## _cr12237

## Source details

**Canonical URL:** [_cr12237](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12237.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12237.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12237.pdf.json)

---

### Background
- Macroeconomic stability preserved; debt burden reduced by HIPC and MDRI initiatives.
- Per capita income: almost no growth in the last five years despite a relatively diversified productive base.
- Poverty: rates stagnated at close to 40 percent; 87 percent of the poor live in rural areas.
- Political context: President re-elected in October 2011 for another seven-year term; legislative elections postponed to 2013.
- Data gaps: government financial operations on a commitment basis not available; balance of payments statistics quality and timeliness need improvement; monetary data subject to long delays.
- Response to past Fund advice (selected):
  - Fiscal: Treasury management constrained by past payment obligations and overruns; fuel subsidies not reduced; non-oil revenue lower than expected; domestic arrears persisted; usable deposits nearly depleted; MTEF not yet operational.
  - Financial sector: Cameroon first issuer of treasury bills on the regional market; little progress on troubled banks; supervision hampered by inadequate regional resources; crisis resolution framework not yet in place.
  - Structural: public capital expenditure reached budgeted level; efforts to improve business climate pursued; moderate progress on institutions and governance.

### Recent economic developments
- Growth and inflation:
  - Real GDP growth: 2010 = 2.9 percent; 2011 = 4.2 percent.
  - Average inflation: 2010 = 1.3 percent; 2011 = 2.9 percent.
  - Retail petroleum prices frozen; subsidized food imports helped contain measured inflation.
- Sectoral contributions (2007–2011): tertiary sector strongest (e.g., 2.8 in 2011); primary and secondary varying, oil sector negative in some years (e.g., -0.8 in 2009).
- External sector:
  - Rebound in international oil prices more than compensated for lower oil export volumes; non-oil exports benefited from higher commodity prices.
  - Import volume grew by almost 16 percent in 2011 due to stronger domestic demand and imports of capital goods for large public infrastructure projects.
- Monetary and reserves:
  - Broad money increased by 11 percent in 2011.
  - Credit to the private sector increased by 28 percent in 2011.
  - Net foreign assets dropped by 12 percent in 2011.
  - CEMAC official reserves about 5 months of total imports or nearly 100 percent of broad money.

### Fiscal and financial sector weaknesses (2011 highlights)
- Fiscal performance:
  - Non-oil revenue shortfall driven by lower-than-budgeted VAT receipts.
  - Oil revenue windfall from higher international oil prices mitigated shortfall.
  - Non-oil primary deficit (NOPD), cash basis: deteriorated from 5.7 percent to 8.5 percent of non-oil GDP.
  - Overall fiscal deficit was 0.8 percentage point of GDP higher than budgeted.
  - Deferred planned bond issuance: CFAF 150 billion—1.3 percent of GDP.
  - Government drew down deposits at BEAC, including public institutions’ deposits.
- Budget execution and arrears:
  - Owed SONARA CFAF 163 billion (1.4 percent of GDP) at end-2011.
  - Cleared prior UPOs of CFAF 295 billion—2.5 percent of GDP; accumulated new UPOs of CFAF 110 billion.
  - Regularization eroded fiscal buffers and reduced compulsory deposits.
- Banking system weaknesses:
  - Financial distress in 4 (possibly 5) banks out of 13 commercial banks; these 5 banks account for 26–29.2 percent of deposits/28 percent of total bank credit in various presentations.
  - Excessive concentration in credit to SONARA.
  - Inadequate resources at COBAC; weak crisis resolution framework.
  - Financial soundness indicators deteriorated in 2011; NPLs increased by about 17 percent; aggregate CAR fell to 5.2 percent in 2011 (statutory limit 8 percent).

### Key fiscal indicators (percent of GDP, selected)
- Total revenue, including grants: 2008 20.8; 2009 18.4; 2010 17.5; 2011 (est.) 17.6; 2011 (budget) 18.9.
- Oil revenue: 2008 7.6; 2009 4.8; 2010 4.5; 2011 (est.) 3.5; 2011 (budget) 5.4.
- Non-oil revenue: 2008 12.3; 2009 12.7; 2010 12.4; 2011 (est.) 13.2; 2011 (budget) 13.0.
- Total expenditure: 2008 18.6; 2009 18.4; 2010 18.6; 2011 (est.) 18.9; 2011 (budget) 21.7.
- Capital expenditure: 2008 5.5; 2009 4.2; 2010 4.1; 2011 (est.) 5.7; 2011 (budget) 6.4.
- Payment of domestic arrears: 2008 0.4; 2009 0.2; 2010 1.1; 2011 (est.) 1.3; 2011 (budget) 0.5.
- Overall balance, including grants: 2008 2.0; 2009 -0.2; 2010 -2.3; 2011 (est.) -2.6; 2011 (budget) -3.4.
- Memorandum: Non-oil primary deficit: 2008 -5.5; 2009 -4.9; 2010 -5.7; 2011 (est.) -4.8; 2011 (budget) -8.5.

### Medium-term economic outlook and risks
- Growth projections (staff): Real GDP projected from 4.2 percent in 2011 to 5½ percent in 2016.
- Drivers of non-oil growth: boost agricultural productivity; major public investment projects; measures to improve business environment.
- Oil sector outlook: expected to boost real GDP in 2012–17; SNH projects sizeable production increase from ongoing investments.
- Inflation outlook: expected to remain below regional convergence criterion of 3 percent.
- External balance: current account deficit projected to decrease from 4.7 percent of GDP in 2012 to about 3.5 percent in 2017; financing mainly by new public external borrowing and private capital inflows.

### Medium-term fiscal outlook and assumptions (section 15)
- Non-oil revenue mobilization: expected improvement in ratio of non-oil revenue to non-oil GDP by about ½ percentage point from 2011 to 2017.
- Public capital spending requirement: 6½–7 percent of GDP to tackle infrastructure gaps.
- Baseline medium-term projections assume:
  - Small improvement in revenue mobilization.
  - Continued freeze in retail fuel prices.
  - Execution of government’s ambitious public investment program.
  - NOPD forecast to remain in range 8.5 to 9 percent of non-oil GDP.
  - Financing gaps remain around 3 percent of GDP in the baseline.
  - Projected accumulation of domestic arrears could reach up to 16 percent of GDP by 2017.

### Risks to outlook (selected)
- (i) Downturn in external environment, particularly euro area.
- (ii) Negative spillovers from continued accumulation of arrears.
- (iii) Vulnerable banking sector generating fiscal liabilities and affecting real sector.
- Additional risks: increasing domestic borrowing and arrears push public debt indicators higher; quasi-fiscal liabilities of SOEs and distressed banks; nonconcessional external borrowing trend could compromise debt sustainability.
- Incorporating arrears into DSA: overall debt-to-GDP ratio increases from 13.7 percent in 2011 to 31.8 percent in 2017.

### Debt sustainability and external borrowing (summary)
- DSA: risk of debt distress remains low; all external debt ratios remain below policy-dependent thresholds including under stress.
- Emerging vulnerabilities: increasing domestic borrowing; accumulation of domestic arrears; potential quasi-fiscal liabilities; higher share of nonconcessional external commitments.

### Downside scenario: Euro Area downturn (Box 2, selected impacts)
- Assumptions relative to April 2012 WEO downturn scenario:
  - Additional 5 percent depreciation of euro/US dollar and 5 percent decrease in international oil price in 2013.
  - Trading partner GDP growth lower by 0.5 and 1 percentage points in 2012 and 2013, respectively.
  - Oil prices per barrel lower by US$10 in 2012 and 2013.
  - Non-oil export prices lower by 5 percent in 2012 and 10 percent in 2013.
  - CFA franc nominal exchange rate against US dollar higher by 5 percent in 2012 and 10 percent in 2013.
- Key projected impacts (baseline vs downside excerpts):
  - Real GDP: baseline 2012 = 4.7; downside 2012 = 4.2; baseline 2013 = 5.0; downside 2013 = 4.0.
  - Consumer prices (period average): baseline 2012 = 3.0; downside 2012 = 3.3; baseline 2013 = 3.0; downside 2013 = 3.3.
  - Oil export price (US$ per barrel): 2011 = 111.6; baseline 2012 = 102.7; baseline 2013 = 101.0; downside 2012 = 92.7; downside 2013 = 91.0.
  - Overall budget balance, including grants (percent of GDP): 2011 = -3.4; baseline 2012 = -3.9; baseline 2013 = -3.8; downside 2012 = -4.5; downside 2013 = -4.5.
  - Current account, including grants (percent of GDP): 2011 = -4.1; baseline 2012 = -4.7; baseline 2013 = -4.2; downside 2012 = -4.6; downside 2013 = -4.2.

### 2012 budget pressures and near-term risks
- 2012 budget: unchanged revenue policies; channels more expenditure toward capital spending.
  - Projects non-oil revenue close to 13 percent of GDP.
  - Projects current expenditure about 0.7 percentage point of GDP lower than 2011 budget.
  - Projects capital expenditure 0.5 percentage point of GDP higher than 2011 budget.
  - Foresees overall fiscal deficit, cash basis, of 2.5 percent of GDP to be financed largely by issuance of securities on regional market (CFAF 250 billion; 2 percent of GDP).
- Budgetary pressures:
  - Windfall oil revenue expected to raise oil revenue by 1 percentage point of GDP relative to budget.
  - Maintaining retail fuel price policy at current world prices requires subsidy about CFAF 400 billion (3 percent of GDP), CFAF 230 billion more than budgeted.
  - Uncertainty over regional market capacity to absorb planned securities issuance.
  - Contingent claims from restructuring distressed banks and public corporations.
  - Resources to clear UPOs could be as high as CFAF 130 billion (1 percent of GDP).
- Incorporating these factors yields a financing gap of up to 1.6 percent of GDP.
- Staff advice to prevent further arrears accumulation:
  - (i) Step up administrative reforms to improve non-oil revenue collection.
  - (ii) Implement a strict cash flow plan and curb non-priority spending.
  - (iii) Screen launch of new public projects carefully and secure concessional financing where possible.

### Containing arrears and medium-term fiscal sustainability
- Arrears and UPOs reached about 4.5 percent of GDP at end-2011.
- Projected financing gaps around 3 percent of GDP could lead to domestic arrears up to 16 percent of GDP by 2017.
- Staff recommendations on fuel subsidies and social protection:
  - Gradual adjustment of pump prices to international prices, accompanied by targeted social programs.
  - Adopt a plan to phase out fuel subsidies through gradual pump price adjustments.
  - Consider reduced adjustment on kerosene and targeted safety nets for the most vulnerable.
- Staff recommended fiscal sustainability measures:
  - Accelerate administrative reforms to widen tax base by:
    - (i) rationalizing tax exemptions and tax incentive schemes;
    - (ii) completing reform of unique taxpayer identification number;
    - (iii) strengthening tax centers for medium-size enterprises and small taxpayers;
    - (iv) simplifying tax and customs procedures.
  - Adopt a tighter path for the NOPD, with a reform scenario generating a lower NOPD than baseline.
  - Raise fiscal buffers.
  - Avoid reemergence of debt vulnerability by contracting new external debt on concessional terms where possible.
  - Strengthen public debt management by:
    - (i) enhancing capacity of national public debt committee;
    - (ii) monitoring contingent liabilities from public enterprises;
    - (iii) conducting periodic audits of domestic arrears.

### Public Financial Management (PFM) improvements
- Staff recommendations:
  - Strengthen PFM and improve expenditure efficiency.
  - Implement program budgeting in the 2013 budget; reforms guided by six PFM directives adopted by CEMAC in December 2011.
  - Actions to contain arrears and UPOs:
    - Complete ongoing audit of arrears and UPOs before end-2012 and adopt settlement plan.
    - Implement IMF TA recommendations on moving from cash-based budget to payment-order system as interim toward accrual budgeting.
    - Strengthen expenditure chain to avoid derogatory commitments and ensure execution within fiscal year.
    - Improve information management to track flow of funds.
  - Improve cash management:
    - Continue issuance of two- and four-week Treasury bills through BEAC.
    - Abide by single Treasury account rule and eliminate use of SNH as payment window.
  - Accelerate PFM modernization plan (adopted 2009): improve absorptive capacity, competitive procurement, transition to program-based budgeting, improve fiscal reporting, make MTEF operational.

### Financial sector stability and resolution of troubled banks
- Banking sector vulnerabilities increased since last Article IV:
  - Causes: delayed restructuring/dissolution of banks, deterioration in soundness indicators, rising prudential breaches, accumulation of arrears and UPOs pushing public enterprises into more bank borrowing.
- Troubled banks and systemic exposure:
  - Number of troubled banks increased from three to four; a fifth likely in difficulty.
  - At end-2011, five banks accounted for 29.2 percent of deposits and 28 percent of total bank credit (selected presentations).
  - Preliminary report: a fifth bank with negative net worth and portfolio with almost 40 percent NPLs.
- Staff recommendations for resolution:
  - Take swift action to resolve troubled banks in close collaboration with COBAC.
  - Liquidate banks with no credible restructuring plans as soon as possible.
  - Monitor liquidity of troubled banks; set short deadlines for recapitalization agreements.
  - Limit public finance impact by requiring full loss absorption by previous shareholders.

### Banking sector structure and vulnerabilities (Appendix I highlights)
- Banking system: 13 commercial banks; microfinance sector with 495 institutions at end-2010.
- Market shares (end-2011): international groups outside SSA 57.3 percent; domestic banks 24 percent.
- Distress and capital metrics:
  - Banks facing insolvency: 4; a fifth reportedly in difficulty.
  - Estimated net negative equity related to NPL losses: CFAF 60 billion (one larger domestic bank); CFAF 20 billion (other troubled banks).
  - Aggregate CAR declined from 7.4 percent (2010) to 5.2 percent (2011); statutory limit 8 percent.
  - NPLs to gross loans: 2011 = 12.3 percent; provisioning for NPLs = 96.7 percent of gross NPLs.
  - Number of banks breaching single large exposure limit: 9 out of 13 in 2011.
- Regulatory and supervisory gaps:
  - COBAC capacity constraints; on-site examinations can take two to four years.
  - Need to strengthen consolidated group supervision and resolution regime.
  - FOGADAC established in 2009; once operational will insure deposits up to CFAF 5 million.

### Fuel subsidies: fiscal burden and reform options (selected)
- Required subsidies: 2010 = CFAF 146 billion (1.3 percent of GDP); 2011 = CFAF 309 billion (2.5 percent of GDP).
- 2012 projection by authorities: about CFAF 400 billion (3.1 percent of GDP).
- Staff estimates (2013–17, unchanged retail prices): required fuel subsidies would average CFAF 415 billion (2.6 percent of GDP) per year.
- Subsidies in 2011 represented about 29 percent of notional retail price for gasoline, 32 percent for diesel, 49 percent for kerosene.
- Distributional incidence (2007 IMF assessment): more than 70 percent of fuel price subsidies accrue to the richest 40 percent; poorest 20 percent receive less than 1 percent of gasoline subsidy and 13 percent of kerosene subsidy.
- Eliminating subsidies on gasoline and diesel only would free 2.3 percent of GDP annually in 2013–17.
- Pricing formula issues:
  - Notional retail price (m) and pump price (n) example (May 2012):
    - Gasoline: m = 875.3; n = 569.0; shortfall m-n = 306.3.
    - Kerosene: m = 714.9; n = 350.0; shortfall m-n = 364.9.
    - Diesel: m = 801.9; n = 520.0; shortfall m-n = 281.9.
  - Memorandum: required subsidy as % of fixed pump price: 54% (gasoline), 104% (kerosene), 54% (diesel).
- Reform options:
  - Short term: delink SONARA supplementary margin from international prices by setting nominal transfer per liter.
  - Medium term: estimate wholesale price based on SONARA production costs, account for efficiency gains from investments.
  - Reassess distribution and price-equalization costs and margins.
  - Staff recommendation: comprehensive reform with gradual pump price adjustments to international prices; reduce kerosene adjustment; targeted safety nets, possibly with donor support.

