## _cr15331 ## Source details **Canonical URL:** [_cr15331](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15331.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15331.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15331.pdf.json) --- ### Macroeconomic overview and shocks - Cameroon suffered two major shocks in 2014: the international crude oil price slump and a surge of terrorist attacks in the Lake Chad region. - Growth and inflation: - Real GDP growth in 2014: 5.9 percent. - Growth projected for 2015: almost 6 percent. - Annual inflation in 2014: remained below 2 percent. - Gasoline retail price increase on July 1, 2014: 15 percent. - Oil sector: - Oil extraction expected rise in 2015: almost 25 percent. - Oil reserves cited: 230 million barrels in 2015. ### Fiscal performance and outlook - 2014 fiscal outturn: - Fiscal deficit (cash basis, including grants) widened to 4.8 percent of GDP in 2014. - Non-oil revenue increased by almost one percentage point of GDP from 2013. - Oil revenue dropped by half a percentage point of GDP from 2013. - Fuel subsidies (accrual basis) in 2014: 2.3 percent of GDP. - Stock of arrears at end-2014: 4.6 percent of GDP. - Medium-term projections and risks: - Fuel subsidies expected reduction in 2015: 1.2 percentage points of GDP. - Public capital spending projected to reach 10 percent of GDP in 2016. - Fiscal deficit projected to peak at over 7 percent of GDP in 2016. - Public debt projection: more than 42 percent of GDP by 2020. - Debt service expected to double in the medium term. ### Government balance sheet (2013–20) - Main summary findings: - Increasing liabilities and stagnating assets projected to reduce government net worth by 31 percent in nominal terms between 2013 and 2020. - Total government assets stagnate in nominal terms because of a 38 percent decline in the value of oil reserves between 2013 and 2020, despite increasing public capital stock. - Liabilities increase threefold, reflecting increased public debt and higher cost of non-concessional borrowing. - Selected figures (CFAF billions): - Total assets: 2013: 27,423; 2014: 27,153; 2015 (Est.): 21,717; 2016: 23,046; 2017: 25,764; 2018: 26,462; 2019: 27,155; 2020: 27,084. - Asset components: - Domestic deposits: 2013: 363; 2014: 290; 2015: 280; 2016: 232; 2017: 184; 2018: 138; 2019: 89; 2020: 59. - Foreign deposits: 0 (all years). - Oil reserves: 2013: 13,410; 2014: 11,870; 2015: 6,674; 2016: 6,561; 2017: 7,642; 2018: 7,701; 2019: 8,370; 2020: 8,282. - Public capital stock: 2013: 13,649; 2014: 14,993; 2015: 14,763; 2016: 16,253; 2017: 17,937; 2018: 18,623; 2019: 18,696; 2020: 18,743. - Liabilities: - Total liabilities: 2013: 3,469; 2014: 4,696; 2015: 6,022; 2016: 7,152; 2017: 8,089; 2018: 9,014; 2019: 9,785; 2020: 10,571. - Domestic debt: 2013: 1,014; 2014: 1,375; 2015: 1,842; 2016: 2,230; 2017: 2,482; 2018: 2,762; 2019: 3,082; 2020: 3,469. - External debt: 2013: 1,766; 2014: 2,774; 2015: 3,660; 2016: 4,429; 2017: 5,137; 2018: 5,806; 2019: 6,280; 2020: 6,699. - Arrears: 2013: 689; 2014: 547; 2015: 520; 2016: 494; 2017: 469; 2018: 446; 2019: 423; 2020: 402. - Net worth (CFAF billions): 2013: 23,954; 2014: 22,456; 2015: 15,694; 2016: 15,893; 2017: 17,675; 2018: 17,449; 2019: 17,370; 2020: 16,514. - Net worth excluding oil reserves (CFAF billions): 2013: 10,544; 2014: 10,587; 2015: 9,021; 2016: 9,332; 2017: 10,033; 2018: 9,748; 2019: 8,999; 2020: 8,232. - Ratios (Percent of GDP): - Assets: 2013: 187.8; 2014: 174.0; 2015: 129.0; 2016: 127.7; 2017: 133.2; 2018: 127.3; 2019: 121.7; 2020: 113.1. - Liabilities: 2013: 23.8; 2014: 30.1; 2015: 35.8; 2016: 39.6; 2017: 41.8; 2018: 43.4; 2019: 43.9; 2020: 44.1. - Net worth: 2013: 164.0; 2014: 143.9; 2015: 93.3; 2016: 88.1; 2017: 91.4; 2018: 84.0; 2019: 77.8; 2020: 69.0. - Net worth excluding oil reserves: 2013: 72.2; 2014: 67.8; 2015: 53.6; 2016: 51.7; 2017: 51.9; 2018: 46.9; 2019: 40.3; 2020: 34.4. ### Debt sustainability and external risks - Debt distress classification: risk of external debt distress rose from “low” to “high” in less than three years. - Present value of external debt to exports breaches the policy-dependent threshold in 2021, nearing 130 versus a threshold of 100. - Drivers of debt distress: - Rapid increase in external debt. - Mostly non-concessional terms of new loans. - Fall in value of Cameroon’s main exports. - Present value of external debt (percent of GDP): 2013: 28.0; 2014: 33.9; 2015: 56.4; 2016: 69.2; 2017: 79.1; 2018: 86.8; 2019: 92.7; 2020: 99.2. - External debt service (percent of exports of goods and services): 2013: 1.8; 2014: 2.5; 2015: 4.4; 2016: 4.5; 2017: 5.5; 2018: 6.5; 2019: 7.4; 2020: 7.9. ### Social indicators and fiscal space for social spending - Poverty rates: - 2007: 39.9 percent; 2011: 38.7 percent; 2014: 37.5 percent. - Urban poverty in 2014: 8.9 percent. - Rural poverty in 2014: 56.8 percent. - Selected social indicators (2007, 2011, 2014): - Population growth: 2.6, 2.5, 2.5. - Life expectancy at birth (years): 52, 54, 55. - Maternal mortality ratio (per 100,000 live births): 720, 690, 782. - Youth literacy rate: 83, 81, N/A. - Constraints: - High fuel subsidies constrained social expenditure allocations in 2014. - Oil price collapse reduced projected fuel subsidies in 2015 to 0.2 percent of GDP, but rising security-related expenditure limited allocations to social sectors. ### Policy discussion and recommendations (selected) - Growth model and private sector: - Shift away from reliance on public investment financed by non-concessional debt toward private sector–led growth. - Timely structural reforms to promote private sector activity and address inequality. - Fiscal measures (selected): - Adopt a NOPD that does not jeopardize fiscal sustainability, with a downward path to below 4 percent of non-oil GDP in the medium term. - Expand the tax base: create more decentralized tax offices; phase out tax and customs exemptions; eliminate the fuel-subsidy scheme; restore normal taxation of fuel products. - Narrow eligibility under the investment incentives law to new external investments with demonstrable growth impact. - Finalize single taxpayer identification by interconnecting tax and customs databases. - Restore budget as effective expenditure control: adopt a supplemental budget for 2015 and a realistic budget for 2016 to unify, rationalize, and scale down multiple investment programs. - Call a moratorium on new infrastructure projects given more than US$4 billion contracted but undisbursed project loans, unless financing is concessional. - Improve debt management: vest sole authority for contracting debt in the Minister of Finance; issue regional bonds consistent with market absorptive capacity; postpone Eurobond issuance. - Implement IT systems to reconcile civil service payroll with the treasury; elaborate wage bill projections. - Strengthen monitoring of SOEs, especially SONARA; produce annual financial reports for all SOEs and state-owned banks; clear SONARA’s arrears. ### Public financial management (PFM) and expenditure control - Issues identified: - Treasury operates through state single treasury account and SNH “advances” account, contrary to staff advice. - Increasing cash outlays not covered by appropriations and direct SNH expenditures make ex post regularization difficult. - Extension of the “complementary period” in 2014 undermined budget execution. - External-financed investment budget items recorded with delays up to two years. - PFM recommendations (selected): - Account for all revenue and expenditure flows on a gross basis. - Limit complementary period to one month; begin using “carry forwards”. - Compile backlog of pending payments and clear them. - Cease using SNH as off-budget advance mechanism. - Eliminate tax expenditures; winding down preferential agreements could yield annual revenues of more than one percent of GDP. - Narrow scope of the 2013 investment incentives law. ### Financial intermediation and banking sector - Performance to end-June 2015: - Total bank assets grew by 6.2 percent year-on-year. - Deposits increased by 6.1 percent. - Credits increased by 13.0 percent. - Banks’ NPLs increased from 10.2 percent in June 2014 to 13.1 percent in June 2015. - Excess liquidity remained significant at almost 5 percent of GDP. - Issues and recommendations: - Three small problem banks unresolved. - Government-sponsored SME bank started operations in July 2015 but has yet to extend significant credit. - Mobile transfers almost doubled in 2014; staff encouraged promotion of financial inclusion via mobile banking and updating legal framework. - Continued modernization of prudential framework and faster adoption of community-wide banking regulations recommended. ### Reform scenario (staff moderate reform scenario) — features and selected projections - Scenario features: - Accelerated private sector-led growth via business environment improvements, faster completion of infrastructure, and expansion of private credit. - Acceleration of PFM reforms and greater fiscal space through moratorium on non-priority investments and better SOE stewardship. - Selected macro projections (Reform Scenario / Baseline Scenario where presented): - Real GDP (percentage change): 2015: 5.9 / 5.9; 2016: 5.3 / 5.3; 2018: 5.7 / 5.7; 2020: 5.7 / 5.7. - Non-oil real GDP (percentage change): 2015: 5.2 / 5.2; 2016: 5.5 / 5.5; 2018: 5.9 / 5.9; 2020: 6.0 / 6.0. - Consumer prices (period average): 2015: 2.8 / 2.8; 2016: 2.2 / 2.2; 2018: 2.2 / 2.2; 2020: 2.2 / 2.2. - Total revenue (incl. grants, percent of GDP): 2015: 17.8 / 17.8; 2016: 16.8 / 16.8; 2018: 17.0 / 17.0; 2020: 16.9 / 16.9. - Oil revenue (percent of GDP): 2015: 2.5; 2016: 2.2; 2018: 2.3; 2020: 2.1. - Total expenditure, cash basis (percent of GDP): 2015: 23.1 / 23.1; 2016: 21.7 / 21.7; 2018: 19.9 / 19.9; 2020: 18.5 / 18.5. - Overall budget balance, cash basis (incl. grants, percent of GDP): 2015: -5.4 / -5.4; 2016: -4.9 / -4.9; 2018: -2.9 / -2.9; 2020: -1.5 / -1.5. - Total public debt (percent of GDP): 2015: 32.6 / 32.6; 2016: 34.5 / 34.5; 2018: 34.5 / 34.5; 2020: 32.0 / 32.0. - Current account (incl. grants, percent of GDP): 2015: -5.1 / -5.1; 2016: -5.0 / -5.0; 2018: -4.3 / -4.3; 2020: -4.0 / -4.0. ### Reform scenario impact and staff view - The reform scenario could raise growth by about ½ percentage point of GDP per year in the medium term. - Non-oil revenue expected to increase by about 1 percentage point per year in the medium term under reforms. - Staff view: tighter fiscal path and structural reforms would strengthen external and fiscal sustainability sufficiently to contain external debt distress risk; Eurobond issuance would exacerbate debt sustainability risks and is discouraged until projects are more mature. ### Debt Sustainability Analysis (DSA) — overview and key findings - Prepared jointly by IMF and World Bank using standard LIC dynamic debt template; covers central government external and domestic debt and publicly guaranteed external debt (CFAF 527 billion at end-2014). - Historical public and publicly guaranteed debt (CFAF billions): 2007: 1,171; 2008: 1,015; 2009: 1,114; 2010: 1,349; 2011: 1,662; 2012: 2,085; 2013: 2,780; 2014: 4,149. - Baseline projections and breaches: - Stock of public debt (percent of GDP): 2013: 19.0; 2014: 26.6; 2015: 32.6; 2016: 36.8; 2017: 39.3; 2018: 41.2; 2019: 41.9; 2020: 42.5. - PV of external debt (percent of GDP): 2015: 56.4; 2020: 99.2. - PV of debt-to-exports ratio breaches policy-dependent threshold (100 percent) in 2021, with ratio nearing 130. - Stress tests bring forward breaches (e.g., to 2017) and show additional breaches of debt-service thresholds. - Drivers: - Acceleration in non-concessional external borrowing, including large bilateral disbursements from non-Paris Club creditors. - Weaker export earnings due to oil price decline. - Eurobond implications: - Proposed Eurobond of US$1.5 billion (~5 percent of GDP) would front-load debt and cause earlier breaches; staff caution against issuing under current market conditions. - Policy recommendations: - Anchor fiscal policy to avoid breaching policy-dependent thresholds. - Make greater use of concessional borrowing. - Monitor debt developments closely, especially externally financed projects. - Improve debt management and tracking of disbursements. ### Risk matrix and key risks - High-likelihood risks: - Protracted slower growth in advanced and emerging economies — Relative Likelihood: High; Impact: Medium. - Sustained low world oil prices — Relative Likelihood: High; Impact: Medium. - Medium-likelihood, high-impact risks: - Spillovers of regional security situation — Relative Likelihood: Medium; Impact: High. - Protracted SONARA payment difficulties — Relative Likelihood: Medium; Impact: High. - Staff recommended policy responses include eliminating fuel subsidies, widening non-oil tax base, improving SONARA efficiency, clearing arrears, and contingency planning for refugees. ### Authorities’ views and commitments - Authorities expressed confidence that large infrastructure projects nearing completion and a supplemental investment program would sustain higher growth and diversification and aim for emerging economy status by 2035. - On fiscal policy: - Authorities undecided on supplemental budget; believed reallocations of unspent funds could meet unforeseen expenditures. - Preparing to issue a US$1.5 billion Eurobond to pay SONARA arrears and finance supplemental investment program but were cautious about social impacts of subsidy removal. - On debt and financial sector: - Recognized risks of debt distress and committed to enhanced debt management and monitoring. - View recent public debt increases as financing needed public investments and consider debt levels sustainable: external public debt 21.7 percent of GDP in 2015; total public debt 32.6 percent of GDP in 2015. - Committed to address NPLs in three small banks and MFIs and coordinate with regional authorities. ### Data, surveillance, and operational follow-up - Data adequacy: broadly adequate for surveillance but important shortcomings remain, including incomplete and delayed fiscal and balance of payments data. - Authorities agreed to step up implementation of technical assistance recommendations for debt management, strengthen PFM systems, prioritize completion-stage projects, monitor public investment program efficiency, and improve SOE oversight. ### Conclusion (key takeaways) - Cameroon faces significant fiscal and external risks driven by large externally financed public investment, falling oil revenues, and rising non-concessional borrowing. - Staff recommendations emphasize tighter fiscal control (NOPD anchor), moratorium on non-priority externally financed projects, PFM reforms, improved debt management, elimination of fuel subsidies, and structural reforms to boost private sector–led growth. - Reform scenario offers potential to raise growth by about ½ percentage point per year and to improve fiscal and external sustainability if implemented. *Source: Data provided by the Cameroonian authorities; and IMF staff calculations, projections, and staff report excerpts contained in _cr15331.* ### 1. Government Balance Sheet ___________________________________________________________________ 9 ### 1. Government Balance Sheet ### Macroeconomic overview and shocks - Cameroon suffered two major shocks in 2014: the international crude oil price slump and a surge of terrorist attacks in the Lake Chad region, which disrupted economic activity in the extreme north and required large-scale multinational military operations. - Growth and inflation: - Real GDP growth in 2014: 5.9 percent. - Growth projected for 2015: almost 6 percent, supported by a surge in oil production and increased public investment. - Annual inflation in 2014: remained below 2 percent. - Gasoline retail price increase on July 1, 2014: 15 percent. - Oil sector: - Oil extraction expected rise in 2015: almost 25 percent (as new wells come on stream). - Oil reserves cited: 230 million barrels in 2015. ### Fiscal performance and outlook - 2014 fiscal outturn: - Fiscal deficit (cash basis, including grants) widened to 4.8 percent of GDP in 2014. - Non-oil revenue increased by almost one percentage point of GDP from 2013. - Oil revenue dropped by half a percentage point of GDP from 2013. - Fuel subsidies (accrual basis) in 2014: 2.3 percent of GDP. - Stock of arrears at end-2014: 4.6 percent of GDP. - Medium-term projections and risks: - Fuel subsidies expected reduction in 2015: 1.2 percentage points of GDP (due to lower oil prices), but oil revenue also expected to fall by a comparable amount. - Public capital spending projected to reach 10 percent of GDP in 2016 (driven by new infrastructure projects). - Fiscal deficit projected to peak at over 7 percent of GDP in 2016. - Non-oil primary deficit (NOPD) projected to follow a similar adverse trend as a percentage of non-oil GDP. - Public debt projection: more than 42 percent of GDP by 2020 (more than twice its level at end-2013). - Debt service expected to double in the medium term. ### Government balance sheet (Box 1): assets, liabilities, and net worth (2013–20) - Summary statement: - Increasing liabilities and stagnating assets are projected to reduce the government’s net worth by 31 percent in nominal terms between 2013 and 2020. - Total government assets stagnate in nominal terms because of a 38 percent decline in the value of oil reserves between 2013 and 2020, despite a projected steady increase in public capital stock from sustained public investment. - Liabilities increase threefold, reflecting increased public debt to finance public investment and higher cost of non-concessional borrowing. - Cameroon: Government Balance Sheet 2013–20 (CFAF billions) - Assets: - 2013: 27,423 - 2014: 27,153 - 2015 (Est.): 21,717 - 2016: 23,046 - 2017: 25,764 - 2018: 26,462 - 2019: 27,155 - 2020: 27,084 - Asset components: - Domestic deposits: - 2013: 363 - 2014: 290 - 2015: 280 - 2016: 232 - 2017: 184 - 2018: 138 - 2019: 89 - 2020: 59 - Foreign deposits: 0 (for all years listed) - Oil reserves: - 2013: 13,410 - 2014: 11,870 - 2015: 6,674 - 2016: 6,561 - 2017: 7,642 - 2018: 7,701 - 2019: 8,370 - 2020: 8,282 - Public capital stock: - 2013: 13,649 - 2014: 14,993 - 2015: 14,763 - 2016: 16,253 - 2017: 17,937 - 2018: 18,623 - 2019: 18,696 - 2020: 18,743 - Liabilities: - 2013: 3,469 - 2014: 4,696 - 2015: 6,022 - 2016: 7,152 - 2017: 8,089 - 2018: 9,014 - 2019: 9,785 - 2020: 10,571 - Liability components: - Domestic debt: - 2013: 1,014 - 2014: 1,375 - 2015: 1,842 - 2016: 2,230 - 2017: 2,482 - 2018: 2,762 - 2019: 3,082 - 2020: 3,469 - External debt: - 2013: 1,766 - 2014: 2,774 - 2015: 3,660 - 2016: 4,429 - 2017: 5,137 - 2018: 5,806 - 2019: 6,280 - 2020: 6,699 - Arrears: - 2013: 689 - 2014: 547 - 2015: 520 - 2016: 494 - 2017: 469 - 2018: 446 - 2019: 423 - 2020: 402 - Net worth (CFAF billions): - 2013: 23,954 - 2014: 22,456 - 2015: 15,694 - 2016: 15,893 - 2017: 17,675 - 2018: 17,449 - 2019: 17,370 - 2020: 16,514 - Net worth excluding oil reserves (CFAF billions): - 2013: 10,544 - 2014: 10,587 - 2015: 9,021 - 2016: 9,332 - 2017: 10,033 - 2018: 9,748 - 2019: 8,999 - 2020: 8,232 - Government balance sheet ratios (Percent of GDP): - Assets: - 2013: 187.8 - 2014: 174.0 - 2015: 129.0 - 2016: 127.7 - 2017: 133.2 - 2018: 127.3 - 2019: 121.7 - 2020: 113.1 - Liabilities: - 2013: 23.8 - 2014: 30.1 - 2015: 35.8 - 2016: 39.6 - 2017: 41.8 - 2018: 43.4 - 2019: 43.9 - 2020: 44.1 - Net worth: - 2013: 164.0 - 2014: 143.9 - 2015: 93.3 - 2016: 88.1 - 2017: 91.4 - 2018: 84.0 - 2019: 77.8 - 2020: 69.0 - Net worth excluding oil reserves: - 2013: 72.2 - 2014: 67.8 - 2015: 53.6 - 2016: 51.7 - 2017: 51.9 - 2018: 46.9 - 2019: 40.3 - 2020: 34.4 - Sources noted for the Box Table: Data provided by the Cameroonian authorities; and IMF staff calculations and projections. ### Debt sustainability and external risks - Debt distress classification: risk of external debt distress has risen from “low” to “high” in less than three years. - Present value of external debt to exports: - The ratio breaches the threshold in 2021, nearing 130 versus a threshold of 100, and is projected to remain over the long term. - Drivers of debt distress: - Rapid increase in external debt. - Mostly non-concessional terms of new loans. - Fall in the value of Cameroon’s main exports. - Exchange rates and competitiveness: - Nominal and real effective exchange rates (REERs) appreciated between 2012 and 2014. - Model-based assessments find the REER is not significantly misaligned with current account norms. ### Social indicators and fiscal space for social spending - Poverty: - Poverty dropped from 39.9 percent (2007) and 38.7 percent (2011) to 37.5 percent (2014). - Urban poverty in 2014: 8.9 percent. - Rural poverty in 2014: 56.8 percent. - Selected social indicators (2007, 2011, 2014): - Population growth: 2.6, 2.5, 2.5 - Life expectancy at birth (years): 52, 54, 55 - Maternal mortality ratio (per 100,000 live births): 720, 690, 782 - Youth literacy rate: 83, 81, N/A - Constraints on social spending: - High fuel subsidies constrained social expenditure allocations in 2014 despite the gasoline price increase. - Oil price collapse reduced projected fuel subsidies in 2015 to 0.2 percent of GDP, but rising security-related expenditure limited allocations to social sectors. ### Policy discussion and recommendations - Growth model shift: - Cameroon should adapt its economy and budget to confront twin shocks while switching to a growth model less reliant on public investment financed by non-concessional debt. - Sustaining inclusive growth requires timely implementation of structural reforms to promote private sector activity and stronger policies to address inequality. - Fostering private sector-led growth: - Potential exists for the private sector to overtake the public sector, notably in energy and construction. Cement production capacity has more than doubled since the last consultation. - Structural competitiveness is critical: total factor productivity made a negative contribution to growth (see Box 2). - Doing Business ranking deteriorated: 158th in 2015 versus 148th in 2014. - Regional integration (CEMAC) actions urged of the authorities: - Ensuring adequate human and financial resources for the CEMAC Commission. - Pushing for a common external tariff across all product categories for the CEMAC customs union. - Harmonizing economic and technical standards, such as sanitary standards for perishable products. - Addressing non-tariff barriers, including burdensome customs procedures and absence of agreements for collecting and redistributing import tariffs for merchandise transiting through Douala. *Source: Data provided by the Cameroonian authorities; and IMF staff calculations and projections.* ### 14. The authorities expressed confidence in the contribution of large public investment ### _cr15331 - 14. The authorities expressed confidence in the contribution of large public investment ### Authorities' stance on public investment and growth - Authorities expressed confidence that large infrastructure projects nearing completion would lift the rate of economic growth sustainably and contribute to economic diversification. - They were confident that an additional, nation-wide, supplemental investment program would further boost economic growth and return the country to the path towards achieving emerging economy status by 2035. - They concurred with staff’s recommendation to focus on first-generation projects nearing completion. - They recognized the need to enhance private sector contribution to growth and viewed filling infrastructure and energy gaps as the best way to achieve this. - Authorities agreed with the need to strengthen competitiveness and remove obstacles to trade and supported regional integration as a major growth opportunity, while noting the difficulty of reaching agreement with other CEMAC partners. ### 2015 budget execution, fiscal composition, and financing - 2015 budget execution disrupted by the fall in oil revenue, unexpected security spending, and the supplemental investment program. - Revenue performance expected to deteriorate in terms of GDP compared with 2014 due to a steep decline in oil revenue, only partially offset by stronger-than-expected non-oil revenue (tax administration reforms and one-off sales of mobile phone licenses). - Total expenditure, in terms of GDP, will remain at the same level as in 2014; composition changes: - Current expenditure contracting by 0.7 percentage point of GDP (lower subsidies). - Capital expenditure increasing by 0.7 percentage point of GDP (expanding public investment). - Overall budget deficit expected to widen to 5.4 percent of GDP. - Financing of the deficit expected via a mix of domestic and external borrowing and deferred payments. - High capital expenditure expected to increase imports of investment-related goods and push the current account deficit above 5 percent of GDP in the medium term. - Authorities preparing to issue a US$1.5 billion Eurobond to pay arrears to SONARA and finance the supplemental investment program. - Footnote: The three-year program (“plan d’urgence”) of infrastructure projects (including hospitals, secondary roads, agricultural projects) is equivalent to some 1.7 percent of GDP annually. ### Total Factor Productivity and structural competitiveness (Box 2) - TFP in Cameroon has been lagging peers; a growth accounting exercise (1991–2012) of 49 African and Asian countries showed TFP made a negative contribution to growth in Cameroon. - Among five country groups (WAEMU, African frontier economies, African emerging markets, Asian benchmark peers, and sub-Saharan African countries) only Cameroon and WAEMU had negative TFP contributions to growth. - Cameroon had the lowest contribution of capital to growth (about one percent). - Weak structural competitiveness, challenging business environment, and governance issues cited as explanations for negative TFP contribution. ### Debt dynamics and fiscal sustainability risks - Rapid growth in non-concessional external debt identified as the most important threat to fiscal sustainability. - Sharp and persistent decline in oil revenue plus rapid increase in public debt require decisive measures. - Many supplemental program investment projects are at an early conceptual stage and far from financing; capacity constraints for implementing numerous large projects simultaneously. - Long delays between completion of new infrastructure and related government revenue generation. - Recommendation to consolidate and rationalize investment plans and fully incorporate them into the budget. - Staff view: Rather than proceeding with additional externally financed projects during fiscal stress, a commitment to a medium-term fiscal anchor (such as the NOPD) is warranted, and measures to exert better control over capital and security expenditures recommended. ### Staff’s recommended fiscal and structural measures (selected) - Adopt a NOPD that does not jeopardize fiscal sustainability, with a downward path to below 4 percent of non-oil GDP in the medium term. - Expand the tax base: create more decentralized tax offices; phase out tax and customs exemptions; eliminate the fuel-subsidy scheme; restore normal taxation of fuel products. - Narrow eligibility under the investment incentives law to new external investments with a clearly demonstrable impact on growth. - Finalize single taxpayer identification by interconnecting relevant databases in tax and customs administrations. - Restore the budget as an effective expenditure control mechanism by adopting a supplemental budget for 2015 and a realistic budget for 2016 to: - unify, rationalize, and scale down multiple investment programs and bring them into the budget, while focusing on projects with a high impact on growth and poverty; - phase in gradually projects for which debt has been contracted but whose implementation has not yet started; - bring the full extent of security expenditures onto the budget. - Focus on projects nearing completion; allocate appropriate resources for maintenance. - Call a moratorium on new infrastructure projects in light of the more than US$4 billion contracted but undisbursed project loans, unless financing is concessional. - Improve implementation of the medium-term debt strategy by vesting sole authority for contracting debt in the Minister of Finance. - Issue regional bonds in local currency in amounts and at a pace consistent with market absorptive capacity. - Postpone issuance of the proposed Eurobond, which is likely to be onerous under current market conditions, because the projects it is intended to finance are insufficiently mature. - Implement the new information technology system under consideration to reconcile the civil service payroll with the treasury payment system; elaborate wage bill projections to inform hiring schedules. - Strengthen monitoring of SOEs, especially SONARA, focusing on contingent liabilities; produce an annual report on the financial health of all SOEs and state-owned banks; clear SONARA’s arrears, including overdue supplier credits. ### Authorities’ views on fiscal measures and debt distress - Authorities undecided on the need for a supplemental budget; believed they could accommodate deviations from budget allocations without a supplemental budget and noted supplemental investment program had been approved by Parliament including external financing. - Argued that reallocating unspent money (e.g., fuel subsidies) could meet unforeseen expenditure (e.g., security). - Considered that unforeseen developments in 2015 could be addressed in the 2016 budget. - Did not agree that Cameroon had reached a high risk of debt distress, noting: - possibility of export rebound with higher commodity prices; - SONARA’s large external arrears characterized as suppliers’ credit pending payment and not to be counted toward total public and publicly guaranteed debt; - external debt distress rating breach was under only one test among five standard tests. - Nonetheless acknowledged deteriorated fiscal sustainability and committed to improving cost-effectiveness of public spending and non-oil revenue mobilization. - Skeptical of a fiscal rule anchored on the NOPD given oil’s fading role; open to considering elimination of the fuel-subsidy scheme but cautious about social impact. ### Public financial management and expenditure control - Treasury operating through both the state’s single treasury account and SNH’s “advances” account, contrary to staff advice. - Increasing cash outlays not covered by appropriations and direct SNH expenditures make ex post regularization difficult, though periodic reconciliations occur. - Extension of the “complementary period” for closing public accounts in 2014 by more than three months undermined rational budget execution and allowed commitments on the 2014 budget to be made in 2015. - Progress noted in winding down undisbursed balances in subaccounts used to hold public entities’ expended subsidies. - Budget registering only net results of offsetting transactions between budget and public entities undermines analysis and transparency. - External-financed investment budget items recorded in the budget with delays up to two years. ### PFM-specific staff recommendations (selected) - Account for all revenue and expenditure flows on a gross basis. - Limit the complementary period to one month; begin using “carry forwards” for unspent allocations. - Compile backlog of pending payments (including toward SONARA) and clear with cash payments or formal debt obligations. - Cease using SNH as an off-budget advance expenditure mechanism. - Eliminate various tax expenditures, including winding down preferential agreements—this could yield annual revenues of more than one percent of GDP. - Narrow scope of the 2013 investment incentives law to a few strategic sectors. ### Financial intermediation and the banking sector - By end-June 2015: total bank assets grew by 6.2 percent year-on-year; deposits increased by 6.1 percent; credits increased by 13.0 percent—reflecting strong domestic demand linked to investment growth. - Banks’ NPLs increased from 10.2 percent in June 2014 to 13.1 percent in June 2015; MFIs’ NPLs also increased. - Excess liquidity remained significant at almost 5 percent of GDP, with variation across institutions. - Three small problem banks unresolved and continue to hinder financial intermediation. - Government-sponsored SME bank started operations in July 2015 with two agencies (Yaoundé and Douala) but has yet to extend significant credit. - Mobile transfers almost doubled in 2014; staff encouraged promotion of financial inclusion via mobile banking and recommended updating the mobile banking legal framework. - Bank supervision improvements: deployment of central information database by BEAC to enable credit bureau creation and repository of balance sheets; COBAC doubled inspectors and deployed new on-line financial reporting tool. - Delays in adopting new regulations slow prudential framework modernization. ### Authorities’ financial sector views - COBAC monitoring showed banking sector broadly satisfactory despite increased NPLs and vulnerabilities in three small troubled banks. - Authorities exploring options to address troubled banks, including agreements with shareholders and considering state recapitalization amounts. - Noted NPL increases partly due to stricter loan portfolio management and better reporting; integrating MFI NPL reporting into overall system in progress. - Concerned about potential inbound spillovers from Equatorial Guinea and the Republic of the Congo through subsidiaries of Cameroonian banks. - Recognized fall in oil revenues and public investment scaling up reduced systemic liquidity but banks still held ample excess deposits at BEAC. - Regretted delays in adoption of community-wide banking regulations and called for better coordination with BEAC and more effective CEMAC Commission publication of regulations. ### Reform scenario (staff moderate reform scenario) — features and selected macro projections - Scenario features: - Acceleration of private sector-led growth via faster improvements in the business environment, faster completion of new infrastructure, and expansion of private sector credit through reduction in bank claims on SONARA. - Acceleration of PFM reforms for more effective commitment control and faster tax and customs administration improvements. - Greater fiscal space via moratorium on non-priority new investments, better financial stewardship of SOEs, and improved control over mandatory expenditures (wages and pensions). - Text Table 3. Cameroon: Selected Macroeconomic Indicators, 2015–20 (selected entries; figures preserved exactly) - Economic growth and prices (Percentage change) - Real GDP (Reform Scenario / Baseline Scenario): 2015: 5.9 / 5.9 ; 2016: 5.3 / 5.3 ; 2018: 5.7 / 5.7 ; 2020: 5.7 / 5.7 ; 2016: 5.2 / 5.2 ; 2018: 5.4 / 5.4 ; 2020: 5.2 / 5.2 - Non-oil real GDP (Reform Scenario / Baseline Scenario): 2015: 5.2 / 5.2 ; 2016: 5.5 / 5.5 ; 2018: 5.9 / 5.9 ; 2020: 6.0 / 6.0 ; 2016: 5.4 / 5.4 ; 2018: 5.6 / 5.6 ; 2020: 5.6 / 5.6 - Consumer prices (period average) (Reform Scenario / Baseline Scenario): 2015: 2.8 / 2.8 ; 2016: 2.2 / 2.2 ; 2018: 2.2 / 2.2 ; 2020: 2.2 / 2.2 ; 2016: 2.2 / 2.2 ; 2018: 2.2 / 2.2 ; 2020: 2.2 / 2.2 - Fiscal aggregates (Percent of GDP) - Total revenue (incl. grants): Reform Scenario / Baseline Scenario: 2015: 17.8 / 17.8 ; 2016: 16.8 / 16.8 ; 2018: 17.0 / 17.0 ; 2020: 16.9 / 16.9 ; 2016: 16.7 / 16.7 ; 2018: 16.8 / 16.8 ; 2020: 16.8 / 16.8 - Of which: Oil: 2015: 2.5 ; 2016: 2.2 ; 2018: 2.3 ; 2020: 2.1 ; 2016: 2.2 ; 2018: 2.3 ; 2020: 2.1 - Non-oil (Percent of non-oil GDP): 2015: 15.6 ; 2016: 15.0 ; 2018: 15.1 ; 2020: 15.2 ; 2016: 14.9 ; 2018: 14.9 ; 2020: 15.0 - Total expenditure, cash basis: Reform Scenario / Baseline Scenario: 2015: 23.1 / 23.1 ; 2016: 21.7 / 21.7 ; 2018: 19.9 / 19.9 ; 2020: 18.5 / 18.5 ; 2016: 23.9 / 23.9 ; 2018: 22.1 / 22.1 ; 2020: 20.7 / 20.7 - Of which: Non-interest current: 13.4 ; 13.3 ; 13.2 ; 13.1 ; 13.3 ; 13.2 ; 13.1 - Capital: 9.1 ; 7.7 ; 6.1 ; 4.8 ; 10.0 ; 8.2 ; 6.7 - Overall budget balance, cash basis (incl. grants): Reform Scenario / Baseline Scenario: 2015: -5.4 / -5.4 ; 2016: -4.9 / -4.9 ; 2018: -2.9 / -2.9 ; 2020: -1.5 / -1.5 ; 2016: -7.2 / -7.2 ; 2018: -5.3 / -5.3 ; 2020: -3.9 / -3.9 - Non-oil primary balance (Percent of non-oil GDP): Reform Scenario / Baseline Scenario: 2015: -7.6 / -7.6 ; 2016: -6.7 / -6.7 ; 2018: -4.8 / -4.8 ; 2020: -3.1 / -3.1 ; 2016: -9.1 / -9.1 ; 2018: -7.2 / -7.2 ; 2020: -5.3 / -5.3 - Total public debt: Reform Scenario / Baseline Scenario: 2015: 32.6 / 32.6 ; 2016: 34.5 / 34.5 ; 2018: 34.5 / 34.5 ; 2020: 32.0 / 32.0 ; 2016: 36.8 / 36.8 ; 2018: 41.2 / 41.2 ; 2020: 42.5 / 42.5 - External sector - Current account (incl. grants): Reform Scenario / Baseline Scenario: 2015: -5.1 / -5.1 ; 2016: -5.0 / -5.0 ; 2018: -4.3 / -4.3 ; 2020: -4.0 / -4.0 ; 2016: -5.3 / -5.3 ; 2018: -5.2 / -5.2 ; 2020: -5.2 / -5.2 *Italic: Source: _cr15331 - 14. The authorities expressed confidence in the contribution of large public investment* ### 32. The reform scenario could result in higher growth of about ½ percentage point of GDP ### _cr15331 - 32. The reform scenario could result in higher growth of about ½ percentage point of GDP ### Reform scenario: growth, inflation, and fiscal effects - The reform scenario could result in higher growth of about ½ percentage point of GDP per year in the medium term. - Drivers under the scenario: - Completion and launch of new infrastructure. - A more business-friendly environment with easier access to credit and easier regional commerce. - Reallocation of public expenditure toward more productive uses. - Inflation: would remain subdued. - Fiscal balances: would improve with non-oil revenue expected to increase by about 1 percentage point per year in the medium term, supported by: - Accelerated administrative reforms to widen the tax base. - Paring down of tax and customs exemptions. - A narrower scope of the 2013 investment incentives law. - External and fiscal sustainability: the tighter fiscal path and structural reforms to boost competitiveness would strengthen external and fiscal sustainability sufficiently to contain the risk of external debt distress (Figure 5). - Time horizon referenced: 2015–35 (Figure 5). ### Authorities’ views - Authorities concurred with the objective of higher, sustainable growth and opined that the planned surge in infrastructure investment would deliver those results. - They expressed confidence that expanded infrastructure would boost economic growth, yield higher exports and government revenue, and make their development model sustainable. - They generally endorsed staff recommendations but insisted on a pace of implementation more in line with Cameroon’s administrative and social realities. ### Recent performance and risk assessment - Cameroon has shown resilience in adverse international and security environments. - The economy continued to grow at a brisk space in 2014–15 and inflation remained low, despite a large increase in administered retail gasoline prices in July 2014. - Lack of adjustment to the oil-price shock has resulted in raising the risk of external debt distress to “high.” - The authorities’ shift toward launching an ambitious supplemental investment program consisting