An International Monetary Fund (IMF) team, led by Ms. Corinne Deléchat, visited Yaoundé from April 27 to May 14, 2018 to conduct discussions on the IMF’s Article IV consultation and the second review of the program supported by the Extended Credit Facility (ECF) that was approved in June last year .
- The IMF team has reached staff-level agreement with the authorities on policies that could support Executive Board’s approval of the second review.
- Growth continues to slow, mostly due to weaker oil production but the medium-term outlook is positive with a gradual rebound driven by large infrastructure projects.
- The authorities and the mission agreed on a set of measures to strengthen program implementation and contain public debt.
At the conclusion of this visit, Ms. Deléchat issued the following statement:
“The IMF team reached staff-level agreement with the authorities on economic and financial policies that could support approval of the second review of their three-year program under the ECF. The IMF Executive Board could consider the second review in June-July 2018. The completion of the second review would enable a third disbursement of US$78.8 million.
“Overall economic growth decelerated to 3.2 percent in 2017 due to a steep decline in oil production despite the gradual rebound in international prices. The tense security environment in parts of the country further contributed to the slowdown in economic activity. Inflation remained muted below 1 percent per annum. Fiscal consolidation was implemented at a slower pace than envisaged under the program despite revenue mobilization exceeding the program target, owing to a substantial acceleration of spending at the end of the year. As a result, the 2017 overall fiscal deficit was substantially higher than targeted under the program. However, good progress continued to be made on structural reforms.
“The macroeconomic outlook for 2018 remains positive. Growth is expected to pick up and reach up to 4 percent, buoyed by new gas production, construction activities for the 2019 African Cup of Nations, and improved energy supply. Inflation should remain low. The authorities are reprofiling the 2018 budget to account for unanticipated spending due to rising fuel subsidies and higher security outlays. In addition, revenue measures introduced in 2017 together with continued improvements in tax administration should yield higher revenue this year. The revised budget projects a slightly higher deficit at 2.6 percent of GDP compared to the 2.3 percent of GDP initial objective under the program. In addition, the authorities are putting in place needed measures to strengthen expenditure controls and ensure transparent and efficient implementation of the budget, including by strictly limiting exceptional spending procedures and accelerating implementation of national laws transposing key CEMAC Directives on public financial management. Enhanced planning and monitoring of foreign-financed projects’ implementation will help contain the deficit and public debt.
“Structural reforms should continue to address key obstacles to boosting the private sector’s contribution to growth and employment, notably by improving the business climate, governance, and financial inclusion, while also reducing gender gaps. Reducing fiscal risks is of paramount importance. This requires adequately managing the link between the financial and the public sectors, and addressing contingent liabilities from state-owned enterprises. The mission welcomed the authorities’ efforts to audit government domestic payment arrears and their action plan to clear them, as well as the steps taken to strengthen monitoring of state-owned enterprises and public entities. Protecting the poor and vulnerable is essential, and the update of the national social protection strategy, which expands safety nets with support from international development partners, is welcome. The mission also welcomed the fact that the floor on social spending under the program was met for 2017, and this floor will remain a key element to mitigate the impact of fiscal consolidation on the poor. The team urged the authorities to speed up efforts to strengthen the financial sector’s resilience and its development.
“The mission took note of the government’s efforts to maintain public debt sustainability. The team stressed the importance of expanding the tax base to reach Cameroon’s tax potential and reduce reliance on debt resources to fulfill the government’s ambitious infrastructure development plans. The team also welcomed the authorities’ efforts to reduce the significant backlog of contracted yet undisbursed debts. It urged the authorities to speed up their plans to eliminate the backlog, including through improved project preparation and implementation.
“The team met with Prime Minister Philémon Yang, State Minister of Justice Laurent Esso, Minister Secretary General at the Presidency Ferdinand Ngoh Ngoh, Minister of Finance Louis Paul Motaze, Minister of Economy, Planning, and Regional Development Alamine Ousmane Mey, Minister of Public Works Emmanuel Nganou Djoumessi, Minister of Agriculture and Rural Development Henri Eyebe Ayissi, Minister of Energy and Water Resources Gaston Eloundou Essomba, Minister of Public Contracts Abba Sadou, BEAC Governor Mahamat Abbas Tolli, BEAC National Director Jean-Marie Mani, and other senior officials. The mission also met Parliamentarians, representatives of the business, diplomatic and donor communities, as well as representatives from trade unions and civil society.