Background

1. Cameroon has remained resilient in the face of successive shocks. The post-pandemic recovery, which was also supported by higher oil prices and non-oil production in 2021, continued into 2022, despite an increasingly challenging environment with Russia’s war in Ukraine, inflationary pressures, supply chain disruptions, and tight global financial conditions.

2. As CEMAC’s largest economy, Cameroon continues to play a leadership role in the region. Cameroon accounted for about 60 percent of net foreign assets, 40 percent of the region’s GDP, and around 55 percent of the total population in 2022 (Text Figure 1). The country also contributes significantly to the region’s rebuilding of fiscal and external buffers.

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Cameroon: Share of Economic Activity in CEMAC, 2018–22

(Percent)

Citation: IMF Staff Country Reports 2024, 051; 10.5089/9798400268229.002.A001

Sources: Country authorities and IMF staff estimates.

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3. While Cameroon’s SDG indicators compare well with the SSA averages, it faces significant fragilities and development challenges. More than a quarter of the population lives below the national poverty line, and more than 1 million people were displaced within the country with an estimated 6.2 million people in need of humanitarian assistance in 2020 (source: UN). In addition, Cameroon is faced with low human capital development, an unfavorable business environment hampered by unprofitable SOEs, and low levels of financial inclusion. Drivers of fragility include institutional complexity and governance weaknesses, internal divisions, social exclusion, insurgency, conflicts along borders, and a rising frequency of climate-related natural disasters. Political risks are increasing, with potential regional spillovers.

4. Far-reaching reforms will be needed to raise growth and create jobs, while protecting vulnerable populations. Cameroon’s National Development Strategy (SND-30) lays out the authorities’ policies to address Cameroon’s economic challenges during 2020–30. The strategy envisages increasing the annual growth rate to 8.1 percent on average by 2030, which is ambitious without substantial acceleration in structural reforms. It identifies important priorities, broadly consistent with program objectives, but implementation remains a challenge, including how to achieve structural transformation. Staff cautioned that import substitution strategy—a key pillar to SND-30—leads to inefficiencies and limits competition.

5. Cameroon also faces socio-political tensions in resource-rich regions. The conflict in the two anglophone regions, sporadic Boko Haram attacks in the far North, and insecurity on the eastern border with the Central African Republic (CAR) continue and could reverse improvements in poverty reduction and development outcomes and jeopardize reform implementation. According to the United Nations High Commissioner for Refugees (UNHCR), Cameroon hosts about two million persons of concern, including one million internally displaced persons (IDP), 460,000 refugees and asylum-seekers, and 466,000 IDP returnees.

A. Recent Economic Developments

6. Cameroon’s growth recovery continued in 2023, despite strong external headwinds. Real GDP growth reached 3.6 percent in 2022 on the back of buoyant agroindustry and service sectors and is expected to reach 4 percent in 2023.

7. Inflation remains high and is projected to reach 7.2 percent on average in 2023 but is decelerating. Inflation in Cameroon is mostly driven by rising food prices and inflation expectations coupled with positive demand shocks and negative supply shocks (Annex II).

8. The current account deficit is projected to narrow in 2023 driven by rising gas production and an improved primary income balance. The current account deficit improved to 3.4 percent in 2022 with strong export growth supported by rising natural gas and oil prices due to Russia’s war in Ukraine. Stronger worker remittances have also helped. The current account deficit is projected to narrow to 3.0 percent of GDP in 2023, driven by rising gas production and an improved primary income balance which partly offset the impact of lower oil prices.

9. Cameroon’s external position in 2022 was assessed as modestly weaker than warranted by fundamentals and desirable policies (Annex III). Cameroon’s real effective exchange rate (REER) depreciated by 3.1 percent following the euro’s depreciation against the US dollar, while domestic inflation edged up. The real exchange rate was assessed to be overvalued by 14.5 percent.

10. Cameroon’s fiscal outcomes remained broadly in line with program objectives. While higher oil prices and a weaker CFA franc led to more spending on the fuel subsidy, stronger revenue mobilization and the fuel subsidy carry-over to 2023 helped contain the non-oil primary deficit at 3.9 percent of GDP in 2022 and resulted in a stronger overall deficit relative to the revised budget law. Lower oil prices and a pump price adjustment in early 2023, as well as stronger-than-projected non-oil revenue performance, improved the fiscal balance by mid-2023 and should help reduce the non-oil primary deficit to 2.5 percent of GDP in 2023.

11. The development of the financial sector is hindered by fragilities in the banking system. While the capital adequacy ratio is improving and liquidity ratios are stable at 16.3 and 29.8 percent, respectively, in mid-2023, NPL ratios rose to 15.4 percent of total loans by mid-2023, from 13 percent at end-2022. Moreover, banks’ exposure to the Cameroonian government increased reaching 35.3 percent of total assets in 2022, up from 23 percent in 2019, while being zero-risk weighted by most banks.¹ This has likely crowded out credit to the private sector and continues to present risks to financial stability.

12. Food insecurity has intensified, with climate-related shocks, security issues, and forced displacements. Over three million people were estimated to be severely food-insecure between January and May 2023, a five percent increase compared to the same period in 2022. The authorities are working with the World Food Program (WFP) and other partners to respond to the immediate food and nutrition needs of crisis-affected populations, mainly in the unsecure regions, including through actions to improve the long-term resilience of communities.

13. The 2022 safeguards assessment found that BEAC maintained strong governance arrangements. Since then, the BEAC senior executive management team, the Government, has gone through significant turnover. A safeguards monitoring mission is planned before end-2023 to evaluate continuity in the governance arrangements at the BEAC. In addition, an external quality assessment of internal audit was finalized, and staff will follow up on the resulting recommendations and implementation of the remaining 2022 safeguards recommendations.

