Cameroon: Staff Report for the 2014 Article IV Consultation
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International Monetary Fund. African Dept.
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Publication Date:
17 Jul 2014
eISBN:
9781498342636
Language:
English
Keywords:
ISCR; CR; right; real GDP; GDP; IMF staff estimate; capital expenditure; banking system; debt service; fiscal policy
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KEY ISSUESContext. Cameroon’s macroeconomic outlook and risks have deteriorated slightly sincethe Article IV consultation in 2013. Economic activity has remained strong and inflation subdued, but the fiscal position has worsened; public debt has been rising at a less sustainable pace; government deposits have dwindled; and payment delays have continued. The anticipated growth path may not suffice to reach upper-middle-income country status by 2035.Focus of the consultation and risks. The overarching policy issue remains unchanged: how to set Cameroon on a higher growth path, while mitigating low but growing risks to macroeconomic stability. Spillovers from regional insecurity have become the main exogenous risk; endogenous risks stem from rising contingent liabilities and credit concentration. Past policy advice remains relevant.Key policy recommendations:• Strengthen cash management and expenditure controls to prevent a further accumulation of payment deferrals.• Close the financing gap in 2014, and adopt a downward path for the non-oil primary deficit to rebuild fiscal space and preserve macroeconomic stability.• Improve non-oil revenue by broadening the tax base and streamlining tax exemptions.• Reprioritize public expenditure by reducing fuel subsidies gradually; provide targeted compensation measures for the most vulnerable.• Increase the selectivity of investment projects and adopt a rigorous screening of the financing terms to ensure debt sustainability.• Pursue the resolution of three small distressed banks and support the strengthening of regional bank and microfinance supervision.• Promote higher and more inclusive growth through better targeted educational andsocial spending, a propitious business climate, and deeper regional integration.

Abstract

KEY ISSUESContext. Cameroon’s macroeconomic outlook and risks have deteriorated slightly sincethe Article IV consultation in 2013. Economic activity has remained strong and inflation subdued, but the fiscal position has worsened; public debt has been rising at a less sustainable pace; government deposits have dwindled; and payment delays have continued. The anticipated growth path may not suffice to reach upper-middle-income country status by 2035.Focus of the consultation and risks. The overarching policy issue remains unchanged: how to set Cameroon on a higher growth path, while mitigating low but growing risks to macroeconomic stability. Spillovers from regional insecurity have become the main exogenous risk; endogenous risks stem from rising contingent liabilities and credit concentration. Past policy advice remains relevant.Key policy recommendations:• Strengthen cash management and expenditure controls to prevent a further accumulation of payment deferrals.• Close the financing gap in 2014, and adopt a downward path for the non-oil primary deficit to rebuild fiscal space and preserve macroeconomic stability.• Improve non-oil revenue by broadening the tax base and streamlining tax exemptions.• Reprioritize public expenditure by reducing fuel subsidies gradually; provide targeted compensation measures for the most vulnerable.• Increase the selectivity of investment projects and adopt a rigorous screening of the financing terms to ensure debt sustainability.• Pursue the resolution of three small distressed banks and support the strengthening of regional bank and microfinance supervision.• Promote higher and more inclusive growth through better targeted educational andsocial spending, a propitious business climate, and deeper regional integration.

Robust Growth, but Lacking Inclusiveness

Economic growth accelerated in 2013, but was not inclusive. Growth prospects hinge on a change in the fiscal stance and a shift to a broad-based, private-sector-led development. The advent of private-sector takeoff is hindered by unproductive spending, rising public debt, and an unpropitious business environment.

1. Cameroon’s growth was robust in 2013. At 5.5 percent, it was fuelled by strong performance in the services sector and by a public investment program of more than 7 percent of GDP (Text Table 1; Figures 1A–2, Tables 1–5 and 8–9; Selected Issues Paper—SIP—Infrastructure Road Map). The public investment program reflects strong progress in the commissioning of new dams and thermal plants to improve the quantity and quality of electric power. However, linkages to the broader economy (e.g., port facilities, power lines, roads) still need to be put in place for the infrastructure projects to contribute to growth. Annual inflation, at 2.1 percent, was under the Central African Economic and Monetary Community (CEMAC) convergence criterion of 3 percent, but was higher than the CEMAC weighted average of 1.7 percent (excluding Cameroon).

Text Table 1.

Cameroon: Contributions to GDP Growth, 2009–13

(Percent)

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Sources: Cameroonian authorities; and IMF staff estimates.
Figure 1A.
Figure 1A.

Cameroon: Nominal GDP by Sector, 2013

(Percent)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: Cameroonian authorities; and IMF staff estimates.
Figure 1B.
Figure 1B.

Cameroon: Electricity Production Capacity, 2009–18

(Megawatts)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: Cameroonian authorities; and IMF staff projections
Figure 2.
Figure 2.

Cameroon: Selected Economic Indicators, 2009–19

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: Country authorities; and IMF staff estimates and projections.
Table 1.

Cameroon: Selected Economic and Financial Indicators, 2012–19

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Nominal GDP was revised upward in 2012.

The export price for oil reflects actual prices for past years; for the current and future years, projections reflect movements in the price of Average Petroleum Spot Price (APSP) crude, less a cumulative prudence factor of US$0.5 for each outer year.

Percent of broad money at the beginning of the period.

Includes the cumulative financing gaps.

Projections are taken from the 2014 Debt Sustainability Analysis (DSA), which excludes the stock of debt on which France provided debt relief under the “Contrat de désendettement et de développement” (C2D).

Present value computed with a discount rate of 5 percent.

Table 2.

Cameroon: Central Government Operations, 2012–19

(CFAF billions, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Historical and budget figures exclude direct taxes, customs duties, and VAT due by SONARA which were subject to cross-cancellations against fuel subsidies due to SONARA (i.e., the revenue is presented on a net basis). From 2014 onward, projections for these taxes are made on a gross basis, except for the “adjusted projections” column, which is presented after expected cross-cancellations, to be comparable with the budget.

Figures for 2012 include securitization of fuel subsidies due to SONARA.

Table 3.

Cameroon: Central Government Operations, 2012–19

(Percent of GDP, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Historical and budget figures exclude direct taxes, customs duties, and VAT due by SONARA which were subject to cross-cancellations against fuel subsidies due to SONARA (i.e., the revenue is presented on a net basis). From 2014 onward, projections for these taxes are made on a gross basis, except for the “adjusted projections” column, which is presented after expected cross-cancellations, to be comparable with the budget.

Figures for 2012 include securitization of fuel subsidies due to SONARA.

Table 4.

Cameroon: Balance of Payments, 2012–19

(CFAF billions, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates and projections.
Table 5.

Cameroon: Monetary Survey, 2012–19

(CFAF billions, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Deposits that are readily available for government operations.

Table 6.

Cameroon: Obligations to SONARA, 2008–13

(CFAF billions, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates.

Fuel subsidies in 2012 and 2013 do not include imports of refined products by private companies.

