Cameroon : Requests for Disbursement Under the Rapid Credit Facility, Extension of the Extended Credit Facility Arrangement, and Rephasing of Access—Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Cameroon
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International Monetary Fund. African Dept.
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Publication Date:
04 Jun 2020
eISBN:
9781513546339
Language:
English
Keywords:
ISCR; CR; arrears policy; staff appraisal; financing; IMF staff estimate; debt service; BOP financing need; financing gap; CFAF billion; COVID-19; Oil sector; Oil; gas and mining taxes; Global
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Requests for Disbursement Under the Rapid Credit Facility, Extension of the Extended Credit Facility Arrangement, and Rephasing of Access-Press Release; Staff R

Abstract

Requests for Disbursement Under the Rapid Credit Facility, Extension of the Extended Credit Facility Arrangement, and Rephasing of Access-Press Release; Staff R

Background

1. The Covid-19 pandemic creates urgent BOP and fiscal needs and the authorities have requested the Fund’s financial assistance through the RCF. The authorities’ immediate priority is to boost health and social protection spending and use counter-cyclical fiscal policy to limit the spread of the disease in Cameroon and its humanitarian, economic, and financial impact. The government’s preparedness and response plan envisages scaling up health spending to ensure infection prevention and control, improve case management, upgrade health facilities, train and increase health personnel. The government is committed to prevent a collapse in revenue collection through various measures. Measures to mitigate the negative financial impact of the COVID-19 pandemic on the private sector are also being considered, including strengthening social safety nets, subsidizing basic medications, and providing support to affected companies.

Pre-COVID-19 Economic Developments

2. The pandemic shock hit as the authorities were seeking to strengthen fiscal and external buffers and manage risks to the economy (Country Report No 20/48). Growth in 2020–22 was expected to remain relatively stable after declining to 3.9 percent in 2019. The authorities were encouraged to broaden the non-oil revenue base and to urgently address systemic financial and fiscal risks associated with the state-owned oil refinery (SONARA), including by reprofiling its bank debt. Continued fiscal consolidation and efforts to repatriate export proceeds were expected to help strengthen buffers over the medium-term. These efforts were also needed to stabilize and then reverse the public debt trajectory and maintain debt service at sustainable levels. The external risks that could have affected growth were related primarily to uncertainty from international trade tensions, slower global growth, and the persistent volatility of commodity prices. Domestically, a further deterioration of the security situation in the two Anglophone regions could have undermined the fiscal consolidation efforts underway and the implementation of reforms. Nevertheless, the non-oil sector was set to remain strong and help mitigate the negative impact of some shocks.

Impact of the COVID-19 Pandemic

3. Cameroon is already feeling a severe impact from the Covid-19 pandemic, which will slow economic growth in 2020 (Text Table 1). GDP growth is projected to fall sharply to -1.2 percent or about 5 ppt below the pre-pandemic projection. The pandemic has led to a substantial deterioration in the global economic environment, reflecting a combination of global supply and demand shocks. On top of the large expected spillovers from the external shock to Cameroon, the country is facing a rapid increase of the number of infected persons. The pandemic is expected to create further disruptions in production factors (both capital and labor), as well as a credit retrenchment and economic losses from fatalities and adverse confidence effects. While an agreement with regards to reprofiling SONARA’s domestic bank debt has become more likely with the introduction of a new price structure, further delays would pose a risk to the capital and liquidity situation of banks.

Text Table 1.

Cameroon: Selected Economic Indicators

(percent change yoy, unless otherwise indicated)

article image
Source: Cameroonian authorites and IMF staff estimates

The decline in current expenditure is partly driven by lower fuel subsidies due to the decline in the international oil price, which partly offsets the increase in health spending and other subsidies and transfers.

