The International Monetary Fund (IMF) has reached a staff level agreement with Cameroon for new loans, the Washington DC-based Fund said in a statement on Thursday.
The IMF said Cameroonian authorities’ proactive management of the COVID-19 pandemic helped contain the fiscal deficit to 3.6 percent of GDP, adding that while economic activity decelerated markedly in 2020, the slowdown was less than anticipated, reflecting strong performance in the agricultural and construction sectors.
“In response to a request from the Cameroon authorities, an International Monetary Fund (IMF) mission led by Amadou Sy, Mission Chief for Cameroon, held virtual meetings during May 13–27 to discuss IMF financial support for the authorities’ economic reform program,” IMF said.
“IMF staff completed policy discussions with the authorities on a new 36-month program that could be supported by IMF resources under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF),” Sy said.
Sy added: “Cameroon has shown resilience in the face of the COVID-19 pandemic, but still faces significant challenges. While economic activity decelerated markedly in 2020, the slowdown was less than anticipated, reflecting strong performance in the agricultural and construction sectors. The current account deficit narrowed to 3.7 percent of GDP, owing to both lower imports and higher than expected non-oil exports. Inflation remained below 3.0 percent. In addition, the authorities’ proactive management of the COVID-19 pandemic helped contain the fiscal deficit to 3.6 percent of GDP.
“Nevertheless, the country faces significant challenges and vulnerabilities heightened by the pandemic. Cameroon has experienced a strong upsurge in COVID-19 cases since January 2021, raising concerns about growth prospects and external and fiscal sustainability. And security risks in parts of the country persist. Since the onset of the pandemic, the IMF’s Executive Board has approved two disbursements under the Rapid Credit Facility (RCF) totaling SDR 276 million, about US$ 382 million or 100 percent of Cameroon’s quota (see IMF Press Release No. 20/205 and IMF Press Release No. 20/318 ). Other development partners provided additional support, but substantial fiscal and external financing needs remain over the medium-term.
“The authorities’ medium-term program centers on post-Covid-19 recovery, macroeconomic sustainability, and an ambitious structural reform agenda—laid out in the National Development Strategy for 2020-30 (SND30). In this context, the IMF-supported program builds on the authorities’ SND-30, with a cross-cutting focus on reinforcing good governance, transparency, and anti-corruption measures. It will focus on four pillars (i) mitigating the consequences of the pandemic, while ensuring macroeconomic sustainability; (ii) accelerating fiscal reforms to modernize tax and customs administration, mobilize revenue, improve public financial management, increase investment efficiency, and reduce fiscal risks from state-owned enterprises; (iii) strengthening debt sustainability and management; and (iv) intensifying structural reforms to boost economic diversification and financial sector resilience. IMF financial support is also expected to help stimulate private sector investment and catalyze additional financing from development partners.
“The program’s fiscal policy is expected to broaden the non-oil revenue base, reduce discretionary tax exemptions, combat tax fraud and evasion, and enhance tax and customs administration. Completion of the Treasury Single Account reform and reduced recourse to direct interventions and exceptional spending procedures will help improve cash management and budget execution and strengthen fiscal transparency and budget credibility.
“The program will also aim to address financial and fiscal risks associated with state-owned enterprises (SOEs). The efforts to restructure the national oil refinery (SONARA) will be based on a thorough cost-benefit analysis of all available options. The planned audits of large SOEs and the clearance of government cross-debts with SOEs and of government arrears will help mitigate contingent risks.
“Given Cameroon’s high risk of debt distress, efforts to strengthen public debt management and limit non-concessional borrowing remain critical to ensure external sustainability. The program will limit non-concessional borrowing to macro critical projects essential for national development and integral to the SND-30, and for which concessional financing is not available.
“Enhancing the business climate and governance is key to promoting private sector-led diversification and inclusive growth. Further steps to enhance investment efficiency and strengthen financial inclusion will also be essential to unlock Cameroon’s growth potential. Efforts to improve governance with an effective enforcement of the anti-corruption legal framework will also be critical.
“Cameroon’s program will continue to be supported by policies and reforms by the regional institutions, which are critical for the program’s success.
“The team met with Prime Minister Joseph Dion Ngute, Minister of State Secretary General at the Presidency Ferdinand Ngoh Ngoh, Minister of Finance Louis Paul Motaze, Minister of Economy, Planning, and Regional Development Alamine Ousmane Mey, BEAC National Director Eugene Blaise Nsom, and other senior officials, development partners and representatives of the diplomatic community and the private sector.
“The team wishes to thank the Cameroonian authorities for their excellent cooperation, and the frank and constructive dialogue.”