### Public investment scenarios and growth model findings (DSGE and reform scenarios)
- Public investment path: increases from 4.1 percent of GDP in 2010 to 6.6 percent by 2018, then down to 5.6 percent by 2032.
- DSGE scenarios:
  - Baseline: projected annual real growth similar to historical average 3.3 percent.
  - Optimistic (higher φ): average annual growth increases to 5 percent.
- Fiscal consequences:
  - Baseline DSGE: muted growth response causes fiscal indicators to deteriorate; NOPD increases substantially.
  - Optimistic DSGE: NOPD recovers and shows non-oil primary surplus by end of projection.
  - Public-debt-to-GDP by 2032: DSGE baseline 35 percent; DSGE optimistic 25 percent.
- Policy conclusions:
  - Scaling up public investment requires substantially higher effectiveness of public investment and an enabling environment for private investment.
  - Recommendation: save at least some oil revenue in current high-price environment for future public investment as effectiveness improves; use NOPD to guide fiscal management.

### Competitiveness, trade facilitation, and constraints
- Internal relative prices (IRERs) findings (1994–2011):
  - IRERx (exportables vs domestic) more volatile and declining since 1998, indicating export competitiveness gains.
  - IRERm (domestic vs importables) rose by 67 percent cumulative 1994–2011, indicating loss of competitiveness for import-substitution production.
  - REER depreciated about 7 percent in 2010–11 but did not offset cumulative REER appreciation 1994–2009 (24 percent).
  - Model estimates suggest REER overvalued by about 8 percent at end-2011.
- Trade facilitation evidence:
  - Average import clearance time in Cameroon: 24 days vs 12.7 days SSA average (World Bank Enterprise Survey 2009).
- Survey indices (2011–12 / 2012):
  - GCI 2012: Cameroon rank 116 out of 142; score 3.7 out of 7.
  - Doing Business 2012: Cameroon rank 161 out of 183 (improved from 168).
  - ETI 2012: Cameroon rank 118 out of 132; overall score 3.3 out of 7.
- Firms cite top constraints: access to financing; corruption; inadequate infrastructure; tax regulations; government bureaucracy.

### Debt sustainability analysis (DSA) — key projections and assumptions
- Overall outstanding debt projected markedly higher than previous DSA due mostly to increased domestic debt from higher issuance of government securities.
- Macroeconomic and fiscal assumptions (selected):
  - DSA 2012 real GDP growth projections: short- and medium-term values shown in projections (e.g., medium term average 5 percent for 2013–17).
  - Oil price (US$ per barrel): DSA 2012 107.1 (near term), 91.8 (medium), 82.0 (long term).
- Projected new external commitments:
  - New external commitments: 2012 = CFAF 994 billion (7.8 percent of GDP); 2013 = CFAF 623 billion (4.5 percent of GDP).
  - Staff assume new borrowing commitments after 2013 decline to 2.4 percent of GDP by 2017.
  - Authorities indicated 75 percent and 70 percent of new commitments in 2012 and 2013, respectively, would be nonconcessional.
- External debt sustainability:
  - Cameroon ranked as ‘weak performer’ under joint IMF/World Bank DSA CPIA classification.
  - Indicative thresholds (weak performers): PV debt-to-exports 100 percent; PV debt-to-revenue 200 percent; PV debt-to-GDP 30 percent; debt service-to-exports 15 percent; debt service-to-revenue 18 percent.
  - DSA findings: all external debt indicators remain below thresholds over projection horizon, but external debt ratios rise driven by infrastructure borrowing.
- Public debt projections (selected):
  - Stock of public debt (percent of GDP): 2010 12.1; 2011 13.7; 2012 17.2; 2013 20.0; 2015 26.5; 2017 31.8.
  - PV of public sector debt-to-revenue and grants ratio (percent): 2012 66.6; 2013 82.6; 2015 117.4; 2017 148.4; 2022 213.7; 2032 293.7 (selected series).
- Total arrears and payment obligations (CFAF billions and percent of GDP):
  - Total arrears and other payment obligations (A+B+C+D): 2011 = 537.3 (4.5 percent of GDP); 2012 = 754.6 (5.9 percent); 2013 = 1,084.7 (7.9 percent); 2017 = 2,989.7 (16.3 percent).
- Stress tests and scenarios:
  - Export shock, contingent liability bound test, public sector downside (A3), depreciation scenarios tested; most extreme shocks identified in figures correspond to large depreciation or export shocks.
  - Public sector downside scenario (A3): permanently lower GDP growth (0.2 percentage point below baseline) yields PV debt-to-GDP 54 percent by 2032 in that scenario.
- Policy implications:
  - Reinforce debt management; conduct comprehensive audit of government payment obligations; favor concessional external borrowing; careful project selection and rigorous evaluation.

### Staff appraisal, Executive Board guidance, and recommended corrective measures (selected)
- Appraisal highlights:
  - Growth moderate; inflation within regional limit of 3 percent.
  - Significant risks: external recovery uncertainty (Europe); increase in fuel subsidies and domestic arrears; financial sector vulnerabilities; reduced reform momentum after legislative elections postponement.
- Urgent corrective measures for 2012 budget:
  - Address underbudgeted fuel subsidies; avoid further arrears accumulation; consider regional market absorption limits for securities issuance; limit contingent liabilities from public enterprises and distressed banks.
- Corrective measures required for medium-term fiscal sustainability:
  - Improve non-oil revenue mobilization.
  - Avoid accumulation of domestic arrears.
  - Rebuild fiscal buffers.
  - Tackle infrastructure gap via public investment while containing current expenditure, particularly fuel subsidies.
- PFM actions:
  - Finalize arrears audit and settlement plan; reinforce expenditure control; accelerate PFM modernization; implement CEMAC PFM directives.
- Financial sector stability:
  - Resolve ailing banks; implement corrective fiscal measures to avoid quasi-fiscal losses; strengthen regional framework and national-regional cooperation; Cameroon to take proactive role in regional reforms.
- Growth and competitiveness:
  - Address infrastructure gaps; improve project selection and limit nonconcessional borrowing; tackle governance issues; deepen private sector dialogue; increase financial intermediation and access to credit; renew efforts on regional trade liberalization.

*Source: CAMEROON 2012 ARTICLE IV REPORT, INTERNATIONAL MONETARY FUND (selected excerpts).*

### 1.  Selected Economic and Financial Indicators, 2010–17 ________________________________________ 28

### _cr12237 - 1.  Selected Economic and Financial Indicators, 2010–17 ________________________________________ 28

### Background
- Macroeconomic stability preserved; debt burden reduced by HIPC and MDRI initiatives (Figure 1).
- Almost no growth in per capita income during the last five years despite a relatively diversified productive base (Text Table 1 and Figure 2).
- Poverty rates have stagnated at close to 40 percent, with 87 percent of the poor living in rural areas (Figure 3).
- Political context: President re-elected in October 2011 for another seven-year term; legislative elections postponed to 2013.
- Data gaps: government financial operations on a commitment basis not available; balance of payments statistics quality and timeliness need improvement; monetary data subject to long delays. Authorities implementing a strategy to improve national accounts statistics with outside technical assistance.
- Response to past Fund advice has been mixed (Box 1):
  - Fiscal: Treasury management constrained by past payment obligations and overruns; fuel subsidies were not reduced; non-oil revenue lower than expected; domestic arrears persisted; usable deposits nearly depleted; MTEF not yet operational.
  - Financial sector: Cameroon first issuer of treasury bills on the regional market; little progress on troubled banks; supervision hampered by inadequate resources at the regional level; crisis resolution framework not yet in place.
  - Structural: Public capital expenditure reached budgeted level; efforts to improve business climate pursued; moderate progress on institutions and governance.

### Recent economic developments: Economic recovery but continued weaknesses
- Growth and inflation:
  - Real GDP growth rose to 4.2 percent in 2011 (from 2.9 percent in 2010).
  - Average inflation edged up to 2.9 percent in 2011 (from 1.3 percent in 2010), mainly due to food prices.
  - Freezing of retail petroleum prices and subsidized food imports contributed to containing measured inflation.
- Sectoral contributions to real GDP growth (Text Table 2):
  - 2007–2011 pattern: Primary sector around 1.2–0.9; Secondary sector, excl. oil around 0.1–0.9; Oil sector negative contributions in some years (e.g., -0.8 in 2009); Tertiary sector strongest (e.g., 2.8 in 2011).
- External sector:
  - Rebound in international oil prices more than compensated for lower oil export volumes, increasing oil export value.
  - Non-oil exports benefited from higher international commodity prices.
  - Import volume grew by almost 16 percent due to stronger domestic demand and imports of capital goods for large public infrastructure projects.
- Monetary and reserves:
  - Broad money increased by 11 percent in 2011.
  - Credit to the private sector increased by 28 percent in 2011.
  - Net foreign assets dropped by 12 percent in 2011.
  - CEMAC official reserves about 5 months of total imports or nearly 100 percent of broad money.

### Continued fiscal and financial sector weaknesses
- Fiscal performance in 2011:
  - Non-oil revenue shortfall driven by lower-than-budgeted VAT receipts, largely because parastatals could not meet VAT obligations.
  - Oil revenue windfall from surge in international oil prices mitigated the non-oil revenue shortfall.
  - Non-oil primary deficit (NOPD), on a cash basis, deteriorated from 5.7 percent to 8.5 percent of non-oil GDP.
  - Overall fiscal deficit was 0.8 percentage point of GDP higher than budgeted.
  - Deferred planned bond issuance: CFAF 150 billion—1.3 percent of GDP.
  - Government drew down deposits at the regional central bank (BEAC), including public institutions’ deposits, to compensate.
- Budget execution and arrears:
  - Government settled some obligations to SONARA via cash payments, cancellation of taxes, and securitization, but still owed SONARA CFAF 163 billion (1.4 percent of GDP) at end-2011.
  - Cleared prior UPOs of CFAF 295 billion—2.5 percent of GDP, but accumulated new UPOs of CFAF 110 billion.
  - Regularization efforts eroded fiscal buffers and reduced compulsory deposits of public institutions.
- Banking system weaknesses (Appendix I):
  - Financial distress in 4 (possibly 5) banks out of 13 commercial banks; the 5 banks account for 26 percent of total bank assets.
  - Excessive concentration in bank credit to SONARA.
  - Inadequate resources at the regional supervisory agency (COBAC).
  - Weaknesses in the framework for dealing with distressed banks.
  - Financial soundness indicators deteriorated in 2011; NPLs increased by about 17 percent.
  - Number of banks violating main prudential ratios continued to rise.
- Regional convergence criteria:
  - Cameroon complied with all four regional convergence criteria in 2011: non-negative basic fiscal balance; consumer price inflation not higher than 3 percent; public debt not higher than 70 percent of GDP; nonaccumulation of government arrears (criterion relates only to audited arrears).

- Key fiscal indicators (Text Table 3; percent of GDP unless stated):
  - Total revenue, including grants: 2008: 20.8; 2009: 18.4; 2010: 17.5; 2011 (est.): 17.6; 2011 (budget): 18.9.
  - Oil revenue: 2008: 7.6; 2009: 4.8; 2010: 4.5; 2011 (est.): 3.5; 2011 (budget): 5.4.
  - Non-oil revenue: 2008: 12.3; 2009: 12.7; 2010: 12.4; 2011 (est.): 13.2; 2011 (budget): 13.0.
  - Total expenditure: 2008: 18.6; 2009: 18.4; 2010: 18.6; 2011 (est.): 18.9; 2011 (budget): 21.7.
  - Current expenditure: 2008: 13.1; 2009: 14.2; 2010: 14.5; 2011 (est.): 13.1; 2011 (budget): 15.4.
  - Capital expenditure: 2008: 5.5; 2009: 4.2; 2010: 4.1; 2011 (est.): 5.7; 2011 (budget): 6.4.
  - Payment of domestic arrears: 2008: 0.4; 2009: 0.2; 2010: 1.1; 2011 (est.): 1.3; 2011 (budget): 0.5.
  - Overall balance, including grants: 2008: 2.0; 2009: -0.2; 2010: -2.3; 2011 (est.): -2.6; 2011 (budget): -3.4.
  - Memorandum items:
    - Non-oil Revenue: 2008: 13.7; 2009: 13.5; 2010: 13.3; 2011 (est.): 14.4; 2011 (budget): 14.2.
    - Non-oil primary deficit: 2008: -5.5; 2009: -4.9; 2010: -5.7; 2011 (est.): -4.8; 2011 (budget): -8.5.

### Medium-term economic outlook and risks
- Growth projections (staff):
  - Real GDP projected to increase from 4.2 percent in 2011 to 5½ percent in 2016.
  - Authorities somewhat more optimistic based on expectations of faster execution of large infrastructure projects.
- Drivers of non-oil growth:
  - Ongoing efforts to boost agricultural productivity and competitiveness.
  - Major public investment projects.
  - Measures to improve the business environment.
- Oil sector outlook:
  - Oil sector expected to boost real GDP growth in 2012–17; SNH projects a sizeable increase in production due to coming on-stream of ongoing investments following successful exploration.
- Inflation outlook:
  - Inflation expected to remain below the regional convergence criterion of 3 percent.
  - Policies to moderate food-price shocks: boost agricultural production, subsidize food imports, build and maintain stocks, and improve information on food market conditions.
- External balance:
  - External current account deficit projected to decrease from 4.7 percent of GDP in 2012 to about 3.5 percent in 2017.
  - Financing assumptions: deficit to be financed mainly by new public external borrowing and private capital inflows.
  - Rationale: steady rise in non-oil exports and resumed oil exports expected to broadly offset projected import increases.

*Source: CAMEROON 2012 ARTICLE IV REPORT, INTERNATIONAL MONETARY FUND (selected excerpts).*

### 15. The medium-term fiscal outlook is

### 15. The medium-term fiscal outlook is

### Medium-term outlook and assumptions
- Predicated on ongoing efforts to improve revenue mobilization and address infrastructure gaps.
- A gradual strengthening in non-oil revenue mobilization is expected to improve the ratio of non-oil revenue to non-oil GDP by about ½ percentage point from 2011 to 2017.
- Efforts to tackle infrastructure gaps will require a high level of public capital spending of 6½–7 percent of GDP.
- Baseline medium-term projections assume:
  - A small improvement in revenue mobilization.
  - A continued freeze in retail fuel prices.
  - Execution of the government’s ambitious public investment program.
  - NOPD is forecast to remain in the range of 8.5 to 9 percent of non-oil GDP.
  - Financing gaps remain around 3 percent of GDP in the baseline.
  - Projected accumulation of domestic arrears could reach up to 16 percent of GDP by 2017 (Table 6; referenced).

### Risks to the medium-term outlook
- Identified risks include:
  - (i) A downturn in the external environment, particularly in the euro area, which remains Cameroon’s main trade partner.
  - (ii) Negative spillovers from the government’s continued accumulation of arrears.
  - (iii) A vulnerable banking sector that may generate fiscal liabilities and affect the real sector.
- Additional risk factors:
  - Increasing domestic borrowing and accumulation of domestic arrears push total public debt indicators significantly higher than in the 2011 DSA.
  - Quasi-fiscal liabilities of state-owned enterprises and distressed banks could lead to further deterioration of debt indicators.
  - Much of the increase in external borrowing commitments over the last two years was on nonconcessional terms; continuation of this trend could compromise future debt sustainability.
  - Incorporation of arrears into the DSA: overall debt-to-GDP ratio increases from 13.7 percent in 2011 to 31.8 percent in 2017.

### Debt sustainability and external borrowing
- The risk of debt distress remains low according to the DSA (companion paper).
- The DSA shows all external debt ratios would remain below their respective policy-dependent thresholds, including under stress conditions.
- However, signs of emerging vulnerabilities are noted from:
  - Increasing domestic borrowing.
  - Accumulation of domestic arrears.
  - Potential quasi-fiscal liabilities from state-owned enterprises and distressed banks.