4. The Covid-19 pandemic has given rise to an urgent BOP need as the external accounts are severely affected through a range of channels. The resulting BOP financing need is assessed to be some CFAF 628 billion, 2.8 percent of GDP (see Text Table 2). As a result of the pandemic shock, a strong decline in growth of main trading partners coupled with a broad-based commodity price collapse are expected to worsen Cameroon’s trade balance further. With Europe and Asia making up more than 80 percent of Cameroon’s foreign demand for goods and price declines in Cameroon’s key commodities such as crude oil, natural gas and cocoa, the slump in exports is expected to far outweigh any contraction in imports due to slowing domestic demand. Furthermore, imports related to health expenditure will likely increase. While the primary income account is expected to improve due to lower repatriated profits in the oil sector, inflows of remittances (1.6 percent of GDP in 2018) would likely weaken as has happened in previous global crises. With global financial conditions tightening and high uncertainty about the shock and its impact depressing investment sentiment, FDI and short-term capital flows are also expected to take a hit.

Text Table 2.

Cameroon: COVID-19 Financing Needs in 2020

article image
Sources: Cameroon authorities; and staff calculations.

The disbursement of the AfDB budget support loan was moved from 2019 to early 2020.

The actual 2019 BEAC gross foreign assets (GFA) turned out higher than the 5th review projection by CFAF 35 billion

5. The increase in 2020 fiscal financing needs related to the pandemic are estimated at CFAF 497 billion (2.2 percent of GDP). The overall 2020 fiscal deficit (cash basis) will deteriorate to 5 percent of GDP, from 2.8 percent of GDP in the pre-virus baseline (Text Table 1). This reflects lower oil revenue (0.7 percent of GDP) and non-oil revenues (0.6 percent of GDP) due to the decline in oil exports and domestic activity, respectively. The package of containment measures (social distancing and partial confinement) is expected to severely hit growth in individual sectors, in particular agriculture, commerce, construction, manufacturing, restaurants and hotels, transportation, and tourism. Revenues are projected to drop by about 14 percent relative to the pre-virus baseline, particularly international trade taxes and customs duties, direct taxes and VAT. To mitigate the severity of the shock, the authorities are considering allowing companies to defer payments of tax penalties and granting a tax moratorium to companies facing extreme and clear difficulties.

Cameroon. Fiscal Performance Before and After the Shock

(percent of GDP)

Citation: IMF Staff Country Reports 2020, 185; 10.5089/9781513546339.002.A001

Cameroonian authorities and IMF staff estimates.

6. On the expenditure side, savings from lower oil import prices partly offset an increase in crisis-related costs. The decline in international oil prices will create room to reduce fuel subsidies by an estimated 0.5 percent of GDP and partly offset the increase in other current expenditures, which will rise by 0.8 percent of GDP, driven by health and social spending. Under the WEO oil price assumptions, 2020 non-tax revenue could outperform by at least CFAF 20 billion (0.1 percent of GDP) as the price of imported refined oil (including taxes, margin, and fees) falls below the fixed pump price. However, Staff did not include this possible windfall in its projections given the increased oil price volatility. The authorities are also considering subsidies to mitigate the burden on affected businesses. They plan to press on with the 2020 drawing plan on committed external project loans to avoid any contractionary impact on growth.

7. Budget support through the proposed RCF will cover less than a third of the financing needs and is expected to catalyze additional support from IFIs. The proposed access of 60 percent of quota (CFAF 136 billion) represents 33 percent of the estimated residual external financing gap of CFAF 410 billion, after taking into account a projected slight drop in external disbursements (CFAF 25 billion), a decumulation of government deposits at the BEAC of CFAF 60 billion, and a shift of some budget support from 2019 to 2020 in the amount of CFAF 53 billion (Text Table 2). On the external side, the BEAC gross foreign assets are projected to decline by CFAF 165 billion (US $280 million) compared to projections at the 5th review. The authorities are also expected to receive additional support from other donors (World Bank, AfDB, France, BCEAC) which should fill some of the remaining needs (CFAF 274 billion). Cameroon could also unlock potential financing by taking advantage of its eligibility to the G20 debt moratorium. Any remaining needs would need to be covered through policy adjustment.