B. Outlook and Risks

14. Medium-term macroeconomic conditions are expected to improve gradually. The medium-term outlook remains positive, provided reforms continue and the external environment becomes more supportive, with real GDP growth expected to average 4.4 percent in the medium term. This improvement is driven by the agroindustry, forestry, and services sectors, as well as LNG production, which should partially offset declining oil output. It is also predicated on the successful contribution of the deep-sea port of Kribi, which began operations in October 2020 and should support trade and natural gas sectors. The Memve’ele hydroelectric plant is also expected to help stabilize provision of power to industries. Inflation is expected to remain above the CEMAC convergence criterion in the near term but return to below 3 percent by end 2027. Assuming the global economy strengthens, and oil prices remain high, Cameroon’s non-oil growth rate should exceed 4 percent starting from 2023 and the public debt-to-GDP ratio should remain below 45 percent.

15. The balance of risks is nevertheless tilted to the downside:

• Escalating global geopolitical tensions could have cascading effects on Cameroon. Fluctuations in prices of Cameroon’s key exports (i.e., oil and agricultural exports), directly affect the trade balance while domestic prices bear pressures from imported inflation. Increasing oil prices may raise fuel subsidies and undermine fiscal objectives.

• Global growth prospects could deteriorate further and more abruptly. While the US economy is expected to be strong, Europe could experience a more intense and protracted fallout from Russia’s war in Ukraine, and China could see a sharper-than-expected slowdown with consequences for Cameroon’s trade and investment.

• Social tensions could intensify in the run-up to the 2025 presidential elections. Violence has increased in the extreme-North region. The crisis in the North-West and South-West regions is intensifying with increased outbreaks of violence.

• Further deterioration in regional stability could have spillovers in Cameroon. There are also risks of intra-region cross-country contagion in the banking sector as cross-country holdings of government securities issued by other CEMAC countries are high.

• More frequent climate disasters would have wide ranging impacts on infrastructure, agriculture, and food security. With Cameroon already facing risks of food insecurity, a strong El Niño presents a significant downside risk to food supplies, inflation, displacement of persons, and social stability.

• Risks are mitigated as Cameroon has a strong record of implementing macroeconomic programs, close engagement with donors, and a comprehensive CD program.

C. Program Performance

17. The program remains broadly on track following corrective actions to respect quantitative targets and progress in reform implementation:

• Quantitative performance by June-2023 was broadly on track (Table 9 and MEFP Table 1). Five out of six QPCs were met. The continuous QPC on non-accumulation of external arrears was not met following delayed debt service payments to the European Investment Bank (EIB) in August and September 2023 due to technical errors. A waiver of non-observance is requested due to the minor and temporary nature of the non-observance (i.e., one and five-day delays totaling 0.003 percent of GDP). All arrears have been cleared. Three ITs were breached: the ceilings on the net accumulation of domestic payment arrears, spending through exceptional procedures, and direct interventions of the National Hydrocarbons Company (SNH), owing to growing security challenges in the Northwest, Southwest, and Far North regions, increased cash needs for compensation of fuel importers due to higher-than-projected global oil prices, and weaknesses in cash management. The government is committed to improve the monitoring of expenditures related to direct interventions by SNH. To improve cash management and limit accumulation of domestic arrears, an IT on limiting Treasury advances without budget allocation (MEFP, Table 1) and SB9 (MEFP, Table 2) on including the stock of domestic arrears into the next year’s budget were introduced in the fourth review. In addition, a new SB to improve management of correspondents’ accounts has been introduced to support the authorities’ efforts to strengthen cash management (SB15).

• Preliminary data for end-September 2023 suggest that six out of ten ITs were met (Table 9, and MEFP Table 1). The four breached ITs are the program ceilings on the net accumulation of domestic arrears, on SNH direct interventions, on Treasury advances without a budget allocation (new IT introduced in the fourth review), and the share of spending through exceptional procedures. A continuous QPC on PV of contracting and guaranteeing of new external borrowing was met.

• Progress on structural reforms is ongoing (Table 10, and MEFP Table 2). Of the nine structural benchmarks (SBs) for the fifth review, three were met on schedule, two were implemented with delay, one is expected to be implemented by the Board date (prior action), and three will be rescheduled/reformulated. Three SBs were met on schedule: (i) formulation of an action plan to eliminate CIT holidays and promote healthy competition in the private sector (SB7, October 2023); (ii) introduction of a new PPP framework due end-June 2023; and (iii) increasing the number of VAT taxpayers by end-October 2023. The latter two were met ahead of schedule during the fourth review. Two SBs were implemented with delay, namely SB1 on government payment arrears audits, and SB8 on the modalities for monitoring project management units’ performance, Publication of the governance diagnostic report (SB5) is delayed but expected before the Board date (prior action). Three SBs due end-September are delayed and need to be rephased. The authorities have established an inventory of public enterprises’ debts to the government and to each other and expect to finalize a plan for clearing them (SB2) by April 2024. Also delayed are the publication of the implementing texts of the Mining Code (SB3) and the development of a detailed restructuring plan for SONARA (SB6). SB6 has been reformulated to focus on a feasibility study (SB16).

A. Ensuring Long-Term Sustainable Growth

B. Addressing Macro-Critical Climate Challenges

22. Without strong adaptation measures, climate change is expected to lead to output losses, and exacerbate poverty, inequality, food insecurity and conflicts in Cameroon. Climate-related losses in output will impede export capacity and may increase imports either to cope with food, sanitation, and health needs during crises or to invest in rebuilding after crises. This will increase balance of payments needs and require fiscal space. Social and economic impact would affect human capital accumulation, jeopardize development, and hinder inclusive growth.

23. The mission stressed the need to mainstream climate commitments into the country’s legal and regulatory framework and its budget cycle. Cameroon has signed all key international agreements related to climate change and identifies it as a key challenge for economic growth and development in key strategic documents (SND-30 and Vision 35). However, climate considerations are yet to be effectively integrated into the country’s legal and regulatory framework, and PFM, including fiscal planning and public investment management. The government also faces capacity constraints, lacks an effective coordination mechanism, and has yet to operationalize its institutional and governance frameworks to respond to climate challenges.

