Yaoundé, December 6, 2000
Mr. Horst Köhler
Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
U.S.A.
Dear Mr. Köhler:
1. The government of Cameroon has implemented a medium-term economic and financial program (July 1, 1997–June 30, 2000), which was supported under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement as approved by the IMF Executive Board on August 20, 1997. To consolidate the progress made since 1997, the government has decided to accelerate and widen its reform efforts, and has therefore adopted a new economic reform program for the period October 1, 2000–September 30, 2003.
2. The attached memorandum outlines the policies and reforms that the government of Cameroon intends to adopt during the next three years. The main goal of the medium-term policies and reforms is to achieve a sustainable reduction in poverty through high economic growth, improved efficiency of public expenditure, well-targeted poverty reduction measures, and strengthened governance. In support of these objectives and policies, the government of Cameroon requests a three-year arrangement supported under the PRGF in an amount equivalent to SDR111.42 million (60 percent of quota).
3. The government is preparing a poverty reduction strategy paper (PRSP) that will involve close consultation with the civil society, the private sector, NGOs and other development partners. Under this process, the medium-term policies will be further developed, building on the interim PRSP, which was sent to the Fund and the World Bank.
4. A first review under the three-year arrangement will be completed by end-June 2001, focusing mainly on budgetary non-oil revenue performance and customs reform, oil revenue, and progress in strengthening public expenditure management and governance, as well as on the nonbank financial sector.
5. The government believes that the policies described in the attached memorandum on economic and financial policies will allow it to achieve the objectives of its economic program for 2000/01–2001/02, but it stands ready to take any additional measures that may be appropriate for this purpose, in consultation with the Fund. The government will provide the Fund with such information as the Fund requests in connection with the implementation of the program. In addition, after the period of the arrangement and while Cameroon has outstanding obligations to the Fund under the arrangement, the government of Cameroon will consult with the Fund, at the initiative of the government or at the request of the Managing Director of the Fund, on it economic and financial policies.
Sincerely yours,
Peter Mafany Musonge
Prime Minister
Head of Government
Attachment:
Memorandum on Economic and Financial Policies for 2000/01–2001/02
Cameroon
Memorandum of Economic and Financial Policies
I. Introduction
1. Since 1996, the government of Cameroon has been implementing
macroeconomic and structural reforms aimed at restoring internal and external
viability, bringing the economy onto a sustainable growth path, and reducing
poverty. Cameroon’s reform efforts regained momentum with the adoption by
the government, in August 1997, of a medium-term economic and financial
program (July 1, 1997-June 30, 2000), which was supported
by the IMF under a three-year Poverty Reduction and Growth Facility (PRGF)
arrangement. The government’s adjustment effort has also been supported
by the World Bank, and other multilateral and bilateral donors and
creditors.
2. Implementation of the medium-term economic and financial program was
satisfactory, enabling Cameroon to reach the decision point under the Heavily
Indebted Poor Countries (HIPC) Initiative in October 2000. Overall, a
critical mass of reforms was implemented with determination, allowing for
considerable progress in terms of both restoring macroeconomic stability and
enabling the promotion of higher rates of economic growth. Real GDP growth
averaged 4½ percent per year during the program period;
CPI-inflation has declined to less than 1 percent; and the external
current account deficit (excluding official transfers) halved from
3 percent of GDP in 1997/98 to 1½ in 1999/2000, aided by
an improvement in the terms of trade. The public finances situation has
improved markedly as a result of the strengthening in oil and non-oil revenue
mobilization and restrained expenditure policy. In the circumstances, the
government ceased accumulating internal arrears, and relations with official
external creditors were normalized. Other achievements under the medium term
program included the acceleration of the privatization program, the
rehabilitation of the domestic banking system, and an improvement in the
foreign reserves position.