8. Downside external and domestic risks to the baseline are relatively high. The global outlook (G-RAM) accounts for several downside external risks including a more severe Covid-19 pandemic causing widespread and prolonged disruptions to economic activity both directly, through global trade and supply chain spillovers, and via confidence effects on financial markets and investment. The global economic outlook is grounded on the temporary nature of the pandemic and the beginning of a recovery from the second half of 2020. Additionally, large swings in energy prices constitute an increased source of risks, especially with uncertainty in the OPEC+ alliance. Domestically, a significant expansion of the local outbreak of the Covid-19 pandemic or a more persistent impact of the shock, could have sizeable effects on Cameroon, inflicting casualties and sharper fall of economic growth, with sizeable additional financing needs. Socio-political tensions as well as fiscal, financial and debt sustainability risks related to SOEs such as a failure to turnaround SONARA’s performance, could curtail the authorities’ ability to accommodate a local outbreak of the pandemic. If downside risks materialize, the authorities would likely need to identify additional measures to ensure that debt is sustainable.

Policy Issues

The authorities’ immediate priority is to stop the expansion of the pandemic and limit its humanitarian, economic, and financial impact. Beyond this short-term objective, the government remains committed to its medium-term reform agenda after the crisis passes.

9. The government of Cameroon is taking steps to limit the spread of the pandemic and alleviate its socio-economic impact.

  • A Preparedness and Response Plan envisages increased health spending to ensure adequate infection prevention and control and improved case management. The plan aims to (i) strengthen epidemiological surveillance through mass screening; (ii) improve the provision of medical care to positive cases by upgrading hospitals’ technical capacities and supply of medications; (iii) mitigate the community spread of Covid-19 through social distancing; (iv) improve the coordination of Covid-19 measures. The plan’s total cost is estimated at CFAF 58 billion (text table below).

  • Measures to mitigate the negative financial impact of the COVID-19 pandemic on the most vulnerable include strengthening existing social safety nets and providing support to affected businesses and households. The measures will be spelled out in a global response plan that is currently under preparation.

Text Table 3.

Cameroon: Preparation and Response Plan to COVID-1 9, 2020

(Summary of budgetary impact)

article image

10. The authorities intend to mitigate the significant revenue loss in 2020 from the Covid-19 pandemic. Although the expected bounce-back of economic activity in 2021 will help, the government is committed to support work on tax and customs administrations in order to limit revenue losses and support hard-hit taxpayers, notably by:

  • Facilitating e-filing and payment obligations by expanding on-line/web services to taxpayers;

  • Offering extended payment arrangements to enterprises that are experiencing cash flow problems;

  • Establishing “mobile payment” options for tax and non-tax payments;

  • Ensuring continuity of trade processing and sufficient on-site presence/control by customs to protect revenue and the borders;

  • Designing and implementing simplified and (very) quick release procedures to clear goods deemed necessary for immediate critical needs;

  • Strengthening in 2021 the collection of deferred tax penalties and payments under moratorium from 2020 by signing and enforcing a protocol specifying the deadlines by which payments will have to be made.

11. The regional central bank (BEAC) Monetary Policy Committee (CPM) recently announced a package of monetary easing measures: The BEAC loosened its monetary policy stance, narrowed its interest rate corridor, increased its liquidity provision, and widened the range of private financial instruments accepted as collateral for monetary policy operations. The CPM also encouraged BEAC’s management to propose to its Board a reduction in haircuts applicable to public securities and private instruments accepted as collateral for refinancing operations, and to postpone by one year principal repayment of consolidated central bank’s credits to member states. Likewise, the CPM recalled that the BEAC made available to the Development Bank of the Central African States (BDEAC) a financing line of FCFA 90 billion to finance public investment projects and invited the latter to make use of it. The CPM also recommended that banks ensure continuity of financial services, including provision of cash through ATMs, strengthen operations of remote banking and reduce banking services costs. The banking association of Cameroon has also taken the initiative for banks to maintain short term credits to the real economy but expects that the government will not increase domestic arrears.