24. Cameroon needs to step up both adaptation and mitigation efforts. Cameroon puts emphasis on enhancing adaptation efforts in agriculture and infrastructure. Priority areas outlined in the Nationally Determined Contributions (NDC) include promoting climate-smart agriculture, building resilient energy and transport infrastructure, diversifying energy supply, reducing disaster risks, and improving population awareness and capacity. Under the NDC, Cameroon committed to reduce greenhouse gas emissions by 35 percent by 2035 relative to 2010, including an unconditional target of 12 percent. Phasing out the fuel subsidy will support the authorities’ mitigation efforts.

25. Mobilizing climate finance is an important challenge. In the near term, the main source of climate-related financing will likely remain donor financing. Going forward, Cameroon needs to develop its capital markets to harvest the potential private funding for climate investments and engage the private sector in supporting its climate agenda.

C. Building Fiscal Resilience

Authorities’ Views

29. The authorities agree with the need to continue fiscal consolidation to support sustainability of public finances and remain on a stable public debt path. They, however, emphasize the need to promote economic growth and structural transformation, which requires substantial public investment. They agree with the need to strengthen non-oil revenue mobilization, rationalize public spending, and improve public investment efficiency.

^{Text Table 1.}

Cameroon: Fiscal Performance and Projections

(Percent of GDP)

Source: Country authorities and IMF staff calculations.

^{Text Table 1.}

Cameroon: Fiscal Performance and Projections

(Percent of GDP)

			2022	2023			2024
			Est.	4th Rev.	June	Proj.	4th Rev.	Proj.
Total revenue and grants			15.9	15.9	8.0	16.0	15.5	15.9
	Oil revenue		3.5	2.9	1.5	2.9	2.1	2.5
	Non-oil revenue		12.1	12.7	6.4	12.7	13.1	13.1
	Grants		0.4	0.3	0.0	0.3	0.3	0.3
Total expenditure			17.1	16.7	7.7	16.6	16.1	16.3
	Current expenditure		12.4	11.5	6.1	11.8	10.4	10.9
		Transfers and subsidies	4.2	3.5	1.9	3.5	2.4	2.6
		Interest payments	0.8	1.1	0.5	1.1	1.1	1.0
	Capital expenditure		4.6	5.0	1.6	4.6	5.4	5.3
Overall balance			-1.1	-0.8	0.3	-0.7	-0.6	-0.4
Non-oil primary balance			-3.9	-2.5	-0.7	-2.5	-1.7	-1.9

Source: Country authorities and IMF staff calculations.

View Table

^{Text Table 1.}

Cameroon: Fiscal Performance and Projections

(Percent of GDP)

			2022	2023			2024
			Est.	4th Rev.	June	Proj.	4th Rev.	Proj.
Total revenue and grants			15.9	15.9	8.0	16.0	15.5	15.9
	Oil revenue		3.5	2.9	1.5	2.9	2.1	2.5
	Non-oil revenue		12.1	12.7	6.4	12.7	13.1	13.1
	Grants		0.4	0.3	0.0	0.3	0.3	0.3
Total expenditure			17.1	16.7	7.7	16.6	16.1	16.3
	Current expenditure		12.4	11.5	6.1	11.8	10.4	10.9
		Transfers and subsidies	4.2	3.5	1.9	3.5	2.4	2.6
		Interest payments	0.8	1.1	0.5	1.1	1.1	1.0
	Capital expenditure		4.6	5.0	1.6	4.6	5.4	5.3
Overall balance			-1.1	-0.8	0.3	-0.7	-0.6	-0.4
Non-oil primary balance			-3.9	-2.5	-0.7	-2.5	-1.7	-1.9

Source: Country authorities and IMF staff calculations.

Strengthening Non-oil Revenue Mobilization

30. The authorities remain committed to strengthening domestic non-oil revenue mobilization. The 2024 budget envisages tax and customs policy and administration measures to this effect (Text Table 2). These actions include both policy measures and efforts to further improve revenue administration through stronger control and digitalization, including phasing out of tax exemptions for businesses on interest from government securities, full taxation of benefits in kind, reduction of VAT exemptions on carbonated drinks and introduction of electronic invoice tracking. The authorities also plan non-tax revenue measures to contribute to domestic revenue mobilization. Overall, these measures are estimated to bring about CFAF 113 billion in budget revenue (0.4 percent of GDP).

^{Text Table 2.}

Cameroon: Non-oil Revenue Measures Planned in 2024

(Billion CFAF)

Source: Country authorities, staff calculations

^{Text Table 2.}

Cameroon: Non-oil Revenue Measures Planned in 2024

(Billion CFAF)

Tax policy measures
	Measures related to PIT and CIT	11
	Rationalization of tax expenditures (VAT and excise taxes)	19
	Specific taxes	2
	Property taxes and stamp duties	9
	Customs duties	11
Tax administration measures
	Electronic invoice tracking	15
	Securing customs revenue on imported phones, tablets and digital terminals	15
	Other	11
Non-tax revenue		22
TOTAL		113
	percent of GDP	0.4

Source: Country authorities, staff calculations

View Table

^{Text Table 2.}

Cameroon: Non-oil Revenue Measures Planned in 2024

(Billion CFAF)

Tax policy measures
	Measures related to PIT and CIT	11
	Rationalization of tax expenditures (VAT and excise taxes)	19
	Specific taxes	2
	Property taxes and stamp duties	9
	Customs duties	11
Tax administration measures
	Electronic invoice tracking	15
	Securing customs revenue on imported phones, tablets and digital terminals	15
	Other	11
Non-tax revenue		22
TOTAL		113
	percent of GDP	0.4

Source: Country authorities, staff calculations

31. Over the medium term, the authorities plan to enhance revenue mobilization by reducing the number of tax exemptions and recovering tax arrears. The authorities have prepared a plan to gradually eliminate CIT holidays, audit, and revise the 2013 law on investment incentives to rationalize tax exemptions for companies (SB4 and SB7). Work is also ongoing to improve tax arrears recovery of the payment arrears from 2000–19. Their audit (SB1, MEFP ¶31) shows around CFAF 215 billion in tax arrears, that the authorities aim to recover over three to seven years—around CFAF 30.8 billion annually. Moreover, the authorities will continue efforts to reform personal income taxation and to rationalize VAT exemptions, in line with their three-year plan and the 2022 tax policy diagnostic recommendations.

