Public Information Notice: IMF Concludes 2001 Article IV Consultation with Cameroon

July 26, 2001

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 July 16, 2001, the Executive Board concluded the Article IV consultation with Cameroon.1


Cameroon's good record of performance in the macroeconomic and structural areas under the previous three-year Poverty Reduction and Growth Facility (PRGF) arrangement remained broadly satisfactory during the first six months (October 2000-March 2001) of the first annual program under the new three-year PRGF arrangement approved by the Executive Board in December 2000.

Under the previous PRGF arrangement, the government made good progress in implementing macroeconomic policies and structural reforms to strengthen the public finances, liberalize the economy and foreign trade, and stimulate private sector initiative. At the same time, in the area of social and poverty alleviation policies, a sectoral strategy for education was drawn up and an interim Poverty Reduction Strategy Paper was prepared, incorporating the outcome of comprehensive participatory consultations. A governance and anticorruption strategy, including an associated action plan, was adopted. These reforms allowed Cameroon to make significant progress toward achieving sustained economic growth, controlling inflation, and reducing internal and external imbalances. Cameroon has reached the decision point under the enhanced HIPC initiative in October 2000 and some creditors, especially the IMF and the World Bank, have started to provide interim assistance.

During the first six months of the current PRGF program, the overall economic and financial situation continued to improve. Program implementation was broadly on track and all the quantitative performance criteria and benchmarks for end-March 2001 were met, with the exception of the performance criterion on net bank credit to the central government and the benchmark on the reduction of domestic arrears. The Executive Board granted a waiver for the nonobservance of the performance criterion on net bank credit to the central government, and modified this criterion for the remainder of the first year of the arrangement. Also, all the structural benchmarks and performance criteria, as well as the other governance-related measures, were observed, except for the development of a computer interface for the government payroll file.

The pace of economic activity has remained fairly steady; real GDP growth is projected at 5.3 percent for 2000/01 and 5.5 percent for 2001/02.The 12-month national consumer price inflation is expected to ease down to 2 percent in 2000/01, following an acceleration to 2.2 percent in March 2001, driven by higher foodstuff prices as a result of a drought in the northern provinces. The external current account deficit (excluding official grants) is projected to widen slightly to 2.7 percent of GDP in 2000/01, as a result of a lower-than- envisaged improvement in the terms of trade.

Government finances continue to improve. In 2000/01, the primary and the overall fiscal surpluses are projected to reach 7.4 percent of GDP and 2 percent of GDP, respectively. While revenue mobilization efforts have continued, the government is now also focusing on strengthening expenditure management and control, and improving transparency in government operations. To this end, annual audits of public agencies are being conducted and quarterly reports on budgetary execution of key ministries are being issued; also, an overhaul of the procurement system was completed. In addition, an action plan is being prepared by the government for end-September 2001, with a view to introducing an integrated computerized fiscal and accounting information system to manage government revenue and expenditure by the end of the current PRGF arrangement in September 2003. Steps are also being undertaken to address the deficiencies in the judiciary system.

Monetary developments point to a weaker-than-anticipated contribution by Cameroon to the net foreign assets position of the Bank of Central African States in 2000/01, an increase in net bank credit to government, and a somewhat lower growth in credit to the private sector than earlier envisaged. Broad money is estimated to have increased by 13 percent in 2000/01, reflecting mainly a recovery in deposits.

Progress in structural reforms has continued, notably in the financial, transport, forestry, and petroleum sectors. However, there have been delays in public expenditure management reform and the privatization of the national water company, the fixed telecommunications company, the electricity company, and the agro-industrial company.

Executive Board Assessment

Executive Directors welcomed Cameroon's continued satisfactory performance, characterized by strong economic growth, rising private investment in non-oil activities, low inflation, and an improving foreign asset position.

Directors, however, saw these achievements as still fragile, partly in view of the economy's heavy dependence on the oil sector, output from which is expected to decline in the longer term. Against this background, they encouraged the authorities to proceed forcefully with their policy agenda. Priorities should be to further strengthen the fiscal position—by a combination of expenditure and revenue measures—and to intensify efforts to improve governance, notably in the judiciary system. Directors were encouraged that these priorities are fully endorsed by the Cameroonian authorities at the highest level.