Stock (n) = Stock (n-1) + Net accumulation of obligations (n).

Table 7.

Cameroon: Government Arrears and Other Payment Obligations, 2010–13

(CFAF billions, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates.

Partial audits conducted in 2010 and 2012 revealed additional arrears of CFAF 18 billion and CFAF 7 billion, respectively. These are included in the end-2010 and 2012 stocks of audited arrears, respectively; this may create discrepancies in flow figures in certain years.

Table 8.

Cameroon: Central Government Operations, 2012–19 (GFSM2001 Presentation)

(CFAF billions, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Historical figures exclude direct taxes, customs duties, and VAT due by SONARA which were subject to cross-cancellations against fuel subsidies due to SONARA (i.e., the revenue is presented on a net basis). From 2014 onward, projections for these taxes are made on a gross basis.

Figures for 2012 include securitization of fuel subsidies due to SONARA.

Rehabilitation and participation shows General Government’s capital transfers.

Table 9.

Cameroon: Central Government Operations, 2012–19 (GFSM2001 Presentation)

(Percent of GDP, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Historical figures exclude direct taxes, customs duties, and VAT due by SONARA which were subject to cross-cancellations against fuel subsidies due to SONARA (i.e., the revenue is presented on a net basis). From 2014 onward, projections for these taxes are made on a gross basis.

Figures for 2012 include securitization of fuel subsidies due to SONARA.

Rehabilitation and participation shows General Government’s capital transfers.

2. The level and pattern of growth have not been pro-poor. The population growth rate stymies progress in per capita income growth. Agriculture, which provides a livelihood to most of the poor, has not expanded enough to reduce poverty and inequality. Poverty1 remains broadly unchanged at close to 40 percent of the population, social indicators are weak, and inequality has likely increased (Text Table 2; Table 13; SIP—Poverty, Inclusiveness, and the Budget).

Text Table 2.

Cameroon: Selected Social Indicators, 2007–11

(Percent, unless otherwise indicated)

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Sources: World Bank World Development Indicators; and World Bank staff estimates.
Table 10.

Cameroon: Reform Scenario—Selected Economic and Financial Indicators, 2012–19

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Nominal GDP was revised upward in 2012.

The export price for oil reflects actual prices for past years; for the current and future years, projections reflect movements in the price of Average Petroleum Spot Price (APSP) crude, less a cumulative prudence factor of US$0.5 for each outer year.

Percent of broad money at the beginning of the period.

Includes the cumulative financing gaps.

Projections are taken from the 2014 Debt Sustainability Analysis (DSA), which excludes the stock of debt on which France provided debt relief under the “Contrat

Present value computed with a discount rate of 5 percent.

Table 11.

Cameroon: Reform Scenario—Central Government Operations, 2012–19

(CFAF billions, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Historical and budget figures exclude direct taxes, customs duties, and VAT due by SONARA, which were subject to cross-cancellations against fuel subsidies due to SONARA (i.e., the revenue is presented on a net basis). From 2014 onward, projections for these taxes are made on a gross basis, except for the “adjusted projections” column, which is presented after expected cross-cancellations, to be comparable with the budget.

Figures for 2012 include securitization of fuel subsidies due to SONARA.

Table 12.

Cameroon: Reform Scenario—Central Government Operations, 2012–19

(Percent of GDP, unless otherwise indicated)

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Sources: Cameroonian authorities; and IMF staff estimates and projections.

Historical and budget figures exclude direct taxes, customs duties, and VAT taxes due by SONARA, which were subject to cross-cancellations against fuel subsidies due to SONARA (i.e., the revenue is presented on a net basis). From 2014 onward, projections for these taxes are made on a gross basis, except for the “adjusted projections” column, which is presented after expected cross-cancellations, to be comparable with the budget.

Figures for 2012 include securitization of fuel subsidies due to SONARA.

Table 13.

Cameroon: Millennium Development Goals, 1990–2012

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Source: World Bank; World Development Indicators.

3. The 2013 budget did not support social policies. Fuel subsidies remained substantial at 2.8 percent of GDP in 2013, and crowded out more effective expenditure. Public spending on health and education was significantly lower than in comparable countries (Figure 3). According to the World Development Indicators, Ghana, Senegal, and Tanzania consistently spend more than of 5 percent of GDP on education. The same countries allocate a minimum of 2.8 percent of GDP to spending on health, more than twice the amount of Cameroon.

Figure 3.
Figure 3.

Cameroon: Public Expenditure by Function 2008–12

(Percent of GDP)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: Cameroonian authorities; and IMF staff estimates.

4. The fiscal outcome has weakened because difficult expenditure rollbacks have been postponed and tax and tariff exemptions remain in place. The fiscal deficit, on a cash basis, exceeded 4 percent of GDP in 2013. Total revenue increased slightly to 17.8 percent of GDP, but masked a fall in oil revenue because of higher production costs that are slated to absorb a significant part of the higher export proceeds (Figure 4; SIP—Fiscal Regime of the Oil Sector). Tax deductions, special regimes, and tariff exemptions on basic foodstuffs cost more than 2.7 percent of GDP in forgone revenue. The stock of arrears and other payment obligations rose to 4.6 percent of GDP, inter alia because the government could not pay fuel subsidies in full (Tables 6–7).

Figure 4.
Figure 4.

Cameroon: Selected Oil Production Indicators, 2009–19

(CFAF billions)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: SNH; and IMF staff estimates and projections.

5. Reform inertia continued in 2013. The IMF’s advice got mixed traction (Box 1). In spite of extensive discussions within the government and civil society, retail fuel prices remained frozen at their 2009 level. Conversely, several technical recommendations in fiscal administration and public financial management were implemented. The spate of nationwide elections in 2013 offers an opportunity for economic reforms.2

6. Growth in 2014 is projected at 5.5 percent, below the authorities’ projection of 6 percent. Over the medium term, staff projects growth at about that same level. Growth will be driven by growing oil production and the public investment program, expected to yield larger electricity and natural gas supplies. Barring fuel price adjustments, inflation is slated to remain low because of stable food prices supported by a growing supply; it would however exceed the very low inflation in the euro area, possibly inducing declining competitiveness.

7. The fiscal situation is projected to become increasingly fragile, as a result of recurrent budget deficits. Revenue is projected to fall by up to 1 percentage point of GDP between 2014 and 2019, reflecting generous investment incentives,3 pervasive tariff exemptions, and weak value-added tax (VAT) collection from ailing public enterprises. Oil revenue will decrease, because rising costs are expected to offset growing output, with international prices trending downward. Expenditure will drop by almost 2 percentage points of GDP by 2019, as the externally financed investment program is scaled back. The wage bill will track GDP growth on the back of hiring trends (SIP—Public Wage Bill Determinants). The non-oil primary deficit (NOPD) is projected to remain at 8–9 percent of non-oil GDP, while financing gaps averaging 3 percent of GDP would persist.