### Downside scenario: Impact of a Euro Area downturn (Box 2)
- Scenario assumptions relative to the April 2012 WEO downturn scenario:
  - An additional 5 percent depreciation of the euro/US dollar exchange rate and a 5 percent decrease in the international oil price in 2013.
  - GDP growth rates in Cameroon’s trading partners lower by 0.5 and 1 percentage points in 2012 and 2013, respectively.
  - Oil prices per barrel lower by US$10 in 2012 and in 2013.
  - Non-oil export prices lower by 5 percent in 2012 and 10 percent in 2013.
  - The nominal exchange rate of the CFA franc against the US dollar is higher by 5 percent (depreciation) in 2012 and 10 percent in 2013.
- Key projected impacts (baseline vs downside scenario excerpts):
  - Real GDP: baseline 2012 = 4.7; downside 2012 = 4.2; baseline 2013 = 5.0; downside 2013 = 4.0.
  - Non-oil real GDP (percent change): baseline 2012 = 4.3; downside 2012 = 3.8; baseline 2013 = 4.9; downside 2013 = 3.9.
  - Consumer prices (period average): baseline 2012 = 3.0; downside 2012 = 3.3; baseline 2013 = 3.0; downside 2013 = 3.3.
  - Oil export price (US$ per barrel): 2011 = 111.6; baseline 2012 = 102.7; baseline 2013 = 101.0; downside 2012 = 92.7; downside 2013 = 91.0.
  - Oil output (thousands of barrels a day): 2011 = 59.2; baseline 2012 = 68.8; baseline 2013 = 73.7; downside 2012 = 68.8; downside 2013 = 73.7.
  - Gross domestic investment (percent of GDP): 2011 = 18.9; baseline 2012 = 18.9; baseline 2013 = 19.4; downside 2012 = 18.1; downside 2013 = 17.8.
  - Total revenue, excluding grants (percent of GDP): 2011 = 18.4; baseline 2012 = 18.4; baseline 2013 = 18.2; downside 2012 = 17.6; downside 2013 = 17.1.
  - Of which oil (percent of GDP): 2011 = 5.4; baseline 2012 = 5.5; baseline 2013 = 5.1; downside 2012 = 4.3; downside 2013 = 5.3.
  - Non-oil revenue (percent of non-oil GDP): baseline and downside entries include 14.2, 14.3, 14.4, 13.8, 13.4 (as presented).
  - Total expenditure (percent of GDP): 2011 = 21.7; baseline 2012 = 20.0; baseline 2013 = 22.3; downside 2012 = 21.8; downside 2013 = 21.9.
  - Capital expenditure (percent of GDP): 2011 = 6.4; baseline 2012 = 6.2; baseline 2013 = 6.6; downside 2012 = 6.0; downside 2013 = 6.1.
  - Overall budget balance, including grants (percent of GDP): 2011 = -3.4; baseline 2012 = -3.9; baseline 2013 = -3.8; downside 2012 = -4.5; downside 2013 = -4.5.
  - Volume of non-oil exports (percent change): 2011 = 9.4; baseline 2012 = 7.0; baseline 2013 = 7.4; downside 2012 = 6.5; downside 2013 = 6.4.
  - Volume of imports (percent change): 2011 = 15.6; baseline 2012 = 7.9; baseline 2013 = 7.8; downside 2012 = 6.6; downside 2013 = 5.5.
  - Current account, including grants (percent of GDP): 2011 = -4.1; baseline 2012 = -4.7; baseline 2013 = -4.2; downside 2012 = -4.6; downside 2013 = -4.2.
  - Terms of trade (percent change): 2011 = 2.4; baseline 2012 = -6.8; baseline 2013 = 2.2; downside 2012 = -8.7; downside 2013 = 1.5.

### 2012 budget pressures and near-term risks
- The 2012 budget:
  - Is based on unchanged revenue policies but channels more expenditure toward capital spending.
  - Projects non-oil revenue to remain close to 13 percent of GDP.
  - Projects current expenditure to be about 0.7 percentage point of GDP lower than in the 2011 budget.
  - Projects capital expenditure to be 0.5 percentage point of GDP higher than in the 2011 budget.
  - Foresees an overall fiscal deficit, on a cash basis, of 2.5 percent of GDP, to be financed largely by issuance of securities on the regional market (CFAF 250 billion; 2 percent of GDP).
- Budgetary pressures include:
  - Windfall oil revenue expected to raise oil revenue by 1 percentage point of GDP relative to the budget assumption.
  - Higher-than-budgeted fuel subsidies: maintaining present retail fuel price policy at current world market prices will require a subsidy of about CFAF 400 billion (3 percent of GDP), CFAF 230 billion more than budgeted.
  - Uncertainty regarding regional market capacity to absorb planned securities issuance (prudential norms of risk concentration and liquidity limit absorption capacity).
  - Contingent claims from restructuring of distressed banks and public corporations.
  - Resources needed to clear UPOs could be as high as CFAF 130 billion (1 percent of GDP).
- Incorporating these factors yields a financing gap of up to 1.6 percent of GDP.
- Staff advice to prevent further accumulation of domestic arrears:
  - (i) Step up implementation of administrative reforms to improve non-oil revenue collection.
  - (ii) Implement a strict cash flow plan and curb non-priority spending.
  - (iii) Screen the launch of new public projects carefully and secure concessional financing to the extent possible.
- Authorities' views:
  - Acknowledged likely excess fuel subsidy but exploring options to reduce it.
  - Confident that the banking system can absorb planned securities issuance.
  - Expected negotiations with investors and asset recovery to minimize contingent liabilities.
  - Improved cash flow management and the possibility of issuing Treasury bills had lessened pressure from UPOs.

### Containing arrears and medium-term fiscal sustainability
- Status and risks:
  - Arrears and UPOs reached about 4.5 percent of GDP at end-2011.
  - Projected financing gaps around 3 percent of GDP could lead to further accumulation of domestic arrears up to 16 percent of GDP by 2017.
- Staff recommendations on fuel subsidies and social protection:
  - Gradual adjustment of pump prices to international prices, accompanied by targeted social programs.
  - Adopt a plan to phase out fuel subsidies through gradual adjustments of pump prices to international oil prices.
  - Consider reduced adjustment on kerosene and targeted safety nets for the most vulnerable.
- Staff recommended measures to ensure medium-term fiscal sustainability:
  - Accelerate administrative reforms to widen the tax base by:
    - (i) Rationalizing tax exemptions and tax incentive schemes.
    - (ii) Completing the reform of the unique taxpayer identification number.
    - (iii) Strengthening tax centers for medium-size enterprises and those for small taxpayers.
    - (iv) Simplifying tax and customs procedures.
  - Adopt a tighter path for the NOPD, taking into account public investment needs, to generate a more sustainable fiscal situation; the reform scenario discussed generates a lower NOPD compared to the baseline.
  - Raise fiscal buffers to build a security margin to mitigate exogenous shocks.
  - Avoid reemergence of debt vulnerability by contracting new external debt on concessional terms, to the extent possible.
  - Strengthen public debt management by:
    - (i) Enhancing the capacity of the national public debt committee.
    - (ii) Monitoring contingent liabilities from public enterprises.
    - (iii) Conducting periodic audits of domestic arrears.
- Authorities' views:
  - Concurred on the need for fiscal sustainability and to pursue non-oil revenue mobilization and strengthen debt management.
  - Did not see an urgent need for a tighter NOPD rule given infrastructure and basic public services needs.
  - Agreed on the importance of gradually rebuilding fiscal buffers.
  - Recognized gradual pump price increases as desirable in the medium term but argued they were incompatible with short-term social peace.

### Public Financial Management (PFM) improvements
- Staff recommendations:
  - Strengthen PFM and improve expenditure efficiency.
  - Implement program budgeting in the 2013 budget; reforms guided by six PFM directives adopted by CEMAC in December 2011.
  - Actions to contain arrears and UPOs:
    - Complete ongoing audit of arrears and other UPOs before end-2012 and adopt a plan for settlement of audited arrears.
    - Implement IMF technical assistance recommendations on moving from cash-based budget to a payment-order system as an interim step toward accrual budgeting.
    - Strengthen the expenditure chain to avoid derogatory spending commitments and ensure execution of the budget within the fiscal year.
    - Improve the information management system to track the flow of funds throughout the expenditure chain.
  - Improve cash management:
    - Continue issuance of two- and four-week Treasury bills through the BEAC.
    - Abide by the single Treasury account rule and eliminate use of SNH as a payment window for government operations.
  - Accelerate implementation of the PFM modernization plan (adopted 2009):
    - Implement strategy to improve absorptive capacity for public investment and build continuity through multiyear commitment appropriations; establish a central unit for project feasibility studies and evaluation.
    - Ensure competitive public procurement and minimize single-source contracts; new procurement ministry welcomed but budgetary implications should be minimized.
    - Prepare transition from line-item to program-based budget with sound management rules and financial organization within line ministries.
    - Improve fiscal reporting by including revenue and expenditure on a gross basis.
    - Make the medium-term expenditure framework operational to translate GESP priorities into annual budgets.
- Authorities' views:
  - Preparing for full implementation of the Budget Framework Law starting January 1, 2013.
  - 2012 budget already incorporates parts of new presentation and expected to improve expenditure chain management.
  - Acknowledged need to deal with arrears; noted substantial reduction in UPOs in 2011 due to improved cash management.
  - Quarterly commitment-basis budget execution reports expected with the 2012 budget.
  - Comprehensive arrears audit expected end-2012 with a plan for settlement.

### Financial sector stability and resolution of troubled banks
- Banking sector vulnerabilities have significantly increased since the last Article IV consultation:
  - Causes: delayed restructuring/dissolution of banks in distress; deterioration in financial soundness indicators; increasing number of banks failing prudential requirements; accumulation of arrears and UPOs by the government pushing public enterprises into increasing bank borrowing.
- Troubled banks and systemic exposure:
  - Number of financially troubled banks increased from three to four since the last consultation; a fifth bank likely in difficulty.
  - No credible restructuring plans for the three banks reported in distress in the 2011 staff report.
  - A fourth bank moved into negative net worth since the last consultation.
  - Preliminary reports indicate a fifth bank with negative net worth and a portfolio with almost 40 percent NPLs.
  - At end-2011, the five banks accounted for 29.2 percent of deposits and 28 percent of total bank credit.
- Staff recommendations for banking sector resolution:
  - Take swift action to resolve troubled banks in close collaboration with COBAC.
  - Liquidate troubled banks with no credible restructuring plans as soon as possible.
  - Monitor liquidity conditions of troubled banks and set short deadlines for recapitalization agreements with shareholders.
  - Limit public finance impact by requiring full loss absorption by previous shareholders.

*Source: _cr12237 - 15. The medium-term fiscal outlook is (Cameroon 2012 Article IV Report).*

### 36. Staff expressed concerns about the

### _cr12237 - 36. Staff expressed concerns about the

### Banking sector vulnerabilities and compliance with regional prudential norms
- Staff expressed concerns about the weakening of the overall compliance of banks with the regional prudential norms.
- Main cause of high concentration of risk in the banking sector: accumulation of UPOs by the government.
- Staff called on authorities, in line with the 2012 consultation report with CEMAC, to engage CEMAC members in:
  - (i) strengthening COBAC’s resources;
  - (ii) bringing the regional prudential regulations up to international standards and best practices;
  - (iii) closely collaborating with COBAC in monitoring banking sector vulnerabilities and enforcing prudential requirements in line with the recommended benchmarks of the Basel Committee on Banking Supervision, especially regarding credit concentration risk.

### Bank crisis prevention and resolution framework
- Protracted failure to address troubled banks highlights need to strengthen the regional bank crisis prevention and resolution framework.
- Identified weaknesses in the current framework:
  - (i) delays in the coordination between regional and national authorities on corrective measures;
  - (ii) lack of clear rules and triggers for intervention;
  - (iii) long delays in legal procedures;
  - (iv) significant opportunity for interference afforded to shareholders of insolvent banks.
- Staff emphasized engaging CEMAC members to adopt the new regional regulation on crisis resolution (prepared with IMF assistance), expected to:
  - (i) allow authorities to intervene early to resolve banks in crisis;
  - (ii) define the responsibilities of regional and national bodies and the scope of judicial review;
  - (iii) prevent shareholders of a troubled bank from participating in its restructuring.
- Staff stressed the critical need for authorities’ full support for early adoption of these reforms.
- Authorities’ views:
  - Agreed on need to resolve distressed banks quickly; restructuring plans exist but are mired in difficulty.
  - Would consider liquidation only if shareholders do not agree on a restructuring plan within established deadlines.
  - Agreed on immediate need for monitoring banks’ liquidity to avoid suspension of payments.
  - Acknowledged inadequate resources in COBAC constrain frequency of on-site inspections and may have led to failure in early detection.
  - Agreed that reforms should focus on (i) appropriate division of responsibilities between regional and national authorities; (ii) clear procedures; (iii) reducing excessive delays before key decisions.

### Financial deepening, access to credit, and ongoing measures
- Access to credit in Cameroon remains lower than the SSA average (World Bank’s “Doing Business Indicators”).
- Penetration rates (number of borrowers from banks or depositors to banks per 1,000 adults) remain well below the SSA average; credit to the private sector, in percent of GDP, has remained lower than the SSA average.
- Some progress in improving access to bank credit in recent years; authorities implementing an action plan to enhance financial deepening including the following ongoing measures:
  - Facilitating greater access to retail banking services and diversifying the range of available financial instruments;
  - Enhancing the availability of information on the cost of credit and payment default;
  - Reinforcing the legal framework of collateral guarantees for securing loans;
  - Reinforcing the supervision of microfinance institutions;
  - Establishing a commercial court and a central bank credit registry;
  - Enacting a law on leasing.
- Staff welcomed agenda to deepen financial intermediation, including:
  - Reactivating a delinquent payments registry;
  - Setting up a framework for monitoring the microfinance sector;
  - Establishing mechanisms for the financing of exports;
  - Improving regional regulations on new financial products.
- Authorities underscored need to implement action plan to develop financial sector; agreed commercial court, central credit registry, and leasing laws are important for SMEs.

### Infrastructure, business environment, and competitiveness
- Key structural weaknesses hampering faster growth: inadequate infrastructure and unfavorable business environment.
- Large public infrastructure projects in ports, energy, roads, telecommunications, mining, and water supply have been launched; financing for most mobilized or under negotiation; 55 percent of external commitments signed in 2011 were for large infrastructure projects.
- Projected issuance of government bonds in 2012 intended to finance these projects.
- Need to improve effectiveness of capital spending:
  - Average execution rate of public investment was below 70 percent during 2005–10.
  - Cameroon’s ratings on the Public Investment Management Index (PIMI) and the Country’s Policy and Institutional Assessment (CPIA) lag behind the SSA average.
  - Staff welcomed improved execution rate in 2011 but cautioned on risks to debt and fiscal sustainability if scaling up of public investment is not accompanied by improved effectiveness.
- REER and competitiveness:
  - REER depreciated by about 7 percent in 2010–11, following depreciation of the euro.
  - This depreciation did not offset cumulative appreciation of the REER in 1994–2009 (24 percent).
  - Various model-based estimates suggest Cameroon’s REER was overvalued by about 8 percent at end-2011.
- Structural constraints to external competitiveness: unpropitious business environment, bottlenecks to trade, high costs of services.
- Staff welcomed initiatives to improve competitiveness: improve basic public infrastructure, strengthen dialogue with business community, implement judicial reform, modernize tax and customs administration, simplify export/import procedures, improve port functioning.
- Progress on regional and international trade constrained by lack of regional progress: high customs duties, non-uniform implementation of regional trade regulations, significant physical and non-physical barriers; planned reduction in common external tariff awaiting economic impact study; regional infrastructure program developed but awaiting implementation.
- Authorities’ views:
  - Agree on need to strengthen external competitiveness and remove trade obstacles.
  - View real exchange rate as in line with fundamentals; could improve competitiveness if euro depreciates further.
  - Intend to pursue regular assessment of Cameroon Business Forum recommendations.
  - Regretted slow regional progress on trade liberalization.

