Abstract
Cameroon’s 2005 Article IV Consultation reports that tangible progress has been made in the health and education sectors, and a number of social indicators have improved significantly. The deterioration in fiscal performance and related weaknesses in fiscal management could, in the longer term, threaten macroeconomic stability and debt sustainability. Moreover, sustainable private sector growth requires the authorities to address inadequate infrastructure, poor service delivery from troubled state enterprises, an investment climate overshadowed by poor governance and low levels of financial intermediation.
This statement provides information that has become available since the issuance of the staff report for the 2005 Article IV consultation and staff monitored program on March 31, 2005. This information does not alter the thrust of the staff appraisal.
The authorities have observed the prior action for the Staff Monitored Program (SMP) by hiring an advisor (the International Finance Corporation) for the restructuring/privatization of the national airline (CAMAIR).
The authorities have met the two structural benchmarks for end-March 2005 (page 53 of the staff report for the 2005 Article IV consultation and SMP). (i) They have provided preliminary budget execution tables (TABORD) for end-February 2005 on a cash and a commitment basis. (ii) The authorities have notified commercial banks that no new government accounts should be opened.
The authorities have also provided final data for budget execution in 2004 that are broadly in line with the preliminary data received earlier. Staff will discuss these data with the authorities during a forthcoming staff visit.
Oil prices projected for the remainder of the year have increased relative to the program, pushing up oil exports earnings and fiscal revenue from oil. It is estimated that fiscal revenue in 2005 would be at least 0.7 percentage points of GDP higher than previously envisaged.
The adjustment of domestic fuel prices in line with world market developments has not been fully reinstated. Fuel prices were adjusted marginally from the beginning of March and prices for some products are below import cost. Also, the authorities have suspended the additional fuel price component introduced in January 2005 that was to allow the domestic refinery to recoup the losses it incurred in 2004.
Early indications present a mixed picture on budgetary execution in January- February. Nonoil revenue grew somewhat but remained weaker than programmed, while expenditure was strongly compressed. The end-March quantitative benchmark on non-oil revenue may be missed unless annual corporate profit tax payments (due in March and April) perform particularly well. All other quantitative benchmarks seem to be within reach.
Progress was made in improving financial management by relying more fully on the Financial Management and Information System in the preparation of budget execution reports and by speeding up the preparation of the reports.
The authorities announced their intention to adhere to the Extractive Industries’ Transparency Initiative (EITI). At the EITI Conference held in London in March, the Minister of the Economy and Finance pledged that Cameroon would meet one element of the requirements of EITI before the end of June of this year, namely that the authorities would begin publishing on a quarterly basis information on total oil production, prices and revenue. These commitments are consistent with the SMP.
The authorities have recently discussed with World Bank and Fund staffs the steps that need to be taken to meet the HIPC completion point triggers (Box 7 of the “HIPC Decision Point Document for the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative” (www.imf.org)).
The authorities have given their consent to the publication of the staff papers for the 2005 Article IV consultation and the SMP.