3. Despite the progress made, Cameroon’s economic and financial situation
remains vulnerable, and available data reveals that poverty continues to affect
slightly more than 50 percent of the population. Although annual real GDP
growth averaged about 5 percent during the last five fiscal years, income
growth performance in Cameroon is still fragile and not inclusive, and access
to basic social services is limited. The country’s economic and social
development is still hampered by the heavy burden of the external debt, the
remaining structural rigidities, high production costs, and weak
governance.
4. Against this backdrop, the Cameroonian government is determined to
consolidate in the coming years the progress made by reinforcing its fiscal
adjustment effort, deepening and completing its structural reform agenda, and
tackling more forcefully governance and corruption, so as to achieve a higher
level of sustainable economic growth, diversify the economy, reduce
significantly poverty, and attain a durable financial viability. To this end,
it has prepared an interim Poverty Reduction Strategy Paper (I-PRSP), based on
an all-inclusive participatory process, with the assistance of the IMF, the
World Bank and other donors, that outlines the government’s macroeconomic
framework and matrix of policies for 2000/01–2003/04
(October 1, 2000–September 30, 2003). In support of
its medium-term program, the government of Cameroon requests a new three-year
arrangement under the Poverty Reduction and Growth Facility, as well as
assistance from the World Bank and the other multilateral and bilateral
donors.
II. Medium-Term Policy Framework and Objectives
5. As spelled out in the interim PRSP, the primary development goal of the
government is to achieve a sustainable improvement in living standards and a
significant reduction in poverty rates. Accordingly, the authorities intend to:
(a) promote high rates of economic growth; (b) implement ambitious
social policies, including well-targeted poverty reduction measures;
(c) improve the efficiency of public expenditure; and (d) strengthen
governance. In this context, the overriding goal of the authorities is to
achieve the international goal of reducing poverty in half by 2015.
6. The Cameroonian government’s macroeconomic objectives for the coming
three years are to: (i) increase real GDP growth rate from an average of
5 percent per annum in recent years to 6 percent by 2002/03,
thus allowing for an increase in per capita GDP of about 2-3 percent;
(ii) contain consumer price inflation at 2 percent; and
(iii) limit the external current account deficit (excluding official
transfers) at about 3-32 percent of GDP. Successful implementation of the
policy framework should enable a reduction in the rate of poverty, from
approximately 50 percent in 1999/2000 to some 42 percent by 2003/04.
7. To achieve the objectives specified above, the government is committed to
pursue sound economic and financial policies, consolidate and deepen structural
reforms, improve governance, and reduce corruption so as to ensure that public
resources are effectively used, in particular in the priority areas of
education, health, infrastructure, and social services. Cameroon’s growth
strategy will aim at correcting structural weaknesses, stimulating economic
activity and job creation, and strengthening and diversifying the production
and export base by: (i) improving productivity and competitiveness through
the broadening and completion of the privatization agenda and the reduction in
the costs of doing business; (ii) creating a legal and regulatory
environment that will help promote private sector development;
(iii) furthering regional integration; and (iv) improving governance
and transparency, and fighting corruption. In this context, gross domestic
investment would rise from 16½ percent of GDP in 1999/2000 to
about 19 percent by 2003/04, while domestic savings are expected
to average 19 percent of GDP during the period.
8. Public finances will be further strengthened through enhanced non-oil
revenue mobilization and continued timely transfers of oil revenue to the
budget, as well as improved public expenditure management. In particular, the
government will intensify its efforts to reinforce the customs and tax
administrations, reduce tax fraud, and broaden the tax base. On that basis, it
is expected that non-oil revenue will increase by about 2 percentage
points of GDP to 15 percent of GDP in 2003/04. Expenditure policy
will aim at reinforcing absorption capacity, elaborating and implementing
goal-oriented budget frameworks, and improving the efficiency of public
expenditure. In this context, public spending will be contained at around
18½ percent of GDP during the program period, while budgetary
allocations to the health, education, and other priority sectors are increased.
