Public Information Notice: IMF Concludes Article IV Consultation with Cameroon

June 21, 2000

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On June 7, 2000, the Executive Board concluded the Article IV consultation with Cameroon.1


Since July 1997, the Government of Cameroon has been successfully implementing a medium term economic program supported by the IMF through a three year arrangement under the Poverty Reduction and Growth Facility (PRGF) covering the period 1997/98-1999/2000 (June-July).

During the first two years of the program, 1997/98-1998/99, macroeconomic performance improved with the implementation of economic and financial reforms and the enhancement of the policy environment. Progress was made in strengthening public finances, with the substantial increase in the non-oil revenue to GDP ratio as a result of reforms centered on revamping indirect taxation, including the introduction of the value-added tax, and strengthening and modernizing tax administration; at the same time, all nonforestry export taxes have been eliminated. Structural reforms were aimed at liberalizing the economy and foreign trade, and stimulating private initiative. They have consisted of a large scale privatization of the parastatal sector, including the national railway system, the adoption of a new regulatory framework for the telecommunications sector, the initiation of a comprehensive restructuring plan for the port sector, the establishment of a Road Fund to finance road maintenance, and the rehabilitation of the banking system.

These reforms allowed Cameroon to make significant progress toward achieving a sustained economic recovery, controlling inflation, and reducing internal and external imbalances, despite a difficult external environment which resulted in a deterioration in the terms of trade of some 20 percent in 1997/98-1998/99. During this period, real GDP grew by 4.7 percent a year on average, while yearly inflation stabilized around 3.5 percent. The primary budget surplus reached 5.9 percent of GDP in 1997/98 and 4.6 percent in 1998/99, while the external current account deficit (excluding official grants) averaged 3.5 percent of GDP. In addition, some CFAF 280 billion of domestic arrears (5 percent of GDP) were settled, and more than CFAF 320 billion of external arrears were cleared, including through rescheduling and debt relief. Monetary developments were characterized by a pick-up of credit to the private sector and an improvement in the net foreign assets position of the banking system.

In 1999/2000, the overall economic and financial situation of Cameroon continued to improve. Performance during the first half of the fiscal year was broadly on track and all the quantitative and structural performance criteria were met. However, economic growth was lower than envisaged, as a slowdown in activity in the export-oriented sectors of manufacturing and forestry was only partially offset by the gains in activity in the agriculture, construction and energy sectors. Overall, real GDP growth is now projected at 4.2 percent, as against 4.8 percent previously, and inflation was contained at 1.8 percent in the 12-month period ending in March 2000; and the external current account is projected to strengthen significantly, as a result of an improvement in the terms of trade largely attributable to sharply higher oil prices.

Public finances continue to improve, and the primary surplus is projected to widen to 7.1 percent of GDP, while the overall fiscal accounts would be close to balance. With the improvement in revenue mobilization, the government efforts are now centered on strengthening expenditure management and control, and improving transparency in government operations. The government's action plan in this area includes, inter alia, annual audits of public agencies, the issuance of quarterly reports by key ministries, and an overhaul of the procurement system. In addition, the authorities have begun preparing detailed strategies for the health and education sectors, which would ensure a better targeting of spending in these sectors in future budgets, and strengthen staffing and improve service delivery; some concrete actions have already been taken in the sector of education, including the suppression of the monopoly of the distribution of textbooks and the removal of school fees for primary education.

Monetary developments point to a stronger than projected Cameroon's contribution to the net foreign assets position of the Bank of Central African States (BEAC), and a higher than anticipated expansion in the credit to the private sector, consistent with a palpable increase in domestic demand and reflecting an improvement in credit conditions. Also the confidence in the banking system continues its gradual increase with the money supply and time deposits rising in real terms.

Progress continues to be made in the structural area. Developments in the telecommunications sector include the establishment of a new private cellular company, the privatization of the government-owned cellular company (CAMTEL-Mobile), and a call for bids for the fixed telecommunications company CAMTEL. Negotiations have began with the successful bidder for the privatization of the water company (SNEC), and bids for the privatization of the electricity company (SONEL) are expected to be launched shortly. The transport sector, which is critical for improving competitiveness, is being promoted by measures aimed at strengthening the Road Fund and road maintenance work, the restructuring of the port of Douala, including a specific action plan to reduce substantially passage time of merchandise, and the rehabilitation of the railroad. In the petroleum sector, a third annual financial audit of the petroleum company (SNH) has been conducted and the key recommendations of the first two annual audits regarding computerization and the adoption of international standards of accounting have now been implemented. In addition an operational and managerial audit of the SNH has been launched, and a strategy defining the respective roles of the SNH and the private sector in the production and distribution of oil and petroleum products is being prepared with a view to further deepening the liberalization of the sector.

Executive Board Assessment

Executive Directors welcomed Cameroon's satisfactory overall performance in 1999/2000 and noted that, despite difficult conditions in the non-oil export sector, economic growth has been sustained; inflation is in check; and the external current account deficit is expected to narrow, owing to favorable oil prices. Nevertheless, despite continuous improvement in economic conditions since 1997, the economy is still fragile and poverty remains widespread in Cameroon. Directors stressed that, in order to ensure lasting and high quality growth, the authorities will need to establish a solid foundation for the next phase of reforms. In particular, they emphasized the need to strengthen budgetary performance, to reinforce structural adjustment efforts and, most importantly, to enhance transparency and proceed vigorously to improve governance. Directors endorsed the broad-based consultations under way for the preparation of the Poverty Reduction Strategy Paper (PRSP), and looked forward to the completion of a well-defined strategy in the health and education sectors and for poverty alleviation.