12. The government is considering measures to manage the medium-term impact of the twin pandemic and terms of trade shocks. Following the Covid-19 shock, Cameroon has accumulated a small amount of arrears to official and private creditors. The authorities have cleared these arrears. They are actively considering the G20 moratorium on bilateral government loan repayments for lower income countries to tackle the coronavirus pandemic, which could alleviate debt service by up to CFAF100 billion in 2020. They are in discussion with the World Bank about the doubling of its budgetary support to USD200 million. The authorities are actively seeking concessional financing from development partners and are committed to avoid new non-concessional borrowing. Allowing for new non-concessional borrowing (NCB) would further weaken already compromised debt sustainability, go against the authorities’ interest and undermine their efforts to secure the international community’s support in an environment in which the G-20 just agreed on debt service suspension on bilateral government loans for low-income countries. The authorities have identified so far about CFAF229 billion of expected financing from development partners (World Bank, AfDB, France, and BDEAC). Efforts to accelerate export diversification while maintaining debt sustainability are also being continued through a range of initiatives with financial and technical support from the World Bank and the EU.

Fund Support Under the Rapid Credit Facility

13. Cameroon meets the eligibility requirements for support under the RCF as:

  • Discussions on the sixth review under the ECF and reaching new understandings with the authorities will take additional time given the current uncertainty regarding the duration and scale of the COVID-19 pandemic. Based on partial and preliminary data at least half of the performance criteria and indicative targets for end-December 2019 (test date) have been missed. Given that it is not feasible to complete the last (sixth) review by the expiration of the current arrangement on June 25, 2020, the authorities are requesting that the ECF arrangement be extended to end-September 2020, and the availability date for the sixth review (seventh disbursement) under the ECF arrangement be moved from May 31, 2020 to July 25, 2020. This would allow for an RCF request of 60 percent of quota within the normal PRGT access limits. Given the expected delay in concluding the sixth review and the urgency of BOP needs, support under the RCF is warranted. Cameroon meets the criteria for support under the RCF as it has urgent balance of payments needs that, if not addressed would result in an immediate and severe disruption; the BOP needs are not caused by a withdrawal of donors; and Cameroon lacks capacity to implement a upper credit tranche (UCT) program owing to the urgent nature of its BOP needs.

  • Cameroon is assessed at high risk of debt distress; however debt remains sustainable. The DSA, dated February 2020, showed debt to be sustainable and the updated DSA, incorporating the Covid-19 pandemic shock, suggests that while risks have increased it continues to remain sustainable conditioned on the availability of concessional resources and avoidance of additional NCB (see Annex I).

  • Cameroon’s capacity to repay the Fund remains strong. A disbursement of 60 percent of quota would result in Fund exposure to Cameroon of 2.3 percent of GDP in 2020 (Table 5). Annual repayments will remain below 0.4 percent of GDP over the 2020–34 period and should peak at 0.3 percent of GDP and 2.1 percent of government revenue in 2026.

  • Staff has confidence that the authorities will cooperate with the Fund and pursue economic policies appropriate for addressing the impact of the virus, based on the country’s track record of economic policies and relations with the Fund. The authorities have committed to ensure that the financial assistance received will be subject to the application of budgetary procedures and controls, including audits in strict compliance with the provisions of the Law on the Code for Transparency and Good Governance in Public Finance Management in Cameroon and the Law on the Financial Regime for the Government and Other Public Entities, all enacted in July 2018 under the ECF-supported program.

  • Cameroon has an existing ECF arrangement approved on June 26, 2017, with an access level of 175 percent of quota. Access of 60 percent of quota, together with a rephasing of the availability date of the final 20 percent of quota disbursement of the sixth and final review beyond July 25, 2020, would place Cameroon at 100 percent of quota annual access normal limit and below 300 percent of the cumulative three years limit.

Table 1.

Cameroon: Selected Economic and Financial Indicators, 2018–25

(CFAF billion, unless otherwise indicated)

article image
Sources: Cameroonian authorities; and IMF staff estimates and projections using updated nominal GDP.

Percent of broad money at the beginning of the period.

Table 2a.

Cameroon: Central Government Operations, 2018–25

(CFAF billion, unless otherwise indicated)

article image
Sources: Cameroonian authorities; and IMF staff estimates and projections with updated nominal GDP.

Other arrears include the stock of unstructured debt that is held by CAA and the "floating" domestic debt at the Treasury as defined in the TMU. The payments of arrears are adjusted starting end-2018 and the stock of unpaid government obligations is adjusted starting end-2016 to reflect these operations.

Table 2b.

