expected to be signed soon; official proposal from the United Kingdom was still expected.
- Paris Club creditors agreed to postpone the deadline for signing from December 31, 2006 to June 30, 2007 due to delays.
- DSA based on data provided by Cameroon’s main multilateral creditors and by the authorities on remaining creditors.
- Data quality has improved but remains uneven, particularly on private sector and public enterprise debt; the structure of debt is complex.

### Macroeconomic assumptions
- Key assumptions broadly the same as in Country Report No. 06/190.
- Real GDP growth:
  - Expected to accelerate to 6 percent in 2011 reflecting increased capital spending, structural reforms under the PRGF-supported program, and investment in infrastructure and energy with World Bank support.
  - Long-term: non-oil growth expected to stabilize at about 5.5 percent; oil GDP will gradually decline.
  - On average, projected growth is about 1 percentage point higher than the historical average due to higher investment financed by debt relief.
- Oil production:
  - Assumed to increase slightly in 2007, then decline by 5 percent in 2008, 2-3 percent thereafter.
- Inflation:
  - Assumed to hold steady at 2 percent over the long-term.
- Fiscal policy:
  - Supportive of growth and poverty reduction.
  - Nonoil revenues expected to rise from 12 percent of GDP in 2006 to 15 percent at the end of the projection period.
  - Government expenditure expected to rise steadily before declining to 17 percent of GDP in the outer years.
- Exports of goods and services:
  - Projected to gradually decline reflecting decline in petroleum exports.
- Current account deficit (including grants):
  - Expected to increase to about 7 percent of GDP over the medium-term, and gradually improve thereafter.
  - Deterioration larger than earlier envisaged reflecting lower oil prices.
- Financing of deficit:
  - Expected through foreign direct investment, private capital flows, and loans (a mixture from IDA and other creditors on less concessional terms).

### Assumptions on new borrowing and debt relief
- New public borrowing assumed to increase gradually over the medium term to finance new investment.
- External borrowing projected to rise to 1.8 percent of GDP in 2015, then decline to about 1 percent by 2027.
- IDA borrowing assumed to constitute 47 percent of new borrowing; remainder from other multilateral and bilateral creditors on less concessional terms.
- Cameroon projected to graduate from IDA in 2010; from that year, new lending on concessional IDA terms will be gradually phased out.
- Debt relief under the Debt Settlement and Development Contract (C2D) by France will be provided in 2007-2011 under the Convention signed in April 2006, and thereafter on comparable terms.
  - Under the Convention, Cameroon must repay amounts falling due, which are then reimbursed by France within the same quarter.
- DSA assumes full delivery of assistance under the CD2 and additional bilateral debt relief provided by end-2006.

### External debt sustainability
- Staff view: Cameroon faces a low risk of debt distress.
- Cameroon ranks as a "medium performer" per the three-year backward looking average World Bank CPIA index.
- Sustainability thresholds for medium performers (used as guideposts):
  - NPV of debt-to-exports ratio: 150 percent
  - NPV of debt-to-GDP ratio: 40 percent
  - NPV of debt-to-revenue ratio: 250 percent
  - Debt service-to-exports ratio: 20 percent
  - Debt service-to-revenue ratio: 30 percent
- Under baseline and alternate scenarios and stress tests throughout the projection period, external debt levels are expected to remain well below indicative thresholds.
- Debt indicators increase over the longer term due to additional borrowing and reduced concessionality from 2010, but thresholds are not breached under baseline or alternative scenarios.
- Low risk of debt distress contingent on:
  - Robust long-run GDP and export growth in the non-oil sector.
  - Prudent fiscal and borrowing policies.
- Note: Preliminary 2006 CPIA findings could reduce CPIA from 3.3 to 3.2 (moving Cameroon into the weak performer group), but even then Cameroon would remain in low risk of debt distress in the baseline scenario and at least until 2017 for most indicators in stress tests.

