INTERNATIONAL DEVELOPMENT ASSOCIATION
AND
INTERNATIONAL MONETARY FUND
CAMEROON
Preliminary Document on the Enhanced Initiative for Heavily Indebted Poor Countries
Prepared by the Staff of IDA and the Fund1
May 23, 2000
Contents
Page
List of Acronyms and Abbreviations ........................................................................................ 4
Executive Summary .................................................................................................................. 5
I.
Background ................................................................................................................... 8
A. PRGF and IDA Status .............................................................................................. 8
B. Policy Reform Track Record.................................................................................... 8
Macroeconomic Polices .................................................................................... 9
Structural Policies ........................................................................................... 10
C. Institutional Reforms .............................................................................................. 12
D. Social Policies ........................................................................................................ 13
E. Poverty Outcomes and Living Standards................................................................ 16
II.
Medium Term Policy Challenges, Sources of Growth, and Poverty Reduction......... 18
A. Poverty Reduction Strategy and Participation........................................................ 18
B. Macroeconomic Objectives and Policies................................................................ 20
C. Institutions, Governance, and Anticorruption ........................................................ 23
D. Social Sectors ......................................................................................................... 25
E. Improving Infrastructure......................................................................................... 29
F. Rural Sector............................................................................................................. 30
G. Petroleum Sector .................................................................................................... 31

1 Approved by Kemal Dervis and Callisto Madavo (IDA), Jesús Seade and Amor Tahari
(Fund).
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III. Debt Sustainability Analysis (DSA) ................................................................................. 32
A. Introduction ............................................................................................................ 32
B. The Structure of External Debt and Relations with Creditors................................ 33
C. Long-Term Balance of Payments and Debt Sustainability .................................... 37
Baseline Scenario ............................................................................................ 37
Sensitivity Analysis......................................................................................... 37
D. Proposed Decision and Floating Completion Points, and Potential Assistance
Potential assistance for Cameroon .................................................................. 38
E. Authorities' Views .................................................................................................. 40
IV. Issues for Discussions ....................................................................................................... 41
Figures
1.
Evolution of Gross Enrollment Ratios by Gender, 1989/90-1998/99.........................14
2.
Composition of Stock of External Debt as of End-June 1999 ....................................42
3.
Composition of Stock of External Debt (After Traditional Debt Relief)
as of End-June 1999.............................................................................................43
4.
NPV of Debt-to-Export Ratios After Traditional Debt Relief, 1998/99-2018/19.......44
5.
Debt Service Ratios, 1991/2000-2018/19 ...................................................................45
Tables
1.
Selected Economic and Financial Indicators, 1996/97-2001/02.................................10
2.
Trends in Key Health Indicators, 1991 and 1998........................................................15
3.
Health Status in Cameroon and in Comparable African Countries ............................16
4.
Recent Debt Service History, 1994/95-1998/99 .........................................................33
5.
Main Assumptions on Macroeconomic Framework,1998/99-2018/19.......................46
6.
Debt Service Payments on Public and Publicly Guaranteed
External Debt, 1999/00-2018/19 ........................................................................47
7.
External Debt Indicators, 1998/99-2018/19 ................................................................48
8.
Net Present Value of Debt After Rescheduling, 1998/99-2018/19.............................49
9.
Discount Rate and Exchange Rate Assumptions ........................................................50
10.
Baseline Scenario and Sensitivity Analysis, 1998/99-2018/19...................................51
11.
Nominal Stocks and Net Present Value of Debt at Decision Point
by Creditor Groups ..............................................................................................52
12.
Estimated Assistance at Expected Decision Point in 2000 .........................................53
13.
Selected Economic and Financial Indicators (1996/97-2001/02) ...............................54
14.
Status of Countries Considered Under the HIPC Initiative, April 2000 .....................55
15.
Indicative Time Line of Steps Leading to the Presentation of the HIPC
Initiative Decision Point Document, PRSP, and New PRGF Program,
November 1999-September 2000............................................................................... 63
16.
Staff Preparations to Help Authorities with the PRSP Process...................................64
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Boxes
1.
Key Structural Reforms, 1990/91-1999/2000 .............................................................11
2.
Profile of Poverty ........................................................................................................17
3.
Milestones for Institutions, Governance, and Anticorruption.....................................24
4.
Short-term and Medium-term Milestones for Education ............................................26
5.
Short-term and Medium-term Milestones for Health..................................................28
6.
Debt and Debt-Service Reduction (DDSR) Operation with
Commercial Creditors .................................................................................................34
7.
Debt Relief From Official Creditors ...........................................................................35
8.
Main Assumptions in the Debt Sustainability Analysis (DSA) ..................................36
9.
Potential Key Reforms and Objectives to be Monitored.............................................39
Annexes
I.
An Overview of Structural Reforms ...........................................................................56
II.
