July 6, 2018
PRESS OFFICER: Lucie Mboto Fouda
Phone: +1 202 623-7100Email: MEDIA@IMF.org
On July 6, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] and completed the second review under the Extended Credit Facility (ECF) arrangement for the Republic of Cameroon. Completion of this review enables the disbursement of SDR 55.2 million (about US$77.8 million).
The three-year ECF arrangement with a total access of SDR 483 million (about US$680.7 million or 175 percent of Cameroon’s quota) was approved by the IMF Executive Board on June 26, 2017.
Following the Board discussion of the ECF review, Mr. Mitsuhiro Furusawa, Deputy Managing Director, and Acting Chair, made the statement below:
“Cameroon’s performance under its ECF-supported program has been mixed against the backdrop of slower economic activity and security concerns. End-year spending overruns offset strong non-oil revenue collection, resulting in a higher-than-envisaged fiscal deficit. Nonetheless, structural reform implementation has been broadly satisfactory and net foreign assets accumulated faster than anticipated owing to a narrowing of the current account deficit.
“The authorities have reiterated their commitment to the program and have implemented corrective measures to bring the fiscal adjustment back on track in 2018, including preparing a revised 2018 budget and tightening expenditure controls. Strict implementation of the 2018 revised fiscal targets will be essential to support the buildup of fiscal and external buffers for Cameroon and the region. With significant spending pressures associated with the 2018 elections, a worsening security situation, and the 2019 African Soccer Cup, any additional oil revenue should be saved.
“Public debt has risen in 2017 owing to faster-than-envisaged execution of investment projects. Strictly limiting new borrowing and tilting its composition toward concessional borrowing would be key to maintaining public debt sustainability. The stock of contracted but undisbursed debt should also be reduced. Financial sector and structural reforms would reduce vulnerabilities and address remaining competitiveness bottlenecks.
Cameroon’s program is supported by the implementation of supportive policies and reforms by the regional institutions in the areas of foreign exchange regulations and monetary policy framework and to support an increase in regional net foreign assets, which are critical to the program’s success.”
Background
Growth is estimated to have decelerated to 3.2 percent in 2017 mainly due to a steep decline in oil production despite the gradual rebound in international prices. Inflation remained low and below 1 percent per annum. Fiscal and external adjustment are supporting the buildup of BEAC reserves. Fiscal consolidation continued, albeit at a slower pace than envisaged under the program owing to a substantial acceleration of spending at the end of the year. However, non-oil revenue mobilization has exceeded program objectives and structural reforms in public financial management are advancing. The current account deficit has narrowed to 2.7 percent of GDP, while capital flows are recovering. The banking sector is stable, however, credit growth to the private sector has remained sluggish at 2.3 percent (y/y).
The macroeconomic outlook for 2018 remains positive. Growth is expected to rebound to 4 percent, driven by the onset of gas production, construction activities for the 2019 African Cup of Nations (CAN), and improved energy supply, while inflation should remain low. Over the medium term, growth ought to gradually reach its potential of 5–5 ½ percent, supported by the coming on stream of key energy and transport infrastructure and increasing private investment.
Risks to the forecast are broadly balanced. Downside risks include unfavorable commodity price movements, a deteriorating security situation, reform fatigue ahead of the Fall presidential elections, and materialization of contingent liabilities that can adversely affect debt dynamics. On the upside, higher oil prices would support a faster buildup of fiscal and external buffers, while a stronger-than-anticipated rebound of non-oil activity in the context of the preparations for the 2019 CAN could further boost growth.
The Cameroonian authorities have adopted a comprehensive economic reform program to restore fiscal and external sustainability and buttress private sector-led and inclusive growth, supported by the IMF’s ECF arrangement. To keep the fiscal consolidation on track, the authorities have revised the 2018 budget to account for unanticipated spending due to rising fuel subsidies and higher security outlays, with a deficit target of 2.6 percent of GDP. In addition, the authorities have taken measures to strengthen expenditure controls and ensure transparent and efficient implementation of the budget, as well as better monitoring of disbursement of foreign financed projects. The authorities are also implementing reforms to maintain financial sector stability while expanding access to financial services, and to improve the business climate.
Executive Board Assessment [2]
Executive Directors noted the slower economic activity in Cameroon amid security concerns, as well as weaker‑than‑envisaged fiscal consolidation in 2017. They underscored that Cameroon’s leadership in bringing its fiscal adjustment back in line with program objectives is key to the buildup of the region’s fiscal and external buffers. In this context, they welcomed the measures taken by the authorities to reprofile the fiscal adjustment and strengthen expenditure controls, while maintaining non‑oil revenue mobilization objectives. In view of the significant risks to the program, Directors urged the authorities to fully adhere to the revised 2018 fiscal targets and save any windfall from higher oil prices. Directors welcomed the authorities’ commitment in this regard.
Directors emphasized the need to improve public financial management. They stressed that enhancing budget controls and reporting in line with the revised budget implementation circular will be essential to meeting program targets. They welcomed the audit of domestic arrears but noted that further improvements in liquidity management would be important to reduce occurrence of new arrears. The implementation of laws transposing two key CEMAC public financial management directives in 2019 would anchor further improvements in fiscal governance and transparency.
Directors underlined the importance of raising non‑oil revenue while enhancing spending efficiency. The planned expansion in the property tax coverage and the reduction of tax exemptions, starting with the 2019 budget, would be essential to broaden the tax base and generate additional fiscal space for priority spending. Directors also highlighted the need to improve the efficiency of social and capital spending, including through targeted transfers and better selection of public investment projects, to further reduce poverty, inequality, and gender gaps.