Cameroon: Response to Past IMF Staff Advice

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8. The real effective exchange rate (REER) is estimated to be somewhat overvalued (Annex I). The REER has held broadly constant since 2005, with a slight appreciation in 2005–09 offset by similar depreciation since then, in line with the depreciation of the euro relative to the US dollar.4 Model-based estimates are consistent with the finding of the last Article IV consultation with the CEMAC, which suggested an overvaluation of 6 to 18 percent. Cameroon’s performance in non-price competitiveness is lagging. Encouragingly, Cameroon became compliant with the Extractive Industries Transparency Initiative (EITI) in 2013. However, its rankings under various doing business indicators deteriorated.

9. External debt remains sustainable, but the associated risk of distress has become “moderate” because of the fast pace of nonconcessional debt accumulation. External financing is currently projected to decrease as percent of GDP in the medium term. A higher sustained share of external financing, preserving or exceeding levels observed in 2013 and expected for 2014, would further increase this risk. The current debt burden is low, compared to that of sub-Saharan African (SSA) peers, but it is projected to accelerate (Figure 5). High fiscal deficits together with weak PFM, as evidenced by recurrent domestic arrears, are important factors for risk of debt distress in the medium and long terms. The companion debt sustainability analysis (DSA) shows that another salient threat to sustainability comes from the limited export base, which will be compounded by a relative decline in oil production over time.

Figure 5.
Figure 5.

Selected African Countries: Gross Government Debt, 2010–19

(Percent of GDP)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: IMF’s World Economic Outlook (WEO); and African Department Database.

10. There are risks to the outlook (Annex II). The spillover risks from civil strife in neighboring countries are significant and potentially harmful to the economy. The authorities believed that UN peacekeeping efforts—in which Cameroon participates—would help stabilize the situation. Domestic risks include a banking sector crisis brought on by a default of a large single public borrower.

11. Data provision to the IMF is broadly adequate for surveillance. The timeliness has improved, but important qualitative gaps remain in fiscal, debt, and external sector information because of lack of capacity. Information on financial operations on a commitment basis is not available, and debt reporting on externally financed projects is neither regular nor timely.

Policy Discussion—Reforms for Sustainable and Inclusive Growth

The overarching economic challenge remains higher, sustainable, and more inclusive growth. Cameroon’s ambition to become an emerging market economy by 2035 requires a faster growth rate, which in turn requires a prompt implementation of pro-poor and pro-growth policies, and structural reforms.

A. Addressing Risks to Fiscal Sustainability

12. The budget for 2014 targets a decline in revenue and an unrealistic retrenchment in expenditure. Revenue projections are disappointing, as they target a fall over the 2013 outturn by 1 percentage point of GDP on account of lower oil revenue, customs and VAT receipts, and the impact of investment incentives. Expenditure is projected to contract by 2.5 percentage points of GDP, although it is not clear how this will be achieved. The overall budget deficit would be 2.6 percent of GDP, and is expected to be financed by borrowing. Staff projects a deficit of 5.6 percent of GDP, based on a current expenditure forecast in line with the 2013 outcome and higher public investment. As in previous years, the budget incorporates only about half of the expected cost of fuel subsidies and transfers to public enterprises, and does not include a provision for fuel subsidy arrears.

13. The Ministry of Finance lacks the tools to weigh on fiscal sustainability. Revenue performance remains weak compared to SSA peer countries, because of a narrow tax base5 and generous tax exemptions. The budget does not set a clear anchor for fiscal policy, such as a downward path for the NOPD. Loans for projects and public-private partnerships (PPPs) proceed with little oversight by the Ministry of Finance and their financing terms are not framed in a comprehensive debt policy.

14. Staff encouraged the authorities to follow a tighter fiscal stance in 2014 and close the projected financing gap. The tense treasury position—illustrated by shrinking government deposits—and the need to clear deferred payments will require a significant revenue mobilization effort. Staff made the following recommendations to alleviate the fiscal constraints:

  • Adopt the NOPD as a fiscal anchor, and set a path that takes into account public investment needs while preserving fiscal sustainability. Staff’s analysis suggests that a gradual reduction of the NOPD from the projected 10.3 percent of non-oil GDP in 2014 to about 4 percent by 2034 would help cap total public debt to less than 30 percent of GDP over the long term.6

  • Improve non-oil revenue by broadening the tax base, adjusting selected tax rates, limiting tax exemptions, and curtailing the application of the investment incentives law. With the expected ratification of the Economic Partnership Agreement (Box 2) and the gradual decline of oil proceeds over the longer term, there is a need to mobilize additional revenue through: (i) lowering the corporate income tax rate while increasing the minimum rate on the turnover tax to reduce incentives for evasion; (ii) switching to a dual income tax approach and improving the progressivity of the personal income tax; and (iii) lowering the VAT rate while removing the exemptions granted in 2008 on basic foodstuffs—these exemptions have not achieved their intended social impact.

  • Strengthen tax administration by finalizing the restructuring of the network of small taxpayer offices, creating additional medium taxpayer offices, and allocating adequate resources to implement reforms.

  • Phase out of fuel subsidies gradually and reprioritize expenditure toward social services. Elaborate a communication strategy and develop well-targeted programs to limit the impact of higher fuel prices on the most vulnerable groups. Take preparatory steps to improve transparency, such as removing the producer mark-up from the fuel pricing formula.7

  • Issue regional bonds in amounts and at a pace consistent with market absorptive capacity and the expected growth impact of concerned projects.

  • Rethink the public investment program to improve its efficiency and enhance the complementarity of a limited set of projects with a high impact on growth and poverty reduction.

  • Lower debt vulnerabilities by renegotiating the least concessional undisbursed loans; implement a medium-term debt strategy in line with recommendations of joint World Bank-IMF technical assistance, including the consolidation of the authority to contract external debt under the Minister of Finance.

  • Monitor contingent liabilities from public enterprises, PPPs, and the banking system. Produce an annual evaluation report on the financial health of all public enterprises, PPPs, and banks, and adopt a payment plan to settle liabilities stemming from situations that have been conclusively addressed.

Cameroon: Revenue Impact of the Economic Partnership Agreement

An economic partnership agreement (EPA) is being negotiated between the CEMAC and the European Union (EU). Cameroon signed an interim EPA in 2009, which is expected to be ratified in October 2014.1 The agreement envisages mutual trade liberalization—duty and quota-free EU access for all exports from Cameroon and a gradual removal of duties and quotas over 15 years on up to 80 percent of EU exports to Cameroon.2 The pace of tariff reduction varies by category of goods (Table). The medium-term impact of the EPA is uncertain, except on government revenue, which is reviewed below.

The short to medium-term impact on Cameroon’s revenue is expected to be modest. The impact on tax revenue until 2020 will be negligible (less than 0.1 percent of GDP) for two reasons: (i) the dismantling will begin in 2017 at the earliest and will affect imports that are already partly or totally exempted or moderately taxed (capital goods under Categories I and II); and (ii) tariff losses could be dampened in the short-term if an increase in import volumes partially offsets reductions in tariff rates.

