Public Information Notice: IMF Executive Board Concludes 2007 Article IV Consultation with Cameroon

July 2, 2007

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.

Public Information Notice (PIN) No. 07/76
July 2, 2007

On June 18, 2007, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Cameroon.1


Cameroon's economy has grown steadily over the past two decades, aided by the devaluation of the CFA franc in 1994, and the accompanying macroeconomic and structural reforms. The resulting growth, however, has not been strong enough to make a significant dent on poverty. A number of factors have constrained Cameroon's growth potential relative to the group of lower middle-income economies, including lower investment rate, shallower financial depth, less open trade; weaker infrastructure and human capital base; and weaker business environment. On the current trajectory, the Millennium Development Goals (MDGs), including the target on halving the percentage of population living below the poverty line, are likely to be missed.

During recent years, the authorities made progress in restoring conditions for macroeconomic stability and strengthening governance. This allowed Cameroon to reach the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative and receive additional debt relief under the Multilateral Debt Relief Initiative (MDRI). Its challenges now are to preserve fiscal sustainability, while expanding priority spending, and make the business climate more attractive for private sector-led growth.

Economic developments were encouraging in 2006. Growth picked up somewhat, following a rebound in construction activities, oil output, and forestry production. Although inflation rose, reflecting higher fuel prices, it was contained at about 5 percent. Higher oil prices and production improved the external current account and resulted in a considerable improvement of the overall fiscal balance. However, in the fourth quarter of 2006, emergency-related extrabudgetary spending financed directly by the national oil company raised concerns about budget transparency.

The Poverty Reduction and Growth Facility-supported program was implemented satisfactorily in July-December 2006. Most fiscal and financial targets were met. However, because of extrabudgetary spending in late 2006, the quantitative performance criterion on bank financing was narrowly missed. Structural reforms monitored under the program were instituted as planned. Efforts to strengthen transparency and improve budget management culminated in the publication of two Extractive Industries Transparency Initiative (EITI) reports covering the period 2001-05. However, the privatization process of the national airline was declared unsuccessful as the revised offer by the winning bidder was considered unsatisfactory. The authorities remain committed to the preparation of a new reform strategy for the airline which will eliminate subsidies while improving air services. Anti-corruption efforts were continued and the government appointed in early 2007 the members of the anti-corruption commission set up a year ago.

The outlook for 2007 and the medium term is encouraging. Economic activity is expected to pick up further in 2007, reflecting stronger performance in the forestry, construction, and tertiary sectors. Because of lower projected oil prices, inflation is expected to decelerate considerably while the external current account deficit will widen over the medium term. Fiscal policies will remain prudent. While the overall fiscal surplus will decline on average during 2007-08, largely as a result of lower oil prices, fiscal consolidation efforts—as reflected in the nonoil fiscal balance—will continue. The main risks to this outlook relate to slower progress in mobilizing nonoil revenue and improving the business climate, and public spending overruns linked to the parliamentary elections in 2007.

Executive Board Assessment

Directors commended the Cameroonian authorities' commitment to sound policies and reforms, which have supported improved macroeconomic performance. Directors noted, in particular, that progress made over the past two years in the areas of fiscal policy and public finance management contributed to macroeconomic stability. While encouraged by the pick up in output growth in 2006, they stressed the importance of consolidating the recent fiscal gains, preserving fiscal sustainability, and strengthening the business climate, in order to accelerate growth, especially given the recent decelerating trend in productivity. Maintaining a strong momentum in the implementation of structural and governance reforms will be critical to the realization of growth and poverty reduction objectives.

Directors underscored the importance of setting non-oil revenues on a steady upward path, especially in the context of declining oil reserves and the expected trade liberalization. They urged the authorities to stay vigilant about meeting their non-oil revenue objectives, including through administrative measures to expand the tax base, and to be ready to accelerate their implementation and to adopt tax policy measures if tax receipts fall below expectations.

Directors encouraged the authorities to monitor closely spending levels while enhancing the quality of public spending. They urged the authorities to follow budgetary procedures and refrain from undertaking extrabudgetary spending. Growth and poverty reduction objectives would be better served by enhancing capital budget execution and reorienting spending toward priority areas. Subsidies to public enterprises should be contained, first, and then eliminated over time, to create more fiscal space for priority spending. More generally, Directors welcomed the authorities' intention to prepare a medium-term action plan to improve budget management further. Directors urged the authorities to continue improving public expenditure management by better monitoring budgets and tracking expenditures, including those related to poverty reduction. Improved transparency in the use of budget resources, including oil, remains a priority.

Directors underscored the importance of pursuing a prudent debt management strategy in the post-debt relief period. Borrowing over the medium term should continue to be on concessional terms, and the related resources should be put to effective use to safeguard debt sustainability. The authorities and non-Paris Club creditors are encouraged to continue good faith efforts to reach agreements on debt relief.

Directors urged the authorities to take decisive actions to strengthen the business environment. In addition to infrastructure improvements, this objective would require policies to improve financial intermediation, liberalize trade, reform public enterprises and strengthen governance. They underscored the importance of deepening financial intermediation, while preserving the soundness of the banking system. In this regard, they welcomed the authorities' commitment to build on the recommendations of the national Financial Sector Assessment Program (FSAP) mission. Directors commended the authorities for pursuing the trade reform agenda within the Central African Economic and Monetary Community, including a lowering of the common external tariffs. They encouraged the authorities to accelerate the reform of public enterprises in a timely and transparent manner in order to reduce the burden on public finances, allow the use of the freed-up resources in more productive areas, and improve services. Directors urged the authorities to step up anticorruption efforts aimed at lowering uncertainty in the regulatory and judicial environment.

Cameroon: Selected Economic and Financial Indicators, 2004-06

  2004 2005 2006
  Est. Est. Est.

  (Annual percentage changes)

National income and prices


GDP at constant prices

3.7 2.0 3.8


-9.3 -9.7 6.9


4.9 2.9 3.5

Consumer prices (12-month average)

0.3 2.0 5.1

External trade


Export volume

-0.7 -8.4 3.4

Of which: Non-oil sector

2.9 -8.5 2.4

Import volume

11.2 4.6 6.8

Terms of trade

-2.2 18.0 14.0

Money and credit (end of period)


Net domestic assets 1

0.3 -5.3 -24.8

Net credit to the public sector 1

0.1 -8.7 -21.7

Credit to the private sector

1.4 10.9 3.2

Broad money (M2)

7.3 4.2 9.3
  (Percent of GDP)

Central government operations


Total revenue (excluding grants)

15.2 17.3 18.9

Non-oil revenue (percent of non-oil GDP)

12.1 13.5 13.5

Total expenditure

16.0 14.4 14.2
  • Fiscal balance (excluding net changes in arrears)Excluding grants

-0.8 3.0 4.6
  • Non-oil primary balance (percent of non-oil GDP) 2

-2.1 0.0 -0.6

External sector


Current account balance (including grants)

-3.8 -3.4 -0.8

Stock of external debt 3

44.2 36.7 5.0

Stock of public debt

61.3 52.7 14.3

Sources: Cameroonian authorities and IMF staff estimates and projections

1 In percent of broad money at the beginning of the period.

2 Excluding external grants and foreign-financed investment.

3 Assumes cancellation of C2D debt in 2006.

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.


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