of additional large infrastructure projects financed by non-concessional debt has elevated the risk of debt distress to high. - Staff view: the outlook for debt sustainability would be exacerbated if a first-time Eurobond were to proceed; staff urged focusing efforts on projects nearing completion and postponing the contemplated Eurobond issue. ### Role of the private sector and structural reforms - The private sector is critical for transitioning to a private sector-led development model. - Staff recommended: - Improving the business environment by reducing bureaucratic impediments, especially in tax payments and intra-CEMAC trading. - Increasing anti-corruption efforts. - Strengthening implementation of the anti-money laundering framework. - Producing a realistic and comprehensive budget to keep government current with payment obligations to the private sector. - Reviving stalled regional integration within CEMAC could support economic diversification and productivity growth in the non-oil sector. ### Fiscal risks and recommended adjustments - Substantial fiscal risks need urgent attention: - Lower-than-budgeted oil revenue and unexpected security expenditures are creating large financing gaps and further accumulation of domestic arrears. - Contingent liabilities from SOEs require better transparency of their accounts. - Specific recommendations: - Prevent re-emergence of fuel subsidies through elimination of the fuel-subsidy scheme; this could be done at present without changing retail gasoline prices, with vulnerable groups protected via a targeted social safety net against possible future price rises. - Draw up and implement a plan to formalize and unwind cross-debts among the state, SONARA, and its commercial partners. - Strengthen PFM beyond monitoring expenditure: restore budget to a rational allocation and an effective control mechanism. - Roll out a tool to reconcile the payroll with civil service registers. - Abandon parallel expenditure channels through the SNH, which undermines fiscal discipline. - Increasing fiscal space will require: - Improved revenue collection, expenditure restraint, and judicious financing choices. - Continuation of reforms that improved tax administration performance to increase non-oil revenue. - Extending improved performance to customs in line with IMF technical assistance. - Sustaining implementation of program budgeting to identify less productive expenditures to scale back. - Resourcing a consolidated and scaled-down public investment plan that prioritizes concessional loans. ### Financial sector and intermediation - Improvements to financial intermediation are needed for public and private investment. - Banking sector: excess liquidity has declined but remains ample; NPLs have increased. - Staff encouraged authorities to collaborate with the regional financial sector regulator to strengthen financial sector supervision, including supervision of the new bank for SMEs. - Importance of better supervising MFIs noted, as some MFIs have become very large. ### Data and surveillance - Data are broadly adequate for surveillance, but important shortcomings remain. - Incomplete and delayed fiscal and balance of payments data can cause authorities to miss early warning signals. *Source: IMF staff appraisal, Cameroon (excerpts).* ### 41. Staff recommends that the next Article IV consultation take place on the 12-month ### _cr15331 - 41. Staff recommends that the next Article IV consultation take place on the 12-month ### Recommendation - Staff recommends that the next Article IV consultation take place on the 12-month consultation cycle. ### Macroeconomic outlook and projections (selected indicators) - GDP at constant prices (annual percent change): 2013: 5.6; 2014: 5.9; 2015: 5.9; 2016: 5.2; 2017: 5.0; 2018: 5.4; 2019: 5.2; 2020: 5.2 - Oil GDP at constant prices (annual percent change): 2013: 8.5; 2014: 13.8; 2015: 23.2; 2016: -0.2; 2017: -5.3; 2018: -0.2; 2019: -5.6; 2020: -5.9 - Non-Oil GDP at constant prices (annual percent change): 2013: 5.4; 2014: 5.6; 2015: 5.2; 2016: 5.4; 2017: 5.5; 2018: 5.6; 2019: 5.6; 2020: 5.6 - GDP deflator (annual percent change): 2013: 2.5; 2014: 1.0; 2015: 1.9; 2016: 1.9; 2017: 2.0; 2018: 2.0; 2019: 2.0; 2020: 2.0 - Nominal GDP (at market prices, CFAF billions): 2013: 14,603; 2014: 15,611; 2015: 16,836; 2016: 18,053; 2017: 19,341; 2018: 20,784; 2019: 22,315; 2020: 23,943 - Oil output (thousands of barrels per day): 2013: 65.7; 2014: 75.4; 2015: 93.4; 2016: 93.4; 2017: 88.5; 2018: 88.3; 2019: 83.4; 2020: 78.4 - Consumer prices (average, annual percent change): 2013: 2.1; 2014: 1.9; 2015: 2.8; 2016: 2.2; 2017: 2.2; 2018: 2.2; 2019: 2.2; 2020: 2.2 ### External sector (selected) - Export volume (annual percent change): 2013: 7.1; 2014: 17.6; 2015: 13.0; 2016: 4.7; 2017: 3.7; 2018: 5.0; 2019: 4.1; 2020: 4.4 - Oil sector export volume: 2013: 8.1; 2014: 20.6; 2015: 24.8; 2016: 0.0; 2017: -5.3; 2018: -0.2; 2019: -5.6; 2020: -5.9 - Non-oil sector export volume: 2013: 6.8; 2014: 16.9; 2015: 10.0; 2016: 6.0; 2017: 6.1; 2018: 6.2; 2019: 6.3; 2020: 6.4 - Import volume (annual percent change): 2013: 2.1; 2014: 15.0; 2015: 10.3; 2016: 4.8; 2017: 4.1; 2018: 4.7; 2019: 3.9; 2020: 3.4 - Average oil export price (US$ per barrel): 2013: 108.5; 2014: 88.5; 2015: 49.8; 2016: 48.5; 2017: 53.6; 2018: 58.0; 2019: 60.4; 2020: 61.1 - Terms of trade (annual percent change): 2013: -1.4; 2014: -7.3; 2015: -8.3; 2016: -1.3; 2017: -0.7; 2018: -0.8; 2019: -2.5; 2020: -3.0 - Current account balance (percent of GDP, excluding grants): 2013: -4.3; 2014: -4.8; 2015: -5.7; 2016: -5.8; 2017: -5.7; 2018: -5.6; 2019: -5.6; 2020: -5.6 - Gross official reserves (imputed reserves, US$ billions): 2013: 3.4; 2014: 3.2; 2015: 2.8; 2016: 2.8; 2017: 2.6; 2018: 2.4; 2019: 1.9; 2020: 1.7 - Exchange rate (CFAF per US$; period average): 2013: 493.9; 2014: 493.6 ### Fiscal accounts (central government, selected) - Total revenue (percent of GDP, excluding grants): 2013: 17.6; 2014: 18.1; 2015: 17.4; 2016: 16.5; 2017: 16.5; 2018: 16.6; 2019: 16.7; 2020: 16.6 - Oil revenue (percent of GDP): 2013: 4.8; 2014: 4.3; 2015: 2.5; 2016: 2.2; 2017: 2.2; 2018: 2.3; 2019: 2.3; 2020: 2.1 - Non-oil revenue (percent of GDP): 2013: 12.9; 2014: 13.7; 2015: 14.9; 2016: 14.2; 2017: 14.3; 2018: 14.3; 2019: 14.4; 2020: 14.5 - Non-oil revenue (percent of non-oil GDP): 2013: 13.8; 2014: 14.7; 2015: 15.6; 2016: 14.9; 2017: 14.9; 2018: 14.9; 2019: 15.0; 2020: 15.0 - Total expenditure (percent of GDP): 2013: 21.9; 2014: 23.1; 2015: 23.0; 2016: 23.9; 2017: 22.5; 2018: 22.1; 2019: 21.0; 2020: 20.7 - Overall fiscal balance (cash basis, excluding grants, percent of GDP): 2013: -4.4; 2014: -5.1; 2015: -5.7; 2016: -7.4; 2017: -6.0; 2018: -5.5; 2019: -4.3; 2020: -4.1 - Non-oil primary balance (percent of non-oil GDP): 2013: -9.0; 2014: -9.2; 2015: -7.6; 2016: -9.1; 2017: -7.7; 2018: -7.2; 2019: -5.8; 2020: -5.3 - Public investment (percent of GDP): 2013: 7.3; 2014: 8.4; 2015: 9.1; 2016: 10.0; 2017: 8.6; 2018: 8.2; 2019: 7.0; 2020: 6.7 - Wages and salaries (percent of GDP): 2013: 5.4; 2014: 5.5; 2015: 5.4; 2016: 5.4; 2017: 5.3; 2018: 5.3; 2019: 5.2; 2020: 5.1 - Fuel subsidies (percent of GDP): 2013: 1.3; 2014: 1.4; 2015: 0.2; 2016: 0.2; 2017: 0.2; 2018: 0.1; 2019: 0.1; 2020: 0.1 - Primary balance (percent of GDP): 2013: -3.6; 2014: -4.3; 2015: #; 2016: -4.7; 2017: -6.5; 2018: -5.1; 2019: -4.5; 2020: -3.3; 2020 (Table 3) shows -3.1 ### Public debt (selected) - Stock of public debt (percent of GDP): 2013: 19.0; 2014: 26.6; 2015: 32.6; 2016: 36.8; 2017: 39.3; 2018: 41.2; 2019: 41.9; 2020: 42.5 - Of which: external debt (percent of GDP): 2013: 12.1; 2014: 17.8; 2015: 21.7; 2016: 24.5; 2017: 26.6; 2018: 28.0; 2019: 28.2; 2020: 28.1 - Present value of external debt (percent of GDP): 2013: 28.0; 2014: 33.9; 2015: 56.4; 2016: 69.2; 2017: 79.1; 2018: 86.8; 2019: 92.7; 2020: 99.2 - External debt service (percent of exports of goods and services): 2013: 1.8; 2014: 2.5; 2015: 4.4; 2016: 4.5; 2017: 5.5; 2018: 6.5; 2019: 7.4; 2020: 7.9 - External debt service (percent of government revenue): 2013: 2.8; 2014: 3.8; 2015: 6.1; 2016: 6.3; 2017: 7.6; 2018: 8.7; 2019: 9.4; 2020: 9.4 ### Monetary and financial sector (selected) - Broad money (M2, annual percent change): 2013: 10.8; 2014: 10.5; 2015: 9.3; 2016: 9.1; 2017: 8.2; 2018: 7.7; 2019: 7.6; 2020: 7.6 - Net foreign assets (contribution to M2 growth, percentage points): 2013: 0.8; 2014: 3.4; 2015: -1.1; 2016: -1.0; 2017: -2.2; 2018: -3.1; 2019: -3.8; 2020: -2.3 - Net domestic assets (contribution to M2 growth, percentage points): 2013: 10.1; 2014: 7.1; 2015: 10.4; 2016: 10.1; 2017: 10.4; 2018: 10.8; 2019: 11.4; 2020: 9.9 - Domestic credit to the private sector (annual percent change): 2013: 14.9; 2014: 14.4; 2015: 10.7; 2016: 10.1; 2017: 10.6; 2018: 10.8; 2019: 11.2; 2020: 10.6 - Financial sector indicators (selected, 2014): Capital/Risk-weighted assets: 10.6; Non-performing loans / Total loans: 9.7; Return on assets (ROA): 0.8; Return on equity (ROE): 21.8; Liquid assets / Total assets: 9.0; Total deposits / Total loans (non interbank): 112.2 ### Arrears, obligations, and contingent items - Fuel subsidies (accrual basis) annual flows and end-year stocks (CFAF billions): 2008: 137; 2009: 231; 2010: 453; 2011: 183; 2012: 222; 2013: 97; 2014: 212 - Fuel subsidies (percent of GDP): 2008: 1.3; 2009: 0.2; 2010: 1.2; 2011: 2.5; 2012: 2.4; 2013: 2.0; 2014: 1.4 - Stock of arrears (end-year, CFAF billions): 2010: 94; 2011: 98; 2012: 136; 2013: 172; 2014: 206; Stock of arrears (percent of GDP): 2010: 0.9; 2011: 0.9; 2012: 1.2; 2013: 1.4; 2014: 1.5; 2014 also 1.4 (two series) - Total arrears and other payment obligations (end-year, CFAF billions): 2010: 585.1; 2011: 464.6; 2012: 126.6; 2013: 598.2; 2014: 690.9; Total arrears (percent of GDP): 2010: 5.0; 2011: 3.7; 2012: 4.4; 2013: 4.7; 2014: 4.6 ### Reform scenario highlights (selected projections) - Under the reform scenario, nominal GDP (CFAF billion): 2016: 18,075; 2017: 19,412; 2018: 20,932; 2019: 22,578; 2020: 24,339 - Under the reform scenario, overall fiscal balance (cash basis, excluding grants, percent of GDP): 2016: -5.1; 2017: -3.7; 2018: -3.0; 2019: -1.9; 2020: -1.6 - Under the reform scenario, total revenue (percent of GDP): 2016: 16.8; 2017: 16.8; 2018: 17.0; 2019: 17.0; 2020: 17.0 - Under the reform scenario, stock of public debt (percent of GDP): 2016: 34.5; 2017: 34.8; 2018: 34.5; 2019: 33.3; 2020: 32.0 - Under the reform scenario, current account balance (including official grants, percent of GDP): 2016: -5.0; 2017: -4.7; 2018: -4.3; 2019: -4.2; 2020: -4.0 *Source: IMF staff estimates and projections, Cameroon: Selected Economic Indicators and accompanying tables (as provided in the content unit).