Front Matter
Author: International Monetary Fund. African Dept. and International Monetary Fund. Strategy, Policy, & Review Department
Publication Date:
04 Aug 2022
eISBN:
9798400217388
Language:
English
Keywords:
Cameroon's economy; transparency policy; debt sustainability indicator; ECF arrangement; Cameroon's response; Credit; Structural reforms; Financial sector stability; COVID-19; anti-corruption framework
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IMF Country Report No. 22/268

Abstract

IMF Country Report No. 22/268

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IMF Country Report No. 22/268

CAMEROON

SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY AND THE EXTENDED FUND FACILITY ARRANGEMENTS, AND REQUESTS FOR WAIVERS FOR PERFORMANCE CRITERIA APPLICABILITY AND MODIFICATION OF PERFORMANCE CRITERION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR CAMEROON

August 2022

In the context of the SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY AND THE EXTENDED FUND FACILITY ARRANGEMENTS, AND REQUESTS FOR WAIVERS FOR PERFORMANCE CRITERIA APPLICABILITY AND MODIFICATION OF PERFORMANCE CRITERION, the following documents have been released and are included in this package:

  • A Press Release including a statement by the Chair of the Executive Board.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 25, 2022, following discussions that ended on June 17, 2022, with the officials of Cameroon on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on July 13, 2022.

  • A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.

  • A Statement by the Executive Director for Cameroon.

    • Letter of Intent sent to the IMF by the authorities of Cameroon*

    • Memorandum of Economic and Financial Policies by the authorities of Cameroon*

    • Technical Memorandum of Understanding*

    • *Also included in Staff Report

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

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International Monetary Fund

Washington, D.C.

Press Release

PR22/270

IMF Executive Board Concludes the Second Reviews of the Extended Credit Facility and Extended Fund Facility Arrangements for Cameroon

FOR IMMEDIATE RELEASE

  • Completion of the Second Reviews provides Cameroon with access to the equivalent of US$ 72.9 million from the IMF.

  • The nascent economy recovery from mid-2021 is now subject to greater uncertainties because of the spillovers from the war in Ukraine, high inflationary pressures-especially food and fuel prices-, and a tightening of global financial conditions. Low vaccination rates also leave the country vulnerable to further COVID-19 waves. However, the medium-term economic prospects remain positive.

  • The overall program performance is mixed, with delayed structural reforms in some key areas

Washington, DC – July 25, 2022: Today, the Executive Board of the International Monetary Fund (IMF) concluded the Second Reviews of the Extended Credit Facility (ECF) Arrangement and the Extended Arrangement under the Extended Fund Facility (EFF) for Cameroon. The completion of the second reviews enables the disbursement of SDR 18.4 million (about US$ 24.3 million) under the ECF Arrangement, and purchases of SDR 36.8 million (about US$ 48.6 million) under the EFF Arrangement, bringing total access under the arrangements to SDR 262.2 million (about US$ 346.1 million). The Executive Board also approved the authorities’ request for a waiver of applicability for the end-June 2022 performance criteria.

Cameroon’s three-year ECF-EFF arrangements were approved on July 29, 2021 and are built around five pillars: (i) mitigating the health, economic, and social consequences of the pandemic while ensuring fiscal and external sustainability; (ii) reinforcing good governance and strengthening the transparency and the anti-corruption framework; (iii) accelerating structural fiscal reforms to modernize the tax and customs administrations, mobilize revenue, improve public financial management, increase public investment efficiency, and reduce fiscal risks from state-owned enterprises; (iv) strengthening debt management and ensuring debt levels remain sustainable; and (v) implementing structural reforms to accelerate economic diversification, boost financial sector resilience and inclusion, and promote gender equality and a greener economy.

Cameroon had started to recover from the COVID-19 shock in 2021, prior to the war in Ukraine. After a record low of -2.2 percent year on year (yoy) in Q2–2020, real GDP growth rate gradually recovered to reach 3.6 percent in 2021, supported by a strong recovery in the primary and tertiary sectors. The nascent economic recovery in 2021 is now subject to greater uncertainties with spillovers from the war in Ukraine, high inflationary pressures, especially on food and fuel prices, and a tightening of global financial conditions.

The economic outlook for 2022 remains positive, but with great uncertainties. Real GDP growth is projected at 3.8 percent in 2022, down from 4.5 percent at the time of the program’s First Reviews. Inflation is projected to rise to 4.6 percent in 2022, but to remain below 3 percent in the medium term.