Cameroon: Central Government Operations, 2018–25

(In percent of GDP)

article image
Sources: Cameroonian authorities; and IMF staff estimates and projections with updated nominal GDP.

Other arrears include the stock of unstructured debt that is held by CAA and the "floating" domestic debt at the Treasury as defined in the TMU. The payments of arrears are adjusted starting end-2018 and the stock of unpaid government obligations are adjusted starting end-2016 to reflect these operations.

Table 3.

Cameroon: Balance of Payments, 2018–25

(CFAF billion, unless otherwise indicated)

article image
Sources: Cameroonian authorities; and IMF staff estimates and projections.
Table 4.

Cameroon: Monetary Survey, 2018–25

(CFAF billion, unless otherwise indicated)

article image
Sources: BEAC; and IMF staff estimates and projections.

Credit to the economy includes credit to public enterprises, financial institutions and the private sector.

Table 5.

Cameroon: Indicators of Capacity to Repay the Fund, 2020–33

article image
Source: IMF staff estimates and projections.

On May 24, 2019 the IMF Executive Board approved a modified interest rate setting mechanism which effectively sets interest rates to zero on ECF and SCF through June 2021 and possibly longer. The Board also decided to extend zero interest rate on ESF till end June 2021 while interest rate on RCF was set to zero in July 2015. Based on these decisions and current projections of SDR rate, the following interest rates are assumed beyond June 2021: 0/0/0/0 percent per annum for the ECF, SCF, RCF and ESF, respectively. The Executive Board will review the interest rates on concessional lending by end-June 2021 and every two years thereafter.

Total debt service includes IMF repurchases and repayments. Quota (in SDRs) 276,000,000

Sources: Cameroonian authorities; and IMF staff estimates and projections using updated nominal GDP.

14. Resources will be channeled to the Treasury by the BEAC. RCF disbursements will be disbursed to the BEAC and be on-lent to the government to provide urgent budgetary financing. The BEAC has implemented most recommendations from the 2017 safeguards assessment. In particular, the alignment of the BEAC’s secondary legal instruments with its Charter was recently concluded, and work is advancing as planned on the full transition to IFRS for FY 2019.

Staff Appraisal

15. Cameroon is being adversely affected by the Covid-19 pandemic. Externally, Cameroon is exposed to demand and supply shocks due to the slowdown of major trading partners (China and Europe) and falling commodity prices. Domestically, containment efforts to slow the number of Covid-19 cases, which have increased rapidly since March 6, 2020, are expected to further slow growth and widen the fiscal and balance of payment deficits. The health system is weak and unprepared to face a major outbreak.

16. Urgent financing needs are emerging as a consequence of the pandemic and the deterioration of terms of trade. The Covid-19-related financing needs in 2020 are estimated at CFAF 497 billion (2.2 percent of GDP). After taking into account already secured financing and some drawdown of government deposits at the BEAC, the residual needs should reach CFAF 410 billion (1.8 percent of GDP).

17. Staff supports the authorities’ priorities to mitigate the humanitarian and economic impact of the pandemic. Staff welcomes the government’s resolve to implement its preparedness and response plan against the pandemic, with technical and financial support from its development partners. Efforts to prevent a collapse in revenue collection through various measures should be scaled up and measures to mitigate the negative financial impact of the COVID-19 pandemic on the private sector, which could include strengthening social safety nets, subsidizing basic medications, and providing support to affected companies should be effectively implemented.

18. Given limited buffers, staff supports the authorities’ request for financial assistance under the Rapid Credit Facility (RCF) equivalent to 60 percent of quota (SDR 165.6 million or 0.6 percent of GDP), extension of the arrangement and rephasing of access. The funds will be provided to the government under the RCF exogenous shock window in the form of budget support to help close the BoP financing gap. Staff assesses that Cameroon meets the eligibility requirements for the RCF. Public debt is sustainable—contingent on identifying sufficient concessional resources to close the identified financing gaps and avoiding additional NCB—and there is adequate capacity to repay the Fund. Staff supports the authorities’ request for extension of the arrangement under the ECF with rephasing of access, which would provide sufficient time to conclude the discussions and complete the sixth and final review when conditions return to normal.

Table 6a.