Salary and wage policy will remain prudent, while taking into account the need
to ensure that public servants are adequately remunerated. At the same time,
efficiency in public investment will be increased through improvements in the
identification and selection, monitoring, and execution of investment projects.
A medium-term expenditure framework (MTEF) will be prepared, with the
assistance from the World Bank and in concert with the Fund and other
development partners, with a view to further strengthen expenditure policy and
to better target poverty reduction efforts.
9. In the financial sector, the government will pursue its ongoing
reforms and follow up on the recommendations of the Financial Sector Assessment
Program, with a view to consolidating sectoral stability and improving
regulations and control of microfinance institutions. Financial deepening will
be pursued through the launching of a transitory financial market. The
government will continue to ensure that the monetary policy conducted at the
regional level is consistent with the objectives of reduced inflation and
strengthened zone-wide net foreign assets position. Additionally, the technical
studies required for the reform of the social security system will be completed
during the program period.
10. At the regional level, the government will encourage further liberalization
of the trade system. In particular, it will seek, in concert with the other
members of the Communauté Économique et Monétaire de
l’Afrique Centrale (CEMAC), to reduce the common external tariff to a
maximum level of 20 percent, and to decrease the number of tariff bands from 5
to 4. The government will also support the ongoing efforts to adopt a single
bank licensing system and a common investment charter throughout the CEMAC
zone.
11. The positive effects of these macroeconomic and structural policies
on growth and poverty will be reinforced by specific policies and measures
aimed at ensuring that the benefits of growth will reach all segments of
society, particularly the poor and disadvantaged. Detailed objectives and
policies for poverty reduction, including a matrix of actions, are reflected in
the interim PRSP, with an emphasis on the areas of education, health, water and
sanitation, infrastructure and rural development, delivery of quality social
services, and improved governance. These policies and measures will be further
developed in the full PRSP. The government will continue to increase budgetary
resources to the priority sectors, while ensuring an effective and efficient
use of debt relief under the HIPC Initiative.
III. Program For 2000/01–2001/02
12. Consistent with the medium-term framework, the primary macroeconomic
objectives for the first year of the program supported by the PRGF arrangement,
which covers the period October 1, 2000-September 30, 2001,
are to: (i) contain CPI inflation at 2 percent; and (ii) limit
the external current account deficit (excluding official transfers) at about
3–32 percent of GDP in 2000/01 and 2001/02. Real GDP
growth is projected to reach 5.4 percent and 5.7 percent
in 2000/01 and 2001/02, respectively. To attain these objectives, the
government will implement the measures outlined below in the fiscal, monetary,
structural reform, social policies and governance areas.
A. Macroeconomic Policies
Fiscal policy
13. Fiscal consolidation remains a cornerstone of the government program, with a
view to achieving financial viability by enhancing non-oil revenue
mobilization, improving the quality and efficiency of public expenditure, and
strengthening expenditure control. The fiscal framework for 2000/01
reflects the favorable environment resulting from the current higher oil
prices. The average oil price for Cameroon for 2000/01 is projected at
US$28.3 a barrel, and oil revenue is now expected to amount to 7.2 percent
of GDP, raising total revenue to 20.8 percent of GDP. As a result, the
primary surplus is targeted at 7.6 percent of GDP and the overall fiscal
balance, on a commitment basis and excluding (including) grants, at a surplus
of 2.1 (2.5) percent of GDP. Part of the additional oil revenue will be
used to accelerate the clearance of domestic arrears audited and validated by
an independent and internationally reputed firm, and the remainder will be used
to reduce net bank credit to the government.
14. Despite the oil windfall, the government remains committed to continue to
strengthen its capacity with respect to the mobilization of non-oil revenue.
This will be achieved primarily through the strengthening and modernization of
the domestic tax administration, including the broadening of the tax base, the
strengthening of the value added tax (VAT), and the reform of forestry taxation
policy.