### Stress tests and scenarios
- Lower GDP growth scenario:
  - Real growth in 2007-08 assumed one standard deviation below historical average.
  - Government closes financing need through borrowing; NPV of debt-to-GDP ratio rises and then levels off.
- Lower export growth scenario:
  - Export growth in 2007-08 assumed one standard deviation below historical average.
  - NPV of debt-to-exports and debt service-to-exports ratios rise above baseline and level off toward end of projection period.
- Scenario of new borrowing on less concessional terms:
  - Interest rate on new borrowing in 2007-2027 assumed two percentage points higher than baseline.
  - All debt ratios deteriorate but do not exceed indicative thresholds.
- Historical average scenario:
  - Reflects past current account surpluses not foreseen in the projection period; yields more optimistic external debt burden indicators than baseline.

### Risks from private creditors and litigation
- Possible litigation by private nonparticipating creditors remains a risk to policy credibility.
- Twenty-two commercial creditors (about 20 percent, US$240 million in claims, including US$78 million principal, of total commercial creditor debt in August 2003) did not accept the buy-back; some sold claims in secondary market.
- Five commercial creditors (Winslow Bank, Del Favero SPA, Sconset Ltd., Antwerp, and Grace Church Capital) pursued legal recourse, including litigation and seizure of Cameroonian assets abroad.
  - Early 2005: Winslow sued and seized US$50 million from Cameroon’s state oil company’s deposits in France.
  - Del Favero froze the account of the Cameroonian embassy in London.
  - Negotiations with Sconset and Antwerp continue; these creditors accepted dropping accumulated interest but insist on full repayment of principal and representation charges and court fees.
  - Grace Church Capital agreed to start negotiations for an out-of-court settlement.
- Absolute amount of claims by private creditors is less than 1 percent of Cameroon’s GDP; unlikely to have a significant impact on debt sustainability.

### Public debt sustainability
- Public debt declined considerably due to large external cancellations and frontloaded domestic debt repayments.
  - Domestic debt repaid substantially following a comprehensive audit of end-2004 stock, reducing domestic debt from 17 percent of GDP in 2004 to 9 percent of GDP by end-2006.
  - Authorities’ debt repayment plan implies substantial additional repayments of domestic debt in coming years.
- Long-term fiscal strategy:
  - Anchor objective: preserve overall public debt sustainability.
  - Nonoil primary deficit expected to gradually decline to about 1 percent owing to additional nonoil revenue mobilization.
  - New borrowing to amount to 1.5 percent of GDP annually during 2007-16, then decline to about 1 percent.
  - Under these assumptions, NPV of public debt as percent of revenues expected to remain broadly stable with some reduction in outer years; debt service expected to be reduced considerably.
- Alternative scenarios and stress tests:
  - Any scenario implying new annual borrowing in excess of 3 percent of GDP would lead to an explosive and unsustainable path (terms of new borrowing same as baseline).
  - Historical experience: government unable to use scaled up foreign-financed investment exceeding 2 percent annually.
  - If aggressive upfront borrowing (even concessional) is compounded with lower than projected GDP, exports, and fiscal revenue growth, this would lead to unsustainable debt buildup.
- Domestic debt management risk:
  - Weak domestic debt management may pose program risks.
  - Nonresident investors may increasingly trade in Cameroon’s domestic debt on the secondary market, though such transactions have not been significant so far.

### Conclusion
- Staff assessment: Cameroon faces a low risk of debt distress under baseline and stress scenarios, conditional on continued robust non-oil growth, prudent fiscal and borrowing policies, full delivery of assumed debt relief, and management of risks from litigation and domestic debt dynamics.

*Source: IMF–World Bank joint DSA update for Cameroon (Introduction, _cr07285).*

### 16. After the full delivery of debt relief Cameroon faces a low risk of debt distress. All

### 16. After the full delivery of debt relief Cameroon faces a low risk of debt distress. All

### Debt sustainability assessment — main conclusion
- After the full delivery of debt relief Cameroon faces a low risk of debt distress.
- All external debt indicators remain below the relevant country-specific debt burden thresholds.
- Alternative scenarios and stress tests reveal an upward trend for the debt indicators but do not result in a breach of the thresholds during the projection period.