The long-run effects—with phasing-in over 15 years—will be more substantial under an unchanged policy scenario. Abundant literature estimates the potential long-term revenue impact of regional trade agreements, such as the EPA. Revenue loss will come through two channels: (i) the direct channel whereby a zero tariff rate would apply to imports from the EU; and (ii) the indirect channel arising from diversion of trade from taxed non-EU imports to non-taxed EU imports. In 2012, 34 percent of Cameroon’s imports came from the EU suggesting that about one third of current tariff revenues would be lost from the liberalization of 80 percent of EU imports over the long term. This would be equivalent of 0.5–0.6 percent of GDP from the direct channel, consistent with estimates in the government’s growth and employment strategy paper. The revenue loss could be higher if trade diversion from the rest of the world in favor of exempted EU imports happened.

The fiscal challenge for Cameroon is to reorganize its tax base and develop alternative forms of taxation. Some positive impacts can be expected from the EPA, such as the widening of the tax base, as incomes rise. The long-term effect will ultimately depend on the authorities’ capacity to offset a reduction in custom revenue by receipts from other sources, such as VAT, excises, and reductions in tax exemptions.

Table.

Cameroon: Calendar of tariff dismantlement

(Percent)

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Source: Article 21 of the Cameroon Interim EPA.
1 Other CEMAC countries are also negotiating the possible signing of EPAs, but they lag Cameroon. 2 Products which will not be liberalized include milk, meat, motor vehicles, textiles, and tobacco.

Authorities’ views

15. The authorities were confident that they would be able to finance the 2014 budget. They expected no problem in raising their targeted domestic financing through securities issues on the regional market, as evinced by a largely oversubscribed issue in December 2013. They acknowledged that fuel subsidies were likely to exceed their appropriation, but drew comfort from what they viewed as the tested financing solution of cross-cancellation of mutual debts with the SONARA.

16. The authorities agreed that current fiscal and debt policies need to be improved to contain the risk of debt distress. They committed to improving non-oil revenue mobilization, in line with the recommendations of recent FAD technical assistance. They recognized that fuel subsidies are straining the budget, and supported the principle of gradual adjustments in retail prices. They agreed that fuel subsidy reform needs to be well prepared and accompanied by appropriate mitigating measures to preserve social peace. However, they were not in a position to provide a specific timeline for this reform. They noted the need to improve the efficiency of public spending in infrastructure investments and in social sectors. They agreed with the need for better analysis to inform external debt contracting, and believed that the national public debt committee (CNDP), chaired by the Minister of Finance, would fulfill this role. The authorities saw little merit in a strict fiscal rule anchored on the NOPD given the large infrastructure gap.

B. Strengthening Public Financial Management

17. Despite some progress, problems encountered in the shift to program budgeting in 2013 have not been fully resolved. The transition to new information technology (IT) systems to administer public expenditure with better oversight of commitments and payments has not been completed. In particular, delays in capital expenditure on 2013 appropriations have led the authorities to extend the fiscal year by three months, which blurs the utility of the budget as a strategic financial management tool.

18. The implementation of the development strategy has been hampered by inadequate monitoring of, and controls over, the public investment program and its financing. Little progress has been made in project screening, appraisal, and implementation, with a further accumulation of arrears to private companies (e.g., VAT reimbursements). At end-2013, nonconcessional loan agreements totaling up to 15 percent of GDP were contracted, and are disbursed without real-time monitoring.

19. Staff encouraged the authorities to persevere in implementing the key components of their financial management reforms to improve the effectiveness of public spending.

  • Improve reliability of budgetary and accounting data and improve fiscal transparency by: (i) limiting the reliance on exceptional procedures, such as the extension of the fiscal year—replacing it with credit reports from one year to the next; (ii) reconciling information from different data systems by putting in place the required IT systems to track the flow of funds throughout the expenditure chain; (iii) respecting the single treasury account rule and avoiding spending outside normal budget procedures; (iv) regularizing spending on an exceptional basis at the end of the fiscal year (e.g., cash advances); (v) budgeting and reporting taxes and subsidies on a gross basis; and (vi) avoiding cross-cancellations of taxes against payments due by the government.

  • Address the issue of domestic arrears by (i) building a multiyear plan to eliminate audited arrears; (ii) appropriating fuel subsidies and transfers to public enterprises fully; (iii) settling past commitments toward SONARA and oil importers through cash payments to ensure continued refined oil product supplies.

Authorities’ views

20. The authorities agreed that improving public financial management will be critical to increasing the effectiveness of public expenditure. They emphasized that progress in this area involved complex reform processes that required strong ownership at all levels to be successful, especially in a context of a tight treasury position. They recognized the adverse impact of belated payments on private sector activity, as companies turned to banks for costly borrowing for working capital. They expressed hope that the resolution of obstacles to the implementation of improved IT systems would lead to an accelerated roll-out of reforms.

C. Encouraging Private Sector-Led Growth

21. Staff emphasized the need for reforms in the business environment to leverage the public investment program. Staff noted that PPPs could help fill the infrastructure gap under the right budgeting, institutional, accounting, and reporting frameworks. However, although Cameroon became compliant with the EITI, its ranking under the Global Competitiveness Index deteriorated marginally (by 3 places); and its ranking under the World Bank’s Doing Business indicators fell more sharply (by 6 places). Although Cameroon’s ranking improved marginally with respect to registering property, its rating deteriorated significantly regarding construction permits, starting a business, getting credit, and enforcing contracts. Staff pointed out that the new investment incentives law does not address these binding constraints on private sector activity, and may even undermine some reforms by increasing discretion in various permitting processes. Staff encouraged the narrowing of the scope of this law to strategic sectors and the requirement of systematic skill transfers, in exchange for fiscal exemptions.

22. Staff urged the authorities to rekindle regional economic integration and re-establish the effectiveness of regional institutions in light of the new challenges to CEMAC arising from the EPA. Challenges include a potential diversion of intra-CEMAC trade, as a result of different tariff regimes, and a setback for the harmonization of CEMAC external tariffs.

Authorities’ views

23. The authorities noted the need to accelerate the pace of reforms that will help the formal private sector flourish. They were comforted by the improving execution rate of public investment, which they saw as the backbone for future private sector development. They noted that an economic “emergency program” being finalized would energize pubic administration and help to make new infrastructure operational. They expressed hope that the investment incentives law would attract new investors, and that the new public bank for small and medium enterprises (SMEs), to be launched soon, would help to finance such enterprises.

24. The authorities considered the ratification of the interim EPA as an important measure to safeguard their access to European markets (50 percent of exports). They viewed the EPA as an opportunity to strengthen their productive sectors, with financial support from the EU. They also thought the EPA may spur a new round of regional integration within the CEMAC.

