On November 18, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Cameroon1.
The economy has shown resilience in the face of the twin shocks of the oil price slump and heightened security threats, with the robust growth of 2014 continuing into 2015. Growth is broad-based and projected to reach 5.9 percent in 2015, buoyed by increased oil production and the performance of sectors benefiting from the ongoing public investment boom. Annual inflation is projected at 2.8 percent and has not been significantly affected by the 15 percent increase in administered fuel prices on July 1, 2014. Total revenue is projected to increase in 2015, owing to a strong performance in non-oil revenue. However, the fiscal deficit is expected to widen to 5.4 percent of GDP, as revenue mobilization efforts are hampered by the oil price decrease and capital expenditure increases further. The reliance on foreign financing for investment expenditure, including on non-concessional terms, has resulted in a sharp rise (from a low base) in external public debt, which represented 17.8 percent of GDP at end-2014. The current account deficit, meanwhile, is projected to increase to 5.1 percent of GDP, reflecting lower prices for exports and continued strong imports, driven by the growth in investment. Growth is projected to moderate to 5.2 percent in 2016, as oil production stabilizes. Inflation is projected to remain low, at 2.2 percent, in line with moderate prices trends for key commodity imports and low euro area inflation. The fiscal deficit is projected to rise to 7.2 percent of GDP, reflecting continued strong public investment and increased expenditures to counter security threats. The external current account deficit is projected to rise to 5.3 percent of GDP, as continued strong imports and the terms-of-trade shock of 2015 continue to have an impact. The financial sector remains relatively sound and has excess liquidity, although this has declined since the onset of the oil price shock and the investment boom. At the same time, non-performing loans in the banking sector increased from 10.2 percent in June 2014 to 13.1 percent a year later, with micro-finance institutions showing similar trends. Bank supervision at national and regional levels has improved. The regional supervisor (COBAC) remains vigilant to potential stresses to the financial system arising from protracted low oil prices and possible regional spillovers.
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The medium-term outlook has somewhat deteriorated since the last Article IV consultation, reflecting weaker prospects for oil and other exports, in addition to the security threats. Lower oil revenues and the costs of countering the security threats are expected to reduce fiscal space going forward. Against this background, the overall fiscal deficit is projected to remain above 5 percent of GDP until 2018, after which the public investment program returns to more normal levels and the fiscal balance is projected to improve. The external current account deficit is projected to rise to 5.3 percent of GDP, as continued strong imports and the terms-of-trade shock of 2015 continue to have an impact.
Downside risks to the outlook are primarily on the external side, including a deepening of the oil price slump and an extension of security threats. At the same time, domestic risks, such as contingent liabilities from state-owned enterprises, could have an adverse impact on public finances.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.