* ### Annex I. Cameroon: Response to Past IMF Staff Advice ### Annex I. Cameroon: Response to Past IMF Staff Advice ### Fiscal policy and public financial management - IMF advice: - Address risks to the 2014 budget through a reduction in fuel subsidies, and adopt a supplemental budget for expenditure reprioritization. - Improve non-oil revenue by broadening the tax base, streamlining exemptions, and increasing the efficiency of tax and customs administrations. - Government response and outcomes: - Retail fuel prices were increased by 15 percent on July 1, 2014. Combined with the oil price slump, this measure has led to a virtual elimination of fuel subsidies in 2015. - There was no supplemental budget in 2014. - Measures to strengthen the tax administration included the creation of tax centers for small and medium-size enterprises, which resulted in a doubling of the number of taxpayers and an increase in the yield of the turnover tax, leading to an increase in tax revenue. - Customs exemptions were not reduced. ### Financial sector stability - IMF advice: - Monitor financial sector (i.e., banks and large micro-finance institutions) soundness, in collaboration with the regional supervisor (COBAC); and press ahead with bank restructuring plans. - Government response and outcomes: - The regional supervisor has strengthened its supervisory capacity and has started to field at least one mission a year for the largest banks. - The national oil refinery (SONARA) remains the largest obligor of the financial sector and poses a systemic risk, but it has not been accumulating new debt. - Restructuring plans for the three distressed banks have not progressed. - Progress in the reform of the regional supervisory and regulatory frameworks has been slow. ### Private sector-led growth - IMF advice: - Improve the business climate by tackling economic governance issues, deepen the dialogue with the private sector, and increase financial intermediation. - Government response and outcomes: - A law providing tax incentives for a potentially large array of investments was adopted in 2013, but the benefits have accrued mainly to incumbent domestic investors, while reducing government revenue. - Arrears to government suppliers continue to hamper economic activity. --- ### Annex II. Cameroon: External Stability Assessment ### A. Balance of Payment and Exchange Rate Developments — key findings - Current account history and composition: - Since 2004, the current account deficit has averaged about 2.4 percent of GDP. - The current account registered a surplus of 1.6 percent of GDP in 2006, deteriorated back to a 3.8 percent deficit in 2013, and widened to a 4.5 percent deficit in 2014. - The goods and services balance moved from a surplus of 1.6 percent of GDP in 2006 to a deficit of 3.4 percent of GDP in 2014. - Net current transfers have made consistently positive contributions; the net income account has been a systematically negative contribution because of the weight of debt service. - Savings and investment: - Over the last decade, investment averaged about 19 percent of GDP, while national savings remained at about 17 percent of GDP. - National savings: 14.0 percent of GDP in 2008, 17.7 percent in 2013, and 17.3 percent in 2014. - Investment rate reached about 22 percent of GDP in 2013 and 2014. - Exports and openness: - Cameroon’s exports, as a share of CEMAC exports, declined over past decades; in the 1990s Cameroon was CEMAC’s second largest exporter after Gabon, by 2014 it was fourth. - Openness (exports + imports divided by GDP) increased despite export share decline. - Real and nominal effective exchange rates: - The REER depreciated after the 2009 recession but slightly appreciated in 2013 and 2014. - Over the long period, the REER appreciated almost 20 percent compared to its 1994 level; since 2009 the REER has depreciated by 5.5 percent. - The NEER closely followed the REER trend, reflecting movements in the euro to which Cameroon’s currency is pegged. - Outlook: - The current account deficit is expected to widen to 5.2 percent of GDP in 2015–20. - The goods and services balance is expected to deteriorate from a deficit of 3.4 percent of GDP in 2014 to a deficit of 4.1 percent in 2015–20. - In 2014, approximately 42 percent of export proceeds came from oil; this share is expected to decline to an average of 37.6 percent of exports in 2015–20. - The current account deficit would be primarily financed by external borrowing. ### B. Model-Based Real Exchange Rate (REER) Assessments — methods and results - Approaches used: - Three CGER approaches: macroeconomic balance (MB), equilibrium real exchange rate (ERER), and external sustainability (ES). - An adjusted ES approach that explicitly considers Cameroon’s oil wealth and projected depletion. - Two “EBA-lite” approaches (see Box 1). - MB approach result: - The estimated current account norm points to a deficit of 5.3 percent of GDP, while the underlying current account deficit is about 5.1 percent. - MB approach suggests the REER is undervalued by between 1.0 percent and 1.2 percent (depending on current account elasticity). - ES approach result: - The current account stabilizing net foreign assets represents a deficit of 1.9 percent of GDP, compared to a 5.1 percent underlying current account deficit. - ES approach suggests the REER is overvalued by between 19.1 percent and 21.7 percent (depending on current account elasticity). - ERER approach result: - The ERER is estimated to appreciate by 5.9 percent, while the underlying REER appreciated by only 0.8 percent. - The ERER approach suggests the REER would need to appreciate by 5.1 percent to restore equilibrium. - The 90 percent confidence interval gives an undervaluation of between 2.9 percent and 7.3 percent (for the ERER-based estimate). - Tailored ES for oil producers (Bems-Carvallo approach): - In Cameroon’s case, oil exports projected to represent close to 5.3 percent of GDP in 2020; net oil exports projected to represent only 0.2 percent of GDP by 2020. - Petroleum reserves assumed exhausted in 30 years; current account norm under a constant real annuity scenario is 0.5 percent of GDP in 2015. - This tailored ES approach corresponds to an overvaluation of Cameroon’s REER of about 17.6 percent. - Note: assessment acknowledges trade-offs between saving oil revenues abroad versus investing domestically given capital market imperfections and absorptive capacity constraints. - Consolidated assessment: - On average, the CGER methodologies and Bems and Carvalho indicate an 8.0 percent overvaluation of the REER in 2015. - The EBA-lite methodologies show an average undervaluation of 10.1 percent in 2015. - Results are sensitive to macroeconomic assumptions and assumptions on current account elasticity to the REER. ### Box 1 — EBA-Lite REER Assessment (summary) - EBA-lite CA model: - Current account norm: -6.6 percent of GDP. - Underlying current account: -5.1 percent of GDP. - Current account elasticity: -0.15. - Implied REER undervaluation: -9.8 percent. - EBA-lite IREER model: - Implied REER undervaluation: -10.3 percent. ### C. Assessment of Structural Competitiveness — indicators and weaknesses - Global Competitiveness Index (GCI), 2014–15: - Cameroon ranks 116 of 148 surveyed countries. - Score: 3.7 of 7. - Within sub-Saharan Africa (SSA), Cameroon ranks 15 of 32. - Two weakest categories: infrastructure (rank 126) and technology readiness (rank 120). - Heritage Foundation Index of Economic Freedom, 2015: - Cameroon’s overall score qualified as ‘mostly unfree’ at 52.6 (2014) and worsened slightly to 51.9 in 2015. - Cameroon slipped in the Foundation’s rankings from 136 to 146 (text notes loss of ten places; exact ranking shift context provided in source). - In eight of the ten Heritage indicators, Cameroon scores lower than the SSA average. - World Bank Doing Business indicators, 2015: - Cameroon’s rank deteriorated to 158 of 189 from 148 in 2014 (lost ten places). - Improvements: easier to obtain a building permit via decentralization and strict time limits; ranks 52nd for time and cost required to obtain a permanent electricity connection for a newly constructed warehouse. - Deteriorations: most other aspects of doing business worsened; ranks 181st with respect to paying taxes. - World Bank Country Policy and Institutional Assessment (CPIA), 2014: - Cameroon’s overall CPIA score: 3.2 (out of 6). - This score equals SSA’s average and is above the CEMAC average (2.9) but slightly below WAEMU’s average (3.3). - Strengths: economic management and macroeconomic management relative to peers. - Weaknesses: social inclusion and public sector management; specific areas for improvement include property rights management, rule-based governance, transparency, accountability, and corruption. *Source: IMF staff report excerpt — Annex I and Annex II from the Cameroon country material.