15. In the area of domestic taxation, the government will emphasize
consolidation of the gains achieved under the previous PRGF program. In this
context, the authorities, with the technical assistance of the IMF, French
Co-operation and the European Union, intend to modernize the tax directorate
management tools while broadening the tax base, universally enforcing tax
provisions and obligations, rationalizing controls, simplifying procedures, and
improving assistance to taxpayers. In particular, they will increase the
allocation of staff and budgetary resources available to the Tax Department,
and adopt a new code on tax procedures.
16. In the forestry area, the government will ensure the implementation
of the sectoral fiscal reforms introduced by the budget law of July 2000,
emphasizing in particular: (i) securitization of fiscal and environmental
liabilities for all valid exploration licenses; (ii) implementation of a
system of adjudication for export quotas of unprocessed logs;
(iii) implementation of a timber tax at the factory entrance
(entrée usine) tax; (iv) phasing out the system of export
processing enterprises (points francs); and (v) the institution of
an intercommunity equalization fund financed by a portion of the annual
forestry royalties. With respect to the securitization system, originally
elaborated under CAS III and implemented since April 1999 with the support
of the World Bank, the authorities will: (i) strengthen the monitoring of
the geographical origin and the traffic of logs; and (ii) render
operational the monitoring system for fiscal and environmental infractions,
including the pursuit of contentious cases to the fullest extent stipulated by
law. The government will also consolidate the improvements attained with
respect to the system for awarding licenses, originally introduced during
fiscal year 1999/00, and implement the standards regulating the
delimitation, classification and planning of concessions, as well as communal
forest lands. Finally, with a view to guaranteeing the sustainability of these
reforms and ensuring that the institutional framework is in line with sectoral
objectives, the government intends to complete the restructuring of
l’Office National de Developpement des Forêts (ONADEF) and the
other structures of the Ministry of Environment and Forestry (MINEF) relating
to the forestry sector and environmental conservation.
17. In the customs area, the government has been engaged in an ambitious reform
program, including the implementation, since August 2000, of a single
processing window, which has already registered satisfactory results.
Additionally, the government will carry out other priority measures to improve
the administration of customs and increase revenue, based on the
recommendations of the IMF technical assistance mission of June 2000. In
particular, it will ensure that physical and documentary controls for the
release of goods are completed within 24 hours for imports and 6 hours for
exports. With a view to reducing both costs and time delays at the port of
Douala, the customs administration will adopt measures to facilitate progress
towards the objective of reducing the time required for the processing of
containerized merchandise to 7 days for imports and 2 days for exports. In
addition, the Cameroonian authorities will reinforce the control and monitoring
of special status traffic (transit, bonded warehouse (entrepôts),
and temporary admission), and they will create a special unit at customs
headquarters to monitor and control exemptions.
18. Customs administration will generalize the use of the unique taxpayer
identification number (TIN). With the assistance of the IMF, the government
will take all the immediate steps necessary to secure the current computer
system in order to limit access to authorized personnel only and to assure that
all the preparation work for the introduction of a new system, PAGODE II, is
done. A rigorous internal audit and inspection scheme will be set up, and a
code of conduct will be adopted and effectively implemented. The procedures for
close collaboration with the pre-shipment inspection company will be extended
to ensure an effective monitoring of the transit trade. The other steps to be
taken to boost tax yield, as well as measures to restructure and modernize the
customs administration, are indicated in Annex I. The government will
reinforce the control mechanism for both processed and unprocessed logs at both
the Cameroon-Congo and the Cameroon-RCA borders, with the administrative
assistance of the respective countries. In the context of securing forestry
receipts, a synergy will be sought between the Directorates of Forestry, Tax
and Customs, as well as with the railway company (CAMRAIL), with a view to
ensuring coherence in the geographical origin of timber products and the
applicable fiscal regime. Other measures to be implemented to ensure the
restructuring and modernization of customs administration are listed in Annex I.