On the fiscal front, Directors welcomed the satisfactory performance of domestic non-oil revenue, in particular the strengthening of the value-added tax (VAT) collection, and the improvement in the transfer of oil revenue to the budget. They noted the authorities' efforts to further consolidate the fiscal stance for 1999/2000, in a context of higher-than-programmed oil revenue and privatization proceeds. Directors stressed that measures to widen the tax base, increase efficiency at customs, and tighten control on exemptions were needed to further enhance the authorities' revenue mobilization efforts.

Directors expressed concern about the very low efficiency of public expenditure, and urged the authorities to implement diligently their action plan to improve budgetary allocation, strengthen expenditure management and control, and provide data on treasury balances in a timely manner. They noted that the authorities' efforts to prepare detailed strategies for the social sectors should ensure better targeting of spending, stronger staffing, and improved service delivery.

Directors noted the authorities' efforts to clarify the domestic arrears situation. They regretted the delay in meeting the original target for the establishment of a comprehensive multiyear settlement plan, and urged the authorities to proceed swiftly in that area.

Directors noted the progress made in the implementation of structural reforms. They observed that the privatization of public utilities is gaining momentum and urged the authorities to expedite the privatization operations currently under way in the agro-industrial sector.

Directors noted the efforts by the government to improve transparency and fight corruption. They welcomed the measures being taken to strengthen governance, in particular in the area of public procurement and in the petroleum, public works, and forestry sectors. Directors emphasized the importance of a strong judiciary and regulatory framework in stimulating private investment.

Directors welcomed Cameroon's participation in the pilot Financial Sector Assessment Program (FSAP). They noted the encouraging conclusions of the Financial System Stability Assessment (FSSA) report, but stressed the need to monitor closely the few banks that remain vulnerable, and to streamline the nonbank financial sector. They urged the authorities to continue ongoing efforts to modernize the payment system.

Directors noted that the country's external debt burden remains heavy. They stressed that continued progress in implementing the authorities' medium-term program and completing the social sector strategy should help mobilize the needed international support, including under the enhanced HIPC Initiative, to alleviate Cameroon's heavy debt burden. Directors also encouraged the authorities to accelerate the reconciliation work on the commercial debt so as to begin negotiations with commercial creditors as soon as possible.

Directors urged the authorities to continue to improve the macroeconomic and social indicators database and to ensure timely dissemination of statistics. They welcomed Cameroon's participation in the pilot project on fiscal transparency, the GDDS, and the ROSCs on the monetary and financial sector and on data; they also welcomed the authorities' decision to make public the ROSC modules on the monetary and financial sector.

Cameroon: Selected Economic Indicators, 1995/96-1999/2000 1/

  1995/96 1996/97 1997/98 1998/99 2/ 1999/2000
Program 3/

In percent
Domestic economy          
Change in real GDP 5.0 5.1 5.0 4.4 4.2
Change in consumer prices (end of period) 4.6 7.0 2.2 2.2 2.0
Changes in terms of trade -8.6 5.1 -4.5 -15.3 32.4
In millions of U.S. dollars 4/
External economy          
Exports, f.o.b. 1,605 1,816 1,800 1,689 2,137
Imports, f.o.b. 1,201 1,347 1,452 1,498 1,608
Current account balance 5/ -375 -257 -235 -393 -243
Direct investment 120 126 140 142 109
Portfolio investment 146 148 113 72 71
Capital account balance -352 -358 -103 -141 -27
Current account balance (percent of GDP) 5/ -4.1 -2.8 -2.7 -4.3 -2.7
Change in real effective exchange
rate (in percent) 6/
6.4 1.8 -0.6 8.5 ...
In percent of GDP 4/
Financial variables          
Gross national savings 11.2 13.4 15.7 15.2 15.2
Gross domestic investments 15.4 16.2 18.4 19.5 18.0
Central government budget
deficit 7/
-1.8 -1.0 -1.7 -3.4 -0.3
Primary budget balance 5.4 5.8 5.9 4.6 7.1
Change in broad money (in percent) -5.1 13.8 7.8 9.7 10.5
Interest rate (in percent) 8/ 8.0 7.5 7.5 7.5 ...
Total External Public Debt 87.4 83.5 87.8 87.9 81.0
Actual External Public Debt Service 9/ 24.9 19.6 16.1 17.8 ...

1/ Fiscal year begins in July.
2/ Data provided by the Cameroonian authorities and IMF staff estimates.
3/ Revised IMF staff projections for the third annual PRGF arrangement.
4/ Unless otherwise indicated.
5/ Including grants.
6/ (+) = appreciation.
7/ Excluding grants.
8/ Bank of Central African States (BEAC) discount rate (end of period).
9/ In percent of exports of goods and nonfactor services.

1Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. In this PIN, the main features of the Board's discussion are described.


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