This paper discusses key findings of the Fifth Review Under the Poverty Reduction and Growth Facility (PRGF) for Cameroon. Non-oil economic activity accelerated somewhat in 2007, and inflation declined. However, rising food and fuel prices starting in late 2007, amidst discussions of possible changes to the constitution, led to violent social unrest in February 2008. Program implementation was satisfactory in the second half of 2007. Most quantitative targets, notably on the non-oil primary fiscal deficit, for end-December 2007, were also met.


This paper discusses key findings of the Fifth Review Under the Poverty Reduction and Growth Facility (PRGF) for Cameroon. Non-oil economic activity accelerated somewhat in 2007, and inflation declined. However, rising food and fuel prices starting in late 2007, amidst discussions of possible changes to the constitution, led to violent social unrest in February 2008. Program implementation was satisfactory in the second half of 2007. Most quantitative targets, notably on the non-oil primary fiscal deficit, for end-December 2007, were also met.

On behalf of my Cameroonian authorities, I would like to express my appreciation to the Executive Board and Management for their continued support to Cameroon’s efforts towards sustained growth and economic development. I would also like to thank staff for constructive policy dialogue and fruitful exchanges during their recent visit to Yaounde. As has been the case with staff reports on previous reviews, the authorities have expressed their consent to the publication of staff reports on the fourth review. As the program performance in the six-month period to end-December 2007 has been broadly satisfactory, my authorities request the completion of the fifth review under the PRGF arrangement.


Soaring oil and food prices and a subsequent transport strike led to violent social unrest that paralyzed economic activity in a number of cities in February 2008. The authorities responded swiftly to these unforeseen events through a series of emergency measures, including raising civil servants’ salaries, suspensions or cuts in taxes and customs duties on some consumer goods and a decrease in retail prices of petroleum and the planned recruitment of civil servants to improve the efficiency of the civil service.

It is important to stress that the unrest was contained without disrupting the implementation of the program. To avoid disruptions and ensure the medium-term sustainability of the emergency measures, the government has decided to reallocate appropriations within the budget, accelerate civil service reform, strengthen the mobilization of nonoil revenue, cut expenditure on goods and services without jeopardizing the quality of public service and take any other measures deemed necessary to accommodate for the additional spending, while maintaining fiscal sustainability.

As a result of the continued implementation of sound macroeconomic and structural policies, economic activity picked up in 2007 and external developments were favorable. Nonoil real GDP growth picked up to 3.9 percent from 2.6 percent in 2006 and the 2007 budget surplus was higher than projected. Although broad money recorded an increase due to continued accumulation of net foreign assets and slower pace of accumulation of government deposits in the banking system, inflation continued to decline. The current account also registered a slight surplus. Most quantitative targets for end-December 2007 were met, with the exception of the performance criterion related to domestic debt and the benchmark on nonoil revenues that were missed by small margins. Execution of the capital budget improved significantly compared to 2006, owing to efforts to improve the efficiency of expenditure management.

The planned structural reforms for the period July-December 2007 were completed. Concerning government finance, the authorities adopted the 2008 Budget Law that was consistent with the objectives of the PRGF-supported program and made the single taxpayer identification for large companies more secure. Regarding fuel pricing policy, the authorities adopted a new formula for the automatic adjustment of fuel prices. In the financial sector, transactions involving Treasury-Zero Coupon bonds became possible, the CAMPOST accounts for years 2004 to 2006 were produced, the draft business plan for CAMPOST financial activities was finalized. Public enterprise reform also continued to be implemented. The management contract of the water company (SNEC) was signed, the privatization of the telecommunications company (CAMTEL) is proceeding. The airline company (CAMAIR) was liquidated and a consulting firm was selected for the privatization of the newly created airline entity to replace CAMAIR. As regards governance, the authorities continued implementation of measures to enhance transparency, by publishing the quarterly budget execution reports, the quarterly operating reports of the national oil company (SNH), and the annual financial aggregates of the main public enterprises, as well as the judicial decisions and administrative penalties against government employees. As part of the anti-corruption campaign, the authorities have stepped-up their efforts by arresting two ex-ministers on corruption charges and have made the National Anti-Corruption Commission (CONAC) operational.


