Press Release No. 03/221

Press Release: IMF Completes Fourth Review Under Cameroon's PRGF Arrangement, Approves US$23 Million Disbursement , and Grants Additional Interim Assistance of US$4.4 Million Under the Enhanced HIPC Initiative

December 17, 2003

The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Cameroon's economic performance under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement and approved the disbursement of an amount equivalent to SDR 15.91 million (about US$23 million) under that arrangement.

The Executive Board also approved Cameroon's request for an extension of the PRGF arrangement through December 20, 2004, and granted Cameroon additional interim assistance in an amount equivalent to SDR 3.019 million (about US$4.4 million) under the enhanced HIPC Initiative.

In completing the review under the PRGF arrangement, the Executive Board granted a waiver for the non-observance of the end-September 2002 quantitative performance criterion on the ceiling on the increase in net claims of the banking system on the central government.

Cameroon's three-year PRGF arrangement was approved on December 21, 2000 (See Press Release No. 00/86) for SDR 111.42 million (about US$163 million). With the disbursement approved today, total disbursements under the arrangement will be brought to SDR 79.59 million (about US$116 million)

The PRGF is the IMF's concessional facility for qualifying low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period on principal payments.

Following the executive Board's discussion on Cameroon's performance, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chair, stated:

"Cameroon's macroeconomic performance has continued to be relatively strong, with real GDP growing at a good pace, inflation well under control, and international reserves continuing to increase. Fiscal policy has remained broadly on track, with the primary and overall fiscal surpluses exceeding the program targets, but implementation of the public investment program was slower than expected. Prospects for continued robust growth are favorable, with the stepped-up use of HIPC Initiative resources expected to contribute to enhancing public investment.

"In completing the fourth review under Cameroon's PRGF-supported arrangement, the Executive Board looked forward to sustained, strong efforts by the authorities to further improve governance and fiscal management and press ahead with key institutional reforms. This will be essential to ensure lasting success in reducing economic vulnerabilities and poverty.

"The third annual program under the PRGF arrangement aims at consolidating the macroeconomic gains to date and maintaining fiscal sustainability. To achieve the PRSP growth and poverty reduction objectives, it will also be important to continue to make progress on public expenditure management and financial sector reforms, and to accelerate the pace of implementation of structural reforms in governance and in the real sectors.

"Key steps that will ensure the successful implementation of Cameroon's poverty reduction strategy, include: a further mobilization of non-oil revenue, in order to maintain non-oil revenue on the path targeted in the PRSP; measures to keep tight control on non-HIPC Initiative current spending and strengthen public expenditure and resource management; initial steps to address the weak financial position of major utilities and the national airline; and higher spending in social sectors and investment in basic infrastructure. To improve the business climate and the environment for private investment, it will be particularly important to continue strong efforts to improve governance and to accelerate efficiency-enhancing structural reforms, including through greater transparency, judicial reform, and increased power supply.

"Close program monitoring, strengthened coordination, and enhanced, concerted government action will be crucial to reach the program targets, achieve the PRSP growth and poverty reduction objectives, and allow Cameroon to reach its HIPC Initiative completion point in 2004," Mr. Sugisaki stated.