### Macroeconomic reform scenario and selected macroeconomic indicators (Text Table 4)
- Reform scenario assumptions (summary):
  - Gradual adjustments of pump prices to international oil prices;
  - Acceleration of administrative reforms to widen tax base;
  - Improved absorptive capacity and higher growth pay-off of public investment;
  - No financing gap or further accumulation of domestic arrears beyond 2012;
  - Gradual buildup of fiscal buffers to about one month of expenditure by 2017.
- Reform scenario outcomes:
  - Debt-to-GDP ratio stabilizes at around 25 percent in 2017 (compared to baseline where debt increases monotonically).
  - NOPD improves substantially over the medium term.
- Selected macroeconomic indicators, 2012–17 (Text Table 4) — figures shown for Baseline Scenario and Reform Scenario where presented; units as indicated:
  - Economic growth and prices (Percentage change):
    - Real GDP: 2012 4.7; 2013 5.0; 2015 5.3; 2017 5.5 (Baseline) — 2013 5.6; 2015 6.0; 2017 6.5 (Reform)
    - Non-oil real GDP: 2012 4.3; 2013 4.9; 2015 5.3; 2017 5.4 (Baseline) — 2013 5.4; 2015 6.1; 2017 6.4 (Reform)
    - Consumer prices (period average): 2012 3.0; 2013 3.0; 2015 2.5; 2017 2.5 (Baseline) — 2013 3.5; 2015 3.0; 2017 3.0 (Reform)
  - Fiscal aggregates (Percent of GDP):
    - Total revenue (incl. grants): 2012 19.0; 2013 18.6; 2015 17.8; 2017 17.9 (Baseline) — 2013 18.8; 2015 18.2; 2017 18.6 (Reform)
    - Of which: oil: 2012 5.5; 2013 5.1; 2015 4.0; 2017 4.1 (Baseline) — 2013 5.0; 2015 3.9; 2017 3.9 (Reform)
    - non-oil: 2012 14.3; 2013 14.4; 2015 14.5; 2017 14.6 (Baseline) — 2013 14.6; 2015 15.1; 2017 15.5 (Reform)
    - Total expenditure: 2012 22.0; 2013 22.3; 2015 22.3; 2017 22.4 (Baseline) — 2013 20.9; 2015 20.9; 2017 20.8 (Reform)
    - Of which: Noninterest current: 2012 15.4; 2013 15.2; 2015 14.8; 2017 14.6 (Baseline) — 2013 13.7; 2015 12.8; 2017 12.5 (Reform)
    - Capital: 2012 6.2; 2013 6.6; 2015 6.8; 2017 7.1 (Baseline) — 2013 6.7; 2015 7.5; 2017 7.6 (Reform)
    - Overall budget balance, cash basis (Including grants): 2012 -3.9; 2013 -3.8; 2015 -4.7; 2017 -4.5 (Baseline) — 2013 -2.3; 2015 -2.8; 2017 -2.2 (Reform)
    - Financing gap: 2012 1.6; 2013 2.8; 2015 3.4; 2017 3.0 (Baseline) — 2013 0.0; 2015 0.0; 2017 0.0 (Reform)
    - Nonoil primary balance (Percent of non-oil GDP): 2012 -9.0; 2013 -9.1; 2015 -8.5; 2017 -8.4 (Baseline) — 2013 -7.3; 2015 -6.4; 2017 -5.8 (Reform)
  - External sector (Percent of GDP):
    - Current account (incl. grants): 2012 -4.7; 2013 -4.2; 2015 -4.0; 2017 -3.3 (Baseline) — 2013 -4.4; 2015 -4.6; 2017 -4.7 (Reform)
    - Total public debt: 2012 17.2; 2013 20.0; 2015 26.5; 2017 31.8 (Baseline) — 2013 18.3; 2015 21.7; 2017 24.5 (Reform)
  - Sources: Cameroonian authorities; and IMF staff estimates and projections.
  - Notes: 1 Percentage change. 2 Percent of GDP. 3 Percent of non-oil GDP.

### Staff appraisal, risks, and recommended corrective measures
- Key staff appraisal points:
  - Economy continues to grow at a moderate pace; measured inflation remains within regional convergence limit of 3 percent.
  - Significant risks to outlook from:
    - (i) uncertainty surrounding strength of global recovery, particularly in Europe;
    - (ii) impact of increase in fuel subsidies and stock of domestic arrears on fiscal sustainability;
    - (iii) increasing financial sector vulnerabilities;
    - (iv) reduced momentum for reform after postponement of legislative elections to 2013.
- Urgent need to address substantial risks to the 2012 budget due to:
  - Underbudgeting fuel subsidies;
  - Further arrears accumulation in 2011;
  - Limited capacity of regional market to absorb planned securities issuance;
  - Contingent liabilities of public enterprises and distressed banks.
- Corrective measures required to safeguard fiscal sustainability over the medium term:
  - Improve non-oil revenue mobilization;
  - Avoid accumulation of domestic arrears;
  - Rebuild fiscal buffers;
  - Tackle infrastructure gap through significant public investment while containing current expenditure, particularly on fuel subsidies.
- Strengthening Public Financial Management (PFM) recommendations:
  - Complete ongoing audit of arrears and adopt plan for settling audited arrears;
  - Reinforce expenditure chain control and better track flow of funds;
  - Accelerate implementation of PFM modernization plan and implement CEMAC PFM directives timely.
- Financial sector stability recommendations:
  - Resolve ailing banks and implement corrective fiscal measures to avoid further quasi-fiscal losses from excessive lending to state-owned enterprises.
  - Achieve lasting financial stability through a more effective regional framework and better cooperation between national and regional bodies.
  - As largest economy in CEMAC, Cameroon should take proactive stance in pressing for necessary regional financial-sector reforms.
- Growth and competitiveness policy guidance:
  - Address infrastructure gaps and improve business climate to achieve higher and more inclusive growth.
  - Ensure full implementation of public investment program with improved project selection and limits on external nonconcessional borrowing.
  - Tackle governance issues, deepen private sector dialogue, increase financial intermediation, and improve access to credit.
  - Renew efforts to reach regional trade liberalization agreements to support diversification and productivity growth in non-oil sector.

*Source: CAMEROON 2012 ARTICLE IV REPORT (excerpt).*

### 62. Containing domestic arrears and

### 62. Containing domestic arrears and

### Debt sustainability and current assessment
- The DSA shows that Cameroon’s risk of debt distress remains low.
- Total public debt indicators are worse than in the 2011 DSA owing to:
  - the impact of domestic arrears on domestic debt, and
  - the need to cover fiscal financing gaps through increased securitization.
- There are further signs of vulnerabilities emerging from:
  - increasing quasi-fiscal liabilities of state-owned enterprises and distressed banks, and
  - external borrowing at nonconcessional terms.

### Policy recommendations to preserve sustainability
- Contain domestic arrears.
- Maintain a prudent borrowing policy.
- Reform the fuel subsidy mechanism.
- Improve commitment control.
- Favor external borrowing at concessional terms to the extent possible to help maintain domestic debt at sustainable levels.

*Source: IMF staff analysis in section 62.*

### 63. Staff recommends that the next

### _cr12237 - 63. Staff recommends that the next

### Recommendation on Article IV consultation cycle
- Staff recommends that the next Article IV consultation take place on the 12-month consultation cycle.

### National account and prices (selected figures, 2010–17)
- GDP at constant prices: 2.9; 4.2; 4.7; 5.0; 5.2; 5.3; 5.5; 5.5
- Oil GDP at constant prices: -12.1; -7.3; 16.2; 6.8; 2.7; 4.3; 7.4; 8.7
- Non-Oil GDP at constant prices: 3.7; 4.7; 4.3; 4.9; 5.3; 5.3; 5.4; 5.4
- GDP deflator: 3.0; 2.9; 2.0; 2.9; 2.0; 2.0; 2.1; 2.2
- GDP at market prices (CFAF billions): 11,107; 11,908; 12,719; 13,745; 14,746; 15,844; 17,065; 18,392
  - Oil: 785; 997; 1,177; 1,227; 1,149; 1,138; 1,200; 1,300
  - Non-Oil: 10,322; 10,911; 11,542; 12,518; 13,597; 14,705; 15,866; 17,092
- Oil output (thousands of barrels a day): 63.9; 59.2; 68.8; 73.7; 75.6; 81.0; 90.9; 103.1
- Consumer prices (average): 1.3; 2.9; 3.0; 3.0; 2.5; 2.5; 2.5; 2.5

### External trade and prices
- Export volume (annual % change): -0.5; 6.3; 9.8; 6.8; 6.9; 7.9; 8.8; 9.2
  - Oil sector exports: -14.6; -8.7; 26.0; 3.7; 2.7; 7.6; 12.8; 14.1
  - Non-oil sector exports: 3.1; 9.4; 7.0; 7.4; 7.8; 8.0; 8.0; 8.2
- Import volume (annual % change): 4.9; 15.6; 7.9; 7.8; 7.3; 7.0; 7.0; 6.9
- Average oil export price (US$ per barrel): 79.6; 111.6; 102.7; 101.0; 93.8; 88.2; 84.3; 82.0
- Terms of trade: 16.0; 2.4; -6.8; 2.2; -2.7; -2.1; -1.5; -0.9
- Export price index: 16.6; 15.4; 3.4; 1.1; -4.0; -3.0; -1.7; -0.6
- Non-oil export price index: -1.5; 8.1; 6.1; 0.7; -1.4; -2.4; -2.8; -2.1
- Import price index: 0.6; 12.6; 11.0; -1.1; -1.3; -0.9; -0.2; 0.3

### Money and credit (selected)
- Broad money (M2) annual change: 11.3; 10.6; 6.0; 7.2; 7.3; 8.0; 8.0; 7.8
- Net foreign assets (contribution to M2 growth, percent points): 2.4; -7.4; -2.2; -0.9; -0.4; 0.9; 1.8; 1.4
- Net domestic assets (contribution to M2 growth, percent points): 8.9; 18.0; 8.3; 8.2; 7.7; 7.0; 6.2; 6.4
- Domestic credit to the private sector (annual % change): 8.2; 28.3; 10.0; 9.2; 8.7; 8.5; 8.5; 8.5
- Gross national savings (percent of GDP): 13.1; 15.7; 14.2; 15.2; 15.4; 16.0; 16.6; 17.2
- Gross domestic investment (percent of GDP): 16.1; 19.8; 18.9; 19.4; 19.8; 20.0; 20.3; 20.5

### Central government operations — levels and ratios (2010–17)
- Total revenue (excluding grants, percent of GDP): 16.8; 18.4; 18.4; 18.4; 18.2; 17.6; 17.4; 17.5; 17.7
  - Oil revenue (percent of GDP): 4.5; 5.4; 5.5; 5.1; 4.3; 4.0; 4.0; 4.0; 4.1
  - Non-oil revenue (percent of GDP): 12.4; 13.0; 12.9; 13.1; 13.3; 13.4; 13.4; 13.6; 13.6
  - Non-oil revenue (percent of non-oil GDP): 13.3; 14.2; 14.3; 14.4; 14.4; 14.5; 14.6; 14.6; 14.6
- Total expenditure (percent of GDP): 18.6; 21.7; 22.0; 22.3; 22.4; 22.3; 22.2; 22.3
- Overall fiscal balance (cash basis, excluding grants, percent of GDP): -2.9; -3.9; -4.4; -4.3; -5.0; -5.0; -4.7; -4.7
- Non-oil primary balance (percent of non-oil GDP): -5.7; -8.5; -9.0; -9.1; -8.9; -8.5; -8.3; -8.4

### External sector (selected, CFAF billions and percent of GDP)
- Current account balance (including official grants, percent of GDP): -3.0; -4.1; -4.7; -4.2; -4.4; -4.0; -3.7; -3.3
- Current account balance (excluding grants, percent of GDP): -4.3; -5.0; -5.6; -5.1; -5.3; -4.8; -4.4; -4.0
- Trade balance (CFAF billions): -104; -199; -452; -411; -494; -530; -527; -495
- Exports, goods (CFAF billions): 2,235; 2,741; 3,113; 3,360; 3,451; 3,612; 3,860; 4,187
  - Oil and oil products: 1,086; 1,381; 1,569; 1,690; 1,675; 1,740; 1,895; 2,105
  - Non-oil sector: 1,149; 1,360; 1,545; 1,670; 1,776; 1,872; 1,965; 2,082
- Imports, goods (CFAF billions): -2,339; -2,940; -3,566; -3,771; -3,945; -4,142; -4,387; -4,682
- Gross official reserves (imputed reserves, US$ billions): 3.6; 3.5; 3.1; 3.0; 3.0; 3.0; 3.2; 3.3
- Imputed reserves (percent of broad money): 65.6; 52.9; 47.8; 43.7; 40.3; 38.2; 37.0; 35.6

### Public debt (selected)
- Stock of public debt (percent of GDP): 12.1; 13.7; 17.2; 20.0; 23.4; 26.5; 29.3; 31.6
  - Of which: External (percent of GDP): 6.5; 7.6; 8.9; 9.8; 10.9; 12.0; 13.1; 14.2
- Present value of external debt (percent of GDP): 20.0; 20.9; 22.8; 24.5; 28.2; 31.2; 34.4; 37.1
- External debt service (percent of exports of goods and services): 0.9; 1.0; 1.6; 1.5; 1.6; 2.0; 1.7; 1.7
- External debt service (percent of government revenue): 1.4; 1.7; 2.8; 2.6; 2.8; 3.5; 2.9; 2.9

### Central government fiscal tables — levels and projections (highlights)
- Table 2 (CFAF billions): Total revenue and grants: 1,940; 2,250; 2,273; 573; 2,411; 2,560; 2,653; 2,816; 3,044; 3,297
- Total expenditure (CFAF billions): 2,067; 2,590; 2,552; 528; 2,804; 3,065; 3,313; 3,538; 3,799; 4,117
- Overall balance (cash basis, including grants, CFAF billions): -252; -401; -305; 44; -495; -528; -680; -738; -764; -828
- Financing (CFAF billions): 252; 401; 305; -44; 290; 145; 192; 205; 270; 283
- Memorandum: Primary balance (CFAF billions): -94; -295; -239; -337; -438; -575; -617; -637; -682

### Monetary survey (selected end-period stocks and dynamics)
- Broad money (CFAF billions, end period): 2,741; 2,714; 3,033; 3,216; 3,449; 3,700; 3,996; 4,315; 4,650
  - Currency outside banks: 501; 398; 511; 547; 594; 644; 703; 767; 834
  - Deposits: 2,240; 2,316; 2,522; 2,669; 2,855; 3,056; 3,293; 3,548; 3,816
- Net foreign assets (CFAF billions end period): 1,830; 1,673; 1,627; 1,559; 1,529; 1,514; 1,549; 1,619; 1,679
- Net domestic assets (CFAF billions end period): 911; 1,041; 1,406; 1,657; 1,920; 2,186; 2,447; 2,696; 2,971
- Net credit to the central government (CFAF billions): -340; -354; -189; -168; -168; -168; -168; -168; -168
- Credit to the private sector (CFAF billions): 1,285; 1,454; 1,649; 1,815; 1,983; 2,155; 2,338; 2,537; 2,753
- Velocity (GDP/average M2): 4.2; 4.4; 4.1; 4.0; 4.0; 4.0; 4.0; 4.0; 4.0