19. On the expenditure side, the government will maintain the preference
accorded to the priority sectors of education, health, rural development and
basic infrastructure, with an emphasis on the allocation and efficient use of
resources for the campaign against VIH/AIDS. Total expenditure, however, will
be contained at 18.7 percent of GDP in 2000/01, due to prevailing
weaknesses in the area of expenditure management. The share of education and
health will be increased from an estimated outturn of 3.0 percent of GDP
in 1990/00 to 3.5 percent in 2000/01, and further to 4.0 percent
in 2001/02. The government will establish a medium-term budget framework
within the social ministries (education and health, in particular), building on
the detailed strategies previously developed with the assistance of the World
Bank. These strategies include quantifiable targets, in the context of a
three-year medium-term expenditure framework, that will be fully reflected in
the budget starting in 2001/02.
20. Regarding public expenditure management, the government will continue to
implement the action plan adopted in December 1998 following the
recommendations of IMF, the European Union, and other development partners. It
will strengthen the institutional capacities of spending departments with
respect to the programming, monitoring, and execution of operations, as well as
the effectiveness and quality of expenditure. The government will prepare
comprehensive quarterly reports on the financial and physical operations of the
priority ministries, and it will carry out an annual financial and physical
audit of the ministries of Education, Health, Public Works and Agriculture. It
will also take steps to: (i) improve the monitoring of delegated credits;
(ii) produce, on a monthly basis, high-quality treasury balances and
budget execution tables; and (iii) improve the reliability of these
instruments by making fully operational the electronic transfer of information
between the main software applications used in the financial administrations.
Regarding domestic arrears, the government has audited and validated the stock
of official government arrears, and it will carry out the comprehensive
multiyear settlement plan it has adopted (including cash payments of CFAF 213
billion in 2000/01 and securitization of the remainder). In this context, the
government will continue its efforts to improve the budget preparation process
and reinforce the operational capabilities of the spending agencies. Other
measures in this area are listed in Annex I.
21. The government will also pursue the reform of the procurement system. To
this end, the government will: (i) render operational, by end-March 2001, the
interim system which was elaborated in June 2000 on the basis of the modified
procurement code; (ii) complete the selection of independent observers,
through an international tender, and set up the operational procedures to carry
out ex post independent audits; and (iii) draw up an action plan to carry out a
more comprehensive reform of the procurement system on the basis of the
recommendations of the World Bank’s Country Procurement Assessment Review
in October 2000. The other measures to be implemented are listed in Annex I.
22. To facilitate civil service reform, the government has completed a
comprehensive physical and legal census of all civil servants. On the basis of
the results from this census, the authorities intend to update the salary
master file and implement the measures necessary to ensure this file remains
current, rationalize personnel management, and assess appropriate staffing and
salary levels.
Monetary prospects and financial sector reform
23. The monetary program for 2000/01 aims at further strengthening
Cameroon’s contribution to the net foreign assets position of the BEAC,
while providing room for an adequate increase in credit to the private sector.
The continued improvement in the public finance situation will help reduce net
bank credit to the government by CFAF 156 billion (2.5 percent
of GDP); credit to the private sector is expected to increase by about
15 percent; and, with income velocity of money unchanged, money demand
should expand by 10 percent. In conducting monetary policy, the
authorities will ensure that the regional central bank will continue to rely
exclusively on indirect instruments, strengthen the functioning of interbank
and money markets, and maintain appropriate interest rate differentials between
its intervention rates and the French money market rate.
24. In the financial sector, the government will continue to support actions
aimed at strengthening the intervention capabilities of the Central African
Banking Commission (COBAC) and enhancing its independence. As the
rehabilitation of the banking system is almost completed, the government will
focus on strengthening the regulatory framework and prudential supervision of
the nonbank financial sector, in particular the microfinance institutions.