32. The government plans to improve personal income tax statistics. To better assess the impact of the revisions to the personal income taxation, the government intends to set up a database of wages and salaries, which comprises the entire public sector and a representative sample of private sector employees (new SB11, November 2024), MEFP ¶21.

33. The government is considering additional measures to collect tax arrears in 2024. As a first step, the government commits to preparing a detailed action plan, consisting of the first 100 unpaid tax and customs debts, including those of public enterprises, to manage and recover at least 15 percent of the outstanding recoverable tax arrears (outstanding as at end-June 2023) and implement 50 percent of the measures included in the action plan (new SB12, April 2024, MEFP ¶22). This measure will improve the collection of tax and customs revenues, the clearance of outstanding statements and strengthen the governance of revenue administrations, while improving the transparency of budget management and public enterprises.

D. Maintaining Debt Sustainability and Reducing Debt Vulnerabilities

42. Cameroon remains at high risk of debt distress, but its debt is sustainable over the medium term. Public debt stock declined to 45.3 percent of GDP at end-2022, compared to 46.8 percent of GDP at end-2021 (Text Table 3). The external debt stock was estimated at 30.8 percent of GDP and domestic debt at 14.5 percent of GDP in 2022. The risk of external debt distress is high, as two out of four indicators breach the thresholds under the baseline scenario. In addition, the present value (PV) of public debt-to-GDP ratio is above the benchmark, indicating a high risk of overall debt distress. Both external and public debt indicators are most vulnerable to commodity shocks. While the debt stock is expected to decline further in 2023 with continued growth, tight fiscal policy and CFA franc appreciation, contingent liabilities associated with state-owned enterprises and public-private partnerships are expected to increase.

43. The debt carrying capacity continues to be weak as suggested by the latest Composite Index (CI) score, and the bond spread is above the benchmark value. External debt service indicators remain above the threshold but on a downward trend. The debt service-to-revenue ratio is expected to stop breaching the threshold in the medium term. Risks are tilted to the downside, which include geopolitical tensions, a longer-than-expected tight global financial conditions, delays in implementing SONARA’s debt restructuring and rehabilitation plan, and a realization of contingent liabilities. The authorities intend to push forward their reform agenda steadily to ensure debt sustainability and reduce associated risks.

^{Text Table 3.}

Cameroon: Decomposition of Public Debt and Debt Service by Creditor, 2022–24

Source: Country Authorities & IMF Staff estimates.

^1/Excludes public guarantees and other contingent liabilities, which are noted under memo items.

^{Text Table 3.}

Cameroon: Decomposition of Public Debt and Debt Service by Creditor, 2022–24

					Debt Stock			Debt Service
					2022			2022	2023	2024	2022	2023	2024
					$US, millions	Percent of total debt	Percent of GDP	$US, millions			Percent of GDP
Total 1/					19234	100.0	43.0	1923	2758	2297	4.3	5.6	4.3
	External				13161	68.4	29.4	1195	1523	1476	2.7	3.1	2.8
		Multilateral creditors			6041	31.4	13.5	132	342	371	0.3	0.7	0.7
			IMF		1273	6.6	2.8
			World Bank		2256	11.7	5.0
			AfDB		1624	8.4	3.6
			Other Multilaterals		888	4.6	2.0
				o/w IsDB	636	3.3	1.4
				o/w IFAD	97	0.5	0.2
		Bilateral creditors			5496	28.6	12.3	722	835	833	1.6	1.7	1.6
			Paris Club		1628	8.5	3.6	257	255	261	0.6	0.5	0.5
				o/w France	1391	7.2	3.1
				o/w Japan	82	0.4	0.2
			Non-Paris Club		3725	19.4	8.3	449	580	572	1.0	1.2	1.1
				o/w China	3603	18.7	8.1
				o/w Turkey	122	0.6	0.3
		Eurobonds			875	4.5	2.0	55	109	105	0.1	0.2	0.2
		Commercial lenders			749	3.9	1.7	285	237	166	0.6	0.5	0.3
				o/w Bank of China	177	0.9	0.4
				o/w Intesa San Paolo SPA	101	0.5	0.2
	Domestic				6072	31.6	13.6	728	1235	821	1.6	2.5	1.5
		T-Bills (BTA)			373	1.9	0.8	11	394	0	0.0	0.8	0.0
		Bonds			2133	11.1	4.8	348	318	342	0.8	0.6	0.6
		Structured debt			1259	6.5	2.8	359	479	435	0.8	1.0	0.8
		Non-structured debt			90	0.5	0.2	11	25	25	0.0	0.1	0.0
		BEAC advances			1125	5.8	2.5	0	19	19	0.0	0.0	0.0
		Floats and arrears			1093	5.7	2.4
Memo items:					0		0.0
	Contingent liabilities				1035		2.3
		o/w: Public guarantees (external)			21		0.0
		o/w: Other contingent liabilities			1014		2.3
				o/w external	584		1.3
				o/w domestic	430		1.0
	Nominal GDP (CFAF, billions)							27702	29704	32063
	Exchange rate, end of period (CFAF/US$)							619	…	…
	Exchange rate, period average (CFAF/US$)							622	…	…

Source: Country Authorities & IMF Staff estimates.

^1/Excludes public guarantees and other contingent liabilities, which are noted under memo items.

