## Unlocking Cameroon’s Growth Potential

_IMF News, September 15, 2017_

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## Bibliographic details
- Published: September 15, 2017

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### Introduction
- First visit by IMF Deputy Managing Director Mitsuhiro Furusawa to Cameroon (Yaoundé, Cameroon, September 15, 2017).
- Context: Cameroon and the CEMAC region face great economic challenges following the steep fall of oil prices and difficult security conditions.
- Yaoundé Summit (December) mobilized national and regional policy responses and commitment to essential reforms.
- New Fund-supported programs approved in June for Cameroon, Gabon, and Chad; increase in Fund resources under the existing program with the Central African Republic.

### Global and Regional Outlook
- IMF World Economic Outlook (July update) forecasts:
  - 3.5 percent growth this year.
  - 3.6 percent growth in 2018.
  - 3.2 percent growth last year.
- Regional and commodity context:
  - Sub-Saharan Africa growth rebound: 1.3 percent in 2016; projected 2.7 percent this year; 3.5 percent in 2018.
  - One-third of countries in the region have negative per capita growth.
  - Oil prices have receded in 2017 due to strong U.S. inventories and increased global supply—adverse for oil-exporting economies like Cameroon.
- Key regional macroeconomic statistics:
  - CEMAC current account deficit widened to 9.3 percent of gross domestic product in 2016 from 3.9 percent in 2014.
  - Public debt rose to 47 percent of GDP from 29 percent.
  - BEAC’s foreign exchange reserves fell by $10 billion; equivalent of only about two months of imports at end-2016.
- Security shocks (Boko Haram attacks, refugee flows) increased pressure on public finances.
- Cameroon’s vulnerabilities:
  - As the most diversified economy in CEMAC, Cameroon showed relative resilience but faced falling growth, growing fiscal and external imbalances, and rapidly increasing public debt by last year.
  - Large infrastructure projects and increased security spending have rapidly eroded fiscal and external reserves.

### Policy Response
- Yaoundé summit commitments:
  - National policies to ensure fiscal sustainability under low oil revenues; structural reforms to strengthen public financial management and the business environment.
  - Regional policies to stop depletion of BEAC reserves and preserve the fixed exchange-rate arrangement, including tighter monetary policy, liquidity management, and measures for financial sector stability.
- Post-summit outcomes:
  - Continued reduction of fiscal and current account deficits.
  - BEAC reserves stabilized and started to increase again in July.
  - IMF and development partner financing provides scope for a more gradual adjustment; ongoing discussions with the Republic of Congo and Equatorial Guinea.
- Rationale for preserving the exchange-rate arrangement: historical role in keeping inflation low and social-economic stability; memory of the 1994 devaluation’s loss of purchasing power.

### Strategy for Stability and Growth
- Core strategy: coordinated national and regional policies recognizing interdependence and persistence of the crisis, with an emphasis on fiscal adjustment and economic reform to restore inclusive growth.
- Program design highlights:
  - IMF-supported program incorporates government reform objectives.
  - 2017 fiscal adjustment based on the finance law.
  - Spending reductions target wasteful or redundant expenditures.
  - No cuts envisaged in civil servant salaries; increased spending on health, education, and other social priorities.
  - Investment spending not subject to drastic cuts; priority given to transport and energy projects that can lift growth.
  - Backlog of undisbursed borrowing commitments equal to 20 percent of GDP; less strategic projects should be delayed or reconsidered.

- Key reform areas (three pillars)

  Fiscal Reforms
  - Objectives:
    - Expand the non-oil revenue base as oil reserves are being gradually depleted.
    - Streamline exemptions and focus tax incentives on priority sectors.
    - Improve tax and customs administration.
    - Improve control and transparency in budget execution; improve public procurement to reduce infrastructure bottlenecks.
  - Public enterprise reforms:
    - Many state-owned enterprises are heavily indebted and falling into arrears.
    - Government subsidies for state-owned enterprises account for about one percent of GDP.
    - Need for improvements in financial reporting and enhanced oversight to limit contingent liabilities.
  - Program-supported measures:
    - Publication of quarterly budget execution reports.
    - Reforms to enhance project preparation—only mature projects included in the budget.
    - IMF to provide comprehensive technical assistance and training in revenue administration, tax and customs modernization, budget management, and management of fiscal risks.

  Financial Sector Reforms
  - Objectives:
    - Strengthen financial stability, broaden financial system reach, and expand financial inclusion.
  - Current conditions:
    - Banking sector resilient but showing strain: declining liquidity and rising non-performing loans.
    - Five small and non-systemic banks are insolvent; most have been for many years.
  - Policy actions:
    - Government plans to resolve insolvent banks and reduce non-performing loans.
    - IMF assistance with Cameroon and the regional supervisor COBAC.
    - Additional measures planned to increase private sector access to financial services.

  Improving the Business Environment
  - Objectives:
    - Improve competitiveness and attract investment by simplifying rules rather than relying on special tax regimes.
    - Reduce red tape, simplify the tax system, and create space for private sector participation in key sectors.
  - Anti-corruption focus:
    - Corruption described as a “silent cancer” undermining competitiveness and business confidence.
    - IMF and World Bank working with the government on practical anti-corruption measures.
    - Encouragement for transparency initiatives: Cameroon joined the Extractive Industries Transparency Initiative in 2007 to improve disclosure of commodity revenue information.

### Conclusion and IMF Support
- Outlook and policy challenge:
  - Collapse of oil prices created a profound policy dilemma; unlikely to return to pre-2014 levels.
  - Reinforced need for reforms to transform the economy in ways that benefit all Cameroonians.
- IMF commitment:
  - Financial support through the current Fund-supported program.
  - Continued policy advice and a comprehensive strategy to build government capacity to address current and future challenges.
  - IMF to remain a reliable partner in supporting Cameroon’s reform efforts.

*IMF Deputy Managing Director Mitsuhiro Furusawa — Yaoundé, Cameroon — September 15, 2017*

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## References

- [Mitsuhiro Furusawa](http://www.imf.org/external/np/omd/bios/mf.htm)
- [Republic of Congo and the IMF](http://www.imf.org/external/country/COG/index.htm)
- [Republic of Equatorial Guinea and the IMF](http://www.imf.org/external/country/GNQ/index.htm)
- [Cameroon and the IMF](http://www.imf.org/external/country/CMR/index.htm)
- [Central African Republic and the IMF](http://www.imf.org/external/country/CAF/index.htm)
- [Chad and the IMF](http://www.imf.org/external/country/TCD/index.htm)
- [The IMF and Good Governance -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/the-imf-and-good-governance)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/09/15/sp091517-unlocking-cameroon-growth-potential_