Efforts to register savings and loan cooperatives (COOPEC) for licensing
purposes and COBAC approval will continue, and non-conforming cooperatives will
be closed. The government will accelerate and complete the reform of the social
security system by June 2002, on the basis of ongoing studies and in compliance
with the sectoral strategy. In the insurance sector, the government will
complete the restructuring/privatization of Société Camerounaise
d’Assurances (SOCAR) by December 2000. All the liquidation
operations managed by the Société de Recouvrement des
Créances du Camerooun (SRC), with the exception of the BMBC, will be
completed by end-December 2000, and the SRC itself will be restructured
with its activities focused on asset recovery starting in July 2001. The
government will adopt, by end-March 2001, a rehabilitation plan for the
state-owned Postal Savings Bank and the Crédit Foncier du Cameroun, both
of which are beset by a weak financial position. Additionally, the government
will undertake a strategic audit of Société Nationale
d’Investissement (SNI) with a view to redefining its area of activity by
end-March 2001. Finally, the government will implement the appropriate
recommendations resulting from the Financial Stability Assessment Program
(FSAP), including the modernization of the payment system and the improvement
of the judicial system, so as to strengthen the financial sector, ensure its
viability and resilience, and improve financial intermediation.
External sector policies and debt management
25. A key objective of Cameroon’s external policy remains to enhance external
competitiveness and promote non-oil exports in order to achieve external
viability and strengthen growth prospects. The current external account deficit
(excluding official transfers) is expected to reach 3 percent of GDP
in 2000/01, mainly on account of an expected pickup of imports related to
the Chad-Cameroon pipeline project and to a slight increase in private and
public sector consumption. The government is aware that the pursuit of prudent
fiscal and credit policies, as well as the implementation of the envisaged
efficiency-enhancing structural reforms, will be key to achieving the projected
gradual strengthening of Cameroon’s external position.
26. The authorities intend to complete the normalization of their relations with
external creditors within this fiscal year. Of particular importance will be
the finalization of the debt- and debt-service reduction operation with the
London Club. To this end, following the completion of the joint report of the
financial and legal advisors, the government intends to start negotiations in
early 2001, after the sixth Paris Club rescheduling, with closure of the
operation expected by the end of the fiscal year. With the assistance of its
development partners, the government is committed to ensuring that the terms of
any agreement with these creditors are comparable with those expected from the
Paris Club under the enhanced HIPC Initiative.
B. Structural and Sectoral Policies
27. The government is determined to accelerate and broaden the scope of
structural reforms in the agro-industry, public utilities, transport, and
petroleum sectors, with a view to stimulating private sector investment,
enhancing the competitiveness and efficiency of the economy, and boosting
potential output growth. With the assistance of the World Bank, it expects to
complete, within the next 12 months, the ongoing reforms and privatization in
the agro-industrial and public utilities sectors. The successful bidders for
the telecommunications company (CAMTEL) were selected in November 2000, while
those for the electricity company (SONEL) will be selected by February 2001.
The government will step up the reforms in the transport sector, aimed notably
at improving the competitiveness of the economy, including the restructuring of
the Port of Douala and the privatization of its activities in the industrial
and commercial areas, in accordance with the calendar established with a World
Bank technical assistance mission. The privatization of Cameroon Airlines will
be relaunched. The authorities will strengthen the operations of the Road Fund
and improve the programming of road maintenance work by carefully preparing the
maintenance of unpaved rural roads and urban roads. They will also prepare a
strategy of disengagement for the hotel sector and reinforce capacity at the
agencies charged with regulating liberalized economic sectors.
28. With a view to diversifying the economic base and increasing the value-added
of domestic production, the authorities intend to define, with the assistance
of their development partners, ambitious growth-oriented sectoral strategies
taking into consideration Cameroon’s comparative advantage in the areas
of agriculture, industry, mining and tourism. Accordingly, technical audits
will be undertaken, and incentive systems favorable to private investment will
be implemented. Additionally, the government will define a more active policy
with respect to the promotion and diffusion of new information technologies,
with a particular emphasis on enhancing economic productivity.