* ### Annex III. Cameroon: Global Risk Assessment Matrix ### Annex III. Cameroon: Global Risk Assessment Matrix ### Risk Matrix — entries (Source of Risk; Relative Likelihood; Impact if Realized; Recommended Policy Response) - Protracted period of slower growth in advanced and emerging economies. - Relative Likelihood: High - Impact if Realized: Medium - Description: "A protracted growth slump in the euro area or in China would have an adverse effect on growth through non-oil exports and more expensive external financing." - Recommended Policy Response: "Diversify export markets, especially toward emerging Asia, CEMAC countries, and Nigeria; improve external competitiveness through structural reforms." - Sustained low level in world oil prices. - Relative Likelihood: High - Impact if Realized: Medium - Description: "A price of oil below US$60 per barrel would cause a higher decline in oil revenues than in spending on fuel subsidies." - Recommended Policy Response: "Eliminate the oil subsidy scheme; widen the non-oil tax base; increase efficiency of the national oil refinery (SONARA); and spur competition in the oil import sector." - Spillovers of the regional security situation. - Relative Likelihood: Medium - Impact if Realized: High - Description: "A deteriorating security situation would lead to an increase in displaced populations; a costlier security response; and limited investment in affected regions." - Recommended Policy Response: - "Allow a moderate relaxation of the fiscal deficit to meet higher security expenditure; start scaling back unproductive public expenditure and rationalize investment programs; and prepare contingency plans for refugees with the UNHCR." - Protracted national oil refinery (SONARA) payment difficulties. - Relative Likelihood: Medium - Impact if Realized: High - Description: "An exacerbation of SONARA’s tight liquidity position would have an adverse effect on the budget, energy supply, and the banking sector." - Recommended Policy Response: - "Make SONARA more efficient; conduct a financial and technical audit of the SONARA; liberalize retail fuel prices; clear stock of arrears; and identify alternative suppliers to ensure energy security." ### Risk Assessment Matrix (RAM) interpretation and staff view - The RAM shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). - Relative likelihood definitions used by staff (subjective assessment): - "low" is meant to indicate a probability below 10 percent, - "medium" a probability between 10 and 30 percent, - "high" a probability of 30 percent or more. - The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. - Non-mutually exclusive risks may interact and materialize jointly. ### Key related finding from Debt Sustainability Analysis (summary) - Risk of external debt distress increased from "moderate" to "high" between the last consultation and end-2014. - Main causes cited: - "The recent acceleration in the accumulation of debt, increasingly on non-concessional terms, and the significant deterioration in the outlook for exports." - Specific stresses and thresholds: - "The policy-dependent threshold for the present value of debt to exports is breached in 2021 under the baseline scenario." - "Standard stress tests result in the breaches of two policy-dependent thresholds." - "The risk of total debt distress is also 'high.'" - "Rising domestic borrowing leads to a breach in the policy-dependent benchmark for the ratio of the present value of total public debt to GDP." - Note: "The analysis does not reflect the possible issue of a Eurobond. The inclusion of the Eurobond would reinforce the conclusion of a 'high' risk of external debt distress." - Policy implication: "To mitigate risks and underpin debt sustainability in the medium term, significant adjustments in the amounts and terms of both external and domestic borrowing are necessary." *Source: Annex III. Cameroon: Global Risk Assessment Matrix (IMF staff report bundle, November 2, 2015).* ### 1. This Debt Sustainability Analysis (DSA) of Cameroon’s public debt was prepared jointly by ### _cr15331 - 1. This Debt Sustainability Analysis (DSA) of Cameroon’s public debt was prepared jointly by ### Overview and scope - Prepared jointly by the International Monetary Fund (IMF) and the World Bank; builds on the 2014 DSA (IMF Country Report No. 14/212) and uses the standard dynamic debt template for low-income countries (LIC). - Uses data from the authorities for end-2014 and the macroeconomic framework derived from the 2015 IMF Article IV consultation. - Assessment covers external and domestic debt of the central government and implicitly or explicitly guaranteed external debt of public enterprises, amounting to CFAF 527 billion at end-2014. - Notes data gaps: debt statistics would benefit from more comprehensive coverage of government contingent liabilities, and liabilities of public enterprises and municipalities. ### Key historical debt stocks (2007–2014) and composition - Total public and publicly guaranteed debt (CFAF billions): 2007: 1,171; 2008: 1,015; 2009: 1,114; 2010: 1,349; 2011: 1,662; 2012: 2,085; 2013: 2,780; 2014: 4,149. - External debt (CFAF billions): 2007: 562; 2008: 578; 2009: 574; 2010: 725; 2011: 927; 2012: 1,197; 2013: 1,766; 2014: 2,774. - Multilateral (CFAF billions): 2007: 230; 2008: 289; 2009: 377; 2010: 460; 2011: 577; 2012: 632; 2013: 725; 2014: 927. - Bilateral (CFAF billions): 2007: 289; 2008: 288; 2009: 196; 2010: 222; 2011: 304; 2012: 400; 2013: 751; 2014: 1,200. - Commercial (CFAF billions): 2007: 43; 2008: 11; 2009: 43; 2010: 46; 2011: 95; 2012: 120. - Domestic debt (CFAF billions): 2007: 608; 2008: 437; 2009: 540; 2010: 623; 2011: 734; 2012: 888; 2013: 1,014; 2014: 1,375. - Nominal GDP (CFAF billions): 2007: 9,792; 2008: 10,444; 2009: 11,040; 2010: 11,700; 2011: 12,546; 2012: 13,515; 2013: 14,603; 2014: 15,607. - In percent of GDP, total public and publicly guaranteed debt at end-2014: 26.6 percent. ### Recent developments and drivers of debt accumulation - Total public debt estimated at 26.6 percent of GDP at end-2014, up from below 10 percent of GDP in 2008 after HIPC and multilateral debt relief. - Sharp increase in total public and publicly guaranteed debt (PPG) in 2014 driven by government financing to support expanding public investment program. - PPG composition: roughly two thirds external and one third domestic debt; private non-guaranteed debt represented only 5 percent of total debt. - Main driver: accumulation of non-concessional external debt, especially strong increase in bilateral disbursements from non-Paris Club (NPC) members—NPC accounted for two thirds of all disbursements in 2014. - New NPC loans (disbursed and outstanding) rose from 4.3 percent of PPG in 2008 to 25.9 percent of PPG in 2014. ### Debt management and institutional capacity - Debt management capacity has improved but critical shortcomings remain. - IMF technical assistance focused on rationalizing debt management functions and clarifying roles. - A National Debt Committee, chaired by the Minister of Finance, now reviews externally financed project proposals. - Contracting of external debt remains split between the Ministry of Finance and the Ministry of Economy, Planning, and Regional Development. - Timely tracking of loan disbursements is inadequate, often leading to belated upward adjustments in external debt figures. ### Assumptions (baseline and changes vs. 2014 DSA) - Key contextual changes vs. 2014 DSA: - Significant decline in export revenues due to slump in world oil prices. - Strong rise in foreign financing of capital investment. - Exports: - Oil exports: expected decline in oil production and lower oil price relative to 2014 DSA. - Non-oil exports: volume growth expected to remain strong but lower than in 2014 DSA, reaching 6.5 percent per annum in the medium term. - External debt accumulation profile: driven by authorities’ commitment to accelerate externally financed public investments; increase expected to be mainly sourced from CFAF 2,800 billion stock of signed but undisbursed loans, mostly on non-concessional terms. - Growth support: medium-term growth supported by continued strong investment expenditure, large infrastructure projects, and strong activity in agriculture, energy generation, and transport. - Financing assumptions unchanged: discount rate is 5 percent (as approved by IMF and World Bank Executive Boards in October 2013); some contingent liabilities in public enterprises omitted due to quantification difficulty. - Domestic financing gaps assumed financed by borrowing; domestic debt assumed to bear a positive interest rate of 1.5 percent on resulting domestic debt (projected financing gaps). ### Key macroeconomic assumptions (selected figures preserved) - Real GDP growth (percent): - DSA 2015: 2014-15: 5.9; 2016-20: 5.2; 2021-35: 4.8. - DSA 2014: 2014-15: 5.5; 2016-20: 5.5; 2021-35: 5.5. - Total revenue excluding grants (percent of GDP): - DSA 2015: 2014-15: 17.7; 2016-20: 16.6; 2021-35: 15.6. - DSA 2014: 2014-15: 18.3; 2016-20: 17.7; 2021-35: 16.4. - Exports of goods and services (percent of GDP): - DSA 2015: 2014-15: 25.6; 2016-20: 21.7; 2021-35: 15.8. - DSA 2014: 2014-15: 27.1; 2016-20: 25.5; 2021-35: 24.2. - Oil price (US dollars per barrel): - DSA 2015: 2014-15: 69.2; 2016-20: 56.3; 2021-35: 61.1. - DSA 2014: 2014-15: 108.0; 2016-20: 93.3; 2021-35: 91.7. ### Baseline scenario (Box 1 highlights) - Medium Term, 2016–20: - Real GDP growth projected to average 5.2 percent. - Annual inflation projected to remain around 2 percent. - Revenue-to-GDP ratio projected to decline from 17.4 percent of GDP in 2015 to 16.6 percent of GDP in 2020. - Oil prices expected to stabilize at about US$60 per barrel in the medium term. - External current account deficit projected to remain marginally above 5 percent of GDP in 2016–20. - Long Term, 2021–35: - Real GDP growth projected to average 4.8 percent. - Revenue-to-GDP ratio projected to decrease from 