IMF Executive Board Concludes 2014 Article Iv Consultation With Cameroon

On June 30, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Cameroon1 and considered and endorsed the staff appraisal without a meeting.2

The pace of economic growth accelerated in 2013, reaching 5.5 percent (compared to 4.6 percent in 2012). Average annual inflation remained subdued at 2.1 percent, because food prices remained stable and fuel prices, controlled. Growth was particularly buoyant in the services and construction sectors, the latter supported by strong public investment. The higher demand for capital goods led to an increase in imports, which offset the improving export performance of the oil sector.

Cameroon's robust economic performance since 2007 does not appear to have dented poverty significantly. Recent estimates show a slight decrease from 39.9 percent of the population in 2007 to 38.7 percent in 2011, while growth incidence curves indicate that inequality may have increased.

The fiscal situation deteriorated in 2013. Oil revenue, which represented more than a quarter of all revenue, was lower than expected, because oil production and prices remained stable, but production costs increased. Retail fuel subsidies reached 2.8 percent of GDP and externally financed capital expenditure surged to 3.4 percent of GDP. These developments led to a budget deficit (on a cash basis) of over 4 percent of GDP, versus 2 percent of GDP in 2012.

Cameroon's debt burden remains low, thanks in part to extensive debt relief in 2006, but it is growing at a fast pace. As a result of new nonconcessional external debt, the debt sustainability analysis shows that Cameroon's risk of external debt distress has increased from "low" to "moderate". On current trends, overall public debt is slated to double as a percentage of GDP between 2012 and 2019.

There has been progress in the banking system, as two previously troubled banks were able to restructure their balance sheets. The regional supervisory authority is in the process of strengthening its human resources to increase the frequency of its supervisions. A major concern remains the excessive concentration in bank credit toward the financially fragile national oil refinery.

Economic growth is expected to remain at about 5.5 percent annually over the medium term under current policies, while inflation is projected to remain below the regional convergence criterion of 3 percent. Oil exports will be sustained by volume growth, although prices are projected to decrease gradually. Large public investment projects in infrastructure will continue to support non-oil growth over the next few years. The private sector's response to the new infrastructure is expected to take over as the main driver of growth thereafter, assuming a significant improvement in the business environment.