IMF Executive Board Approves US$666.2 Million Arrangement Under the Extended Credit Facility for Cameroon

June 26, 2017

  • Executive Board decision allows an immediate disbursement of SDR 124.2 million (about US$171.3 million) to Cameroon.
  • Cameroon’s ECF-supported program aims to restore the country’s fiscal and external sustainability and unlock job-rich, private sector-driven growth.
  • Reforms to maintain financial stability and boost financial inclusion, and address structural obstacles to competitiveness and economic diversification, will be key in accelerating private sector-led diversification.

On June 26, 2017, the Executive Board of the International Monetary Fund (IMF) approved a three-year arrangement under the Extended Credit Facility (ECF) with Cameroon for SDR 483 million (about US$666.2 million, or 175 percent of Cameroon’s quota) to support the country’s economic and financial reform program.

The ECF-supported program is expected to help Cameroon restore external and fiscal sustainability and lay the foundations for sustainable, private sector-led growth.

An amount of SDR 124.2 million (about US$171.3 million) will be immediately made available to Cameroon, further to the approval of the arrangement. The remaining amount will be phased in over the duration of the program, subject to semi-annual program reviews.

Following the Executive Board discussion on Cameroon, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said:

“Cameroon has been hit hard by the twin oil price and security shocks which have affected the CEMAC region since 2014 and led to a sharp drop in the pooled international reserves. Having initially shown resilience owing to its greater diversification, the Cameroonian economy is now facing decelerating growth, declining fiscal and external buffers, and rapidly-rising public debt. The authorities’ Fund-supported program appropriately aims at addressing Cameroon’s large balance of payments need and restoring fiscal and external sustainability, while also contributing to the collective effort to rebuild regional reserves. The Cameroonian authorities’ leadership has been instrumental in spearheading the coordinated regional response to maintain the integrity of the CEMAC’s monetary arrangement.

“Addressing the rising fiscal and external imbalances requires a sustained and balanced fiscal consolidation based on expanding the non-oil revenue base, prioritizing public investment projects with demonstrated growth dividends, and rationalizing recurrent expenditure, while protecting social spending. The authorities’ fiscal program is supported by comprehensive structural reforms in revenue mobilization and public financial management to further boost non-oil revenue collection, improve spending efficiency, and contain fiscal risks.

“The authorities are committed to enhance Cameroon’s competitiveness and medium-term growth potential, in line with their strategy to reach emerging economy status by 2035. The completion of large energy and transport public infrastructure projects will help boost private sector investment, job creation and further diversification, and is supported by complementary reforms to maintain financial stability, expand access to financial services and improve the business environment.

“The success of Cameroon’s program will also depend on the implementation of supportive policies and reforms by the regional institutions.”

Annex

Recent Economic Developments

Cameroon, the largest economy in the Central African Economic and Monetary Union (CEMAC), has been hit hard since 2014 by shocks caused by a slump in oil prices and increased security threats. Oil revenue declined and security and humanitarian spending increased, while needed infrastructure programs continued, leading to widening fiscal and current account deficits as well as a rapid accumulation of external debt.

After showing initial resilience to the shocks, growth weakened to 4.7 percent in 2016, from 5.8 percent in 2015 and 5.9 percent in 2014. Inflation declined to 0.3 percent at end 2016 and remained low at 0.4 percent in March 2017. It is expected to stay below the CEMAC convergence criterion of 3 percent in the medium-term. The fiscal deficit rose to 6.5 percent in 2016, from 2 percent of GDP in 2015, largely driven by a surge in capital spending and a decline in revenues.

Program Summary

Cameroon’s reform strategy is embedded in the coordinated regional approach outlined at the Yaoundé Heads of States summit in December 2016, during which the Cameroonian authorities spearheaded a coordinated response to maintain regional external stability as well as the integrity of the monetary arrangement. In that context, Cameroon’s ECF-supported program aims to restore the country’s fiscal and external sustainability and unlock job-rich, private sector-driven growth. The program rests on three main pillars: i) frontloaded fiscal consolidation to strengthen fiscal and external buffers, while protecting social spending and social safety nets; ii) structural fiscal reforms to expand the non-oil revenue base, improve the efficiency of public investment and the quality of budgetary system, and mitigate fiscal risks from contingent liabilities; iii) reforms to accelerate private sector-led economic diversification and boost the resilience of the financial sector.