### Government arrears and payment obligations (2011–17)
- Audited arrears (end-year stocks, CFAF billions): 163.1; 137.2; 114.7; 94.6; 78.6; 68.8; 60.6
  - Percent of GDP (audited arrears): 1.4; 1.1; 0.8; 0.6; 0.5; 0.4; 0.3
- Unsettled payment orders (UPOs) (end-year stock assumed constant, CFAF billions): 131.0 each year (2011–2017)
  - Percent of GDP: 1.1; 1.0; 1.0; 0.9; 0.8; 0.8; 0.7
- Obligations to SONARA (including securitized arrears, CFAF billions):
  - End-2011 stock: 243.2; flows 102.0
  - End-2012 stock: 345.2; flows 226.1
  - End-2013 stock: 571.3; flows 220.5
  - End-2014 stock: 791.7; flows 223.9
  - End-2015 stock: 1,015.7; flows 234.3
  - End-2016 stock: 1,249.9; flows 251.4
  - End-2017 stock: 1,501.3
  - Non-securitized obligations to SONARA (CFAF billions, selected): 163.2; 227.0; 461.1; 693.4; 929.1; 1,175.2; 1,438.4
  - Securitized arrears to SONARA (CFAF billions): 80.0; 118.1; 110.1; 98.3; 86.5; 74.7; 62.9
- Residual obligations from financing gap (excluding A, B, C) (CFAF billions): 0.0; 141.3; 141.3; 267.7; 503.4; 785.3; 1,023.6; 1,296.7 (select years shown)
- Total arrears and other payment obligations (A+B+C+D) (CFAF billions): 537.3; 754.6; 1,084.7; 1,520.8; 2,010.6; 2,473.3; 2,989.7
  - Percent of GDP: 4.5; 5.9; 7.9; 10.3; 12.7; 14.5; 16.3

### Reform scenario (selected macro projections, 2010–17)
- GDP at constant prices: 2.9; 4.2; 4.7; 5.5; 5.7; 6.0; 6.2; 6.5
- Non-Oil GDP at constant prices: 3.7; 4.7; 4.3; 5.4; 5.8; 6.1; 6.2; 6.4
- GDP at market prices (CFAF billions): 11,107; 11,908; 12,719; 13,871; 15,017; 16,314; 17,767; 19,415
  - Oil: 785; 997; 1,177; 1,226; 1,148; 1,136; 1,196; 1,294
  - Non-Oil: 10,322; 10,911; 11,542; 12,645; 13,870; 15,178; 16,571; 18,121
- Broad money (M2) annual change under reform scenario: 11.3; 10.6; 6.0; 8.2; 8.3; 9.2; 9.2; 9.3
- Net foreign assets (contribution to M2 growth, percent points): 2.4; -7.4; -2.2; 1.6; 2.2; 3.4; 4.0; 4.1
- Total revenue (excluding grants, percent of GDP) under reform: 16.8; 18.4; 18.4; 18.3; 17.9; 17.9; 18.1; 18.3
- Total expenditure (percent of GDP) under reform: 18.6; 21.7; 22.0; 20.9; 20.8; 20.9; 21.0; 20.8
- Overall fiscal balance (cash basis, excluding grants, percent of GDP) under reform: -2.9; -3.9; -4.4; -2.7; -3.0; -3.2; -3.0; -2.5
- Public debt (stock of public debt, percent of GDP) under reform: 12.1; 13.7; 17.2; 18.3; 20.0; 21.7; 23.4; 24.5

### Millennium Development Goals (selected indicators, 1990–2010)
- Employment to population ratio, 15+, total (%): 60; 61; 61; 62; 62
- GDP per person employed (constant 1990 PPP $): 3,124; 2,407; 2,687; 2,901; 2,991
- Primary completion rate, total (% of relevant age group): 54; ..; 51; 53; 79
- Total enrollment, primary (% net): 71; ......; 92
- Ratio of female to male primary enrollment (%): 86; 90; 85; 84; 86
- Immunization, measles (% of children ages 12-23 months): 56; 46; 49; 68; 79
- Mortality rate, infant (per 1,000 live births): 85; 91; 91; 88; 84
- Mortality rate, under-5 (per 1,000): 137; 147; 148; 142; 136
- Maternal mortality ratio (modeled estimate, per 100,000 live births): 680; 680; 660; 640; 600
- Improved sanitation facilities (% of population with access): 47; 48; 47; 47; 47
- Improved water source (% of population with access): 50; 57; 64; 71; 74
- GNI per capita, Atlas method (current US$): 910; 720; 630; 930; 1,180
- Life expectancy at birth, total (years): 53; 52; 50; 49; 51

*Sources: Cameroonian authorities; and IMF staff estimates and projections.*

### Appendix I. Cameroon: Issues in the Banking System

### Appendix I. Cameroon: Issues in the Banking System

### A. Structure of the Banking System
- The Cameroonian banking system comprises 13 commercial banks with a diversified ownership structure: (i) subsidiaries of international banking groups based outside sub-Saharan Africa (SSA) (five banks); (ii) banks controlled by groups headquartered in SSA (five banks); and (iii) domestic banks (three banks).
- These banks represent more than 40 percent of banking assets in the Central African Economic and Monetary Community (CEMAC).
- By end-2011:
  - International groups based outside SSA accounted for 57.3 percent of the credit market, an increase of 1.3 percentage point from 2010.
  - French affiliates controlled more than 40 percent of the credit market.
  - Domestic banks had a total share of 24 percent of the credit market.
  - Four subsidiaries of Nigerian, Togolese, and Gabonese groups covered the remaining 19 percent of the credit market.
  - Ecobank held 10 percent of the credit market; Union Bank of Cameroon (Oceanic Group parent) held 2.1 percent; Banque Gabonaise et Française Internationale held 2.5 percent; Banque Atlantique du Cameroun held 1.6 percent; United Bank for Africa held 2.2 percent.
- The government has significant shares in both French affiliates and in the Moroccan bank recently acquired from another French group active in Cameroon until last year.
- The microfinance sector totaled 495 institutions at end-2010 and is of significant size, equal to one of the country’s medium-sized banks. COBAC is responsible for supervising the sector but faces capacity constraints; a large number of microfinance entities are reported to be in financial difficulty.

### B. Banking System Vulnerabilities
- Increase in distressed banks:
  - Four banks facing insolvency and a fifth reportedly also in difficulty (compared to three at end-2010).
  - Contributing factors: mismanagement (connected lending), failure to assemble viable restructuring plans, inadequate human resources in some banks.
- Estimated net negative equity related to losses on NPLs:
  - CFAF 60 billion for one larger domestic bank (assets valued at CFAF 113 billion).
  - CFAF 20 billion for the other troubled banks.
- Contagion and reputational risk:
  - Virtual absence of interbank lending reduces contagion risk, but failure of one bank could precipitate loss of confidence in other undercapitalized banks; principal risk is reputational.
- Prudential breaches and capital adequacy:
  - Number of banks exceeding the limit on single large exposure rose to 9 (out of 13 banks) from 5 (out of 12) in 2010.
  - Aggregate capital adequacy ratio (CAR) declined from 7.4 percent of risk-weighted assets in 2010 to 5.2 percent in 2011. Statutory limit is 8 percent.
  - Divergence: international banks maintain buffers well in excess of the statutory limit; majority of regional and domestic banks have low buffers or negative equity.
- Sovereign risk premium revision:
  - Cameroon’s fulfillment of all CEMAC convergence criteria in 2011 resulted in a reported downward revision of its sovereign debt risk premium from 85 percent to 0 percent.
  - Banks’ holdings of government bonds accounted for 6.9 percent of total assets at end-2010; reduction in risk premium would likely improve CARs for banks holding these bonds, conditional on continued compliance with CEMAC criteria.
- Nonperforming loans (NPLs) and provisioning:
  - NPLs grew by 17.5 percent in value relative to 2010.
  - Share of NPLs in total loans remained practically unchanged at 12.3 percent.
  - Provisioning for NPLs increased to 96.7 percent of gross NPLs from 89.2 percent in 2010.
  - Rules allowing up to four years for provisioning NPLs and infrequent on-site supervisory visits may affect data reliability and delay provisioning.
- Risk concentration:
  - 9 of the 13 banks are in breach of the limit on single large exposure.
  - Credit concentration risk primarily linked to the national oil refinery (SONARA); large common borrowers face liquidity problems due to protracted delays in receiving government payments.
  - Public enterprises borrowing from banks crowd out private sector borrowing and constrain growth.
  - Regional stress tests indicate vulnerability to credit risk from concentration of lending to a few large borrowers and to the public sector; concentration also creates potential liquidity risk.

### C. Dealing with Distressed Banks
- Urgency and arrangements:
  - Restructuring or resolution should be carried out promptly; necessary arrangements should be put in place immediately.
  - Efforts to identify new investors to recapitalize banks and avoid closures should continue aggressively.
- Status of restructuring plans (bank-specific next steps):
  - Bank A: (i) finalize details of recapitalization plans; (ii) decide on government participation in recapitalization; (iii) submit restructuring plan to COBAC for approval.
  - Bank B: finalize preparations and shortly seek shareholder approval for a revised restructuring plan.
  - Bank C: confirm parent group's intentions regarding onward sale or absorption to enable shareholders to decide on a restructuring plan and seek COBAC approval.
  - Bank D: COBAC decision on a restructuring plan submitted in March 2012 should be finalized as soon as possible.
  - Bank E: establish a timetable for discussions on capitalization needs.
  - Procedural delays in dealing with these banks have increased potential contingent liabilities associated with resolution.
- Immediate government actions (in close coordination with COBAC):
  - Closely monitor the liquidity of troubled banks to avoid suspension of payments.
  - Set short deadlines for specific prior actions for each bank to reach agreement on restructuring plans; consider liquidation if agreement is not reached within established deadlines.
  - Require credible full loss absorption by previous shareholders to reduce impact of restructuring on public finances.

### D. Issues in the Regulatory Environment
- Need to strengthen the common institutional framework at CEMAC level; prudential regulations related to provisioning for NPLs and exposure to single creditors need urgent review.
- Bank resolution framework:
  - Needs strengthening as a matter of priority; establish clear rules and time-bound procedures; improve cohesion between COBAC and local authorities in enforcing regulations.
  - Reforms should focus on (i) appropriate division of responsibilities between regional and national authorities; (ii) setting out clear procedures; and (iii) reducing excessive decision-making delays.
  - A special resolution regime has been drawn up as a crisis management tool but still needs formal adoption by CEMAC.
  - More effective regional tools required for mandatory recapitalization, transfer of assets and liabilities, and orderly winding up.
- Capital adequacy statutory limit:
  - The statutory limit of 8 percent is considered insufficient to build buffers against emerging risks and could be increased in line with Basel Committee on Banking Supervision guidance being adopted elsewhere.
- COBAC capacity constraints:
  - COBAC lacks sufficient resources; staffing levels remain low.
  - Limits frequency of on-site inspections, early detection of problems, and effective supervision of the microfinance sector.
  - On-site examinations can take two to four years per bank, hindering enforcement of provisioning standards.
  - COBAC’s capacity needs to be reinforced urgently, consistent with the 2006 FSAP report.
- Off-site supervision:
  - Well-developed reporting platform exists but rating system needs updating and is subject to maintenance delays.
- Consolidated banking group surveillance:
  - COBAC lacks a mandate to carry out consolidated surveillance of international banking groups; this impairs assessment of restructuring plans for international banks.

### E. Improving the Regulatory Framework (Key Recommendations)
- Tighten provisioning rules:
  - Eliminate or shorten the rule allowing up to four years for provisioning NPLs, given COBAC’s limited enforcement capacity.
- Reduce exposure limits:
  - Reconsider the regulatory capital limit on exposures to a single borrower (current 45 percent, extended to up to 90 percent for large public enterprises) versus BCBS suggested benchmark of 15–25 percent.
- Strengthen consolidated supervision:
  - Establish a mandate and capability for COBAC to carry out consolidated surveillance of international banking groups.
- Reinforce bank resolution regime:
  - Formally adopt the special resolution regime at CEMAC level and provide tools for mandatory recapitalization, transfer of assets and liabilities, and orderly winding up.
  - Clarify division of responsibilities and set time-bound procedures to reduce delays.
- Reinforce COBAC resources and capacity:
  - Increase staffing and operational resources to allow more frequent, in-depth on-site examinations and effective supervision of banks and the microfinance sector.
- Regional deposit insurance:
  - Fonds de Garantie des Dépôts en Afrique Centrale (FOGADAC) established in 2009; started accepting contributions in March 2011.
  - FOGADAC is supervised by COBAC, under the oversight of BEAC and banking sector representatives.
  - Scheme, funded by fees from financial institutions, will insure deposits up to CFAF 5 million once operational.

### F. Key Statistics and Financial Soundness Indicators (selected)
- Banking sector composition:
  - Total commercial banks: 13.
- Microfinance:
  - Number of microfinance institutions at end-2010: 495.
- Distressed banks:
  - Banks facing insolvency: 4; a fifth bank reportedly in difficulty (compared to 3 at end-2010).
- Estimated net negative equity associated with NPL losses:
  - CFAF 60 billion (one larger domestic bank); CFAF 20 billion (other troubled banks).
- Credit market shares (end-2011):
  - International groups based outside SSA: 57.3 percent.
  - Domestic banks: 24 percent.
  - Ecobank: 10 percent; Union Bank of Cameroon: 2.1 percent; Banque Gabonaise et Française Internationale: 2.5 percent; Banque Atlantique du Cameroun: 1.6 percent; United Bank for Africa: 2.2 percent.
- Sovereign risk premium revision:
  - Reported revision from 85 percent to 0 percent.
- Bank holdings of government bonds:
  - 6.9 percent of total assets at end-2010.
- NPLs and provisioning:
  - NPL growth in value relative to 2010: 17.5 percent.
  - NPLs to gross loans: 12.3 percent.
  - Provisioning for NPLs: 96.7 percent of gross NPLs (up from 89.2 percent in 2010).
- Single large exposure breaches:
  - Banks in breach: 9 out of 13 (2011); 5 out of 12 (2010).
- Capital adequacy:
  - Aggregate CAR: 5.2 percent in 2011 (7.4 percent in 2010). Statutory minimum: 8 percent.
- Aggregate banking system indicators (from Table 3, selected):
  - Deposit growth (percent p.a.): 2010: 11.5; 2011: 11.8.
  - Credit growth (gross) (percent p.a.): 2010: 12.0; 2011: 16.9.
  - Regulatory capital to risk-weighted assets (percent): 2009: 10.0; 2010: 7.0; 2011: 5.2.
  - Tangible net worth (net) to risk-weighted assets (percent): 2009: 10.2; 2010: 7.9; 2011: 4.9.
  - Loans (net) to assets (percent): 2009: 48.9; 2010: 48.8; 2011: 50.4.
  - NPLs to gross loans (percent): 2009: 9.8; 2010: 12.4; 2011: 12.3.
  - Provisions to gross loans (percent): 2009: 10.2; 2010: 11.1; 2011: 11.9.
  - Provisions to gross NPLs (percent): 2009: 103.6; 2010: 89.2; 2011: 96.7.
  - NPLs less provisions to net worth (percent): 2009: 23.7; 2010: 44.1; 2011: 59.0.
  - Liquid assets to total assets (percent): 2009: 40.4; 2010: 38.8; 2011: 36.2.
  - Liquid assets to deposits (percent): 2009: 49.2; 2010: 47.0; 2011: 44.0.

*IMF staff compilation from Appendix I of the Cameroon 2012 Article IV report.*

### 3. Fuel subsidies impose a heavy

### _cr12237 - 3. Fuel subsidies impose a heavy

### Fuel subsidies and fiscal burden
- Required subsidies reached CFAF 146 billion (1.3 percent of GDP) in 2010 and CFAF 309 billion (2.5 percent of GDP) in 2011.
- In 2011, subsidies represented about 29 percent of the notional retail prices for gasoline, 32 percent for diesel, and 49 percent for kerosene.
- The authorities project required fuel subsidies to reach about CFAF 400 billion (3.1 percent of GDP) in 2012.
- Staff estimates, based on current WEO oil price projections and a growth rate of 6 percent in the volume of domestic consumption, indicate required fuel subsidies would average CFAF 415 billion (2.6 percent of GDP) per year in 2013–17, under the assumption of unchanged retail fuel prices.
- The required fuel subsidies in 2012 will be equivalent to 20 percent of total projected current expenditure and about three-fourths of domestically financed government capital expenditure.