Directors expressed concerns about the rapid increase in public debt. They emphasized the importance of staying within the nonconcessional borrowing target and tilting the composition of borrowing toward concessional loans. They also encouraged the authorities to accelerate efforts to reduce the backlog of contracted but undisbursed loans. Directors welcomed the improved reporting on state‑owned enterprises’ debt but highlighted the importance of further reforms to ensure their financial viability. In particular, they recommended the review of administered prices to ensure cost‑recovery for key public utilities while protecting the poor.
Directors welcomed the authorities’ efforts to enhance financial stability and competitiveness. They stressed the importance of concrete progress in resolving ailing banks while minimizing fiscal costs, and reducing the large non‑performing loans. Further strengthening the AML/CFT framework will also be important. Directors noted that completing ongoing priority infrastructure projects, improving the business environment, finalizing the financial inclusion strategy, and addressing non‑tariff barriers including weak governance could boost competitiveness and sustainable growth.
Directors noted that Cameroon’s program is supported by the implementation of policies and reforms by the regional institutions, which are critical to the program’s success. These comprise the implementation of the three policy assurances provided in the June 2018 Letter of Policy Support and the union‑wide background paper. Completion of the third review will continue to be conditional on the implementation of these policy assurances.
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Table 1. Cameroon: Selected Economic and Financial
Indicators, 2017–23
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2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
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Est. |
Proj. |
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|
(Annual percentage change, unless otherwise indicated) |
||||||||
|
National account and prices |
||||||||
|
GDP at constant prices |
3.2 |
4.0 |
4.5 |
4.8 |
5.0 |
5.2 |
5.4 |
|
|
GDP deflator |
0.4 |
0.5 |
1.3 |
1.5 |
1.5 |
1.6 |
1.6 |
|
|
Consumer prices (average) |
0.6 |
1.1 |
1.3 |
2.0 |
2.0 |
2.0 |
2.0 |
|
|
External trade |
||||||||
|
Export volume |
-0.3 |
4.1 |
3.8 |
4.0 |
4.6 |
5.4 |
5.6 |
|
|
Import volume |
-4.8 |
2.2 |
4.4 |
4.3 |
4.0 |
3.8 |
3.4 |
|
|
Nominal effective exchange rate (depreciation -) |
… |
… |
… |
… |
… |
… |
… |
|
|
Real effective exchange rate (depreciation -) |
… |
… |
… |
… |
… |
… |
… |
|
|
Terms of trade |
-2.6 |
-10.2 |
-4.2 |
-4.1 |
-4.0 |
-3.3 |
-2.8 |
|
|
Money and credit |
||||||||
|
Broad money (M2) |
5.9 |
5.5 |
5.8 |
6.6 |
7.1 |
7.5 |
8.1 |
|
|
Net foreign assets 1/ |
6.1 |
0.9 |
0.4 |
-1.0 |
0.3 |
1.7 |
1.8 |
|
|
Net domestic assets 1/ |
-0.2 |
4.6 |
5.4 |
7.6 |
6.8 |
5.8 |
6.2 |
|
|
Domestic credit to the private sector |
2.3 |
4.6 |
5.8 |
6.7 |
8.6 |
9.9 |
11.0 |
|
|
(Percent of GDP, unless otherwise indicated) |
||||||||
|
Gross national savings |
23.4 |
23.8 |
24.3 |
24.8 |
25.3 |
25.9 |
26.3 |
|
|
Gross domestic investment |
26.2 |
26.8 |
27.2 |
27.7 |
28.2 |
28.7 |
29.2 |
|
|
Public investment |
8.8 |
6.2 |
6.1 |
5.9 |
6.1 |
6.1 |
6.3 |
|
|
Private investment |
17.3 |
20.6 |
21.2 |
21.7 |
22.1 |
22.6 |
22.9 |
|
|
Central government operations |
||||||||
|
Total revenue (including grants) |
15.4 |
15.8 |
15.8 |
15.8 |
15.9 |
16.1 |
16.1 |
|
|
Total expenditure |
20.4 |
18.4 |
17.8 |
17.3 |
17.5 |
17.5 |
17.5 |
|
|
Overall fiscal balance (including grants, payment order basis) |
-5.0 |
-2.6 |
-2.0 |
-1.5 |
-1.5 |
-1.5 |
-1.4 |
|
|
Overall fiscal balance (including grants, cash basis) |
-4.6 |
-4.0 |
-2.9 |
-2.5 |
-1.5 |
-1.5 |
-1.4 |
|
|
Non-oil primary balance (payment basis, percent of non-oil GDP) |
-6.3 |
-4.0 |
-3.1 |
-2.3 |
-2.2 |
-2.1 |
-2.1 |
|
|
External sector |
||||||||
|
Current account balance |
||||||||
|
Excluding official grants |
-3.1 |
-3.4 |
-3.3 |
-3.2 |
-3.2 |
-3.2 |
-3.2 |
|
|
Including official grants |
-2.7 |
-3.0 |
-2.9 |
-2.8 |
-2.8 |
-2.9 |
-2.9 |
|
|
Public debt |
||||||||
|
Stock of public debt 2/ 3/ |
38.2 |
39.1 |
38.9 |
38.2 |
36.8 |
35.4 |
34.1 |
|
|
Of which: external debt |
25.6 |
26.7 |
26.7 |
27.7 |
27.2 |
26.7 |
26.3 |
|
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Sources: Cameroonian authorities; and IMF staff estimates and projections using updated nominal GDP |
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1/ percent of broad money at the beginning of the period. |
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2/ Includes the cumulative financing gap. |
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3/ Projections are taken from an update to the 2015 Debt Sustainability Analysis (DSA), which excludes the stock of debt on which France provided debt relief under the "Contrat de désendettement et de développement" (C2D). |
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[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.
[2] 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.