### Key policy recommendation
- The authorities should monitor closely debt indicators and avoid excessive borrowing on nonconcessional terms over the medium term.

### External debt indicators and projections (high-level findings)
- NPV of external debt-to-GDP ratio (selected years/projections): 3.6 (2007), 3.8 (2008), 4.4 (2009), 4.8 (2010), 5.3 (2011), 6.3 (2012), 7.3 (2017), 11.8 (2017 table entry), 11.9 (2027).
- NPV of external debt in percent of exports (selected years/projections): 13.7 (2007), 16.4 (2008), 19.5 (2009), 22.9 (2010), 26.8 (2011), 33.4 (2012), 40.5 (2017), 80.0 (2017 table entry), 99.3 (2027).
- Debt service-to-exports ratio (in percent): 2.8 (2007), 1.7 (2008), 1.7 (2009), 1.9 (2010), 1.7 (2011), 1.7 (2012), 1.8 (2017), 2.4 (2017 table entry), 4.2 (2027).
- PPG (public and publicly guaranteed) NPV of external debt (in percent of GDP and exports) mirrors overall external debt series closely (e.g., PPG NPV-to-GDP: 3.5 (2007), 3.8 (2008), 4.4 (2009), 4.7 (2010), 5.3 (2011), 6.2 (2012), 7.2 (2017), 11.7 (2017 table entry), 11.9 (2027); PPG NPV-to-exports: 13.5 (2007), 16.2 (2008), 19.4 (2009), 22.7 (2010), 26.6 (2011), 33.2 (2012), 40.3 (2017), 79.7 (2017 table entry), 99.1 (2027)).
- Total gross financing need (billions of U.S. dollars): 0.1 (2007), 0.5 (2008), 0.8 (2009), 1.1 (2010), 1.4 (2011), 1.7 (2012), 2.0 (2017), 3.2 (2017 table entry), 4.7 (2027).

### Identified net debt-creating flows and contributors (selected figures)
- Change in external debt (percent of GDP): -31.8 (historical), 0.6 (2007), 1.1 (2008), 0.7 (2009), 0.9 (2010), 0.9 (2011), 0.9 (2012), 0.5 (2017), -0.6 (2027).
- Identified net debt-creating flows (percent of GDP): -2.8 (historical), 2.2 (2007), 3.3 (2008), 4.3 (2009), 5.0 (2010), 5.6 (2011), 6.2 (2012), 7.0 (2017), 4.4 (2017 average).
- Non-interest current account deficit (percent of GDP): 0.6 (historical), 1.3 (2007), 1.9 (2008), 2.4 (2009), 3.5 (2010), 4.6 (2011), 5.4 (2012), 6.0 (2017), 6.6 (2017 average), 7.5 (2027).
- Exports (percent of GDP): 26.0 (historical), 23.3 (2007), 22.5 (2008), 20.8 (2009), 19.8 (2010), 18.8 (2011), 17.9 (2012), 14.7 (2017), 12.0 (2027).
- Imports (percent of GDP): 28.4 (historical), 28.2 (2007), 28.3 (2008), 27.6 (2009), 27.1 (2010), 26.6 (2011), 26.1 (2012), 23.6 (2017), 17.7 (2027).
- Net current transfers (negative = inflow, percent of GDP): -1.4 (historical), -1.3 (2007), 0.4 (2008), -2.1 (2009), -1.8 (2010), -1.7 (2011), -1.5 (2012), -1.3 (2017), -1.2 (2017 average), -0.9 (2027).