View Table

^{Text Table 3.}

Cameroon: Decomposition of Public Debt and Debt Service by Creditor, 2022–24

					Debt Stock			Debt Service
					2022			2022	2023	2024	2022	2023	2024
					$US, millions	Percent of total debt	Percent of GDP	$US, millions			Percent of GDP
Total 1/					19234	100.0	43.0	1923	2758	2297	4.3	5.6	4.3
	External				13161	68.4	29.4	1195	1523	1476	2.7	3.1	2.8
		Multilateral creditors			6041	31.4	13.5	132	342	371	0.3	0.7	0.7
			IMF		1273	6.6	2.8
			World Bank		2256	11.7	5.0
			AfDB		1624	8.4	3.6
			Other Multilaterals		888	4.6	2.0
				o/w IsDB	636	3.3	1.4
				o/w IFAD	97	0.5	0.2
		Bilateral creditors			5496	28.6	12.3	722	835	833	1.6	1.7	1.6
			Paris Club		1628	8.5	3.6	257	255	261	0.6	0.5	0.5
				o/w France	1391	7.2	3.1
				o/w Japan	82	0.4	0.2
			Non-Paris Club		3725	19.4	8.3	449	580	572	1.0	1.2	1.1
				o/w China	3603	18.7	8.1
				o/w Turkey	122	0.6	0.3
		Eurobonds			875	4.5	2.0	55	109	105	0.1	0.2	0.2
		Commercial lenders			749	3.9	1.7	285	237	166	0.6	0.5	0.3
				o/w Bank of China	177	0.9	0.4
				o/w Intesa San Paolo SPA	101	0.5	0.2
	Domestic				6072	31.6	13.6	728	1235	821	1.6	2.5	1.5
		T-Bills (BTA)			373	1.9	0.8	11	394	0	0.0	0.8	0.0
		Bonds			2133	11.1	4.8	348	318	342	0.8	0.6	0.6
		Structured debt			1259	6.5	2.8	359	479	435	0.8	1.0	0.8
		Non-structured debt			90	0.5	0.2	11	25	25	0.0	0.1	0.0
		BEAC advances			1125	5.8	2.5	0	19	19	0.0	0.0	0.0
		Floats and arrears			1093	5.7	2.4
Memo items:					0		0.0
	Contingent liabilities				1035		2.3
		o/w: Public guarantees (external)			21		0.0
		o/w: Other contingent liabilities			1014		2.3
				o/w external	584		1.3
				o/w domestic	430		1.0
	Nominal GDP (CFAF, billions)							27702	29704	32063
	Exchange rate, end of period (CFAF/US$)							619	…	…
	Exchange rate, period average (CFAF/US$)							622	…	…

Source: Country Authorities & IMF Staff estimates.

^1/Excludes public guarantees and other contingent liabilities, which are noted under memo items.

44. The authorities are committed to limiting non-concessional borrowing and implementing proactive debt management. The program ceiling on the PV of newly contracted or guaranteed external public debt and ceiling for disbursement of non-concessional external debt have served as a binding constraint on debt management, helping to slow debt accumulation and improve Cameroon’s debt profile. In 2023 and 2024, the overall debt ceiling remained unchanged compared to 2022, with an adjustor to accommodate concessional infrastructure and social projects financed by the World Bank. To improve the liquidity and debt profile, a debt management operation to borrow longer-term external debt to clear domestic unpaid government obligations is planned before end-2023.²

^{Text Table 4.}

Cameroon: 2022 Summary Table on External Borrowing Program

Source: Country Authorities & IMF Staff estimates.

^1/Excludes ordinary credit for imports, debt relief obtained in the form of rescheduling or refinancing, and budget support loans from the WB.

^2/Calculated using exchange rate of 543.201 CFAF/USD

^3/The PV is calculated using the terms of individual loans and applying the 5 percent program discount rate. The PV of loans with a negative grant element is assumed to be equal to the nominal value of the loan. An adjustor for WB projects, which is the difference between the total PV of newly signed WB projects identified in 2023 and the PV of WB projects in 2022, will apply to the PV ceiling of new debt once new WB projects in 2023 reaches the PV level of the previous year.

^{Text Table 4.}

Cameroon: 2022 Summary Table on External Borrowing Program

PPG external debt contracted or guaranteed 1/				Volume of new debt (USD million)	Volume of new debt (CFAF billion) 2/	PV of new debt (CFAF billion) 2/ 3/
	Sources of Debt Financing			1374	746	513
		Concessional debt, of which		911	495	281
			Multilateral debt	911	495	281
			Bilateral debt	0	0	0
		Non-concessional debt, of which		462	251	232
			Semi-concessional debt	439	239	219
			Commercial terms	23	13	13
	Uses of Debt Financing			1374	746	513
		Infrastructure		1197	650	417
		Budget financing		177	96	96
		Other		0	0	0

Source: Country Authorities & IMF Staff estimates.

^1/Excludes ordinary credit for imports, debt relief obtained in the form of rescheduling or refinancing, and budget support loans from the WB.

^2/Calculated using exchange rate of 543.201 CFAF/USD

^3/The PV is calculated using the terms of individual loans and applying the 5 percent program discount rate. The PV of loans with a negative grant element is assumed to be equal to the nominal value of the loan. An adjustor for WB projects, which is the difference between the total PV of newly signed WB projects identified in 2023 and the PV of WB projects in 2022, will apply to the PV ceiling of new debt once new WB projects in 2023 reaches the PV level of the previous year.