The fiscal objectives of the program will be achieved through a better prioritization of public investment, focusing on infrastructure projects essential to further economic diversification, and a rationalization of the government’s spending on goods and services, while supporting an expansion of essential social expenditure and safety nets. In addition, with oil revenue declining over time, further expanding the non-oil revenue base and enhancing spending efficiency are key to maintaining the fiscal space needed for infrastructure investment and other priority areas.

To address the remaining weaknesses in public financial management, the authorities plan to enhance the budget credibility and transparency, including through the publication of regular reports on budget execution; strengthen treasury management, strictly limit and eventually eliminate the resort to exceptional procedures, and improve the efficiency in planning, executing and monitoring public investment projects.

Public debt management will focus on reducing the pace of debt accumulation in line with the program’s fiscal deficit objectives, tilting the composition of new borrowing towards more concessional financing, and closely monitoring contingent liabilities.

Reforms to maintain financial stability and boost financial inclusion, and address structural obstacles to competitiveness and economic diversification, will be key in accelerating private sector-led diversification.

Background

Cameroon, which became member of the IMF on July 10, 1963, has an IMF quota of SDR 276 million.

For additional information on the IMF and Cameroon, see:

http://www.imf.org/external/country/CMR/index.htm

 

Cameroon: Selected Economic Indicators, 2015-20

2015

2016

2017

2018

2019

2020

Est.

Est.

Proj.

Proj.

Proj.

Proj.

(Annual percentage change, unless otherwise indicated)

National account and prices

GDP at constant prices

5.8

4.7

4.0

4.6

5.0

5.1

Oil GDP at constant prices

28.1

-4.5

-2.4

-0.1

-3.4

-3.8

Non-oil GDP at constant prices

4.9

5.1

4.3

4.8

5.3

5.5

GDP deflator

0.3

-1.2

0.9

1.0

1.3

1.7

Consumer prices (average)

2.7

0.9

0.7

1.1

1.4

2.0

External trade

Export volume

17.8

1.0

2.0

5.2

6.7

8.5

Oil sector1,4

27.9

-3.1

-2.4

-0.1

-3.4

-3.8

Non-oil sector

15.2

2.2

3.2

6.5

9.0

11.0

Import volume

-5.0

-19.0

4.0

5.3

4.9

4.7

Terms of trade

-13.8

-20.4

3.4

-1.0

-3.5

-2.9

Money and credit

Broad money (M2)

9.1

5.6

3.3

5.7

6.4

7.5

Domestic credit to the private sector

12.8

6.4

5.8

9.3

10.8

11.2

(Percent of GDP, unless otherwise indicated)

Central government operations

Total revenue and grants

17.9

16.3

16.7

17.3

17.6

17.7

of which : Oil revenue

3.3

2.4

2.4

2.4

2.3

2.2

Total expenditure

19.9

22.8

20.1

19.8

19.6

19.3

Overall fiscal balance (payment order basis)

-2.0

-6.5

-3.4

-2.5

-1.9

-1.6

Gross national savings

17.2

16.5

16.9

17.8

18.9

20.1

Gross domestic investment

21.3

20.1

20.0

20.8

21.6

22.4

Public investment

6.7

8.3

7.3

6.9

6.7

6.5

Private investment

14.6

11.9

12.7

13.9

14.9

15.8

External sector

Current account balance, including grants

-4.1

-3.6

-3.1

-3.0

-2.7

-2.2

Overall balance, including grants

2.9

-4.7

-2.0

-1.2

-1.3

0.4

Public debt

Stock of public debt2,3

33.0

34.1

36.1

36.1

36.1

35.1

Of which: external debt

21.3

22.7

26.6

29.2

31.1

31.2

Memorandum items

Nominal GDP (CFAF billions)

16,807

17,386

18,242

19,273

20,498

21,925

Oil

876

700

917

913

867

831

Non-Oil

15,931

16,686

17,325

18,360

19,630

21,094

Sources: Cameroonian authorities; and IMF staff estimates and projections.

1 The export price for oil reflects actual prices for past years; for the current and future years, projections reflect movements in the Average Petroleum Spot Price (APSP) of three types of crude oil (Dated Brent, West Texas Intermediate, and the Dubai Fateh), with no discount.

2 Includes the cumulative financing gap.

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).

4 Crude oil volumes are augmented as of 2018 with natural gas exports of 60 million standard cubic feet per year.

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