16.9 percent of GDP in 2021 to 14.9 percent of GDP in 2035. - External current account deficit projected to average about 4.6 percent of GDP in 2021-35. ### New external borrowing by concessionality (2014–35) - New borrowing, 2014 DSA (CFAF billions): Selected totals and shares (as presented): - New borrowing total examples: 2014 DSA totals include figures such as 574, 591, 471, 520, 728, 985, 495, 852. - Concessional (CFAF billions) examples: 170, 171, 190, 234, 321, 423, 201, 370; percent of total: 30, 29, 40, 45, 44, 43, 41, 43. - Non-concessional (CFAF billions) examples: 404, 420, 281, 286, 407, 561, 295, 482; percent of total: 70, 71, 60, 55, 56, 57, 59, 57. - New borrowing, 2015 DSA (CFAF billions): Selected totals and shares (as presented): - New borrowing totals: 677, 768, 898, 728, 871, 1,126, 1,505, 830, 1,053. - Concessional (CFAF billions) examples: 132, 141, 155, 104, 113, 132, 173, 129, 128; percent of total: 20, 18, 17, 14, 13, 12, 11, 16, 12. - Non-concessional (CFAF billions) examples: 545, 627, 743, 624, 758, 994, 1,333, 701, 924; percent of total: 80, 82, 83, 86, 87, 88, 89, 84, 88. - Note: new non-concessional creditors such as China, the IBRD, and the African Development Bank projected to play larger roles; non-concessional external borrowing projected to exceed 80 percent of new external borrowing in 2015 and rise over the forecast period. ### External debt sustainability assessment and thresholds - CPIA-based policy and institutional capacity: Cameroon rating 3.21 (scale 1 to 6); category: weak policy and institutional capacity. - Policy-dependent thresholds for this category: - PV of debt-to-exports ratio: 100 percent. - PV of debt-to-revenue ratio: 200 percent. - PV of debt service-to-exports ratio: 30 percent. - Debt service-to-exports ratio: 15 percent. - Debt service-to-revenue ratio: 18 percent. - Baseline scenario breaches: - PV of the debt-to-exports ratio breaches the threshold in 2021; ratio exceeds 130 and remains sustained over time. - Causes: acceleration in external debt accumulation, weaker export earnings due to large decline in export prices versus 2014 DSA, and increased recourse to non-concessional external financing. - Result: breach of one threshold leads to categorization of debt sustainability as “high” risk of external debt distress. - Stress tests: - Bring forward breach of PV of debt-to-exports ratio to 2017. - Produce additional breach for the debt-service-to-exports ratio in 2023 (debt-service-to-exports ratio projected to exceed the 15 percent threshold in 2023 and remain above it thereafter). ### Implications of a proposed Eurobond - Authorities considering a Eurobond of US$1.5 billion (about 5 percent of GDP). - An issuance would front-load accumulation of new disbursed and outstanding debt and cause an earlier breach of the PV of the debt-to-exports threshold under the baseline scenario. - At prevailing bond yield levels, debt sustainability would deteriorate; costs associated with derivative hedging instruments would reinforce this assessment. - (Possible terms noted by authorities: maturity ten years; fixed interest rate; bullet repayment in year ten.) ### Public sector debt sustainability - Public debt projected to rise faster than external debt due to continued recourse to domestic financing to cover persistent fiscal financing gaps. - PV of public debt-to-GDP ratio projected to breach the policy-dependent benchmark of 38 percent in 2024. - PV of public debt-to-GDP projected to average over 45 percent of GDP in 2021–35. - Debt service to revenue and PV of debt-to-revenue projected to show strongly rising trends, reinforcing elevated debt distress conclusions from external debt analysis. ### Conclusions - Risk of external debt distress increased from “moderate” to “high” due to breach of the policy-dependent PV of debt-to-exports threshold under the baseline scenario. - Current public debt ratio of 26.6 percent of GDP is manageable but projected to double by 2030 on current trends. - Less favorable outlook for oil prices versus previous DSA exacerbates the impact of rising debt on key debt ratios. - Increased reliance on non-concessional external financing increases debt service costs. - Eurobond issuance would further heighten risks. - Projected domestic borrowing exacerbates risk, with public PV of debt-to-GDP benchmark breached under baseline. ### Policy recommendations (staff) - Anchor fiscal policy to a pace of debt accumulation that does not cause a breach of any policy-dependent threshold under the baseline scenario. - Make greater use of concessional borrowing. - Monitor debt developments more closely, especially for externally financed projects. - Implement policies to improve debt management rigorously. *Source: IMF and World Bank staff Debt Sustainability Analysis for Cameroon (based on end-2014 data and the 2015 IMF Article IV consultation).* ### 16. The authorities recognized the risks of debt distress and acknowledged the importance of ### _cr15331 - 16. The authorities recognized the risks of debt distress and acknowledged the importance of ### Authorities' assessment and commitments - Recognized risks of debt distress and acknowledged the importance of enhanced debt management and closer monitoring of debt developments. - Considered that a more robust growth response from the public investment program than projected in the DSA would produce a more benign outlook for debt sustainability. - Undertook to make more progress in implementing technical assistance recommendations for debt management and budget reforms. - Committed to maintain debt sustainability while pursuing growth and economic diversification. - Will endeavor to secure concessional financing where possible and contract non-concessional loans only in the absence of concessional resources and for projects of critical importance. ### Fiscal and investment policy directions - Fiscal policy priorities: - Increase non-oil revenue. - Provide more resources to priority spending while strengthening public financial management and preserving debt sustainability. - Prioritize projects near completion over new ones, emphasizing private sector–enhancing investments (including power generation and water supply). - Revenue and public finance management reforms: - Enhanced tax and customs administration expected to raise non-oil tax and customs revenue. - Improve monitoring, accounting, and reporting of public spending. - Implement new information technology architecture connecting the civil service register to the payroll to improve expenditure control. - Public enterprises and contingent liabilities: - Improve monitoring and oversight of state-owned enterprises, including SONARA, to strengthen their financial footing and prevent contingent liabilities from impacting the public budget. ### Financial sector stance - Financial sector described as broadly sound: banks highly profitable, liquid, and growing in assets and credit. - Authorities committed to addressing non-performing loans (NPLs) in three small banks and microfinance institutions; attribute NPL increases to stricter loan portfolio and risk management practices. - Will coordinate with BEAC, CEMAC, and COBAC and adopt regionally recommended banking legislation. ### Debt sustainability stance and key statistics - Authorities note recent public debt increases are due to financing of needed public investments but emphasize debt remains relatively low: - External public debt: 21.7 percent of GDP in 2015. - Total public debt: 32.6 percent of GDP in 2015. - Authorities assert that this level of debt is sustainable and that there is financing space to continue the investment program; view recent Eurobond issuance as not affecting long-term debt sustainability. - Will base debt sustainability on careful investment–growth nexus analysis to gauge medium- to long-term growth effects of investments. ### Staff analysis elements and stress testing (as described in source) - DSA includes alternative scenarios and bound tests; most extreme stress tests referenced include: - Exports shock (figures b., c., e. correspond in notes). - One-time depreciation shock (figures d., f. correspond in notes). - Figures and tables present indicators such as: - Rate of debt accumulation; grant-equivalent financing (% of GDP); grant element of new borrowing (%). - PV of debt-to-GDP ratio; PV of debt-to-exports ratio; PV of debt-to-revenue ratio. - Debt service-to-exports ratio; debt service-to-revenue ratio. - Sensitivity analysis reported across multiple scenarios (alternative scenarios A1–A3 and bound tests B1–B5), including a one-time 30 percent real depreciation and increases in other debt-creating flows. ### Operational follow-up and monitoring - Authorities agreed to step up efforts on: - Implementing technical assistance recommendations for debt management and budget reforms. - Strengthening PFM systems and expenditure control. - Prioritizing completion-stage projects and monitoring the public investment program’s efficiency and growth payoffs. - Will pursue counter-terrorism operations while maintaining fiscal sustainability in the face of security and oil price risks. *Source: IMF staff report and Cameroonian authorities' statement as contained in the provided chapter.* ### Conclusion ### Conclusion ### Key assessments - Cameroon is at a crossroads of significant challenges. - The authorities strongly believe that their development plans are sensible and are based on maintaining strong macroeconomic stability. - They are committed to prudent policies aimed at ensuring strong and inclusive growth. - Their efforts will also encompass addressing forcefully the security issues. - In their endeavors, the authorities appreciate staff advice and useful recommendations. *Source: _cr15331 - Conclusion* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15331.pdf_