### Stress tests, alternative scenarios, and sensitivity analysis — highlights
- Baseline and alternative scenarios for NPV debt-to-GDP, NPV debt-to-exports, and debt service ratios were simulated for 2007-27; stress tests include:
  - A1. Key variables at their historical averages in 2007-27.
  - A2. New public sector loans on less favorable terms in 2007-27 (assumes interest rate on new borrowing is by 2 percentage points higher than in the baseline).
  - B1–B6. Bound tests including shocks to real GDP growth, export value growth, US dollar GDP deflator, net non-debt creating flows, combination shocks, and a one-time 30 percent nominal depreciation relative to the baseline in 2007.
- A2 (less favorable financing) yields higher debt ratios (examples): NPV debt-to-GDP under A2: 3.8 (2007), 4.7 (2008), 5.4 (2009), 6.3 (2010), 7.4 (2011), 8.4 (2012), 12.9 (2017), 12.2 (2027).
- Bound tests produce higher peaks but do not breach the country-specific thresholds during the projection period under the scenarios considered (tables and figures show upward trends without threshold breaches).

### Public sector debt indicators (selected figures)
- Public sector debt (percent of GDP): 14.3 (2006), 12.4 (2007), 11.7 (2008), 12.4 (2009), 13.3 (2010), 14.2 (2011), 15.0 (2012), 18.7 (2017), 16.3 (2017 average).
- NPV of public sector debt (percent of GDP): 12.8 (2006), 10.6 (2007), 9.4 (2008), 9.7 (2009), 10.3 (2010), 11.2 (2011), 12.2 (2012), 16.7 (2017), 16.9 (2027).
- NPV of public sector debt-to-revenue ratio (in percent): 67.0 (2006), 54.9 (2007), 50.1 (2008), 53.0 (2009), 57.8 (2010), 64.5 (2011), 72.2 (2012), 105.9 (2017), 109.3 (2027).
- Debt service-to-revenue ratio (in percent): 4.5 (2006), 2.7 (2007), 2.8 (2008), 2.9 (2009), 2.7 (2010), 2.7 (2011), 2.7 (2012), 3.1 (2017), 4.1 (2027).
- Gross financing need (percent of GDP): -4.1 (2006), -1.0 (2007), -0.7 (2008), 1.0 (2009), 1.6 (2010), 1.8 (2011), 2.1 (2012), 2.6 (2017), 1.9 (2027).

### Fiscal and macro assumptions used in projections (selected)
- Real GDP growth (in percent): 3.8 (historical), 3.9 (2007), 1.1 (2008), 4.5 (2009), 4.5 (2010), 4.8 (2011), 5.5 (2012), 5.4 (2017), 5.3 (2027); longer-run averages appear at 5.2, 5.4, 5.3 in projection tables.
- GDP deflator in US dollar terms (change in percent): 4.6 (historical), 3.7 (2007), 9.0 (2008), 5.0 (2009), 2.2 (2010), 2.0 (2011), 2.4 (2012), 2.7 (2017), 2.6/2.8/2.0 (various projection entries).
- Effective interest rate (percent): 0.5 (historical), 4.1 (2007), 2.3 (2008), 2.6 (2009), 2.4 (2010), 2.1 (2011), 1.8 (2012), 1.7 (2017), 1.6/2.0/1.5/0.0/1.4 (various projection entries).
- Growth of exports of G&S (US dollar terms, in percent): 20.2 (historical), 7.8 (2007), 10.0 (2008), -1.6 (2009), 3.2 (2010), -1.0 (2011), 2.5 (2012), 2.9 (2017), 3.1/1.5/3.5/6.4/4.6 (various projection entries).
- Grant element of new public sector borrowing (in percent): 41.0, 41.1, 41.4, 41.4, 14.7, 14.7, 32.4, 14.7, 14.7, 14.7 (entries across tables).

### Sensitivity analyses — selected scenario outcomes (2007-27)
- NPV of debt-to-GDP (baseline and alternatives): baseline shows rising path to 11.9 (2027); A2 (less favorable terms) reaches 12.2 (2027) in one table and higher peaks in scenario tables for exports- and growth-shock bound tests (e.g., baseline 11.9 (2027) vs. A2 101.5 (2027) in specific table entries for NPV-to-exports under adverse financing — note: multiple tables present series by indicator and scenario).
- Debt service-to-revenue and NPV-to-revenue ratios show significant sensitivity to scenarios with larger increases under adverse shocks (examples: NPV of public sector debt-to-revenue ratio up to 109.3 (2027) in baseline; scenario B5 and B6 stress tests yield higher peaks in sensitivity tables).