### Arrears to SONARA and securitization actions
- The government had accumulated arrears to SONARA amounting to CFAF 98 billion (0.9 percent of GDP) at end-2009.
- Required fuel subsidies amounted to CFAF 146 billion in 2010. The government paid the refinery CFAF 107 billion, of which CFAF 90 million were from the proceeds of the 2009 SDR allocation. This payment left a stock of payment obligations amounting to CFAF 136 billion (1.2 percent of GDP) at end-2010.
- Cumulative obligations to SONARA at end-2011, including the end-2010 stock of arrears, were CFAF 445 billion (3.7 percent of GDP).
- The government settled these obligations by:
  - cash payment: CFAF 97 billion;
  - cancellation of tax due from SONARA: CFAF 105 billion;
  - issuance of securities (with a maturity of 10 years) in favor of SONARA: CFAF 80 billion.
- These operations left a stock of CFAF 163 billion of payment obligations at end-2011.
- The government agreed with SONARA in March 2012 to clear that amount by:
  - cancellation of taxes due from SONARA in the second half of 2011: CFAF 87 billion;
  - cash payment: CFAF 38 billion;
  - additional securities: CFAF 38 billion.

### 2012 budget measures to reduce subsidies and estimated savings
- Measures made effective in March 2012 included:
  - a reduction from 10 to 5 percent in the tariff rate on imports of crude oil from non-CEMAC countries;
  - a decrease in the margin for SONARA (“adjustment coefficient”) from 15 to 12 percent;
  - elimination of the “dead freight” in the calculation of the import parity price.
- The authorities estimated these measures would reduce the required fuel subsidies by about CFAF 50 billion in 2012.

### Distributional incidence and fiscal implications of reform
- A 2007 IMF assessment showed more than 70 percent of fuel price subsidies accrue to the richest 40 percent of households.
- The poorest 20 percent of households receive less than 1 percent of the subsidy for gasoline; for kerosene the poorest 20 percent receive only 13 percent of the subsidy.
- Of the CFAF 309 billion of required fuel subsidies in 2011, the share of kerosene was 12.5 percent, equivalent to 0.3 percent of GDP.
- Eliminating subsidies on gasoline and diesel only would free resources equivalent to 2.3 percent of GDP annually in 2013–17 for alternative use.

### Fuel pricing formula: structure and issues
- The fuel subsidy is calculated through a pricing formula in place since 2007. The formula:
  - calculates a local wholesale price (f) by adding to the prevailing import parity price of imported refined products: a profit margin (or a producer subsidy to SONARA) of 12 percent; value added taxes (VAT); and coastal navigation costs.
  - derives a notional retail price by adding port taxes, distribution costs, a contribution to the anti-smuggling fund, and a special tax on petroleum products (earmarked for road maintenance) to the wholesale price.
  - calculates the shortfall (subsidy) per liter as the difference between the notional retail price and the fixed pump price.
- Box Table (Cameroon: Fuel Pricing Formula, In CFAF per liter; As of May 2012) illustrates components and resulted shortfalls (examples included in source):
  - Notional retail price (m) for gasoline: 875.3; pump price (n): 569.0; shortfall (m-n): 306.3.
  - Notional retail price (m) for kerosene: 714.9; pump price (n): 350.0; shortfall (m-n): 364.9.
  - Notional retail price (m) for diesel: 801.9; pump price (n): 520.0; shortfall (m-n): 281.9.
  - Memorandum items show required subsidy as a percentage of fixed pump price: 54%, 104%, 54% for gasoline, kerosene, diesel respectively.
- Two issues identified with the pricing formula:
  - The margin for SONARA increases with world market prices because the margin is ad valorem, leading to increasing government transfers to SONARA as international fuel prices increase.
  - The formula could be made simpler and more transparent: unclear inclusion of customs duties on crude oil imported by SONARA from non-CEMAC countries in the import parity price of refined products; apparent double counting between distribution and price equalization costs.

### Reform options and policy recommendations (Way Forward)
- Options to modify the pricing formula:
  - Short term: delink the supplementary margin for SONARA from international fuel price levels by setting a specific nominal transfer per liter of final product.
  - Medium term: estimate the wholesale price (item f in Box 1, Table 1) on the basis of SONARA’s production costs, taking into account efficiency gains from SONARA’s investments.
  - Reassess distribution and price equalization costs and margin to bring more efficiency into the sector.
- Staff recommendation:
  - Adopt a comprehensive reform of fuel pricing with a plan for gradual adjustments of pump prices to international prices.
  - Reduce the adjustment for kerosene, which is used primarily by the poorest segments of the population.
  - Put in place targeted safety net programs to ease the impact of price adjustments, potentially designed and carried out with donor support, including the World Bank.

*Source: _cr12237 - 3. Fuel subsidies impose a heavy (Cameroon 2012 Article IV Report, International Monetary Fund).*

### 8. The model shows Cameroon will

### 8. The model shows Cameroon will

### Public investment scenarios and growth outcomes
- Public investment path (both DSGE scenarios): increases from 4.1 percent of GDP in 2010 to 6.6 percent by 2018, before coming down to 5.6 percent by 2032.
- Two DSGE scenarios differ by the parameter φ (baseline and optimistic), with φ values taken from Hulten (1996).
- The baseline scenario produces projected annual real growth similar to the historical average of 3.3 percent.
- If public capital can be made more effective (optimistic scenario), average annual growth increases to 5 percent.
- The GESP scenarios assume much higher growth pay-offs than the DSGE optimistic scenario despite similar public investment paths.

### Fiscal consequences and debt projections
- In the baseline DSGE scenario, the muted growth response to the public investment increase causes fiscal indicators to deteriorate substantially.
- Non-oil primary deficit (NOPD) increases substantially in the medium term in both DSGE scenarios, but:
  - Under the optimistic scenario the NOPD recovers much better in the long run and shows a non-oil primary surplus by the end of the projection period.
  - Under the baseline scenario the non-oil primary deficit stabilizes at 2.5 percent.
- Public-debt-to-GDP ratios by 2032:
  - DSGE (baseline): 35 percent of GDP by 2032.
  - DSGE (optimistic): 25 percent by 2032.
- The optimistic DSGE scenario also sees the non-oil primary balance turn positive by the end of the projection period.

### Conditions required to attain the optimistic growth path
- Two essential pillars:
  - (i) address the issues linked to the low φ (increase the effectiveness of public investment);
  - (ii) ensure an enabling environment for private investment.
- Elements to improve φ typically include:
  - better project management,
  - development of capital markets,
  - reform of public utilities,
  - improvement of public financial management.
- Elements to improve the environment for private investment include measures aimed at creating an improved business climate.

### Policy conclusions and recommendations
- Assuming no substantial change to the structure of the Cameroonian economy or public finances, the current scaling up of public investment will result in a low-growth trajectory in line with Cameroon’s historical performance.
- Both the PIH and the DSGE baseline show the planned public investment increase results in high NOPDs and fast-accumulating debt.
- For the scaling-up effort to be effective:
  - the effectiveness of the public investment program needs to increase substantially;
  - an enabling environment for private sector investment needs to be created.
- The optimistic scenario shows that if these conditions were fulfilled, growth would reach a long-run level of around 5 percent, with debt indicators becoming more sustainable.
- Current practice: Cameroon is currently spending all its oil revenue in a way that could jeopardize future fiscal sustainability.
- Recommendation: At least some of the oil revenue should be saved in the current high-oil-price environment, and released for public investment in future years as its effectiveness picks up.
- The NOPD should be used to guide future changes in the design and management of Cameroon’s public finances while taking into account the depletion of oil reserves.
- Without improvement in public investment effectiveness, the scaling-up will not generate the growth needed for a sustainable NOPD path.

*Source: _cr12237 - 8. The model shows Cameroon will (IMF staff text provided).*

### 12. The three-good framework

### 12. The three-good framework

### Framework and IRER Definitions
- The framework produces two IRERs, corresponding to the relative prices of exportables and importables in terms of domestically produced and consumed goods:
  - IRERx = Px / Pd
  - IRERm = Pd / Pm
- Where Pd is the price of the domestic goods, and Px and Pm the domestic prices of exportables and importables, respectively, measured in domestic currency terms.
- Interpretation:
  - IRERx is an indicator of the internal price competitiveness of exports relative to domestic goods. A decline in IRERx indicates a gain in competitiveness for the export sector.
  - IRERm is an indicator of the internal price competitiveness of domestic goods relative to importables. A rise in IRERm indicates a loss in competitiveness for importables (i.e., an overall gain in competitiveness for imports in domestic consumption).

### Evolution of Relative Prices (1994–2011) — Key observations from Figure 3
- The four relative-price series compared are: external real exchange rate (REER), IRERm (domestic goods to imports), IRERx (domestic goods to exports), and IRERn (nontradables to tradables from Cameroon National Institute of Statistics).
- Empirical findings:
  - IRERx and IRERm have been more volatile than the external real exchange rate (REER). This higher volatility increases uncertainty not captured by the external REER and is detrimental to externally oriented sectors.
  - IRERx has been on a declining trend since 1998, suggesting that the exportable sector has been gaining competitiveness against domestically oriented sectors. This evolution reflects:
    - the rise in oil and non-oil commodities’ international prices in the period considered,
    - the overall containment of prices of domestic goods through fiscal and monetary policies,
    - actions to raise the supply of agricultural commodities.
  - IRERm has been on a rising trend. The cumulative appreciation of IRERm from 1994 to 2011 is 67 percent. This indicates a general gradual loss in competitiveness for production oriented toward import substitution and an overall gain in competitiveness for imports in domestic consumption.
  - IRERn, calculated using authorities’ price series of tradable and nontradable commodities, tracks quite well the evolution of the external REER, suggesting that analysis based solely on REER or IRERn would not adequately capture price incentives affecting production and consumption and ultimately external balance assessment of competitiveness not based on real exchange rate measures.
- Figure 3 indexing convention: (1994 = 100).

### Border administration and trade facilitation (evidence)
- World Bank Enterprise Survey (2009): average time for import clearance in Cameroon is 24 days, compared with 12.7 days in the rest of sub-Saharan Africa (SSA).

### Assessment of competitiveness not based on real exchange rates — Survey-based findings
- The 2011–12 World Economic Forum definition: competitiveness = set of institutions, policies, and factors determining productivity.
- Global Competitiveness Index (GCI) 2012:
  - Cameroon ranked 116 out of 142 surveyed countries, with a score of 3.7 out of 7 (Table 1).
  - Cameroon ranks lower than the SSA average on institutional environment and infrastructure, but higher on macroeconomic environment, health, and primary education.
  - Overall rank on efficiency enhancers is 120 out of 142; SSA average is 111.
- World Bank Doing Business Indicators (2012):
  - Cameroon improved from 168 to 161 (out of 183) versus 2011.
  - Noted improvements: dealing with construction permits, getting credit, starting a business.
  - Cameroon still ranks below the SSA average of 137.
  - Firms identify as top constraints: access to financing, corruption, inadequate infrastructure, tax regulations, government bureaucracy.
- Enabling Trade Index (ETI) 2012 (World Economic Forum):
  - Cameroon rank: 118 out of 132 with an overall score of 3.3 out of 7 (Table 3).
  - Low scores on:
    - availability and use of ICTs: 2.3
    - transparency of border administration: 2.6
    - transport and communications infrastructure: 2.7
    - availability and quality of transport services: 2.8
    - availability and quality of transport infrastructure: 3
    - efficiency of import-export procedures: 3
  - Factors with highest negative impact on exporting (percent of responses):
    - Access to trade finance: 15.9
    - Burdensome procedures and corruption at foreign borders: 17.3
    - Other notable items: Technical requirements and standards abroad (5.2); Access to imported inputs at competitive prices (6.6); Rules of origin requirements abroad (6.9); High cost or delays caused by domestic transportation (8.2); Identifying potential markets and buyers (8.5); High cost or delays caused by international transportation (10.3); Difficulties meeting quality/quantity requirements of buyers (10.4); Inappropriate production technology and skills (10.7).
  - Factors with highest negative impact on importing (percent of responses):
    - Burdensome import procedures: 25.5
    - Corruption at the border: 21.4
    - Tariffs and non-tariff barriers: 20.9
    - High cost or delays caused by international transportation: 9.3
    - High cost or delays caused by domestic transportation: 6.6
    - Domestic technical requirements and standards: 5.8
    - Inappropriate telecommunications infrastructure: 5.1
    - Crime and theft: 5.3

### Survey-based ranked constraints for doing business (Figure 4)
- Percent of responses identifying most problematic factors:
  - Access to financing: 22.3
  - Corruption: 21.2
  - Inadequate supply infrastructure: 12.6
  - Tax regulations: 10.9
  - Inefficient government bureaucracy: 9.7
  - Tax rates: 8.4
  - Restrictive labor regulations: 4.3
  - Inflation: 3.5
  - Poor work ethic in national labor force: 1.9
  - Crime and theft: 1.6
  - Inadequate educated workforce: 1.2
  - Poor public health: 1.0
  - Policy instability: 0.8
  - Foreign currency regulations: 0.7
  - Government instability/coups: 0.0

### Tables and indices (selected numeric entries preserved as reported)
- GCI 2011–12: Rank 116, Score 3.6 (Table 1 entries preserved as presented).
- Doing Business (comparative ranks shown for CEMAC, WAEMU, SSA and Cameroon for 2011–2012; Cameroon overall Ease of doing business rank 161 in 2012).
- ETI 2012: Index rank 118, Score 3.3; Sub-index and pillar scores reported in Table 3 (see pillar scores above).

### Transition to debt sustainability analysis (overview points)
- The joint IMF-World Bank LIC-DSA concludes:
  - Cameroon continues to face a low risk of debt distress insofar as all external debt ratios remain well below the policy-dependent indicative thresholds under the baseline scenario and under all stress tests.
  - Total public debt indicators are markedly higher than in the 2011 DSA, largely because of:
    - projected accumulation of payment arrears on domestic debt,
    - higher issuance of government securities to cover part of the fiscal deficit.
  - Projected large increase in domestic debt motivates policy action:
    - reform of the fuel subsidy mechanism,
    - strengthening of commitment controls to limit accumulation of domestic arrears.
  - There has been acceleration in nonconcessional borrowing commitments since the 2011 DSA, warranting a cautious approach to borrowing.
  - Policy recommendations to mitigate debt vulnerabilities include:
    - enhancing non-oil revenue mobilization,
    - widening the export base in light of the anticipated long-run decline of oil revenues,
    - limiting nonconcessional external borrowing where feasible.
- Baseline scenario assumptions relative to the 2011 DSA:
  - somewhat higher oil prices,
  - higher new domestic borrowing through issuance of government securities (projected CFAF 750 billion over the projection period versus CFAF 250 billion in the previous DSA),
  - faster accumulation of domestic arrears,
  - oil prices for 2012-17 based on WEO assumptions and assumed constant beyond 2017,
  - government intentions to issue securities in 2012 and remain active on the regional bond market.
- Domestic debt developments:
  - Total domestic debt: CFAF 734 billion in 2011 (Table: 2011 total domestic debt 734; shares — structured debt 561, non-structured debt 163).
  - Of the CFAF 200 billion issued in 2010, CFAF 42 billion was sold externally (authorities’ convention treated as external debt; staff treats it as domestic going forward).
- Historical context on public debt:
  - Public debt-to-GDP ratio declined from 52 percent in 2005 to 10 percent in 2008 following HIPC and MDRI; since 2008 domestic and external borrowing has been rising.
  - Total public debt (billions of CFA francs) reported across 2005–2011 and percent of GDP series are included in Text Table 1 (entries preserved as presented).

*Source: _cr12237 - 12. The three-good framework (IMF staff summary of chapter content).*

### 4. Overall outstanding debt is

### 4. Overall outstanding debt is

### Debt projections and drivers
- Overall outstanding debt is projected to be markedly higher than in the previous DSA throughout the projection period.
- The higher level of debt reflects mostly the increase in domestic debt arising from the higher issuance of government securities to cover budgetary commitments and financing gaps.