D. Enhancing Financial Intermediation for Broad-Based Growth

25. Staff noted an improvement in the health of the banking system, which accounts for about half of bank assets in the CEMAC. The recapitalization of two troubled banks in the past year has reduced systemic risk, although the consolidated data veil frailty in some smaller banks that do not pose a systemic risk (SIP—Financial System Overview). The quality of assets, underscored by a nonperforming loan (NPL) ratio of 13.9 percent, is rather unsatisfactory; and so are provisions for NPLs, at 60 percent. The creation of a specialized public bank to cater to SMEs poses a new NPL risk that the regional supervisory body (COBAC) needs to monitor closely. Excessive exposure by most banks to a financially fragile SONARA is a source of systemic concern.

26. Staff encouraged the authorities to pursue initiatives to promote financial intermediation. Despite a jump of almost 15 percent of credit to the private sector in 2013, financial intermediation remains low. Given the already high level of commissions and fees, which account for about 40 percent of the income of the banking sector, profit growth for banks is more likely to come from transforming the prevalent high liquidity into investments. Initiatives to facilitate lending include a pooling of data on debtors, and closer monitoring of microfinance institutions. However, little progress has been made in enforcing contracts through the judicial system and in using real property as collateral.

27. Staff noted the ongoing efforts to strengthen supervision through better staffing of the COBAC, and progress in articulating crisis prevention and resolution frameworks at the regional level. Key objectives include a lowering of the time that a bank can spend under provisional administration, so that decisions on restructuring or closing can be expedited; the imposition of management guidelines stressing asset conservation; and the inclusion of the full cost of a bank’s resolution in the budget. Staff proposed that a memorandum of understanding be drawn between the COBAC and the Ministry of Finance to enhance information sharing and set a division of labor in microfinance supervision.

Authorities’ views

28. The authorities recognized the risk posed by the concentration of bank credit on ailing public enterprises. They opined that liquidity problems of large debtors would be resolved through a progressive clearing of government obligations. They also noted that the ongoing expansion of SONARA’s refining capacity would improve its financial situation.

29. The authorities committed to limiting the risks linked to the new bank for SMEs. They pointed out the active supervision of COBAC, and added that new tools by the national branch of the regional central bank (BEAC), such as maintaining a real-time credit registry, would help the bank to make informed decisions.

E. Reform Scenario

30. Staff presented a moderate reform scenario. Its main tenets are (i) a reining in of the fiscal deficit and of the pace of debt accumulation helped by a gradual adjustment in retail fuel prices of gasoline and diesel that would not reach full cost-recovery levels over the medium term; (ii) tax policy reforms to reduce exemptions, adjust selected tax rates, and broaden tax bases; and (iii) an acceleration of private sector growth from improvements in the business environment and strengthening of the anti-corruption framework.

31. The reform scenario would lead to an increase in growth by up to ½ percentage point of GDP by 2019 (Text Table 3). Improved tax performance and more efficient public investment spending would create fiscal space for social spending and the maintenance cost of new infrastructure. Together with business environment reforms, these expenditure and tax policies would enhance growth, and limit the fiscal deficit significantly over the medium term. Inflation would see a modest temporary increase owing to the fuel price adjustments, but would remain well within single digits.

Text Table 3.

Cameroon: Selected Macroeconomic Indicators, 2014–19

(Units as indicated)

article image
Sources: Cameroonian authorities; and IMF staff estimates and projections.

Percentage change.

Percent of GDP.

Percent of non-oil GDP.

Authorities’ views

32. The authorities found the reform scenario realistic. They accepted the need for reforms to fiscal policy and the business environment, but were of the view that their ongoing reform efforts, at a pace more compatible with Cameroon’s social realities, paired with the rapid implementation of the public investment program, would yield similar results.

Staff Appraisal

33. Cameroon’s increased public investment spending has accelerated growth. The authorities need to implement higher quality policies and improve governance to promote development. The current level of growth, in itself, is not sufficient to accelerate poverty reduction and achieve upper-middle-income country status by 2035. A combination of reforms to enhance the cost-effectiveness of public expenditure and to foster private sector response has become critical. Regional security risks add an element of urgency to reforms to make the economy more resilient and to rekindle regional integration.

34. The fiscal stance requires adjustment. Risks to the 2014 budget need to be addressed without delay to avoid further accumulation of domestic arrears that undermine fiscal sustainability. Non-oil revenue performance will remain tepid unless unwarranted exemptions are removed, the tax base is broadened, and tax administration is made more effective. International oil prices and domestic demand will keep fuel subsidies high, unless pump prices are progressively raised. Contingent liabilities in the public and banking sectors and PPPs threaten fiscal sustainability.

35. The envisaged ratification of the EPA could further undermine revenue in the long term. An evaluation of its direct and indirect impacts on revenue is necessary, and could inform new discussions on regional integration with CEMAC partner countries.

36. Although debt remains sustainable, new external liabilities have pushed the risk of external debt distress from “low” to “moderate.” The level of external debt remains low relative to the average of SSA, but the pace of debt accumulation is faster, and the risk of external debt distress would be higher still if the composition of future financing were to preserve or exceed external levels observed in 2013 and expected for 2014, rather than gradually decreasing as currently projected. The sensitivity of external debt sustainability to exports calls for export diversification.

37. The projected external debt accumulation points to a need to generate more value from public investment. A three-pronged approach is necessary: (i) a new round of project selection to identify projects with a high impact on growth and poverty reduction, and the rolling back of non-essential projects; (ii) the integrity of public financial management needs to be strengthened, including competitive procurement to generate more cost-effective spending; and (iii) the terms of new debt need to be more concessional.

38. A broad array of reforms to the business environment needs to be initiated, because its credibility will take time to establish. The private sector needs to take over as the main engine of growth by the time the public investment program is scaled back. The various reform areas cited by the Doing Business indicators point to a direct link between improvements in revenue policy, public financial management and private sector activity; they include “trading across borders” and “paying taxes.”

39. Risks to the banking system have receded, but financial intermediation remains low. The restructuring of two troubled banks leaves only three small banks in need of a resolution. The microfinance sector could expand faster and with less risk with the adoption of a regulatory framework and diligent joint supervision by COBAC and the Ministry of Finance. The new bank for SMEs is in need of regulatory vigilance, starting with its credit policy.

40. Staff recommends that the next Article IV consultation take place on the standard 12-month cycle,in accordance with the Decision on Article IV Consultation Cycles (Decision No. 14747–(10/96) (9/28/2010).

Annex I. Cameroon: External Competitiveness

The findings of this monograph1 are consistent with the findings of the 2013 and the preliminary 2014 Central African Economic and Monetary Community’s (CEMAC) external assessment.2 Cameroon’s real effective exchange rate, on balance, appears somewhat overvalued. Structural competitiveness also shows weaknesses. The analysis of non-price indicators highlights the continued need for Cameroon to improve its business climate, which implies improving infrastructure and access to financing.

