Cameroon 2012 Budget to Benefit from High Global Oil Prices

“Cameroonian Economy Recovery Continues”

“The recovery of the Cameroonian economy has continued following the 2008-09 global crisis, with economic growth estimated at 4.2 percent in 2011, and inflation contained below 3 percent”. …this was a declaration issued in a Press Release following an International Monetary Fund (IMF) mission, led by Mr. Mario de Zamaróczy visited Cameroon during May 2–16, 2011 to conduct the 2012 Article IV Consultation.

The mission met with Prime Minister Philémon Yang, Minister Secretary General at the Presidency Ferdinand Ngoh Ngoh, Minister of Finance Alamine Ousmane Mey, Minister of Economy, Planning, and Territorial Development Emmanuel Nganou Djoumessi, several other ministers, the National Director of the Bank of Central African States (BEAC), other senior officials, and representatives of the private sector, labor unions, civil society organizations, and development partners.

Discussions during the visit focused on recent economic and financial developments, the execution of the 2012 Cameroon budget, and the economic outlook for 2012 and beyond.

According to Mr. de Zamaróczy, Economic prospects in Cameroon remain favorable and growth is projected to reach 4.7 percent in 2012. This assessment is mainly based on account of a rebound in oil production and exports, an increase in public investment on large infrastructure projects, and ongoing initiatives to improve productivity in agriculture.

The Press Release also states that, “During 2011, oil revenue was higher than expected. That past payment obligations were cleared, and there was more flexibility in cash flow management through the issuance of securities. However, according to the IMF mission, current expenditure exceeded budgetary allocations and new unsettled payment obligations were accumulated.

Credit was giving to the Cameroonian Government for efforts made to strengthen tax and customs administration, improve public expenditure management, and deepen the dialogue with the private sector through the Cameroon Business Forum.

INFLATION The IMF mission holds that Inflation in Cameroon is expected to remain subdued in 2012, mainly because of efforts to increase food supply and continuing government subsidies on fuel and some utilities.

2012 BUDGET The IMF mission to Cameroon believes that “The Cameroon 2012 budget is expected to benefit from windfall oil revenue generated by current high international prices. This is good news for Cameroon…only that a caution was given that despite this oil benefits, the execution of the 2012 budget could be hampered by the carryover of unsettled payment obligations and the higher-than-budgeted cost of fuel subsidies.

In addition, it is uncertain whether the full amount of the planned bond issuance will be absorbed by the domestic and regional financial market. The budget could also come under pressure from contingent liabilities from the restructuring of distressed banks and from assistance to loss-making public enterprises.

To ensure that budget execution will not lead to further accumulation of domestic arrears, the mission recommended that Cameroon strengthens her cash flow management and reprioritize expenditures, taking into account the financing that may realistically be mobilized.

BANKS The mission urged the authorities to swiftly conclude the resolution process of distressed banks in order to preserve financial stability and minimize costs to the public finances. It emphasized the need to engage the Central African Economic and Monetary Community (CEMAC) authorities to enhance the regional supervisory body’s resources and to further define rules and decision mechanisms for the treatment of troubled banks. The mission also encouraged the authorities to speed up the implementation of reforms to remove obstacles to accessing bank credit.

Unlocking Cameroon’s Growth Potential

To unlock Cameroon’s growth potential, the mission agreed with the authorities that it is critical to reduce the constraints to higher and more inclusive growth by continuing to address infrastructural bottlenecks, raise the quality and efficiency of public spending, and improve the business climate and governance. It is also important to accelerate regional integration. The mission was encouraged by the authorities’ commitment to take action to help achieve these objectives.

The IMF’s Executive Board is expected to examine the report on the 2012 Article IV Consultation with Cameroon in July 2012.