View Table

^{Text Table 4.}

Cameroon: 2022 Summary Table on External Borrowing Program

PPG external debt contracted or guaranteed 1/				Volume of new debt (USD million)	Volume of new debt (CFAF billion) 2/	PV of new debt (CFAF billion) 2/ 3/
	Sources of Debt Financing			1374	746	513
		Concessional debt, of which		911	495	281
			Multilateral debt	911	495	281
			Bilateral debt	0	0	0
		Non-concessional debt, of which		462	251	232
			Semi-concessional debt	439	239	219
			Commercial terms	23	13	13
	Uses of Debt Financing			1374	746	513
		Infrastructure		1197	650	417
		Budget financing		177	96	96
		Other		0	0	0

Source: Country Authorities & IMF Staff estimates.

^1/Excludes ordinary credit for imports, debt relief obtained in the form of rescheduling or refinancing, and budget support loans from the WB.

^2/Calculated using exchange rate of 543.201 CFAF/USD

^3/The PV is calculated using the terms of individual loans and applying the 5 percent program discount rate. The PV of loans with a negative grant element is assumed to be equal to the nominal value of the loan. An adjustor for WB projects, which is the difference between the total PV of newly signed WB projects identified in 2023 and the PV of WB projects in 2022, will apply to the PV ceiling of new debt once new WB projects in 2023 reaches the PV level of the previous year.

45. The authorities are reducing contracted but undisbursed loans (SENDs). The publication of a decree specifying the modalities for monitoring the performance of project management units was implemented with a delay (SB8, August 2023, MEFP ¶8). The debt management agency had a stock-taking assessment of existing loan and grant agreements related to 180 projects, in preparation for consulting with development partners on cancelling non-performing SENDs and negotiating reallocation of unused external credit lines to other projects where applicable. Going forward, timely disbursement according to the schedule is a prerequisite to contain SENDs, amidst the need to sign more new projects to address urgent infrastructure gaps.

E. Strengthening Financial Sector Resilience and Financial Inclusion

47. Financial sector resilience needs strengthening. The mission emphasized the need for banks to: (i) implement COBAC’s recommendations on provisioning and capitalization; (ii) strengthen their credit risk assessment frameworks; (iii) diversify away from the sovereign (both Cameroonian and other CEMAC governments); (iv) follow a strategy to reduce the high share of NPLs (15.4 percent in total gross loans in 2023Q2); and (v) ensure that data are submitted to BEAC. In addition, it is essential that the government completes the Commercial Bank of Cameroon (CBC) privatization in 2024 as planned and finishes the resolution of the distressed banks in a timely manner.

48. Progress is ongoing in restructuring the distressed Cameroonian banks. The asset shortfall of one of the banks has been filled, while another one, in which the government will take a majority stake, still misses a significant amount. The filling of the asset shortfall of the latter bank remains unclear as the authorities have mentioned a loan to be made to the government by the insolvent bank, due to the regulatory forbearance. Staff emphasized that self-funding of the capital of banks is inconsistent with good practices as it is not recognized by international regulatory standards (Basel capital framework). Staff position is that the asset shortfall is filled with funds that meet prudential requirements by the end of the Fund program. Discussions are ongoing with COBAC to ensure that the recapitalization complies with international regulatory standards. While COBAC has approved the recapitalization plans in July 2023, a substantial part of the capital is yet to be transferred by both the government and private shareholders (end-2024).

49. The Société de Recouvrement des Créances (SRC), a public credit recovery agency, is facing difficulties. The SRC experienced around CFAF 1 billion in losses in 2022, with a claim portfolio of about CFAF 800 billion. The mission advocated an audit of losses to better understand the reasons for the failure to recover credit. It is also important to strengthen the SRC’s operations to ensure a robust governance framework, operational and budgetary independence, and strong transparency and accountability rules, prior to any extension of SRC’s activities. The mission reiterated the need for the government to commit to a sunset clause for banking assets recovery activities.

^{Box 1.}

Financial Inclusion in Cameroon: A Regional Perspective

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Number of Commercial Bank Branches and ATMs

(per 100,000 adults)

Citation: IMF Staff Country Reports 2024, 051; 10.5089/9798400268229.002.A001

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Number of Mobile Money Agents and Debit Cards

(per 100,000 adults)

Citation: IMF Staff Country Reports 2024, 051; 10.5089/9798400268229.002.A001

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Number of Household Sector Depositors

(per 1,000 adults)

Citation: IMF Staff Country Reports 2024, 051; 10.5089/9798400268229.002.A001

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Number of Household Sector Borrowers

(per 1,000 adults)

Citation: IMF Staff Country Reports 2024, 051; 10.5089/9798400268229.002.A001

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Financial inclusion can be of different dimensions: traditional inclusion with, for instance, the number bank branches or ATMs, and digital inclusion with, for example, the number of mobile money agents or debit cards, per a given population. Cameroon scores low in terms of traditional financial inclusion, compared to its regional peers (Figure 1). It has an average of 2.2 commercial bank branches and 5 ATMs per 100,000 adults, whereas the CEMAC average is 3.8 bank branches and 7.5 ATMs per 100,000 adults. The average for Sub-Saharan African countries (SSA) is even higher, with an average of 6.6 bank branches and 14.8 ATMs. However, Cameroon appears to score better in terms of digital financial inclusion (Figure 2). It has an average of 1,321 mobile money agents per 100,000 adults, which is largely over the CEMAC average of 565. Mobile money agents have a major role in providing access to banking for populations in SSA, usually compensating for the low presence of bank branches outside of major cities.

While financial inclusion can be analyzed through the prism of access to financial services, such as the number of bank branches, ATMs, or mobile money agents, it can also be considered though the filter of usage of financial services. For instance, the percentage of adults who have a deposit account at a commercial bank or who borrow from a bank reflects this usage. Cameroon scores low in terms of household sector depositors with commercial banks compared to its neighbors (Figure 3): only about 112 adults per 1,000 have a deposit account, whereas the corresponding number is 182 in Gabon, 282 in Equatorial Guinea, and 437 in SSA. In addition, the number of adults borrowing from a bank in Cameroon is slightly above the CEMAC average but considerably below the SSA average (Figure 4): 33 per 1,000 in Cameroon, 30 in the Republic of Congo, 35 in Equatorial Guinea and 21 in CEMAC and 61 is SSA.