### Key macroeconomic and fiscal assumptions (selected figures from source)
- Real GDP growth (percent):  
  - DSA 2012: 4.5, 5.2, 4.6 (for 2011-12, 2013-16, 2017–32 as displayed)  
  - DSA 2011: 4.2, 4.6, 4.6
- Total revenue (percent of GDP, excluding grants):  
  - DSA 2012: 18.4, 17.7, 16.8  
  - DSA 2011: 17.8, 18.7, 16.2
- Exports of goods and services (percent of GDP):  
  - DSA 2012: 31.4, 30.8, 24.3  
  - DSA 2011: 26.3, 29.8, 23.8
- Oil price (U.S. dollars per barrel):  
  - DSA 2012: 107.1, 91.8, 82.0  
  - DSA 2011: 97.8, 86.6, 78.9
- Footnotes: Figures beyond 2011 incorporate a discount of US$ 6 from the WEO projected international prices for uncertainty (prudence factor) and US$3 for the poorer quality of Cameroon's oil.

### Projected new external borrowing and commitments
- Staff project new external commitments to reach CFAF 994 billion in 2012 (7.8 percent of GDP) and CFAF 623 billion (4.5 percent of GDP) in 2013.
- Text Table 4 (selected datapoints):  
  - Outstanding commitments at year-end (2011–2017, in Billions of CFA francs): 1454.0, 2245.4, 2620.2, 2907.4, 3120.8, 3254.0, 3295.7  
  - New external commitments (2011–2017, in Billions of CFA francs): 852, 994, 623, 595, 552, 505, 450  
    - In percent of GDP: 7.2, 7.8, 4.5, 4.0, 3.5, 3.0, 2.4  
    - Concessional (as percent of total): 20.4, 25.0, 30.0, 30.0, 30.0, 30.0, 30.0  
    - Concessional (as percent of GDP): 1.5, 2.0, 1.4, 1.2, 1.0, 0.9, 0.7  
    - Non-concessional (as percent of total): 79.6, 75.0, 70.0, 70.0, 70.0, 70.0, 70.0  
    - Non-concessional (as percent of GDP): 5.7, 5.9, 3.2, 2.8, 2.4, 2.1, 1.7  
  - External disbursements (central government and parastatals, Billions of CFA francs): 184.1, 202.8, 248.6, 307.7, 338.5, 371.8, 408.3  
  - Disbursement rate on previous year's commitments: 24.3, 13.9, 11.1, 11.7, 11.6, 11.9, 12.5
- Authorities indicated that 75 percent and 70 percent of the new commitments in 2012 and 2013, respectively, would be nonconcessional.
- Staffs assume new borrowing commitments after 2013 will decline gradually to 2.4 percent of GDP by 2017.
- A rate of disbursement from outstanding commitments of about 14 percent has been assumed for 2012.

### New external borrowing baseline (Text Table 5, selected figures)
- New borrowing, 2012 DSA (Billions of CFA francs, selected years): 2012: 203, 2016: 372, 2020: 383, 2025: 415, 2030: 440, 2032: 439, Average 2012-17: 313, Average 2018-32: 415
  - Concessional (2012 DSA, Billions of CFA francs, selected): 14, 110, 109, 103, 99, 98, Average 2012-17: 120, Average 2018-32: 79  
    - Percent of total (concessional): 69.3, 29.4, 26.9, 26.9, 23.8, 20.7, Average 2012-17: 19.1, Average 2018-32: 18.9  
  - Nonconcessional (2012 DSA, Billions of CFA francs, selected): 62, 263, 280, 317, 349, 355, Average 2012-17: 174, Average 2018-32: 336  
    - Percent of total (nonconcessional): 30.7, 70.6, 73.1, 73.1, 76.2, 79.3, Average 2012-17: 80.9, Average 2018-32: 81.1

### Macroeconomic assumptions for the baseline scenario (Box 1, selected)
- Medium Term, 2013-17:  
  - Forecast average GDP growth: 5 percent.  
  - Oil production: from 69 thousand barrels a day in 2012 to 103 thousand barrels in 2017.  
  - Average annual consumer price inflation: 2.5 percent.  
  - Non-oil revenue: forecast to average 14.5 percent of non-oil GDP in 2012-17.  
  - Oil revenue: estimated to decline from 5.5 percent of GDP in 2012 to 4.1 percent of GDP in 2017.  
  - Non-oil fiscal primary deficit: projected to remain close to 9 percent of non-oil GDP during 2013–17.  
  - External current account deficit: projected to decline from 4.7 percent of GDP in 2012 to 3.3 percent of GDP in 2017.  
  - Non-oil exports volume growth: from 7 percent in 2012 to above 8 percent in 2017.
- Long Term, 2018-32:  
  - Growth: expected to average 4.6 percent in 2018–32.  
  - Oil revenue: projected to decline from 4.0 percent of GDP in 2017 to 0.3 percent of GDP by 2032.  
  - Non-oil revenue: projected to rise from 14.6 percent of non-oil GDP in 2017 to 16.0 percent by 2032.  
  - Non-oil primary deficit: projected to decline gradually, reaching about 3 percent of non-oil GDP towards the end of the forecast period.

### External debt sustainability assessment (baseline and thresholds)
- Cameroon ranked as a ‘weak performer’ under the joint IMF/World Bank debt sustainability framework (CPIA three-year moving average). CPIA ratings (2006–2010): Cameroon: 3.22, 3.23, 3.21, 3.21, 3.17.
- Indicative external debt burden thresholds for weak performers:  
  - PV of debt-to-exports ratio: 100 percent  
  - PV of debt-to-revenue ratio: 200 percent  
  - PV of debt-to-GDP ratio: 30 percent  
  - Debt service-to-exports ratio: 15 percent  
  - Debt service-to-revenue ratio: 18 percent
- DSA findings:  
  - The DSA calculations indicate Cameroon’s external debt is sustainable; all debt indicators remain below their thresholds over the projection horizon.  
  - There is a significant rise in external debt ratios up to the end of the projection period up to 2025 before they level off.  
  - The increase in external debt is driven by acceleration in borrowing required for the government’s infrastructure program.  
  - Increased new external commitments on nonconcessional terms could represent a threat to debt sustainability in the longer term.
- Threshold comparisons (selected from Text Table 7):  
  - PV of debt-to-GDP (DSA 2012): 7.3 (2012), 9.5 (2013–17), 12.7 (2018–32) versus threshold 30.  
  - PV of debt-to-exports (DSA 2012): 22.8 (2013–17), 31.1 (2018–32) versus threshold 100.  
  - PV of debt-to-revenue (DSA 2012): 39.7 (2013–17), 53.8 (2018–32) versus threshold 200.  
  - Debt service-to-exports (DSA 2012): 1.6 (2012), 1.7 (2013–17), 3.2 (2018–32) versus threshold 15.  
  - Debt service-to-revenue (DSA 2012): 2.8 (2012), 2.9 (2013–17), 4.5 (2018–32) versus threshold 18.

### Alternative scenarios and stress tests
- Export shock stress test:  
  - Assumes exports growth in US dollar terms in 2013–14 at one standard deviation below the ten-year historical average (a drop of 5.2 percent in the value of exports in both 2013 and 2014), then return to baseline growth rates.  
  - The magnitude of the shock is somewhat lower than in the 2011 DSA; the additional borrowing required does not cause a breach in thresholds.
- Contingent liability bound test:  
  - Takes into account potential contingent claims from restructuring distressed banks (estimated at CFAF 60 billion for one major bank) and negative equity (CFAF 28 billion) in a recently-audited state-owned enterprise.  
  - These amounts are not significant in terms of impact on long-run debt sustainability.
- Public sector downside scenario (Scenario A3):  
  - An alternative downside scenario assuming a growth rate of 0.2 percentage point below the baseline for the entire projection period results in a PV of debt-to-GDP ratio of 54 percent by 2032 (higher than baseline 48 percent).
- Scenario with unchanged primary deficit from 2012:  
  - Under this scenario, all key debt ratios remain below the baseline, reflecting that the baseline projects an increasing primary deficit due to higher public investment and fuel subsidies.

### Public sector debt assessment
- Baseline shows a marked upward trend in public sector debt ratios:  
  - PV of debt-to-GDP projected to increase from 16 percent of GDP in 2012 to 48 percent of GDP in 2032 (compared with expected 12-15 percent in the previous DSA).  
  - Substantial increase in PV of debt-to-revenue ratio as well.
- Major contributors to the increase in public debt: issuance of government securities, securitization of arrears to SONARA, and accumulation of further domestic debt to finance fiscal gaps.
- The 2011 DSA had been calibrated on a policy reform scenario; that reform scenario was not retained for the 2012 DSA because postponement of legislative elections to 2013 is likely to reduce near-term reform momentum.

### Debt management and institutional measures
- Ongoing improvements:  
  - Authorities implementing a new debt management strategy aligned with CEMAC guidelines.  
  - Since 2009, a quarterly report on the country’s debt situation has been published.  
  - Authorities produce an annual DSA and update the medium-term debt management strategy for central government debt, annexed to the annual budget law.  
  - The National Debt Committee (instituted in 2008) is now in place, and the audit of domestic arrears is ongoing.
- Further efforts needed to preserve long-term debt sustainability given emerging vulnerabilities.

### Policy recommendations and conclusions (selected)
- Risk assessment: Cameroon’s risk of debt distress remains low, but signs of vulnerability are emerging from increasing domestic debt.
- Recommendations:  
  - Borrowing should be contracted on concessional terms to the extent possible.  
  - Borrowing should be contingent on thorough project evaluation and rigorous project selection to maximize returns on investment.  
  - Continued efforts to improve non-oil revenue mobilization and to widen the export base would help mitigate emerging debt vulnerabilities.  
  - Strengthen debt management framework and reinforce ongoing efforts (debt reporting, audit of arrears, medium-term debt strategy).
- Authorities’ view: Authorities broadly shared the risk assessment, noting scarcity of concessional financing for key infrastructure projects; they regard the current vulnerability level as providing some space for increased debt-financed investment but stress preference for concessional financing and a reform scenario that assumes lower domestic arrears accumulation.

*Source: IMF staff and Cameroonian authorities, Cameroon 2012 Article IV Report — Debt Sustainability Analysis (selected sections from the provided document).*

### 16. Persistent weakness in public

### _cr12237 - 16. Persistent weakness in public

### Key vulnerabilities and diagnostic findings
- Persistent weakness in public financial management and insufficient data coverage underline the need for caution in assessing Cameroon’s debt sustainability.
- Vulnerabilities identified:
  - Quasi-fiscal liabilities of state-owned enterprises and distressed banks.
  - Further build up of domestic arrears.
- Authorities’ efforts to improve debt management could be reinforced by:
  - Ensuring better coverage of public sector liabilities.
  - A new and more comprehensive audit of all government payment obligations.

### Debt dynamics and projected indicators (selected figures and trends)
- Public sector debt (percent of GDP) — historical and projected series (selected years and values as presented):
  - 2009: 10.6
  - 2010: 12.1
  - 2011: 13.7
  - 2012: 17.2
  - 2013: 20.0
  - 2014: 23.4
  - 2015: 26.5
  - 2016: 29.3
  - 2017: 31.8
  - 2022: 39.9
  - 2032: 50.4
- Foreign-currency denominated share of public sector debt (percent of GDP):
  - 2009: 5.5
  - 2010: 6.5
  - 2011: 7.5
  - 2012: 8.9
  - 2013: 9.8
  - 2014: 11.0
  - 2015: 12.0
  - 2016: 13.1
  - 2017: 14.2
  - 2022: 16.7
  - 2032: 13.8
- Change in public sector debt (percent of GDP):
  - 2009: 1.1
  - 2010: 1.5
  - 2011: 1.6
  - 2012: 3.5
  - 2013: 2.7
  - 2014: 3.4
  - 2015: 3.2
  - 2016: 2.7
  - 2017: 2.5
  - 2022: 1.6
  - 2032: 0.7
- Identified debt-creating flows (percent of GDP):
  - 2009: -0.2
  - 2010: 0.9
  - 2011: 1.6
  - 2012: 3.3
  - 2013: 2.6
  - 2014: 3.2
  - 2015: 3.1
  - 2016: 2.7
  - 2017: 2.5
  - 2022: 1.7
  - 2032: 0.9
- Primary deficit (percent of GDP) — selected values and averages:
  - 2009: -0.3
  - 2010: 1.0
  - 2011: 2.6
  - 2012: -2.4
  - 2013: 2.8
  - 2014: 2.8
  - 2015: 3.3
  - 2016: 4.0
  - 2017: 4.1
  - 2012-17 Average: 3.9
  - 2022: 4.0
  - 2032: 3.7
- Revenue and grants (percent of GDP):
  - 2009: 18.4
  - 2010: 17.5
  - 2011: 18.9
  - 2012: 19.0
  - 2013: 18.6
  - 2014: 18.0
  - 2015: 17.8
  - 2016: 17.8
  - 2017: 17.9
  - 2022: 17.1
  - 2032: 16.3
- Primary (noninterest) expenditure (percent of GDP) — selected values:
  - 2009: 18.1
  - 2011: 21.5
  - 2012: 21.7
  - 2013: 21.9
  - 2014: 22.0
  - 2015: 21.9
  - 2016: 21.8
  - 2017: 21.9
  - 2022: 20.3
  - 2032: 19.2
- Automatic debt dynamics contribution (percent of GDP):
  - 2009: 0.1
  - 2010: -0.2
  - 2011: -1.0
  - 2012: 0.0
  - 2013: -0.9
  - 2014: -0.8
  - 2015: -1.0
  - 2016: -1.2
  - 2017: -1.4
  - 2022: -1.5
  - 2032: -2.0
- Gross financing need (percent of GDP):
  - 2009: 0.7
  - 2010: 1.7
  - 2011: 3.9
  - 2012: 4.4
  - 2013: 5.2
  - 2014: 6.1
  - 2015: 6.3
  - 2016: 5.9
  - 2017: 6.0
  - 2022: 4.9
  - 2032: 5.2
- PV of public sector debt-to-revenue and grants ratio (percent):
  - Selected values in projections:
    - 2012: 66.6
    - 2013: 82.6
    - 2014: 96.8
    - 2015: 117.4
    - 2016: 135.0
    - 2017: 148.4
    - 2022: 213.7
    - 2032: 293.7
- PV of public sector debt-to-revenue ratio (percent) (revenue excluding grants):
  - 2012: 68.4
  - 2013: 85.0
  - 2014: 99.1
  - 2015: 120.0
  - 2016: 137.6
  - 2017: 151.0
  - 2022: 215.6
  - 2032: 294.6
- Debt service-to-revenue and grants ratio (percent):
  - 2009: 5.3
  - 2010: 3.7
  - 2011: 7.0
  - 2012: 8.8
  - 2013: 10.3
  - 2014: 11.4
  - 2015: 12.7
  - 2016: 10.8
  - 2017: 11.3
  - 2022: 9.7
  - 2032: 13.8

### Macroeconomic and fiscal assumptions used in projections (selected)
- Real GDP growth (in percent) — selected years and values:
  - 2009: 2.0
  - 2010: 2.9
  - 2011: 4.2
  - 2012: 3.2
  - 2013: 0.8
  - 2014: 4.7
  - 2015: 5.0
  - 2016: 5.2
  - 2017: 5.3
  - 2022: 5.5
  - 2032: 5.5
  - 2018-32 Average: 5.2
  - 2012-17 Average: 4.6
- Average nominal interest rate on forex debt (in percent) — selected values:
  - 2009: 1.6
  - 2010: 1.2
  - 2011: 2.8
  - 2012: 2.2
  - 2013: 1.3
  - 2014: 2.6
  - 2015: 2.3
  - 2016: 2.2
  - 2017: 2.2
  - 2022: 2.3
  - 2032: 2.3
- Average real interest rate on domestic debt (in percent):
  - 2009: 4.3
  - 2010: -1.8
  - 2011: -0.8
  - 2012: -0.5
  - 2013: 2.6
  - 2014: 0.2
  - 2015: -0.2
  - 2016: 1.1
  - 2017: 1.1
  - 2022: 0.6
  - 2032: 0.6
- Inflation rate (GDP deflator, in percent) — selected values:
  - 2009: -3.3
  - 2010: 3.0
  - 2011: 2.9
  - 2012: 2.1
  - 2013: 2.5
  - 2014: 2.0
  - 2015: 2.9
  - 2016: 2.0
  - 2017: 2.0
  - 2022: 2.1
  - 2032: 2.2
- Grant element of new external borrowing (in percent) — selected projected values:
  - 2016: 32.6
  - 2017: 29.8
  - 2018: 27.1
  - 2019: 24.4
  - 2020: 24.2
  - 2021: 23.9
  - 2022: 27.0
  - 2023: 22.7
  - 2024: 20.2

### Scenario and stress-test outcomes (selection)
- Figure notes and stress-test identification:
  - “The most extreme stress test is the test that yields the highest ratio in 2022.”
  - For various panels, the most extreme shocks correspond to:
    - a one-time depreciation of the exchange rate shock (figure b. and d. and f. references),
    - an exports shock (figure c., e., and f. references).
- Alternative scenarios and bound tests (selected labels and baseline comparisons as presented):
  - A1. Real GDP growth and primary balance are at historical averages
  - A2. Primary balance is unchanged from 2012
  - A3. Permanently lower GDP growth
  - B1. Real GDP growth is at historical average minus one standard deviations in 2013-2014
  - B2. Primary balance is at historical average minus one standard deviations in 2013-2014
  - B3. Combination of B1-B2 using one half standard deviation shocks
  - B4. One-time 30 percent real depreciation in 2013
  - B5. 10 percent of GDP increase in other debt-creating flows in 2013

### Policy implications and recommended actions
- Given identified vulnerabilities and projection trajectories, recommended policy actions include:
  - Reinforce authorities’ debt management efforts to ensure better coverage of public sector liabilities.
  - Conduct a new and more comprehensive audit of all government payment obligations.
  - Exercise caution in assessing debt sustainability due to data coverage gaps and quasi-fiscal contingent liabilities.