As a crude oil exporter, Cameroon has experienced some positive effects on its external and fiscal positions. However, intensified higher global prices and supply disruptions have significantly increased the cost of fuel subsidies and are placing additional pressure on Cameroon’s domestic prices, especially for food and fertilizers.

Risks relating to the war in Ukraine have compounded pandemic risks. Downside risks include rising and volatile food, fertilizers, and energy prices, and supply disruptions; new outbreaks of lethal and highly contagious COVID-19 variants; a sharp increase in global risk premia following the ongoing monetary policy tightening in advanced economies; and inadequate progress on fuel price subsidies.

On the upside, Cameroon may benefit from new oil and gas opportunities and the completion of major hydroelectric plants. Risks are mitigated by the authorities’ strong implementation record of macro-economic programs, close engagement with donors, a comprehensive capacity development program, and contingency planning, including its COVID-19 response plan.

At the conclusion of the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, made the following statement:

“Cameroon’s economy proved resilient to the COVID-19 shock, but the recovery is now subject to greater uncertainties, with increased inflationary pressures, low vaccination rates, and tightening global financial conditions. The ECF and EFF arrangements have supported the authorities’ efforts to achieve a rapid post-pandemic recovery, strengthen medium-term external and fiscal sustainability, and implement their structural reform agenda toward sustained, more inclusive, and diversified growth.

“Cameroon’s performance under the program remains on track and structural reforms are advancing, albeit with delays in some key areas. The authorities are committed to achieving the program’s objectives and accelerating the pace of reform implementation to support private sector-led economic diversification.

“The authorities’ strategy to maintain their fiscal consolidation path, and to reduce fuel subsidies gradually, starting in 2023, while protecting the vulnerable, will help mitigate the impact of recent shocks. Continued non-oil revenue mobilization and expenditure rationalization will help rebuild fiscal space for strengthening social safety nets, and boosting the recovery, while preserving debt sustainability. While debt sustainability indicators have improved, continued efforts are warranted to manage debt cautiously and limit reliance on non-concessional borrowing.

“Effective and resolute implementation of the authorities’ structural reforms, particularly to further strengthen transparency, good governance, and the anti-corruption framework, are essential to promote growth and help catalyze additional donor financing. To help ensure financial sector resilience, the authorities should closely monitor the rising non-performing loans and proceed with bank restructuring within the timetable set by COBAC. Further efforts are also needed to tackle gender inequality and climate change related challenges.”

Table 1.

Cameroon: Selected Economic and Financial Indicators, 2021–27

(CFAF billion, unless otherwise indicated)

article image
Sources: Cameroonian authorities; and IMF staff estimates and projections using updated nominal GDP.

Percent of broad money at the beginning of the period.

Title page

CAMEROON

SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY AND THE EXTENDED FUND FACILITY ARRANGEMENTS, AND REQUESTS FOR WAIVERS FOR PERFORMANCE CRITERIA APPLICABILITY AND MODIFICATION OF PERFORMANCE CRITERION

July 13, 2022

Context. Following two years of COVID-19 challenges, Cameroon, the largest economy in the Central African Economic and Monetary Union (CEMAC), is facing a new policy environment. The nascent economic recovery from mid-2021, supported by higher oil prices and non-oil production, is now subject to greater uncertainties with spillovers from the war in Ukraine, high inflationary pressures, especially on food and fuel prices, and a tightening of global financial conditions. Low vaccination rates also leave the country vulnerable to further COVID-19 waves. In July 2021, the IMF’s Executive Board approved three-year arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) for SDR 483 million (about US$689.5 million, or 175 percent of Cameroon’s quota) to support the country’s economic and financial reform program.

Policy discussions. The second ECF/EFF Review focused on policies to i) ensure judicious management of the recent shock and sustain the recovery, to maintain a fiscal consolidation path consistent with the program, while protecting the vulnerable, ii) reinforce good governance and strengthen transparency and anti-corruption efforts, iii) accelerate structural fiscal reforms, iv) strengthen debt management and reduce debt vulnerabilities, and v) promote private sector-led economic diversification and boost financial sector resilience. Cameroon continues to be supported by extensive IMF capacity development (CD).