With 19 different banks present in Cameroon, this limited use of banking services could reflect a low financial literacy among the population, a sparse geographical network of bank branches, or too high banking fees due to limited competition. Furthermore, the large gender gap in access to deposit accounts and loans from commercial banks mirrors the substantial gender inequalities in financial inclusion both in Cameroon and in the rest of SSA. Addressing these inequalities with specific measures targeting financial inclusion for women would not only raise overall financial inclusion in Cameroon, but also unlock growth potential by helping women develop businesses and participate in the formal economy.

50. The operationalization of the Caisse des Dépôts et Consignations (CDEC) continues. Charged with collecting and managing idle bank accounts and judiciary seizures, the state-owned financial institution is still waiting for its regulatory texts to be signed by the government. Meanwhile, discussions with the banking sector led to an agreement to limit the impact of the transfers on banks’ liquidity positions. However, the CDEC has difficulties evaluating its claims and getting cooperation from some of the banks. The government therefore needs to commit to ensure that CDEC has the necessary financial and logistical resources to exercise its responsibilities in terms of collection, management, and security of the various resources that will be transferred to it. In addition, the CDEC should be regulated as any financial institution.

51. Supporting SMEs’ access to credit is the key to unlocking private sector led growth. SME’s access to credit should be supported further. This requires improving the business climate and reducing NPLs to increase banks’ lending confidence. To that end, the government should support: (i) operationalization of the credit registries at BEAC and the creation of a scoring system of companies; (ii) digitalization of the land registry and the creation of a real estate collateral registry, (iii) training of judges in corporate law and the creation of commercial courts; (iv) operationalization of the state-backed collateral fund for small companies to facilitate access to credit (fond de garantie aux PME); and (v) internalization of the public sector crowding out effect in the government’s bonds issuance strategy.

52. Cameroon is lagging in terms of financial inclusion (Box 1), but it has launched a national Strategy for Financial Inclusion over 2023–27. The strategy, prepared with UNDP support, is part of a broader CEMAC effort to promote financial inclusion and is expected to cost CFAF 38 billion. It will focus on traditional and digital financial inclusion as well as reducing the related gender gap.

F. Strengthening Governance, Transparency and Anti-Corruption Efforts

54. The authorities are working to strengthen transparency, governance, and the fight against corruption. A diagnostic of the country’s vulnerabilities in governance and corruption was completed in collaboration with IMF staff (SB5, MEFP ¶44) and will be published by the Board date (prior action). Based on the priority recommendations of the report, the government will prepare and publish an action plan to further strengthen economic governance.

55. The government also intends to adopt a timetable for the transformation of common chapters for the benefit of authorizing officers and managers in the relevant ministries, as part of the reform of decentralized authorizations (SB17, MEFP ¶45). The inclusion of appropriations for accidental and unforeseeable expenditures in allocations will be effective in the 2025 budget law, and will not exceed 3–5 percent of the budget, and the budget will also specify the modalities for the management of these allocations (SB18, MEFP ¶45).

56. The mission welcomed the progress in the authorities’ efforts to facilitate the timely completion and publication of spending audits. The authorities have developed and published an action plan to strengthen frameworks for preparing, publishing, and monitoring public expenditure audits, including recommendations to strengthen relevant institutions, in particular the Supreme Court’s Audit Chamber (SB met in the fourth review).

G. Addressing Fragility and Regional Spillovers

59. Cameroon has been recently added to the IMF list of fragile and conflict affected states (FCS). Sources of fragility include institutional and governance weaknesses, internal divisions, social exclusion, insurgency and conflicts along borders, and a rising frequency of climate-related natural disasters. Security risks are increasing, with potential regional spillovers from the region. In the region, Cameroon has a high number of internally displaced persons (IDPs), driven mainly by internal conflict and the impact of climate change, and natural disasters such as floods. The country will continue to be affected by simultaneous and complex humanitarian, refugees, and internally displaced people (IDP) crises and situations. These multiple dimensions of fragility present challenges for sustaining inclusive growth and improving social indicators. A country engagement strategy (CES) has been prepared in collaboration with international partners, to assess the drivers of fragility, highlight factors of resilience, and inform the IMF staff’s ongoing and future engagement with Cameroon. The authorities agreed with the overall proposal and stressed the need for close coordination with other partners, especially in areas that go beyond the Fund’s mandate.

A. Program Modalities

60. Prior actions. The review includes two prior actions. The first is a submission to the Parliament of the budget law consistent with the budget framework agreed in the fifth review. The second is the publication of the governance diagnostic. Cameroon’s governance indicators highlight the need for urgent action in this area. Governance vulnerabilities and corruption continue to weigh down on Cameroon’s development prospects from a variety of perspectives (private sector development, financial sector growth, public finance management, selection of investment projects).

61. Regional assurances. BEAC met its end-June 2023 NFA (Net Foreign Assets) target and provided updated policy assurances in support of CEMAC countries’ Fund-supported programs. A review of regional policies and policy assurances is scheduled to be discussed by the IMF Executive Board in December 2023. Adequate policies and assurances are a condition for the conclusion of the review. The regional assurances on regional NFA are critical for the success of Cameroon’s Fund-supported program and to help bolster the region’s external sustainability.

62. Program performance reviews will continue semi-annually through six-monthly and continuous QPCs, quarterly ITs, and SBs. Staff supports the authorities’ request to reset end-March 2024 ITs and set new end-June and end-December 2024 QPCs, end-September 2024 ITs reflecting the current macroeconomic framework, budget projections, and program commitments. The missed SBs are proposed to be reset (Table 10) and new SBs are proposed to support revenue mobilization, public financial management and good governance and transparency consistent with program objectives.

