The International Monetary Fund (IMF) staff and the Cameroonian authorities have reached a $74.6 million staff-level agreement on economic policies to conclude the third review of the program under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements.
In a statement released on Wednesday, the IMF revealed that Cameroon will have access to the money once the review is formally completed by its Executive Board in early March 2023.
“The economic recovery is underway. Growth is estimated at 3.4 percent in 2022 and is projected to reach 4.3 percent in 2023,” the IMF stated.
The authorities recognized the need to reduce fuel subsidies to create fiscal space for productive investment and social spending and are committed to accelerating structural reforms.
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Cemile Sancak, Head of the IMF’s visiting team to Cameroon, said that “Cameroon proved resilient to the COVID-19 shock. Following an increase of 3.6 percent in 2021, real GDP growth is expected to remain stable at 3.4 percent in 2022. Headline inflation is expected to reach 6 percent at the end of 2022, mainly driven by food prices due to higher import costs as well as domestic supply pressures.”
Sancak added that the recovery in the Central African country will be subject to greater risks with spillovers from Russia’s war in Ukraine, including inflationary pressures, supply chain disruptions, and a tightening of global financial conditions. Fertilizer shortages and high prices have posed new challenges to food security.
The IMF mission applauded the authorities’ efforts to ensure adequate fertiliser supplies for the harvest, which were backed up by the World Bank and the African Development Bank.
“The overall fiscal deficit is expected to decline to 1.7 percent of GDP in 2022, supported by continued recovery, higher oil prices, and non-oil tax revenue. The performance of non-oil tax revenue should offset the increase in current spending, mainly from higher fuel subsidies, which are estimated to reach CFAF 800 billion (2.9 percent of GDP) in 2022. The public debt-to-GDP ratio is estimated at 46.3 percent at the end of 2022.
“The economic outlook for 2023 is favorable, though subject to considerable downside risks, especially from the external economic environment. Economic growth is expected to accelerate to 4.3 percent in 2023, while inflation is projected to remain at about 6 percent at end-2023.
“The authorities expressed their continued commitment to maintaining macroeconomic stability and to further reducing the non-oil primary fiscal deficit to 2.2 percent of GDP to contain public debt at 43 percent of GDP in 2023. To make room for productive investment and social spending, the authorities agreed on the need to further mobilize domestic non-oil revenues through widening the tax base,” the team stated.
The team expressed concern about the expensive fuel subsidies and suggested the Cameroonian authorities reduce the costly fuel subsidies, which according to them are “unsustainable under the current international oil price projections and are poorly targeted to those in need and crowd out priority spending.”
The Bretton Wood organisation added that the fuel subsidies represent six times the budget allocated to agriculture, four times that to health, and over three times that to energy and water. Fuel subsidy reform would need to be accompanied by measures to mitigate the impact on the most vulnerable, including cash transfers.
