2018 Article IV Consultation, Second Review Under the Extended Credit Facility Arrangement Requests for Waivers of Nonobservance of Performance Criteria and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Cameroon
This 2015 Article IV Consultation highlights that Cameroon's economy has shown resilience in the face of the twin shocks of the oil price slump and heightened security threats, with the robust growth of 2014 continuing into 2015. Growth is broad-based and projected to reach 5.9 percent in 2015, buoyed by increased oil production and the performance of sectors benefiting from the ongoing public investment boom. Total revenue is projected to increase in 2015, owing to a strong performance in non-oil revenue. Growth is projected to moderate to 5.2 percent in 2016, as oil production stabilizes.
Poverty reduction strategies (PRS) are central to Fund-supported economic and financial programs in low-income countries (LICs). The joint IMF-World Bank’s Heavily Indebted Poor Country (HIPC) Initiative introduced the PRS approach and established documentation requirements centered on the Poverty Reduction Strategy Paper (PRSP). The PRS approach has also been a cornerstone for the Fund’s concessional financing, currently the Extended Credit Facility (ECF), and has been extended to the Policy Support Instruments (PSI), the non-financing instrument for LICs, with PRS documentation serving as the operational framework for development of strategies to promote growth and reduce poverty under Fund-supported programs.
KEY ISSUESContext. Cameroon’s macroeconomic outlook and risks have deteriorated slightly sincethe Article IV consultation in 2013. Economic activity has remained strong and inflation subdued, but the fiscal position has worsened; public debt has been rising at a less sustainable pace; government deposits have dwindled; and payment delays have continued. The anticipated growth path may not suffice to reach upper-middle-income country status by 2035.Focus of the consultation and risks. The overarching policy issue remains unchanged: how to set Cameroon on a higher growth path, while mitigating low but growing risks to macroeconomic stability. Spillovers from regional insecurity have become the main exogenous risk; endogenous risks stem from rising contingent liabilities and credit concentration. Past policy advice remains relevant.Key policy recommendations:• Strengthen cash management and expenditure controls to prevent a further accumulation of payment deferrals.• Close the financing gap in 2014, and adopt a downward path for the non-oil primary deficit to rebuild fiscal space and preserve macroeconomic stability.• Improve non-oil revenue by broadening the tax base and streamlining tax exemptions.• Reprioritize public expenditure by reducing fuel subsidies gradually; provide targeted compensation measures for the most vulnerable.• Increase the selectivity of investment projects and adopt a rigorous screening of the financing terms to ensure debt sustainability.• Pursue the resolution of three small distressed banks and support the strengthening of regional bank and microfinance supervision.• Promote higher and more inclusive growth through better targeted educational andsocial spending, a propitious business climate, and deeper regional integration.
Despite achieving macroeconomic stability, there is not much improvement in Cameroon's social indicators. To achieve higher and more inclusive growth, the report mentioned that problems in sectors such as infrastructure and a reduction in per capita income and mounting costs of fuel subsidies should be attended to. Due diligence should be exercised to control the expenditure chain and to better track the flow of funds. Better cooperation between national and regional bodies should be initiated for financial stability.