29. In the petroleum sector, the government has implemented the key
recommendations of the first two audits regarding computerization and
harmonization of the accounts of the national oil company (SNH) with
international accounting standards. With a view to enhance transparency in this
sector, the government will continue to conduct annual financial audits of SNH,
with the audit for 1999/2000 to be completed by end-February 2001 by an
internationally reputed auditing firm. Similarly, the organizational and
operational audit of SNH will be completed by end–December 2000, and on
the basis of the recommendations, the authorities will prepare a strategy to
refocus the activities of SNH by end-March 2001. In addition, an overall
strategy defining the respective roles of both the public and the private
sector in the petroleum sector will be prepared, with assistance from the World
Bank, on the basis of the recommendations from the technical study on the
institutional and regulatory framework. As a first step, the distribution
segment of the market will be liberalized, and the publicly-held shares in, as
well as management of, the petroleum storage facility (SCDP) will be
transferred to the private sector by end-September 2001.
C. Use of HIPC Relief and Social and Poverty Reduction Policies
30. Regarding the use of HIPC resources, the government will focus on eight key
sectors: education; health; sexually transmitted diseases, including VIH/AIDS;
social affairs; rural development; provision of safe drinking water; sanitation
and waste collection; and governance. In each of these areas, the government
has developed detailed programs and projects in consultation with civil society
and donors. In order to ensure an efficient use of these additional resources
and their adequate monitoring, the government has worked out a
“ring-fencing” mechanism, including a special Treasury account at
the central bank, a monitoring committee with membership from the donor
community and civil society, and regular independent audits (see Annex III).
For 2000/01, total HIPC assistance is projected at CFAF 37 billion, of which
CFAF 20 billion in grants, and the government is introducing a supplementary
budget with CFAF 16 billion in current and CFAF 21 billion in capital
expenditure. Table 1 in Annex III details the planned expenditures for the
period 2000/01 to 2002/03.
31. The main focus of the government’s social policies is to ensure that
strengthened economic performance translates into tangible results in terms of
poverty reduction, job creation, and genuine improvement in the economic
welfare of the population as a whole. The core elements of the fight against
poverty include the education and health sectors, quality social services
delivery, urban sanitation, rural road infrastructure, and safe drinking water.
The detailed spending plans prepared for the 2000/01 budget allow for a
significant increase in outlays in real terms for the priority sectors, in line
with the medium-term targets and taking into account the projected resources
freed up by the HIPC debt relief. The full PRSP, which will be prepared in
participatory manner, will be completed by end-November, 2001.
D. Governance
32. The government is determined to enhance transparency and accountability in
its operations and to fight corruption. As spelled out in the recently adopted
National Governance Program, which is annexed to the I-PRSP, the main
objectives are to: (a) achieve greater transparency in the management of
public affairs; (b) make managers more accountable; and (c) improve
service delivery at the institutional level, with particular attention to
bringing services closer to beneficiaries. Within these broad objectives, the
government will place emphasis in the following areas: (i) improvement of
the expenditure system including comprehensive reform of the procurement
system; (ii) judicial reform to enhance the credibility of the Judiciary
by strengthening its independence and internal control, including rendering
operational, in a harmonious manner, the jurisdictional institutions called for
in the Constitution; (iii) deconcentration of service delivery in key
areas, including health, education, and basic infrastructure;
(iv) establishing an anti-corruption coalition, which will include
representatives from civil society, the private sector, the NGOs and other
partners; (v) improvement of access to citizen information on public
affairs; and (vi) implementation of community-level pilot projects.