In the fiscal area, Directors welcomed the authorities' determination to correct the recent expenditure slippages, and the cautious approach adopted in setting revenue and expenditure targets for the next fiscal year. They encouraged the authorities to improve non-oil revenue mobilization by strengthening custom and tax administration, combating fraud, and avoiding potentially costly tax exemptions. Directors also urged the authorities to ensure that the government wage bill remains under firm control, as well as to adhere strictly to their plan to phase out the petroleum subsidy. In this regard, Directors welcomed recent price adjustments for petroleum products.

For the medium term, Directors emphasized the importance of continuing to strengthen the efficiency and transparency of public revenue and expenditure management. In particular, they underscored the need for timely introduction of an integrated computerized fiscal and accounting information system to manage central government revenue and expenditure by the end of the current PRGF-supported program.

Directors expressed concern that Cameroon's low implementation capacity could affect the quality of government expenditures, including those financed by savings from the HIPC Initiative. They recommended that absorptive and capacity constraints be carefully taken into account in implementing HIPC-related expenditure initiatives. In this regard, Directors noted that projects would require endorsement by the national consultative committee on the implementation of the HIPC Initiative. They also noted the important role of consultations with civil society in selecting expenditure priorities, and, more generally, in fostering social support and understanding for the needed policies.

Directors strongly encouraged the authorities' efforts to tackle weaknesses in governance, improve transparency, fight corruption, and uphold the rule of law, in order to create a favorable environment for private economic activity. Some serious deficiencies in the functioning of the judiciary system need to be addressed swiftly to help foster investor confidence and prevent a possible deterioration of the financial health of the banking system. Directors welcomed the authorities' intention to launch a technical audit of the judicial system in the very near future.

Regarding other structural reforms, Directors urged the authorities to implement without delay their welcome decision to focus on early completion of the ongoing privatization program. They also supported the importance the authorities are giving to further consolidation of the domestic financial system, including through the establishment of sound microfinance institutions, and to reform of the petroleum sector. Directors looked forward to early implementation of the reforms envisaged in the forestry, transport, and agro-industrial sectors in order to enhance competitiveness, job creation, and diversification of the economy.

Directors welcomed progress in resolving debt-related issues with bilateral creditors and took note of ongoing negotiations with other creditors.

Directors urged the authorities to continue their efforts to improve economic data, including in the context of PRSP preparation and of the General Data Dissemination System.

Cameroon: Selected Economic Indicators, 1995/96-2000/01 1/

  1995/96 1996/97 1997/98 1998/99 1999/2000 2/ 2000/01 3/

  In percent
Domestic economy            
Change in real GDP 5.0 5.1 5.0 4.4 4.2 5.3
Change in consumer prices
(end of period)
4.6 7.0 2.2 2.2 -0.7 2.0
Change in the terms of trade -8.6 5.1 -4.5 -15.7 41.1 1.8
  In millions of U.S. dollars 4/
External economy            
Exports, f.o.b 1,605 1,816 1,800 1,682 2,124 2,134
Imports, f.o.b 1,201 1,347 1,441 1,483 1,538 1,657
Current account
balance 5/
-375 -257 -217 -377 -154 -211
Direct investment 120 126 140 143 107 152
Portfolio investment 146 148 113 73 185 165
Capital account balance -352 -358 -120 -157 -49 -147
Current account balance
(percent of GDP) 5/
-4.1 -2.8 -2.5 -4.1 -1.7 -2.7
Change in real effective
exchange rate (in percent) 6/
6.4 -1.8 -0.6 8.5 -4.2 ...
  In percent of GDP 4/
Financial variables            
Gross national savings 11.2 13.4 15.0 14.6 14.7 15.0
Gross domestic investments 15.4 16.2 17.5 18.7 16.4 17.7
Central government budget balance 7/ -1.3 -1.0 -1.4 -3.2 1.4 2.4
Primary budget balance 5.4 5.8 5.9 4.6 7.2 7.4
Change in broad money
(in percent)
-5.1 13.8 7.8 9.7 18.8 13.0
Interest rate (in
percent) 8/
8.0 7.5 7.5 7.5 7.6 7.3
Total External Public Debt 87.4 83.5 87.8 90.2 79.3 75.6
Actual External Public Debt Service 9/ 24.9 19.6 16.1 17.8 14.0 ...

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

1 Under 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. This PIN summarizes the views of the Executive Board as expressed during the July 16, 2001 Executive Board discussion based on the staff report.


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