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IMF Country Report No. 13/279

CAMEROON

2013 ARTICLE IV CONSULTATION

September 2013

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2013 Article IV consultation with Cameroon, the following documents have been released and are included in this package:

• Staff Report for the 2013 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on May 14, 2013 with the officials of Cameroon on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 12, 2013. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

• Informational Annex prepared by the IMF.

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

• Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its June 26, 2013 discussion of the staff report that concluded the Article IV consultation.

• Statement by the Executive Director for Cameroon.

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

Copies of this report are available to the public from

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©2013 International Monetary Fund

Title Page

CAMEROON

STAFF REPORT FOR THE 2013 ARTICLE IV CONSULTATION

June 12, 2013

KEY ISSUES

Context: Cameroon’s macroeconomic performance, outlook, and risks have not changed fundamentally since the Article IV consultation in 2012. Economic activity has continued to recover gradually from the 2009 slump, and inflation has remained subdued. However, fiscal policy buffers have shrunk, as reflected by moderately rising public debt and depleted government deposits. Further accumulation of domestic arrears, stemming from sizable fuel subsidies, and weak public financial management are risks for medium-term macroeconomic stability. Absent a protracted global slowdown, economic growth is projected to increase progressively to 5½ percent a year in 2018. However, growth would need to be sustained at a much higher pace for Cameroon to achieve its ambition of becoming an emerging market economy by 2035.

Focus of the consultation and risks: The overarching policy issue is how to spur reform momentum to set Cameroon on a higher growth path, while mitigating low but growing risks to macroeconomic stability. The main exogenous risk is a protracted slump in the euro area, whose impact would be low, with temporary effects. Endogenous risks dominate and stem from rising fuel subsidies, contingent liabilities arising from distressed banks and public enterprises, slow progress in raising non-oil revenue, escalating nonconcessional financing, and widespread unemployment.”

Key policy recommendations: In light of growing vulnerabilities, there is urgency in implementing the following policies:

• Reprioritize public spending to help close the financing gap in 2013, and adopt a path for the non-oil primary deficit to rebuild fiscal space, preserve medium-term macroeconomic stability, and support external adjustment.

• Adopt a plan to reduce fuel subsidies gradually, accompanied by targeted social programs for the neediest, to free up resources for public investment.

• Strengthen public financial management through improved cash management and expenditure commitment control to prevent further accumulation of arrears.

• Promote higher and more inclusive growth through a better business climate and strengthened capacity to manage a large public investment program.

• Accelerate resolution of distressed banks and enhance the regulatory framework to promote lending.

Approved By

Anne-Marie Gulde-Wolf and Dhaneshwar Ghura

Contents

• GLOSSARY

• ECONOMIC STASIS

• BALANCED OUTLOOK WITH MODERATE RISKS

• POLICY DISCUSSION: UNLEASHING HIGH GROWTH POTENTIAL

• A. Containing Risks to the 2013 Budget

• B. Mitigating Risks to Medium-Term Fiscal Sustainability

• C. Strengthening Public Financial Management

• D. Promoting Sound Financial Intermediation

• E. Fostering Higher Growth

• F. Reform Scenario

• STAFF APPRAISAL

• BOX

• 1. Response to Past IMF Advice

• FIGURES

• 1. Public Debt, 2005-12

• 2. Nominal GDP, 2012

• 3. Selected Economic Indicators, 2008–12

• 4. Government Arrears and Payment Obligations, 2009–12

• 5. Medium-Term Outlook, 2013–18

• 6. Power Supply, 2010–18

• TABLES

• 1. Selected Economic and Financial Indicators, 2011–18

• 2. Central Government Operations, 2011–18

• 3. Central Government Operations, 2011–18

• 4. Balance of Payments, 2011–18

• 5. Monetary Survey, 2011–18

• 6. Obligations to SONARA, 2007–12

• 7. Government Arrears and Other Payment Obligations, 2009–12

• 8. Central Government Operations, 2011–18 (GFSM2001 Presentation)

• 9. Central Government Operations, 2011–18 (GFSM2001 Presentation)

• 10. Reform Scenario—Selected Economic and Financial Indicators, 2011–18

• 11. Reform Scenario—Central Government Operations, 2011–18

• 12. Reform Scenario—Central Government Operations, 2011–18

• 13. Millennium Development Goals, 1990–2011

• APPENDICES

• I. Fuel Subsidies

• II. Financial Sector Review

• III. External Competitiveness

• ANNEX

• I. Risk Assessment Matrix

Glossary