A. Balance of Payments and Exchange Rate Developments

1. Cameroon’s current account has fluctuated over the last decade, reflecting developments in the trade balance and international commodities prices. Since 2002, the current account deficit has averaged about 2.3 percent of GDP (Figure I.1). The only recent surpluses occurred in 2006 and 2007 because of high oil prices. Cameroon also reached the Highly Indebted Poor Country (HIPC) completion point in 2006, which significantly lowered interest payments on public debt. Since then, the current account has returned to previous levels. The goods and services balance has deteriorated from a surplus of 1.6 percent of GDP in 2006 to a deficit of 3.3 percent of GDP in 2013. Net current transfers have been making a systematically positive contribution to the current account, highlighting the role of capital grants and aid inflows. Conversely, the net income account has been making a systematically negative contribution to the current account, mostly owing to the increase in income from direct investment.

Figure I.1.
Figure I.1.

Cameroon: Current Account Balance Components, 2002–19

(Percent of GDP)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: IMF African Department Database; IMF Notice System (INS); and IMF staff estimates.

2. In 2002–13, investment averaged 18.6 percent of GDP, while national savings averaged 16.3 percent of GDP (Figure I.2). Gross domestic investment decreased from 20.2 percent of GDP in 2002 to 14.3 percent in 2006. Since then, it has recovered to 21.3 percent in 2013. The national savings rate increased from 15.1 percent of GDP in 2002 to 17.6 percent in 2009 at the height of the global crisis. Since then, it has decreased to 17.2 percent in 2013. In the medium term, the private sector is expected to pull investments, drawing on ongoing infrastructure development.

Figure I.2.
Figure I.2.

Cameroon: National Accounts Components, 2002–13

(Percent of GDP)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: IMF African Department Database; IMF Notice System (INS); and IMF staff estimates.

3. Cameroon’s exports, as a share of CEMAC exports, declined over the past couple of decades (Figure I.3). In the 1990s, Cameroon used to be the second largest exporter after Gabon. At present, it has moved to the fourth position, despite an increase in the openness of the economy (defined as the sum of exports and imports divided by GDP), behind Equatorial Guinea, the Republic of Congo, and Gabon.

Figure I.3.
Figure I.3.

Cameroon: Market Share in CEMAC and SSA, 1990–2013

(Percent)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: IMF Direction of Trade statistics (DOTS).

4. The current account deficit is expected to grow from 3.9 to 4.4 percent of GDP in 2013–19. In 2013, approximately 52 percent of exports were oil and oil products. The expected deterioration in the goods and services balance is predicated on the strong growth of imports for investment projects. The current account deficit would primarily be financed by government borrowing.

5. Cameroon’s REER has depreciated since 2010, partially reversing a previous long-run appreciation (Figure I.4). Since 2009, the REER has depreciated by 7.7 percent, with the nominal effective exchange rate (NEER) closely following this trend. This depreciation reflects the movements of the NEER of the euro, to which the country’s currency is pegged. However, this depreciation has not offset fully the 24 percent REER appreciation in 1994–2008.

Figure I.4.
Figure I.4.

Cameroon: Effective Exchange Rates and Terms of Trade, 1994–2013 (REER and NEER 1994=100)

(TOT 2005=100)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: IMF African Department Database; IMF Notice System (INS); and IMF staff estimates.

6. As a preliminary assessment, Cameroon’s current REER appears to be somewhat overvalued. The first approach for assessing the REER is to assume that the mean of the two years following the CFA franc’s devaluation in 1994 is the long-run effective exchange rate (LREER). Another approach is to assume the LREER is the sample mean over the period 1994–2013. The first approach suggests that the REER was overvalued by 9.2 percent at end-2013, while the second approach indicates that the REER is broadly in line with equilibrium. As noted in previous years, one important determinant of the LREER are the terms of trade—up by nearly 27 percent since 2009, which indicates that the LREER may have shifted over time. Furthermore, Cameroon’s non-oil current account deficit has been worsening (Figure I.5), suggesting a possible overvaluation of the REER. Accordingly, the utility of these approaches may be limited by the strong assumptions on the LREER made for this preliminary assessment.

Figure I.5.
Figure I.5.

Non-Oil Current Account Balance, 2000–13

(Percent of GDP)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: Cameroonian authorities; and IMF staff estimates

B. Model-Based Real Exchange Rate Assessments

The effective real exchange rate is assessed using the three approaches of the Consultative Group on Exchange Rate (CGER) issues. A methodology accounting for the need for natural-resource-rich countries to smooth consumption of resource revenue over time is also used.

7. The REER is assessed using the three approaches of the CGER. They are: (i) the macroeconomic balance (MB); (ii) the external sustainability (ES); and (iii) the equilibrium real exchange rate (ERER) approaches (Figure I.6). Annual data for 184 countries for 1973–2013 are used, along with projections from the macroeconomic framework of the 2014 Article IV consultation. The standard CGER procedures are complemented by an adjusted ES approach that considers Cameroon’s oil wealth and the projected exhaustion of its oil resources. The results are broadly in line with the previous assessment,3 consistent with the limited changes in Cameroon’s economic circumstances over the past year.

Figure I.6.
Figure I.6.

Cameroon: Required Change in the REER to Bring it to Equilibrium Level

(Percent change)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Source: IMF staff estimates.

8. The MB approach calculates the difference between the current account balance projected over the medium term at prevailing exchange rates (the “underlying current account balance”) and an estimated equilibrium current account (also called the “current account norm”), which is a function of economic fundamentals. The extent to which the real exchange rate needs to adjust mostly depends on the country-specific elasticity of the current account with respect to the real exchange rate. The current account balance elasticity to the exchange rate4 is taken from Tokarick (2010).5

9. The MB approach suggests the REER was overvalued by 3 to 9 percent at end-2013. The estimated current account norm points to a deficit of 3.3 percent, while the underlying current account deficit is about 4.5 percent. The real exchange rate would then need to eliminate this difference. Tokarick (2010) estimates three trade balance elasticities to the real exchange rate: CGER (-0.14); general (-0.31); and small country (-0.38). At one end, CGER elasticity is the so-called “Keynesian Case,” where both the supply of exports and imports are assumed to be perfectly inelastic. At the other end, the small country case assumes that export demand and import supply are perfectly elastic, as the country is unable to affect international prices. The real exchange rate is assessed using these three estimates of the trade balance elasticity. The more elastic the current account is, or the more open the economy is, the less the exchange rate needs to be adjusted. The mean has drifted downward in past assessments, from 15.4 in 2010 to 5.5 percent in 2013.

10. Using the same elasticities, the ES approach suggests the REER was overvalued by 6 to 17 percent at end-2013. The ES approach calculates the difference between the actual current account and the current account that would stabilize the net foreign assets (NFAs) position at some benchmark level. The NFA-stabilizing current account is a deficit of 2.0 percent of GDP, compared to a 4.5 percent underlying current account deficit. The mean has remained between 11 and 13 percent since the 2010 assessment, except for a dip to 8.6 percent in 2012. In the preliminary external assessment for CEMAC in 2014, the REER was overvalued by 10.9 percent using the same approach.

