Statement by the IMF Staff Representative December 19, 2007

Cameroonian monetary developments in the first half of 2007 continued to be driven by high oil prices while inflation declined. Fiscal performance in the first half of 2007 was broadly satisfactory, although concerns about investment execution remain. Performance under the Poverty Reduction and Growth Facility (PRGF)-supported program over January-June 2007 was mixed, but corrective actions have been taken. The medium-term fiscal strategy aims at expanding priority spending while preserving macroeconomic sustainability. The authorities agreed that non-oil revenue mobilization remained key to ensuring fiscal sustainability.

Abstract

Cameroonian monetary developments in the first half of 2007 continued to be driven by high oil prices while inflation declined. Fiscal performance in the first half of 2007 was broadly satisfactory, although concerns about investment execution remain. Performance under the Poverty Reduction and Growth Facility (PRGF)-supported program over January-June 2007 was mixed, but corrective actions have been taken. The medium-term fiscal strategy aims at expanding priority spending while preserving macroeconomic sustainability. The authorities agreed that non-oil revenue mobilization remained key to ensuring fiscal sustainability.

This statement provides an update on recent economic developments based on information received after the staff report (Country Report No. 07/285) was finalized. The information provided below does not alter the thrust of the staff appraisal:

  • Inflation has declined, reflecting a deceleration of fuel prices and the impact of last year’s tariff reductions on basic staples (fish, flour, and rice). Average inflation in the 12-month period through September declined to 0.5 percent, compared with 2.5 percent in June.

  • Preliminary data through September show that fiscal performance was broadly satisfactory despite slow economic activity. The nonoil primary deficit (program definition) was slightly (0.1 percent of GDP) higher-than-expected due to a shortfall in nonoil revenues. The underperformance in nonoil revenues in the third quarter was due to lower-than-projected nontax revenues, reflecting mainly lower dividend payments. Program spending was broadly in line with staff projections. The authorities are strengthening nonoil revenue collection by tightening controls, and enhancing the collection of tax arrears.

  • Progress was made on structural reforms. Preparations for the adoption of an automatic fuel pricing formula (proposed performance criterion for end-December) is nearing completion. Work related to the streamlining of the taxpayer identification, upgrading the single identification software, and safeguarding the single taxpayer file is proceeding as planned. Important progress has been made on the transfer of secondary-market transactions on zero-coupon treasury bonds to the financial market, expected to be completed by end-2007. The 2008 budget, broadly in line with the program, was approved by Parliament. As expected, the Parliament also approved a new budget organic law. Regarding public enterprise reform, the authorities selected in November a financial advisor for the privatization of the national airline (CAMAIR). Negotiations with the successful bidder for the management contract of the water company (SNEC) are continuing, and the contract is expected to be signed shortly. The authorities have finished the technical evaluation of proposals for the privatization of CAMTEL and are considering the next steps.

  • The new government that took office in September has pursued efforts to strengthen relations with the international donor community. Donors have pledged to work closely with the government to continue strengthening the public financial management system to ensure effective use of debt relief resources.

  • The authorities are in the process of finalizing signature of the bilateral agreement with the last remaining Paris Club creditor.

Cameroon: Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver of Performance Criterion, and Financing Assurances Review: Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Cameroon
Author: International Monetary Fund