63. The authorities request a waiver for nonobservance of a performance criterion. The continuous zero ceiling on the accumulation of new external payments arrears was missed following delayed debt service payments to the EIB in August and September 2023 due to technical errors. A waiver of non-observance is requested due to the minor and temporary nature of the non-observance, and these arrears have been cleared. The authorities emphasized that while there were weaknesses in cash management, all efforts were made to respect external payment deadlines on time. Given the capacity constraints and the minor and temporary technical delays, staff proposes to add a 30-day period after the payment due date before considering the delayed payments as external arrears for program assessment purposes. The authorities are receiving technical assistance to improve debt monitoring capacity.

64. The authorities have requested a 12-month extension of the ECF/EFF arrangements (through July 28, 2025). This would be accompanied by an augmentation of access of 40 percent of quota over the extension, for balance of payments support (SDR 110.4 million). Staff proposes that the increase in access be shared between resources from the General Resources Account (GRA) (26.7 percent of quota; SDR 73.6 million) and the Poverty Reduction and Growth Trust (PRGT) (13.3 percent of quota; SDR 36.8 million). The extension will allow for more time to implement the policies and reforms foreseen under the program, given the additional external shocks faced since approval of the ECF/EFF arrangements. In addition to reducing the space for implementing reforms the shocks have created additional balance of payments needs. The tightening of global financial conditions has raised borrowing costs and access to financing on international markets, the war in Ukraine accelerated inflation and weighed down on growth domestically and in partner countries, and the volatility of oil prices has raised the costs of subsidies and complicated budget management.

65. Cameroon’s capacity to repay the IMF is adequate, but subject to significant risks (Figure 3). Under the baseline, total Fund credit outstanding (based on existing and prospective drawings) peaks at over 3 percent of GDP in 2023, while annual obligations to the Fund peak at about 2.8 percent of revenues excluding grants in 2027, well above the reference group top quartile. Risks to the program and the Fund are elevated and capacity to repay the Fund could be further strained by the materialization of potential risks (e.g., global spillover risks, SOEs’ contingent liabilities, especially from delays in implementing critical reforms such as SONARA’s restructuring, and security risks). Accelerating the pace of reforms and staying on course on program targets will be essential, as will timely budget support. Strong political support for the program’s objectives at national and regional level are critical to mitigating these risks.

66. Financing assurances have been obtained. The program remains fully financed, with firm commitments over the next 12 months and good prospects for its financing over the remainder of the arrangement. Discussions with donors confirmed the importance of the Fund’s engagement in their decision to contribute to budget support, quasi-budget support and project financing.

67. Risks to the program are manageable. Fuel subsidy reforms could lead to civil unrest if not accompanied by appropriate social mitigation measures. Further delays in implementing supportive infrastructure projects could exacerbate social and/or security tensions. Higher oil revenue could test the authorities’ ability to implement reforms ahead of the elections. Higher spillovers from the global environment could threaten external balances, while increased climate related events could heighten food insecurity and social tensions. The authorities’ track record and commitment to reforms envisaged under the program suggests that risks can be managed. Risks are also mitigated by program conditionality, close engagement with key donors, and a comprehensive capacity development program, tailored to pressing and longer-term needs.

^{Text Table 5.}

Cameroon: External Financing

(In billion CFAF, unless otherwise indicated)

Source: IMF staff estimates and projections.

^1/Cameroon’s current quota is SDR 276.0 million.

^{Text Table 5.}

Cameroon: External Financing

(In billion CFAF, unless otherwise indicated)

		2023	2024	2025	Total (CFAF, billions)	Total (SDR, millions)	Percent of Gap	Percent of Quota1
Financing Gap		186	253	104	542	673	100	244
IMF Financing		136	89	44	269	334	50	121
	ECF	45	30	15	89	111	16	40
	EFF	91	59	30	180	223	33	81
Budget Support from other Donors		50	164	60	273	339	50	123
	AfDB	23	18	0	41	51	8	18
	World Bank	0	120	60	180	223	33	81
	France	27	26	0	53	65	10	24
	EU	0	0	0	0	0	0	0
	Other	0	0	0	0	0	0	0
Exceptional Financing		0	0	0	0	0	0	0
Residual Gap		0	0	0	0	0	0	0

Source: IMF staff estimates and projections.

^1/Cameroon’s current quota is SDR 276.0 million.

View Table

^{Text Table 5.}

Cameroon: External Financing

(In billion CFAF, unless otherwise indicated)

		2023	2024	2025	Total (CFAF, billions)	Total (SDR, millions)	Percent of Gap	Percent of Quota1
Financing Gap		186	253	104	542	673	100	244
IMF Financing		136	89	44	269	334	50	121
	ECF	45	30	15	89	111	16	40
	EFF	91	59	30	180	223	33	81
Budget Support from other Donors		50	164	60	273	339	50	123
	AfDB	23	18	0	41	51	8	18
	World Bank	0	120	60	180	223	33	81
	France	27	26	0	53	65	10	24
	EU	0	0	0	0	0	0	0
	Other	0	0	0	0	0	0	0
Exceptional Financing		0	0	0	0	0	0	0
Residual Gap		0	0	0	0	0	0	0

Source: IMF staff estimates and projections.

^1/Cameroon’s current quota is SDR 276.0 million.

B. Statistical Issues

68. Data provision is broadly adequate, and the authorities have been working with development partners to improve the quality, coverage, and timeliness of key macroeconomic data. Significant developments since the last Article IV Consultation include the strengthening of the quality and frequency of public debt and balance of payments data, and the shift of budget execution reports to a commitment basis with a more comprehensive coverage. Important weaknesses in fiscal data remain in the coverage of local government and public enterprises, including cross-debts.

C. Capacity Development

69. The Capacity Development (CD) strategy for Cameroon is well-aligned with the authorities’ economic reform strategy SND-30 objectives (Annex VI). Cameroon has an overall good track record of implementing TA recommendations. A revised CD strategy was discussed with the authorities, taking stock of emerging priorities and Cameroon’s status as an FCS.