11. In contrast with the MB and ES approaches, but in line with previous assessments, the equilibrium real exchange rate (ERER) approach suggests the REER was undervalued by 6 to 11 percent at end-2013.6 The ERER approach calculates the difference between the actual real exchange rate and an estimated equilibrium real exchange rate, which is directly derived from the projection of medium-term fundamentals, such as the NFAs, productivity differential between tradable and non-tradable sectors, and the terms of trade. The range shown in Figure I.6 is determined by calculating the standard deviation from 2010 to 2013. Since the 2010 assessment, the mean has fluctuated between -3 and -13 percent.

12. To complement the above analysis, the ES approach is tailored to oil-producing countries.7 External sustainability is particularly important for exhaustible natural-resource producers like Cameroon. Cameroon may anticipate future resource depletion and a decline in resource export. In such a case, it is recommended to maintain a foreign asset cushion in order to mitigate external shocks, and to manage NFAs accordingly (IMF, 2012).8 In the case of oil producers, where oil represents a relatively small share of economic activity, like in Cameroon, it is important to also account for oil imports and to rely on net oil exports to evaluate external sustainability. While oil exports are projected to represent close to 10 percent of GDP in 2019, net exports are projected to represent about 5 percent of GDP by the same year (Figure I.7). For this exercise, Cameroon’s petroleum reserves are assumed to be completely exhausted in 20 years and the current account norm assumes that part of oil revenues are saved to provide a constant real annuity over time.

Figure I.7.
Figure I.7.

Cameroon: Oil Exports and Imports, 2007–19

(Percent of GDP)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Sources: IMF African Department Database; IMF Notice System (INS); and IMF staff estimates.

13. This adjusted “Bems-Carvalho” ES approach suggests the REER was overvalued by 18 percent at end-2013. The results from this method have fluctuated since the 2011 between 13 and 18 percent. The corresponding current account norm under this scenario is a 4.1 percent current account surplus by 2019. This result, however, should be considered in light of the fact that international capital market imperfections and urgent development needs create an argument for countries to invest in domestic infrastructure instead of investing in domestic savings. In other words, when external borrowing is constrained, the optimal response to a natural resource windfall implies a smaller current account surplus than otherwise. However, investment inefficiencies and absorptive capacity constraints imply that the ability of domestic investment is limited in acting as a domestic savings mechanism, consequently justifying larger current account surpluses. In either case, the transitory nature of oil revenues in Cameroon would suggest investing a larger proportion of these revenues in safe assets with reasonable yield, be it abroad or domestically. In the preliminary external assessment for CEMAC in 2014, the REER was overvalued 12.7 percent for this approach.

14. Taken together, the above results indicate that, on balance, Cameroon’s REER appears somewhat overvalued, confirming last year’s exchange rate assessment. The above results are sensitive not only to the prevailing macroeconomic assumptions, but also to the hypotheses each approach uses, such as the level of elasticity of the current account to the real exchange rate. All things considered, maintaining Cameroon’s NFA position would require reducing the current account deficit and therefore implies an overvalued REER. This argument is strengthened if Cameroon saves some of its windfall oil revenues. From this perspective, it is important to bear in mind that the underlying current account deficit is a function of Cameroon’s competitiveness, which is function of factors beyond the REER. Correspondingly, improving Cameroon’s competitiveness could reduce the current account deficit and help the country save some of its transitory petroleum revenues. The next section assesses Cameroon’s structural competitiveness using non-price indicators.

C. Assessment of Structural Competitiveness

15. Competitiveness is defined by the World Economic Forum as the set of institutions, policies, and factors that determine the level of productivity of a country. It can be measured with non-price indicators, in addition to price indicators. This section presents survey data that compare Cameroon on the structural determinants of external competitiveness. The surveys considered in this section include: the World Economic Forum’s Global Competitiveness Index (GCI); the Heritage Foundation indicators of economic freedom; the World Bank’s Doing Business indicators; and the Country Policy and Institutional Assessment (CPIA).

16. According to the 2013–14 GCI report, Cameroon ranks 115th of 148 surveyed countries. It has lost three places since the previous report, but maintained a score of 3.7 out of 7. Within sub-Saharan Africa (SSA), Cameroon ranks 12th out of 34 countries, above the region’s average and median (Table I.1). Cameroon also obtained higher scores than the SSA average on three sub-indices: basic requirements; efficiency enhancers and factors of innovation; and sophistication.

Table I.1.

Cameroon and SSA: Global Competitiveness Index, 2013–14

article image
Source: World Economic Forum, The Global Competitiveness Report, 2014.

17. The report identifies the same five major constraints as last year: corruption, access to financing, inadequate infrastructure, government bureaucracy, and tax regulations (Figure I.8). Notably, despite the authorities’ efforts, corruption still tops the list followed by poor access to financing.

Figure I.8.
Figure I.8.

Cameroon: Problematic Factors for Doing Business, 2013—14

(Percent of responses)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Source: World Economic Forum, 2013–14.

18. Similarly, according to the Heritage Foundation, Cameroon continued to score below the world average. Areas for improvement are freedom from corruption and the protection of property rights, despite some marginal reforms. Cameroon’s total score improved slightly in 2013, from 52.3 to 52.6 out of 100, reflecting gains in trade and fiscal freedom (Table I.2). In spite of this, Cameroon slipped in the Foundation’s rankings from 133 to 136, losing three places for the second year in a row. Cameroon’s index qualifies the economy as “mostly unfree.” Half of the ten Heritage Foundation indicators of economic freedom deteriorated in the course of the year, including property rights, investment freedom, and monetary freedom.

Table I.2.

Cameroon: Index of Economic Freedom, 2012–14

article image
Source: Heritage Foundation.

Scale (low-high): 0 − 100.

19. Cameroon’s business climate, as measured by the 2014 World Bank Doing Business indicators, has deteriorated. Its rank is lower than the average for SSA (Table I.3, Figure I.9). The country lost six places in 2014, slipping to the 168th place (out of 189). Cameroon has made it easier to obtain a building permit by decentralizing the process and by introducing time limits, but the notification and inspection requirements have more than offset those improvements. Although Cameroon’s ranking has improved marginally with respect to registering property, the country’s rating has deteriorated significantly regarding construction permits, starting a business, and getting credit. The country’s 175th ranking with respect to enforcing contracts reflects the 800 days needed to resolve a legal dispute versus 652 days on average in SSA (and 42 procedures to enforce a contract versus 39).

Table I.3.

Cameroon: Doing Business Indicators, 2013–14

(Rank)

article image
Source: Doing Business Indicators, World Bank, 2014.
Figure I.9.
Figure I.9.

Cameroon: Doing Business Indicators, 2014

(Rank)

Citation: IMF Staff Country Reports 2014, 212; 10.5089/9781498342636.002.A001

Source: Doing Business Indicators, World Bank. 2014.