External Debt Management Practices .........................................................................58
III.
Poverty Reduction Strategy Paper Preparation: Process to Date and Roadmap .........60
IV. Main Structural Reforms−Past Measures and Future Milestones ...............................65
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Cameroon: List of Acronyms and Abbreviations
Acronym/
Abbreviation
Meaning
AFD
Agence Française de Développement
BADEA
Arab Bank for Economic Development in Africa
BDEAC
Central African States Development Bank
BICEC
Banque Internationale pour le Crédit et l'Épargne au Cameroun
CAMAIR
Cameroon Airlines
CAMSHIP Lines
Cameroon Shipping Lines
CAMSUCO
Cameroon Sugar Company
CAMTAINER
Société Nationale de Transport et de Transit du Cameroun
CAMTEL
Cameroon Telecommunications (fixed telephones)
CAMTEL-Mobile
Cameroon Telecommunications (mobile telephones)
CDC
Cameroon Development Corporation
CEMAC
Communauté Economique et Monétaire pour l’Afrique Centrale
CIMA
Conférence Interafricaine des Marchés d’Assurances
CNPS
Caisse Nationale de Prévoyance Sociale
CNR
Caisse Nationale de Réassurance
COBAC
Commission Bancaire de l’Afrique Centrale
DPT
Diptheria, Polio, and Tetanus
DSA
Debt Substainability Analysis
HEVECAM
Hévéa Cameroun
ICOR
Incremental capital output ratio
MINEF
Ministère de l’Environnement et des Forêts
MOH
Ministry of Health
NPV
Net Present Value
NTBs
Nontariff barriers
ONADEF
Office National de Développement des Fôrets
PNRVA
Programme National pour la Recherche et la Vulgarisation Agricole
REGIFERCAM
Régie Nationale des Chemins de Fer du Cameroun
SAC
Structural adjustment credit
SCDP
Société Camerounaise de Dépôts Pétroliers
SGS
Société Générale de Surveillance
SNEC
Société Nationale des Eaux du Cameroun
SNH
Société Nationale des Hydrocarbures
SOCAMAC
Société Camerounaise de Manutention et d’Acconage
SOCAPALM
Société Camerounaise des Palmeraies
SOCAR
Société Camerounaise d'Assurances
SODECOTON
Société de Développement du Coton
SONARA
Société Nationale de Raffinage
SONEL
Société Nationale d'Electricité du Cameroun
SOSUCAM
Société Sucrière du Cameroun
SOTUC
Société des Transports Urbains du Cameroun
SRC
Société de Recouvrement des Créances du Cameroun
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EXECUTIVE SUMMARY
1. This paper presents a preliminary assessment of Cameroon’s eligibility for assistance
under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC Initiative) on the
basis of a debt sustainability analysis (DSA) prepared by the staffs of the International
Development Association (IDA) and the International Monetary Fund (IMF), and the
Cameroonian authorities. Based on this preliminary assessment, the staffs are of the view
that, even after the full application of all traditional debt relief mechanisms, Cameroon’s
external debt situation is unsustainable over the medium term. The paper’s proposals on
possible levels of assistance are necessarily provisional, pending full reconciliation of all
loans with creditors and consultations with multilateral and bilateral creditors2.
2. Cameroon’s unsustainable debt burden is the result of a severe terms of trade shock in
the mid-1980s, an over-valued exchange rate up to 1994, a long economic depression and
fiscal crisis, and, until about three years ago, economic mismanagement. The government
was slow to carry out necessary structural reforms which would have enabled it to benefit
more from the January 1994 devaluation of the CFA franc. Since late 1996, after much
internal debate and reluctance, Cameroon changed course and committed itself to correcting
the years of economic mismanagement. It undertook a wide-ranging economic reform
program with support from an IMF PRGF arrangement (1997-2000), an IDA structural
adjustment credit (SAC III), and technical assistance.
3. Cameroon is expected to complete satisfactorily the mid-term review of the third
annual Poverty Reduction and Growth Facility (PRGF) arrangement and is also
implementing SAC III slowly but satisfactorily3. In this framework, encouraging progress
has been made in macroeconomic stability, public finance, relations with external creditors,
restructuring the banking system, privatization, economic liberalization, transportation, and
forestry. This "first generation” of reforms has shown the government’s commitment to
revamping the economy and to creating a more conducive basis for sustained growth.
4. However, owing to the magnitude of the economic collapse and the need for
sequencing of the reform agenda, many important areas have not yet been addressed in a

2 In October 1997, Cameroon was granted a three-year flow rescheduling by the Paris Club
on Naples terms, with an overall debt service reduction of 50 percent in net present value
(NPV) terms. Most HIPC countries have received a 67 percent NPV reduction.