The revised macroeconomic framework reflects government priorities since the February unrest. In the period ahead, the key challenge facing the authorities is to strike the right balance between maintaining fiscal sustainability, addressing the harmful social consequences of rising food and fuel prices and promoting economic growth.

My authorities are determined to address the considerable increase in the cost of living by expanding the production base in favor of agriculture and infrastructure and improving the business climate. The macroeconomic framework assumes the favorable trend in economic activity in 2007 is expected to continue into 2008. Real nonoil GDP growth is projected to be 4.6 percent mainly as a result of the recovery in agricultural and services sectors and the significant increase in public investment. However, rising cost of building materials could hamper economic growth and inflationary pressures could re-emerge in connection with international food prices. While fiscal policy will be somewhat more relaxed over the medium-term to accommodate the measures recently taken to address the pressing needs of the population in the aftermath of the social unrest, it will remain consistent with macroeconomic stability and fiscal sustainability.

Fiscal policy

The main budget targets of the 2008 program are part of a medium-term fiscal strategy aimed at creating space for priority outlays while preserving fiscal sustainability. This will be achieved through a gradual increase in nonoil revenues, expanded poverty-related spending and paying down domestic arrears to improve the business environment. In implementing this strategy, my authorities will put emphasis on increasing the level and quality of priority expenditure in production sectors and infrastructure to accelerate economic growth, foster domestic agricultural production and combat poverty, while preserving the stability of the macroeconomic framework and fiscal sustainability.

On the revenue side, the mobilization of nonoil revenue remains a key challenge, as the authorities expect a shortfall due to the temporary tax exemptions recently granted for certain basic goods. To meet the revenue targets, the authorities are determined to accelerate implementation of a number of administrative measures. This will include the consolidation of the number of tax centers for small taxpayers, the extension of the number of tax payers covered by the tax centers for medium-sized enterprises, the connection of the information systems of the General Directorate of Taxes and the General Directorate of Customs and continued efforts to adopt measures based on the recommendations of the 2008 IMF technical assistance mission and on the action plan of the fiscal reform commission. The authorities have also set up a government-private sector commission to review domestic and foreign trade taxation and prepare a medium-term tax reform plan to improve the mobilization of nonoil revenues. The authorities also intend to improve the collection of property taxes. To increase forestry revenue, the government will strengthen forestry taxation with the assistance of the World Bank and restore the institutional capacity to monitor and control the sector tax base.

On the expenditure side, the authorities will concentrate their efforts on the priority areas of the PRSP and accelerate public investment, particularly in infrastructure and agriculture, health, and education, while lowering non interest current expenditure. To contain the costs of the March 2008 fiscal measures, the authorities plan to cut spending on goods and services by 0.7 percent of nonoil GDP without jeopardizing services. They will also strengthen their efforts to contain wages and staffing by consolidating the harmonized personnel and payroll records, and preparing a plan to reform the civil service in order to design a more efficient civil service policy, allowing rationalizing of recruitment and a more productive government. These savings will be complemented with efforts to reduce transfers to public enterprises and resume the pass-through of changes in world oil prices to consumers, in order to reduce subsidies in favor of SONARA and use the freed budgetary resources to improve social safety net and increase investment in the priority sectors. To this end, my authorities are committed to resuming implementation of the mechanism for adjusting the retail prices of petroleum products starting in 2009 and phasing out fuel price subsidies. In collaboration with the Fund, my authorities will launch a study to determine ways of implementing this sensitive reform process. In the meantime, they continue to implement measures to strengthen SONARA’s financial position and reduce budgetary transfers.

In order to improve public expenditure management, the authorities intend to strengthen the budget reporting system and prepare a government financial operations table (TOFE), in a medium-term, on a payment order basis in collaboration with their technical and financial partners. In the meantime, the authorities have agreed to set a ceiling on the stock of fiscal float and are committed to stepping up efforts to further improve the monitoring and management of treasury float. Regarding the use of the oil windfall revenue, the authorities are committed to exclusively financing nonrecurring expenditure, in the following areas: (i) accelerating payments on domestic debt and arrears, (ii) buying back debt by external commercial creditors and, (iii) financing investment in sectors specified in the PRSP, including infrastructure and investment in major sectoral programs, including education, health, rural and urban development.