*Sources: Cameroonian authorities; and IMF-World Bank staff estimates and projections.*

### 1. Real GDP growth is at historical average minus one standard deviations in 2013-201483101130153171187262376

### 1. Real GDP growth is at historical average minus one standard deviations in 2013-2014

### Debt sustainability sensitivity analysis (Table 2 / Table 3 series)
- Scenarios tested (labels and shocks as presented):
  - B1. Real GDP growth is at historical average minus one standard deviations in 2013-2014.
  - B2. Primary balance is at historical average minus one standard deviations in 2013-2014.
  - B3. Combination of B1-B2 using one half standard deviation shocks.
  - B4. One-time 30 percent real depreciation in 2013.
  - B5. 10 percent of GDP increase in other debt-creating flows in 2013.
  - A1. Real GDP growth and primary balance are at historical averages.
  - A2. Primary balance is unchanged from 2012.
  - A3. Permanently lower GDP growth (assumes real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period).
- Key notes on scenario construction:
  - Revenue includes grants.
  - Bound-test footnotes: variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.
  - Assumption for less favorable financing (A2 in some tables): interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods are the same as in the baseline.
  - Depreciation definition: percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.
  - Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

### Selected sensitivity outcomes (PV and ratios, as reported)
- Baseline PV of external debt (percent of GDP) series (excerpt): 6.4; 7.3; 7.9; 8.7; 9.5; 10.3; 11.1; 13.4; 11.2 (as shown in table sequence).
- Baseline PV of PPG external debt (percent of government revenues): 34.9; 39.7; 43.2; 49.3; 54.3; 58.9; 63.1; 79.0; 68.9.
- PV of external debt (in percent of exports) series in projections: ...20.0; 20.9; 22.8; 24.5; 28.2; 31.2; 34.4; 37.1; 53.6; 53.8 (as presented).
- Baseline PV of Debt-to-GDP Ratio (Table 3a baseline): 7.3; 7.9; 8.7; 9.5; 10.3; 11.1; 13.4; 11.2 (2012– projection columns shown).
- Alternative and bound-test results (selected entries as shown):
  - A1 (key variables at historical averages): entries include 7.3; 5.0; 2.8; 0.7; 0.0; 0.0; 0.0; 0.0 (series shown).
  - B1 (real GDP growth at historical average minus one standard deviation in 2013-2014): 7.3; 8.0; 9.1; 9.9; 10.9; 11.8; 13.4; 10.0 (series shown).
  - B6 (one-time 30 percent nominal depreciation relative to the baseline in 2013): 7.3; 11.1; 12.2; 13.3; 14.6; 15.8; 18.0; 13.3 (series shown).
- Debt service and financing indicators (selected baseline and projections):
  - Debt service-to-exports ratio (in percent) baseline and historical: 1.3; 0.9; 1.0; 1.6; 1.5; 1.6; 2.0; 1.7; 1.7; 2.6; 4.1.
  - PPG debt service-to-revenue ratio (in percent) baseline and projections: 1.8; 1.4; 1.7; 2.8; 2.6; 2.8; 3.5; 2.9; 2.9; 3.9; 5.2.
  - Total gross financing need (Billions of U.S. dollars) series: 0.0; 0.4; 0.3; 0.4; 0.5; 0.6; 0.7; 0.8; 0.8; 0.8; 1.0.

### Endogenous debt dynamics and flows (select figures preserved)
- Change in external debt series (selected years): 0.0; 1.1; 1.0; 1.4; 0.9; 1.2; 1.1; 1.1; 1.0; 0.2; -0.6.
- Identified net debt-creating flows (selected): 0.2; 1.7; 0.2; 1.0; 1.2; 1.4; 1.4; 1.4; 1.4; 0.5; -0.3.
- Non-interest current account deficit (selected): 0.6; 2.9; 3.9; 0.8; 1.5; 4.5; 4.0; 4.2; 3.7; 3.4; 3.0; 2.8; 0.3; 1.8.
- Net FDI (negative = inflow) (selected): -0.8; -1.3; -3.1; -2.8; 3.6; -3.3; -2.6; -2.6; -2.1; -1.7; -1.2; -1.9; -0.3; -1.2.
- Residual (3-4) (selected): -0.2; -0.6; 0.8; 0.3; -0.3; -0.2; -0.3; -0.3; -0.4; -0.3; -0.3.
- Exceptional financing (component): 1.4; 1.0; -1.3; -0.5; -0.2; -0.1; 0.2; 0.4; 0.3; 0.0; 0.0.

### Key macroeconomic assumptions (selected exact entries)
- Real GDP growth (in percent): 2.0; 2.9; 4.2; 3.2; 0.8; 4.7; 5.0; 5.2; 5.3; 5.5; 5.5; 2.4; 4.6; 4.5; 4.6 (series as presented).
- GDP deflator in US dollar terms (change in percent) (selected): -8.3; -1.6; 9.6; 7.1; 8.1; -5.0; 3.0; 1.6; 1.6; 1.6; 1.6; 0.7; 3.0; 3.2; 3.1.
- Effective interest rate (percent) (selected): 1.6; 1.2; 2.8; 2.1; 1.3; 2.6; 2.3; 2.2; 2.2; 2.3; 2.3; 2.1; 2.2; 2.1.
- Growth of exports of G&S (US dollar terms, in percent) (selected): -29.2; 10.0; 37.0; 12.8; 18.0; 3.9; 8.2; 2.8; 5.2; 6.1; 7.4; 5.6; 4.1; 6.2; 5.2.
- Growth of imports of G&S (US dollar terms, in percent) (selected): -20.0; 3.5; 37.9; 17.8; 18.4; 6.0; 6.3; 3.9; 4.0; 5.2; 5.8; 5.2; 4.2; 5.5; 4.7.
- Grant element of new public sector borrowing (in percent) (selected): 32.6; 29.8; 27.1; 24.4; 24.2; 23.9; 27.0; 22.7; 20.2; 22.0.
- Government revenues (excluding grants, in percent of GDP) (selected): 17.6; 16.8; 18.4; 18.4; 18.2; 17.6; 17.4; 17.5; 17.7; 17.0; 16.2; 16.8.
- Aid flows (Billions of US dollars): 0.2; 0.3; 0.4; 0.4; 0.4; 0.4; 0.4; 0.4; 0.4; 0.4; 0.3.
- Grant-equivalent financing (in percent of GDP) (selected): 1.0; 1.0; 1.0; 0.9; 0.8; 0.8; 0.5; 0.2; 0.4.
- Grant-equivalent financing (in percent of external financing) (selected): 49.3; 43.6; 38.6; 34.7; 33.2; 31.8; 29.7; 24.5; 28.1.

### Memoranda (selected exact figures)
- Nominal GDP (Billions of US dollars) series (selected): 22.2; 22.5; 25.6; 25.5; 27.6; 29.5; 31.5; 33.8; 36.2; 52.8; 111.9.
- Nominal dollar GDP growth (selected): -6.5; 1.2; 14.2; -0.6; 8.1; 6.9; 7.0; 7.2; 7.2; 6.0; 7.7; 7.9; 7.8.
- PV of PPG external debt (Billions of US dollars) (selected): 1.7; 1.9; 2.2; 2.6; 3.0; 3.5; 4.0; 6.8; 10.8.
- (PVt-PVt-1)/GDPt-1 (in percent) (selected): 0.8; 1.2; 1.4; 1.4; 1.6; 1.7; 1.4; 1.1; 0.3; 0.8.
- Gross workers' remittances (Billions of US dollars) (selected): 0.3; 0.3; 0.2; 0.2; 0.2; 0.2; 0.3; 0.3; 0.3; 0.3; 0.4.

### Table 3b public and PPG external debt sensitivity (selected)
- PV of Debt-to-GDP Ratio (baseline small values): 1.6; 1.5; 1.6; 2.0; 1.7; 1.7; 2.6; 4.1.
- PV of Debt-to-Exports Ratio (baseline): 22.8; 24.5; 28.2; 31.2; 34.4; 37.1; 53.6; 53.8.
- PV of Debt-to-Revenue Ratio (baseline): 39.7; 43.2; 49.3; 54.3; 58.9; 63.1; 79.0; 68.9.
- Debt service-to-exports and debt service-to-revenue ratio projections provided in table (see above figures preserved).

### Memorandum item (from Table 3b)
- Grant element assumed on residual financing (i.e., financing required above baseline): 20.3; 20.3; 20.3; 20.3; 20.3; 20.3; 20.3; 20.3.

*Sources: Cameroonian authorities; and IMF-World Bank staff estimates and projections.*

### IMF staff and Executive Board assessment — key findings and policy recommendations
- Growth and inflation:
  - Economic rebound continued: real GDP growth 4.2 percent in 2011 (2.9 percent in 2010).
  - Average inflation 2.9 percent in 2011 (1.3 percent in 2010).
  - Staff projects real GDP to increase from 4.2 percent in 2011 to 5½ percent in 2016 under current policies.
  - Inflation expected to remain below the regional convergence criterion of 3 percent.
- External sector:
  - Current account deficit (including grants) widened from 3.0 percent to 4.1 percent of GDP in 2011, following a 16 percent increase in import volumes.
- Fiscal situation and public debt:
  - Government fiscal situation difficult in 2011: non-oil primary deficit (cash basis) deteriorated from 5.7 percent to 8.5 percent of non-oil GDP.
  - Overall fiscal deficit (cash basis) reached 3.4 percent of GDP in 2011 versus 2.3 percent the year before.
  - Total public debt indicators worsened since 2011 owing to domestic arrears and increased securitization for fiscal financing gaps.
  - Cameroon’s risk of debt distress remains low, but maintaining prudent borrowing and reducing domestic arrears are essential.
- Financial sector vulnerabilities:
  - Distress in four (and possibly five) of 13 commercial banks; nonperforming loans increased by about 17 percent in 2011.
  - Excessive credit concentration, inadequate supervisory resources, and weaknesses in the framework for dealing with distressed banks.
- Policy recommendations endorsed by Executive Directors (selected, verbatim emphasis preserved):
  - Address the substantial challenges facing the 2012 budget to avoid further fiscal deterioration.
  - Improve non-oil revenue mobilization.
  - Contain expenditure on fuel subsidies and avoid accumulation of domestic arrears.
  - Rebuild fiscal buffers.
  - Finalize the ongoing audit of arrears and adopt a plan for settling audited arrears.
  - Strengthen public expenditure management by improving control of the expenditure chain and better tracking of the flow of funds.
  - Achieve lasting financial stability through an effective regional framework and better cooperation between national and regional bodies; Cameroon should take a proactive stance toward regional financial reforms.
  - Accelerate public investment to address infrastructure gaps and improve competitiveness; tackle governance issues and deepen dialogue with private sector interests to improve the business climate and access to credit.
  - External borrowing should be on concessional terms to the extent possible; reform the fuel subsidy mechanism and improve commitment control to help maintain overall debt sustainability.

### Selected economic and financial indicators (Cameroon: Selected Economic and Financial Indicators, 2010–13)
- National income and prices (annual percentage change):
  - GDP at constant prices: 2010 Act. 2.9; 2011 Est. 4.2; 2012 Proj. 4.7; 2013 Proj. 5.0.
  - Oil: 2010 -12.1; 2011 -7.3; 2012 16.2; 2013 6.8 (exact series as shown).
  - Non-oil: 2010 3.7; 2011 4.7; 2012 4.3; 2013 4.9.
  - GDP deflator: 2010 3.0; 2011 2.9; 2012 2.0; 2013 2.9.
  - Consumer prices (12-month average): 2010 1.3; 2011 2.9; 2012 3.0; 2013 3.0.
- External trade (volume, annual percentage change):
  - Export volume: 2010 -0.5; 2011 6.3; 2012 9.8; 2013 6.8.
    - Of which non-oil sector: 2010 3.1; 2011 9.4; 2012 7.0; 2013 7.4.
  - Import volume: 2010 4.9; 2011 15.6; 2012 7.9; 2013 7.8.
  - Terms of trade ("-" = deterioration): 2010 16.0; 2011 2.4; 2012 -6.8; 2013 2.2.
- Money and credit (end of period):
  - Net domestic assets (percent of broad money at start): 2010 8.9; 2011 18.0; 2012 8.3; 2013 8.2.
  - Net credit to the public sector: 2010 -1.6; 2011 5.7; 2012 2.7; 2013 2.9.
  - Credit to the private sector (end of period): 2012 28.3; 2013 10.0; subsequent 9.2 (as shown).
  - Broad money (M2): 2010 11.3; 2011 10.6; 2012 6.0; 2013 7.2.
- Central government operations (percent of GDP):
  - Total revenue (excluding grants): 2010 16.8; 2011 18.4; 2012 18.4; 2013 18.2.
  - Non-oil revenue (percent of non-oil GDP): 2010 13.3; 2011 14.2; 2012 14.3; 2013 14.4.
  - Total expenditure: 2010 18.6; 2011 21.7; 2012 22.0; 2013 22.3.
  - Overall fiscal balance (including payments of arrears), excluding grants: 2010 -2.9; 2011 -3.9; 2012 -4.4; 2013 -4.3.
  - Overall fiscal balance (including grants): 2010 -2.3; 2011 -3.4; 2012 -3.9; 2013 -3.8.
  - Non-oil primary balance (percent of non-oil GDP): 2010 -5.7; 2011 -8.5; 2012 -9.0; 2013 -9.1.
- External sector:
  - Current account balance (including grants): 2010 -3.0; 2011 -4.1; 2012 -4.7; 2013 -4.2.
  - Imputed reserves (percent of broad money): 2010 65.6; 2011 52.9; 2012 47.8; 2013 43.7.
- Public debt:
  - Total public debt (percent of GDP): 2010 12.1; 2011 13.7; 2012 17.2; 2013 20.0.
  - External (percent of GDP): 2010 6.5; 2011 7.6; 2012 8.9; 2013 9.8.

*Sources: Cameroonian authorities; and IMF staff estimates and projections.*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12237.pdf_