Cameroon: Original Schedule of Disbursements Under the ECF Arrangement, 2017–20

article image
Source: IMF staff calculations.

Cameroon’s current quota is SDR 276.0 million, and SDR 427.8 million was outstanding as of April 15, 2020

Table 6b.

Cameroon: Proposed New Schedule of Disbursements Under the ECF Arrangement, 2017–20

article image
Source: IMF staff calculations.

Cameroon’s current quota is SDR 276.0 million, and SDR 427.8 million was outstanding as of April 15, 2020

Appendix I. Letter of Intent

Yaoundé, April 28, 2020

To

Madam Kristalina Georgieva

Managing Director

International Monetary Fund

700 19th Street N.W.

Washington, DC. 20431

USA

Subject: Letter of Intent for access to the Rapid Credit Facility

Dear Madam Managing Director,

1. While the government is continuing to implement its Economic and Financial Program, supported by an Extended Credit Facility (ECF), the COVID-19 pandemic has appeared and is causing a significant impact on Cameroon’s economy, potentially undoing hard-won macroeconomic gains and endangering our development agenda. The economic impact was being felt even before the first case was confirmed on March 5 when trade with China and Europe, Cameroon’s largest partners, was disrupted and our export and service sectors have been hit hard following a grinding halt to imports from and exports to China and Europe, the reduction in tourism and transfers from abroad, the cancellation of multiple large international events (including the Soccer African Nations Championship) that were planned to take place in Douala and Yaoundé during this first semester of this year, and the slowdown in the world’s global growth. The pandemic comes on the back of the negative economic impact of the security crisis in the two anglophone regions as well as in the far-northern region and the suspension of production at the SONARA since it was hit by a fire at end-May 2019.

2. Since the first case of infected person were uncovered in Cameroon, the negative economic impact of the pandemic has accelerated as the number of cases started to climb. To contain and mitigate the spread of the disease, we took on March 17 a set of strict measures including closure of our land, air and sea borders (with the exception of cargo flights and vessels transporting consumer products and essential goods and materials), cancellations of sport competitions, closure of schools, bar and restaurants, and prohibition of the gathering of more than 50 people throughout the national territory. We have also scaled up health care spending to respond to this outbreak.

3. In conjunction with the implementation of these drastic measures, a COVID-19 preparation and response plan has been developed by our Ministry of Public Health with the support of WHO and other local government institutions. The plan includes country-level coordination, case investigation and rapid response, provision of patient care and medical supplies, infection prevention and control, case management, and raising public awareness of the risks posed by the pandemic and prevention methods. At this juncture, the cost of preparedness and response plan is estimated at about CFAF 58.3 billion (about 0.2 percent of GDP).

4. Our country is hit by the COVID-19 at the same time as the collapse of international oil prices. These two shocks, combined, have a major negative impact on Cameroon’s economic activity. Our preliminary projections indicate that real GDP growth could decline from 3.9 percent in 2019 to -1.2 percent in 2020 —down from a pre-pandemic projection of 3.8 percent at the time of the 5th review of the ECF arrangement—owing to the various channels through which the COVID-19 pandemic is affecting economic activities, particularly the closing of our borders and the restrictions imposed on the movement of the population. Despite the disruption of the food supply channels, inflation is expected to rise moderately due to multiple factors that are dampening domestic demand.

5. We are experiencing significant deterioration in our external sector position. The projected decline in international oil prices, global demand of our non-oil exports, tourism receipts and current transfers (including remittances) are expected to widen our current account by 2 percentage point of GDP. This rise in current account deficit, together with projected decline in non-official capital inflows, will generate an additional external financing gap estimated at 2 percent of GDP in 2020.