3 Two tranches of this six-tranche operation were released in 1998/99 and two of the four
floating tranches, one pertaining to the privatization program and the other to the forestry
sector, are expected to be released within the next three to four months. The remaining two
tranches (one pertaining to the port sector and the other to the privatization program) could
be released in the first half of 2001.
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satisfactory manner in the ongoing reforms. In particular, poverty reduction, improved
governance, effective delivery of social services, and development of basic infrastructure still
need to be urgently tackled and prioritized. In addition, the sharp decline of civil service
salaries since 1993 has led to a widening and deepening of corruption, which has now
become a major obstacle to increased private investment and efficiency of public
expenditure. Cameroon thus presents a sharp contrast, with significant progress having been
achieved in some areas, while there has been no progress in others (and, in some sectors, the
situation may even have worsened). These sectors will be the focus of the “second
generation” of reforms, which will be addressed in the context of the enhanced HIPC
Initiative, in the Poverty Reduction Strategy Paper (PRSP), and in the future assistance
programs of the Bretton Woods institutions.
5. The alleviation of Cameroon’s heavy external debt is crucial to the sustainability of
the progress that has already been achieved and would provide an important incentive for
Cameroon to accelerate and broaden its reforms. Without debt relief, the burden of financing
the country’s debt would be overwhelming. However, it is necessary to assess the Cameroon
government's commitment to enhance and advance the reform agenda, particularly in
the areas of governance and poverty reduction. In this context, the government has decided
to take a set of specific, up-front actions, prior to the proposed decision point (expected in
September 2000), aimed at improving governance, addressing the growing threat from
HIV/AIDS, and ensuring the efficient delivery of basic services to the poor, especially in the
social sectors. In the staffs' view, effective implementation of these actions would
demonstrate the government’s willingness to take strong measures to launch the new
generation of reforms. The government has also committed to preparing an interim PRSP by
decision point which will be reviewed by the Bretton Woods institutions.
6. Thereafter, in order to ensure sustainability of the reform program as the country
progresses from decision to completion point, a credible framework of PRSP
implementation, performance triggers, sector expenditure programs, close monitoring of the
use of resources, and evaluation of outcomes would be necessary. This framework is vital to
ensure that debt relief helps create more equitable growth and provides a better quality of life
for all Cameroonians. It includes (i) sectoral strategies and actions (health, education, rural
and urban development), including institutional reforms and sector expenditure programs, to
be implemented between the decision point and the completion point; (ii) proposals for
monitoring and evaluating the PRSP; and (iii) assurances that appropriate use will be made of
the considerable resources that could be available by debt relief. One possibility under
consideration is to establish a Poverty Action Fund (as in Uganda) for the debt service
savings which would be fully integrated in the overall budget framework and closely
monitored and audited by an independent outside body.
7. In particular, in order to ensure that good use is made of debt service savings, the
reforms and strategies would be closely monitored and supported by the IMF, under a new
three-year PRGF arrangement, and by IDA, under current adjustment operations and capacity
building projects and new adjustment operations (to be designed under the next CAS).
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8. This paper is organized as follows. Section I presents Cameroon’s eligibility under
the HIPC Initiative, and assesses Cameroon’s economic management and reform record since
the mid 1980s. Section II discusses the broad outline of the authorities’ medium-term policy
agenda, sector by sector, and describes in detail the key measures to be taken prior to the
proposed decision point and in the interim period between the decision and completion
points. Section III presents the results of the DSA, a discussion of Cameroon’s eligibility
under the HIPC Initiative, and the authorities’ views. Section IV concludes with possible
issues for discussion by Executive Directors.
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I. BACKGROUND
A. PRGF and IDA Status
1. Cameroon is currently a Poverty Reduction and Growth Facility (PRGF)-eligible and
IDA-only country, with a per capita GDP of about US$640 in 1998/99. Twenty-year
projections indicate that Cameroon’s per capita GDP would increase by 4.2 percent annually
to about US$1,450 in 2018/19.4 In the medium term, Cameroon will continue to need
substantial international concessional assistance and is likely to remain a PRGF-eligible and
IDA-only country in the foreseeable future.
B. Policy Reform Track Record
2. Following a period of pronounced terms of trade volatility in the early 1980s
(including a 50 percent decline between 1984 and 1986), a 60 percent appreciation of the
exchange rate in real terms, and expansionary, unproductive fiscal policy financed by foreign
debt accumulation, Cameroon fell into a decade-long recession from 1985-94. During this
period, per capita income halved, and poverty increased dramatically. The accompanying
fiscal crisis led to increasing corruption, and a serious deterioration of Cameroon’s education
and health systems, infrastructure, and the civil service: education quality and enrollment
rates significantly deteriorated, and Cameroon’s health indicators worsened.