To achieve fiscal sustainability, my authorities will strengthen external debt management. In this context, they continue to negotiate in good faith with the remaining three commercial creditors, in order to reach an agreement in line with Cameroon’s commitment to the Paris Club. To keep the risk of debt distress low, they intend to conduct a prudent debt policy to ensure debt sustainability. To this end, the authorities will finalize preparation of a new comprehensive strategy for public debt management consistent with the macroeconomic framework, the medium-term fiscal debt sustainability objectives.

Structural Reforms

Improving the business environment is a key component of the reform agenda. In this area, my authorities intend to put emphasis on accelerating growth, in particular by improving the business climate, implementing a one-stop shop for business creation to reduce the time and expense of setting-up a business and finalizing a private sector development strategy by the end of 2008. They will also accelerate the privatization of the remaining state-owned enterprises included in the program to improve competitiveness and lessen the budgetary burden on the economy. Improving governance and enhancing the fight against corruption will also help reduce obstacles to private sector development. In this regard, the authorities will continue publishing corruption-related court decisions and prepare an anti-corruption strategy based on the joint CHOC program (Change Habits-Out WITH Corruption) developed in collaboration with donors. Building on the most recent stepped-up anti-corruption campaign, the authorities will take steps to facilitate the asset disclosure of senior government officials, accelerate efforts to recover embezzled public funds and keep publishing on the internet the summary of the reports monitoring the physical and financial implementation of capital investment projects.

In the financial sector, my authorities are committed to implementing the action plan to strengthen financial intermediation with particular focus on increasing the banking sector’s resilience to withstand external shocks, establishing a regional government securities market, strengthening the supervision of microfinance, facilitating access to banking services, improving information on the cost of credit and payment defaults, strengthening the legal framework and diversifying financial instruments. In this regard, the authorities have published the list of accredited microfinance institutions to better protect depositors and launched a number of initiatives to facilitate access to credit by reducing constraints linked to the business environment. My authorities also intend to work with the Bank of Central African States (BEAC) to update the list of clients in default of liquidated or restructured banks in the central credit register. To promote transparency in the banking sector, my authorities intend to ask BEAC to request that credit institutions publish their lending rates. To improve the soundness of the banking sector and develop the securities market, my authorities will adopt an appropriate regulatory framework for factoring, leasing and venture capital, modify the legislation on the opening and closing of bank branches by end–December 2008 and limit the recourse to new statutory advances from the Central Bank and issue publicly–traded government securities. They are also assessing the future financial activities of CAMPOST.

On regional integration, the authorities will increase coordination with their CEMAC partners in order to provide a new impetus to institutional reforms and consolidate subregional integration. In particular, they bolster efforts to reduce obstacles to the development of intraregional trade, contain and reduce exemptions, eliminate the minimum administrative values for all imported products, implement the Common External Tariff (CET), and to find a common ground with their partners to finalize the Economic Partnership Agreement (EPA) with the European Union. To facilitate foreign trade transactions, the authorities will finalize the implementation of a one-stop shop interface between those parties involved in port transactions.


My Cameroonian authorities continue to implement the PRGF-supported program in a satisfactory manner in spite of a difficult domestic and international environment. They have achieved significant progress in the implementation of reforms, thanks to strong commitment to macroeconomic stability and fiscal sustainability stemming from good ownership of the program..

Based on their track record of policy and reform implementation, I would like, on behalf on my authorities, to request the completion of the fifth review under the current PRGF arrangement. In light of the appropriate debt policies pursued by my authorities, including prudent borrowing policies and their good-faith efforts to reach agreements with the remaining three private creditors, I also request the Board’s support for the completion of the financing assurances review. My authorities also seek a waiver for the nonobservance of the performance criterion related to domestic debt, whose target was only missed by a small margin. Given the fact that emergency fiscal measures were due to circumstances outside the authorities’ control, my authorities would like to request the modification of the June performance criteria to account for the fiscal impact of the emergency measures adopted to address the consequences of rising food and fuel prices. In order to allow time for the completion of the sixth and final review of the current arrangement, the authorities would like to request the extension of the PRGF arrangement through January 2009. On behalf of my authorities, I would appreciate Board support of these requests.

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