6. The dramatic fall in oil prices, the slowdown in economic activity, and the implementation of measures to limit the spread of the pandemic have a strong negative impact on fiscal revenues, while expenditures are increasing, in particular to implement our anti-pandemic response plan, meet basic health care needs, and support the most vulnerable segments of the population. The uncertainties about the duration and extent of the pandemic is complicating a full assessment of the full impact of the two shocks on public finances. We currently expect a shortfall in total domestic revenue of 1.3 percentage point of GDP in 2020, compared to the pre-COVID-19 projections. To cope with the pandemic, the government has intensified the tightening of controls over spending and initiated a reassessment of its investment program to reprioritize projects and free up room for the funding of expenditures related to COVID-19 and support hard-hit private-sector enterprises and vulnerable groups. Despite these measures and the automatic drop in budgeted pump price subsidies, the pandemic shock has generated immediate fiscal needs close to CFAF 400 milliards for 2020 (about US$700 million).

7. Against this background, and in the face of the urgent fiscal and balance of payments needs arising from the two exogenous shocks and the need to limit the negative impact of the shocks on poverty and growth, the Government of Cameroon requests emergency financing from the IMF under the Rapid Credit Facility (RCF) in the amount of SDR165.6 million, equivalent to 60 percent of our quota, to ease the pressure on our fiscal resources and official foreign reserves. We are confident that IMF involvement in the international effort to assist Cameroon in dealing with the economic fallout from the global pandemic will play a catalytic role in securing additional financing from our development partners, particularly to cover urgent needs to upgrade our health system. We commit also to strengthen our efforts to seek additional financial assistance from donors, either in the form of grants or concessional loans.

8. We will ensure that the financial assistance received is used for the intended purposes, in strict compliance with the provisions of the Law on the Code for Transparency and Good Governance in Public Finance Management in Cameroon and the Law on the Financial Regime for the Government and Other Public Entities, all adopted in July 2018. For this purpose, the funds linked to COVID-19 will be subject to the strict application of the budgetary procedures and controls provided for by the above Laws. In addition, we commit to issue a semi-annual report on COVID-19 related spending and to commission an independent audit of this spending at the end of the 2020 fiscal year and publish the results. We also commit to publishing documents relating to the results of public procurement awarded by the government and the beneficial ownership of companies receiving procurement contracts on COVID-19 related expenditures. In the meantime, such COVID-19 related expenditures are being incorporated in a supplementary budget in preparation and expected to be presented to the Parliament in June 2020

9. We remain firmly determined in fulfilling our commitments made in our January 7, 2020 Letter of Intent for the fifth review and committed to the ECF-supported program. However, the impact of the pandemic on the economic outlook and the accompanying restrictions make completing the sixth review of the ECF arrangement difficult at this juncture. Maintaining macroeconomic stability, strengthening the fiscal revenue base, improving spending efficiency, fostering good governance, and promoting the formal private sector are still key goals. The government will ensure that the support and assistance measures taken as part of the response to COVID-19 do not prejudice the mobilization of tax revenues in the medium and long term. The government is committed to observe fiscal transparency by enshrining the measures in a revised budget. Moreover, the government will not introduce measures or policies that would compound its BoP difficulties or introduce any new exchange or trade restrictions. Due to the delay in the completion of the sixth review under the ECF arrangement and to allow for an RCF request of 60 percent of quota, we request that (i) the ECF arrangement be extended from June 25, 2020 to September 30, 2020 and; (ii) the availability date for the sixth review (seventh disbursement) under the ECF arrangement be moved from May 31, 2020 to July 25, 2020.

10. The Cameroon government will continue to maintain a constructive dialogue with the IMF and will provide the Fund staff with all the data and information necessary to evaluate our policies, including those taken under the access to the RCF. We agree to cooperate with the IMF in relation to any update safeguards assessment of the BEAC to be carried out by the IMF. We further authorize the IMF to publish this Letter and the staff report for the request for disbursement under the RCF.

Sincerely yours,

/s/

Louis Paul Motaze

Minister of Finance

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Cover IMF Staff Country Reports
Cameroon: Requests for Disbursement Under the Rapid Credit Facility, Extension of the Extended Credit Facility Arrangement, and Rephasing of Access-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Cameroon
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2020: Issue 185
Publisher:
International Monetary Fund
ISBN:
9781513546339
ISSN:
1934-7685
Pages:
42
DOI:
https://doi.org/10.5089/9781513546339.002
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    Cameroon. Fiscal Performance Before and After the Shock

    (percent of GDP)

Cameroon. Fiscal Performance Before and After the Shock

(percent of GDP)