33. The program for 2000/01 will focus on public expenditure management,
the procurement system, transparency in oil sector operations, and the
privatization of public enterprises. Specific actions will include audits of
SNH, physical and financial audits of the government procurement system, audits
of the utilization of the HIPC resources, and audits of the Road Fund and the
four key ministries (Education, Health, Public Works and Agriculture). In the
forestry area, the audits will cover the operations of the Special Fund for
forestry development. Transparency in this sector will be reinforced by the
publication of the reports of the independent observer in the commission
awarding timber concessions, annual reports on capacity building in the
forestry monitoring area, independent evaluations of concession exploration
plans, and annual evaluations of transactions affecting common forestry lands.
In the justice area, the government will adopt a plan of action, before
end–December 2001, for the implementation of the jurisdictional
structures called for in the Constitution (including the Chambre de
Comptes), and it will carry out a technical study of the justice system by
August 2001. To enhance transparency in public sector management, the
government will publish by modern means of communication, including a web site,
the quarterly management reports on the priority ministries, as well as the
results of the studies, service beneficiary assessments, audits and strategies
indicated in the priority action plan. Additionally, the authorities will
implement, before end-September 2001, the regulations of Decree 2000/287 (dated
October 12, 2000) governing private sector activities and situations of
potential conflict of interest for public servants. Finally, the government
will strengthen enforcement of personal tax law, and in particular, it will
ensure that all high level officials, including elected and appointed members
of public administration and Parliament, declare their income to the Tax
Department and meet their tax obligations on a timely basis, in accordance with
the law.
IV. Prior Actions
34. The following measures have been agreed to constitute prior actions for the
approval of the new arrangement under the PRGF:
- Issuance, to the successful bidder of the fixed telecommunications company
(CAMTEL), of an invitation to negotiate; and
- Finalization of the priority spending plans to be financed by HIPC
resources.
V. Program Monitoring, Targets, And Reviews
35. To monitor policy implementation under the program, a number of quantitative
benchmarks are proposed for end-December 2000 and a number of quantitative
performance criteria and benchmarks are proposed for end-March 2001, while
indicative targets are proposed for end-June 2001 and end-September 2001. The
proposed benchmarks will comprise the following: (i) a ceiling on the
increase in net claims of the banking system on the central government;
(ii) a floor on the primary balance; (iii) a floor on the non-
accumulation of public sector external payment arrears; (iv) a ceiling on
new medium- and long-term nonconcessional external loans contracted or
guaranteed by the government; (v) a ceiling on new external loans with a
maturity of less than one year; (vi) a floor on the total revenue of the
central government; (vii) a floor on the non-oil revenue of the central
government; and (viii) a floor on the reduction of domestic arrears. The limits
established in items (i)–(v) will serve as performance criteria. In
addition, the reform measures indicated in Table 2 will serve as
performance criteria and structural benchmarks for the first six months of the
annual program.
36. In view of the uncertainties about external debt relief, privatization
proceeds, oil prices, and exchange rate fluctuations, the program contains a
built-in contingency mechanism for the adjustment of the quantitative
benchmarks and performance criteria; the modalities of these mechanisms are
outlined in the attached technical memorandum. The program for October
1, 2000-September 30, 2001 will provide for two reviews with the
Fund staff on the basis of performance with respect to the quantitative and
structural performance criteria and benchmarks for end-March 2001 and
end-September 2001. The review will focus mainly on budgetary non-oil
revenue performance and the customs reform, oil revenue, and progress in
strengthening public expenditure management and governance, as well as on
improvements in the nonbank financial sector.
37. As in the past, program implementation will be examined in cabinet meetings
chaired by the Prime Minister, the Head of Government. An Interministerial
Supervisory Committee, chaired by the Minister of Economy and Finance and
comprising the key economic and social sector ministers, will continue to
coordinate program implementation with the assistance of the Technical
Monitoring Committee for Economic Programs. The committee will, on a timely
basis, provide Fund staff with all the data necessary to effectively monitor
the program. To this end, the government will continue to improve data quality,
coverage, and timeliness, and public dissemination of key economic indicators,
in the context of the framework of the General Data Dissemination System
(GDDS).
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