Program performance. Program performance – is mixed with delayed structural reforms in some key areas. All QPCs for end-December 2021 were met but three indicative targets were missed, namely direct interventions by the National Hydrocarbons Corporation (SNH), exceptional spending procedures, and the accumulation of domestic arrears. Overruns are attributable, in part, to the need for rapid security spending. At end-March 2022, the indicative target on domestic arrears was met. Implementation of the structural benchmarks is moving ahead albeit with delays. Of the nine SBs due between end-December 2021 and end-June 2022, three have been met on time. One SB has been implemented with delay in July 2022 and five remain to be met based on new timelines. The authorities are committed to achieving the program’s objectives and accelerating the pace of reform implementation. They request (i) modification of one end-December 2022 IT and one end-December 2022 QPC in line with program objectives; (ii) the adoption of new March 2023 ITs and end-June 2023 QPCs; (iii) a waiver of applicability for the end-June 2022 QPC targets, as data will not be available by the time of the Board meeting and there is no clear evidence that such QPCs will not be met.

Approved By

Vitaliy Kramarenko (AFR) and Geremia Palomba (SPR)

Prepared by the Cameroon staff team, comprising Amadou Sy (Head), Gillian Nkhata, Magdi Ahmed (All AFR), Roberto Piazza (FAD), Seunghwan Kim (SPR), Nicholas Staines (Resident Representative), Martin Ambassa, and Du Prince Tchakote (Local Economists). Ms. Andrianometiana (OEDAF) joined the team. Joanna Delcambre contributed to the preparation of this report. Discussions with the authorities took place during June 3–17, 2022, through video conferencing and in person in Yaoundé.

Contents

  • RECENT ECONOMIC DEVELOPMENTS, OUTLOOK, RISKS, AND PROGRAM PERFORMANCE

  • A. Recent Economic Developments

  • B. Outlook and Risks

  • C. Program Performance

  • POLICY DISCUSSIONS

  • A. Managing Food and Fuel Shocks, while Rebuilding Buffers and Protecting the Vulnerable

  • B. Sustaining the Pandemic Response

  • C. Structural Fiscal Reforms

  • D. Maintaining Debt Sustainability and Market Access

  • E. Competitiveness and Private Sector Development

  • F. Financial Sector Resilience

  • G. Governance, Gender, and Climate Change

  • PROGRAM MODALITIES, AND CAPACITY DEVELOPMENT

  • A. Program Modalities

  • B. Statistical Issues

  • C. Capacity Development

  • STAFF APPRAISAL

  • BOX

  • 1. Implications of the War in Ukraine for Cameroon

  • FIGURES

  • 1. Real Sector Developments, 2016– 21

  • 2. Fiscal Developments, 2017–21

  • TABLES

  • 1. Selected Economic and Financial Indicators, 2021–27

  • 2a. Central Government Operations, 2021–27 (CFAF billion)

  • 2b. Central Government Operations, 2021–27 (In Percent of GDP)

  • 3. Balance of Payments, 2021–27

  • 4. Monetary Survey, 2021–27

  • 5. Capacity to Repay the Fund, 2022–36

  • 6. Financial Soundness Indicators, 2016– 21Q2

  • 7. Schedule of Disbursements and Purchases Under ECF and EFF, 2021–24

  • 8. External Financing Needs and Sources

  • 9. Quantitative Performance Criteria (QPC) and Indicative Targets (IT) Under the ECF and EFF Arrangements

  • 10. Structural Benchmarks

  • ANNEXES

  • I. Risk Assessment Matrix

  • 11. Food and Fuel Prices in Cameroon: Current Features and Reform Needs

  • III. Fuel Pricing in Cameroon

  • IV. Cameroon’s Response to the COVID-19 Crisis

  • V. Follow-up on Commitments Under RCF-1 and RCF-2, as of end-December 2021

  • VI. National Accounts Revision

  • VII. Cameroon’s Capacity Development Strategy Note Update (Summary)

  • VIII. Cameroon’s Development Strategy

  • APPENDIX

  • I. Letter of Intent

    • Attachment I. Supplementary Memorandum of Economic and Financial Policies, 2021-22

    • Attachment II. Technical Memorandum of Understanding

Same Series

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
Cameroon: Second Reviews Under The Extended Credit Facility And The Extended Fund Facility Arrangements, And Requests For Waivers For Performance Criteria Applicability And Modification Of Performance Criterion—Press Release; Staff Report; And Statement By The Executive Director For Cameroon
Author: International Monetary Fund. African Dept. and International Monetary Fund. Strategy, Policy, & Review Department
Volume/Issue:
Volume 2022: Issue 268
Publisher:
International Monetary Fund
ISBN:
9798400217388
ISSN:
1934-7685
Pages:
127
DOI:
https://0-doi-org.library.svsu.edu/10.5089/9798400217388.002