### Statement by the IMF Staff Representative (June 15, 2007) — updates after staff report
- Inflation: Consumer price inflation fell to 1.4 percent in the first quarter of 2007 (compared with 4.5 percent in the same period last year).
- Fiscal performance Q1 2007: Broadly satisfactory; overall fiscal surplus significantly higher than projected due to lower-than-programmed spending more than compensating for lower revenues.
  - The end-March 2007 quantitative benchmark on the nonoil primary balance was missed by 0.03 percent of GDP.
  - Nonoil revenues underperformed mostly because of lower-than-projected nontax revenues reflecting delays in payment of dividends.
  - Investment execution: domestically-financed investment close to program target; foreign- and debt relief-financed investments significantly lower than expected.
  - Authorities are taking steps to strengthen nonoil revenue collection and monitor spending closely.
- Privatization: Authorities relaunched the privatization process for the national airline and announced a bidding process in May for recruitment of an international bank to advise during privatization.

*Source: Staff simulations; IMF staff statement, June 15, 2007.*

### 4.      The authorities are in the process of finalizing bilateral agreements on debt

### 4.      The authorities are in the process of finalizing bilateral agreements on debt

### Status of Paris Club bilateral agreements and debt relief
- As of May 2007, eleven bilateral agreements on debt cancellation with Paris Club creditors had been signed and three remain to be finalized.
- The Paris Club agreed to extend the deadline for signing bilateral agreements from December 31, 2006 to June 30, 2007.
- The authorities have committed to the Paris Club to offer comparable treatment to creditors that did not participate in the 2003 debt buy-back operation; negotiations with private creditors are ongoing, and some private creditors have agreed to forgo accumulated interest and penalties.

### IMF reviews, disbursements, and PRGF arrangement
- The IMF Executive Board completed the third review under the PRGF arrangement and the review of financing assurances.
- Approval was given for a waiver of non-observance of a performance criterion pertaining to net claims of the banking sector on the central government on the basis of a minor deviation and corrective action taken.
- Disbursement approved: SDR 2.65 million (about US$4 million).
- Total disbursements under the arrangement after this review: SDR 10.6 million (about US$16 million).
- The three-year PRGF arrangement was approved on October 24, 2005 in an amount equivalent to SDR 18.57 million (about US$27.9 million).
- PRGF loan terms (as stated): annual interest rate of 0.5 percent and repayable over 10 years with a 5 ½-year grace period on principal payments.

### Macroeconomic developments and outlook
- 2006: growth picked up following rebounds in construction activities, oil output, and forestry production; inflation contained at about 5 percent.
- Outlook for 2007 and medium term:
  - Economic activity expected to pick up further in 2007.
  - Because of lower projected oil prices, inflation is expected to decelerate considerably while the external current account deficit will widen over the medium term.
  - Fiscal policies will remain prudent.
  - Overall fiscal surplus expected to decline on average during 2007-08, largely as a result of lower oil prices.
  - Fiscal consolidation efforts—as reflected in the nonoil fiscal balance—will continue.
- Main risks to the outlook: slower progress in mobilizing nonoil revenue, weak improvement in the business climate, and public spending overruns linked to the parliamentary elections in 2007.

### Fiscal policy stance and commitments
- Authorities intend to meet the fiscal objectives of the 2007 program; nonoil revenue objective set at 12.5 percent of GDP.
- Two-thirds of noninterest spending in 2007 will be allocated to capital expenditures.
- Commitments on use of windfall oil revenue:
  - Accelerate payments on domestic debt and arrears.
  - Repurchase debt held by external commercial creditors who did not take part in the commercial debt repurchase initiative within the London Club.
  - Finance investment projects in priority sectors (infrastructure, education, health, rural and urban development) after consultation with IMF staff.
- Fiscal management measures and procurement:
  - Prepare a road map toward executing a multiyear investment budget.
  - Enter as priority items in the following year’s budget all expenditure items committed but for which payment has not been authorized by the end of the fiscal year.
  - Continue improving public expenditure management, strengthen monitoring via monthly budget execution tables on a cash basis and on a payment order basis, and publish penalties imposed on procurement offenders.