20. Cameroon’s Country Policy and Institutional Assessment (CPIA) score of 3.2 was in line with SSA average and above the average of the CEMAC (2.9) in 2012 (Table I.4). Although Cameroon’s scores in major areas exceed the scores of the CEMAC and are strong in economic management compared with SSA, they lag SSA in policies for social inclusion. Areas for improvement are in property rights, rule-based governance, transparency, accountability, and corruption.

Table I.4.

Country and Policy Institutional Assessment Index, 2011–121

article image
Source: World Bank, CPIA Africa Report, 2013.

Scale (low-high): 1–7.

CEMAC excludes Gabon and Equatorial Guinea because of data unavailabity.

Annex II. Cameroon: Risk Assessment Matrix1

article image
1

The poverty threshold is the adult-equivalent, per person income of CFAF 738, which corresponds to the 2007 price of a basic basket of goods.

2

A new Senate was elected in May 2013, and a National Assembly and municipal councils were elected in September 2013.

3

A law was adopted in 2013 to provide investment incentives through generous tax exemptions, without restricting these exemptions to new investments of strategic importance.

4

The exchange arrangement of the CEMAC countries is a conventional pegged arrangement of the CFA franc vis-à-vis the euro.

5

Ten enterprises paid 55 percent of all corporate taxes in 2013.

6

For an analysis of fiscal sustainability predicated on the NOPD, see Appendix III to IMF Country Report 12/237.

7

For a discussion of fuel subsidy reform, see Appendix I to IMF Country Report 13/279.

1

This annex was prepared by Jean-Philippe Stijns (formerly IMF), Kwame Tweneboah Kodua, Samuel Fahlberg, and Jean van Houtte. It uses an Excel template developed by Nikoloz Gigineishvili, and benefited from comments from Aleksandra Zdzienicka.

2

The external stability assessment of the CEMAC (IMF Country Report No. 13/322, 2013) found that the real effective exchange rate (REER) was overvalued, but was within the margin of error, indicating that the REER was broadly consistent with equilibrium under current policies, while reserves remained adequate.

3

IMF Country Report No. 13/279, Appendix III, 2013.

4

The current account elasticity is calculated as: (export elasticity) x (export-to-GDP ratio)-(import elasticity − 1) x (import-to-GDP ratio).

5

Tokarick, S., “A Method for Calculating Export Supply and Import Demand Elasticities”, IMF Working Paper No. 10/180, July 2001; Washington, DC, 2010.

6

The panel regression model to estimate the LREER for Cameroon was incomplete owing to data unavailability.

7

See Bems, Rudolfs, and Irineu de Carvalho Filho, “Exchange Rate Assessments: Methodologies for Oil-Exporting Countries,” IMF Working Paper No.09/281, Washington, DC, 2009.

8

IMF Policy Paper, “Macroeconomic Policy Frameworks for Resource-Rich Developing Countries,” Washington, DC, August 24, 2012.

1

The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood of risks listed is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability of 30 percent of more). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly.

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Cover IMF Staff Country Reports
Cameroon: Staff Report for the 2014 Article IV Consultation
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2014: Issue 212
Publisher:
International Monetary Fund
ISBN:
9781498342636
ISSN:
1934-7685
Pages:
71
DOI:
https://doi.org/10.5089/9781498342636.002
  • Figure 1A.
    View in gallery
    Figure 1A.

    Cameroon: Nominal GDP by Sector, 2013

    (Percent)

  • Figure 1B.
    View in gallery
    Figure 1B.

    Cameroon: Electricity Production Capacity, 2009–18

    (Megawatts)

  • Figure 2.
    View in gallery
    Figure 2.

    Cameroon: Selected Economic Indicators, 2009–19

  • Figure 3.
    View in gallery
    Figure 3.

    Cameroon: Public Expenditure by Function 2008–12

    (Percent of GDP)

  • Figure 4.
    View in gallery
    Figure 4.

    Cameroon: Selected Oil Production Indicators, 2009–19

    (CFAF billions)

  • Figure 5.
    View in gallery
    Figure 5.

    Selected African Countries: Gross Government Debt, 2010–19

    (Percent of GDP)

  • Figure I.1.
    View in gallery
    Figure I.1.

    Cameroon: Current Account Balance Components, 2002–19

    (Percent of GDP)

  • Figure I.2.
    View in gallery
    Figure I.2.

    Cameroon: National Accounts Components, 2002–13

    (Percent of GDP)

  • Figure I.3.
    View in gallery
    Figure I.3.

    Cameroon: Market Share in CEMAC and SSA, 1990–2013

    (Percent)

  • Figure I.4.
    View in gallery
    Figure I.4.

    Cameroon: Effective Exchange Rates and Terms of Trade, 1994–2013 (REER and NEER 1994=100)

    (TOT 2005=100)

  • Figure I.5.
    View in gallery
    Figure I.5.

    Non-Oil Current Account Balance, 2000–13

    (Percent of GDP)

  • Figure I.6.
    View in gallery
    Figure I.6.

    Cameroon: Required Change in the REER to Bring it to Equilibrium Level

    (Percent change)

  • Figure I.7.
    View in gallery
    Figure I.7.

    Cameroon: Oil Exports and Imports, 2007–19

    (Percent of GDP)

  • Figure I.8.
    View in gallery
    Figure I.8.

    Cameroon: Problematic Factors for Doing Business, 2013—14

    (Percent of responses)

  • Figure I.9.
    View in gallery
    Figure I.9.

    Cameroon: Doing Business Indicators, 2014

    (Rank)

Figure 1A.

Cameroon: Nominal GDP by Sector, 2013

(Percent)
Figure 1B.

Cameroon: Electricity Production Capacity, 2009–18

(Megawatts)
Figure 2.

Cameroon: Selected Economic Indicators, 2009–19
Figure 3.

Cameroon: Public Expenditure by Function 2008–12

(Percent of GDP)
Figure 4.

Cameroon: Selected Oil Production Indicators, 2009–19

(CFAF billions)
Figure 5.

Selected African Countries: Gross Government Debt, 2010–19

(Percent of GDP)
Figure I.1.

Cameroon: Current Account Balance Components, 2002–19

(Percent of GDP)
Figure I.2.

Cameroon: National Accounts Components, 2002–13

(Percent of GDP)
Figure I.3.

Cameroon: Market Share in CEMAC and SSA, 1990–2013

(Percent)
Figure I.4.

Cameroon: Effective Exchange Rates and Terms of Trade, 1994–2013 (REER and NEER 1994=100)

(TOT 2005=100)
Figure I.5.

Non-Oil Current Account Balance, 2000–13

(Percent of GDP)
Figure I.6.

Cameroon: Required Change in the REER to Bring it to Equilibrium Level

(Percent change)
Figure I.7.

Cameroon: Oil Exports and Imports, 2007–19

(Percent of GDP)
Figure I.8.

Cameroon: Problematic Factors for Doing Business, 2013—14

(Percent of responses)
Figure I.9.

Cameroon: Doing Business Indicators, 2014

(Rank)