### Structural reforms, governance, and business environment
- Structural measures to boost revenue and broaden the tax base within the year:
  - (i) connect online the IT systems of the tax and customs directorates;
  - (ii) establish the electronic one-stop window to facilitate foreign trade;
  - (iii) eliminate the minimum administrative values for all imported products while taxing imported goods in accordance with CEMAC rules;
  - (iv) pursue efforts to control and reduce duty exemptions and improve ex-post controls;
  - (v) improve the implementation and control of customs and economic regimes;
  - (vi) increase the number of taxpayers covered by the tax centers for medium-sized enterprises in Yaoundé and Douala;
  - (vii) streamline taxpayer identification;
  - (viii) complete implementation of a tax-related information management software (AREN);
  - (ix) create a commission to review domestic tax and foreign trade taxation to make revenue-boosting recommendations.
- Public enterprise reform and privatization plans: CAMTEL, SNEC, and CAMAIR with specific timetables in the Memorandum of Economic and Financial Policies.
- Financial sector reforms: improve financial reporting, simplify procedures for calling in collateral, establish a commercial court, develop the securities market, and support BEAC implementation of regional FSAP recommendations.
- Governance and transparency measures: implement EITI principles, publish quarterly budget-execution reports, operating reports of the national oil company, financial aggregates of main public enterprises, statistical data, debt analysis, and judicial decisions and administrative penalties against corrupt government employees; National Anti-Corruption Commission (CONAC) appointed and operational.
- Authorities intend to establish a Business Forum (modeled on Vietnam) to coordinate public-private partnerships (PPPs).

### Debt strategy and external debt management
- Prudent debt policy to be pursued consistent with medium-term macroeconomic framework and fiscal objectives.
- Borrowing over the medium term to be contracted on concessional terms.
- Bilateral agreements with Paris Club member creditors to be signed; good-faith negotiations to clear arrears with private creditors to proceed with concern for comparable treatment.

### IMF Directors’ assessment and policy recommendations
- Commended authorities’ commitment to sound policies, fiscal policy improvements, and public finance management that contributed to macroeconomic stability.
- Urged authorities to:
  - Set non-oil revenues on a steady upward path and be ready to accelerate administrative and tax policy measures if tax receipts fall below expectations.
  - Monitor spending closely, follow budgetary procedures, refrain from extrabudgetary spending, enhance capital budget execution, and reorient spending toward priority areas.
  - Contain and then eliminate subsidies to public enterprises to create fiscal space for priority spending.
  - Maintain prudent debt management, continue concessional borrowing, and put resources to effective use to safeguard debt sustainability.
  - Strengthen the business environment: improve infrastructure, deepen financial intermediation while preserving banking system soundness, liberalize trade, reform public enterprises, and step up anticorruption efforts.
  - Build on national FSAP recommendations to prepare a financial sector strategy and pursue trade reform within CEMAC, including lowering the common external tariff.

### Selected numeric targets and program indicators (as stated)
- Non-oil revenue objective: 12.5 percent of GDP.
- Nonoil primary deficit stabilized around 2.2 percent.
- Annual GDP growth should remain above 4 percent.
- Inflation contained below 2 percent.
- PRGF disbursement approved: SDR 2.65 million (about US$4 million); total disbursements to date: SDR 10.6 million (about US$16 million).
- Original PRGF arrangement amount: SDR 18.57 million (about US$27.9 million).
- PRGF loan terms: annual interest rate of 0.5 percent; repayable over 10 years with a 5 ½-year grace period on principal payments.
- Paris Club signing deadline extended from December 31, 2006 to June 30, 2007.
- As of May 2007: eleven bilateral agreements signed; three remain to be finalized.

*Source: IMF staff/Executive Board materials (Public Information Notice and PRGF review materials, June 2007).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2007/_cr07285.pdf_