3. Starting in 1988, Cameroon implemented a series of economic and structural
reforms aimed at stabilizing the economy, restoring internal and external viability, fostering
economic growth, and improving social conditions. In particular, structural reform efforts
concentrated on the liberalization of the coffee and cocoa sectors, the revision of the forestry
code, and liberalization of prices and the labor code. Despite the concerted international
support, the reform program was implemented haphazardly in the early stages and lacked
government commitment5. This attempt to stabilize the economy and restore internal and
external balances through internal adjustment alone, including a major cut in civil service
wages in 1993, did not produce the expected results, leaving the country with an
unmanageable debt, large external and internal arrears, a demoralized civil service, and a
financial sector in crisis. It also led to a deterioration in relations between the government
and its domestic and external partners, with a breakdown of trust with creditors and civil
society .
4. The situation began to improve following the CFA franc devaluation in January
1994, and the growth rate turned positive, attaining 5 percent in 1995-96. Yet, economic and

4 Real per capita income has grown at about 2.6 percent over the last five years.
5 Two IMF stand-by arrangements went off track in 1989 and in 1992 and disbursements
under the first structural adjustment loan (SAL I) were suspended.
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financial management still remained unsatisfactory; two more IMF stand-by arrangements
went off track, and disbursements under the IDA-financed Second Structural Adjustment
Credit were suspended. A new government was appointed in September 1996, with a specific
mandate to bring the situation under control and restore relations with external creditors and
the Bretton Woods Institutions, in particular. The new government was confronted by serious
imbalances in the country’s macroeconomic situation and in almost all areas of the public
sector. Recognizing that it would be impossible to tackle all these issues at once, a
sequential approach to reform was adopted with the support of the Bretton Woods
institutions, which provided financial support in the form of a three-year PRGF arrangement
(1997-2000) and the third Structural Adjustment Credit (1998). Major support was also
received from bilateral donors through a Paris Club three-year rescheduling. This sequential
approach involved a “first generation” of reforms that concentrated on macroeconomic
stability, public finance, relations with external creditors, restructuring of the banking
system, privatization, economic liberalization, transportation, and forestry. Since late 1996,
the government has demonstrated its commitment to this program of reform and encouraging
progress has been made in these areas, albeit at times at a slower pace than was originally
envisioned.
5. However, there has been little progress on fighting poverty, improving the health
and education sectors, or investing in agriculture and rural infrastructure, and, as a result,
social indicators most likely have deteriorated6. Major institutional and policy issues remain
to be tackled in all these sectors. Significant governance problems – in particular a weak and
highly centralized institutional and administrative framework, as well as rampant corruption
– continue to seriously undermine the legitimacy and credibility of the state, as well as the
restoration of basic trust between the government and civil society. The AIDS epidemic is
increasing in both urban and rural areas and is likely to reach catastrophic proportions in the
next one to two years if it is not urgently addressed.
Macroeconomic Polices
6. Macroeconomic performance during the first two and a half years of the PRGF
arrangement and under SAC III has been satisfactory. Economic developments in 1997-
99 were generally favorable, despite the adverse impact of the sharp deterioration in the
terms of trade (16 percent) experienced in the first half of 1998/99. Real GDP grew at an
average rate of about 5 percent a year, and annual inflation was maintained at around
3 percent. Gross domestic investment increased by 2.6 percentage points of GDP during the
period, of which 1.2 percentage points only were financed by an increase in national savings.
As a result, the external current account deficit widened from 2.8 percent of GDP in 1996/97
to 4.3 percent in 1998/99 (Tables 1 and 13).

6 Available data are neither comprehensive nor reliable. The 1998 Demographic and Health
Survey results show deterioration in indicators since the 1991 survey, although the sample
population of both 1991 and 1998 surveys is quite small.
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7. Fiscal performance was broadly satisfactory. Non-oil revenue increased by
2 percentage points of GDP, owing to an improvement in revenue collection with the
strengthening of the administration of the tax department and the smooth implementation of
the value-added tax (VAT). Oil revenues also strengthened, benefiting from the improvement
in the international oil prices and more timely transfer of oil revenues from SNH (the
national oil company) to the budget. Measures have been taken to improve expenditure
management and increase its efficiency and transparency.
Table 1. Cameroon: Selected Economic and Financial Indicators, 1996/97-2001/021
1996/97
1997/98
1998/99
1999/00
1999/00
2000/01
2001/02
Prog.
Revised
Proj.
Proj.
(Annual percentage changes)
GDP at constant prices
GDP per capita
5.1
2.3
5.0
2.2
4.4
1.6
4.8
2.0
4.2
2.1
5.3
3.0
5.7
3.0
Consumer prices (end of period)
7.0
2.2
2.2
2.0
2.0
2.0
2.0
Broad money (end of period)
13.8
7.8
9.7
12.5
10.5
8.0
9.5
(In percent of GDP)
Central government revenue
15.1
16.2
15.5
16.6
19.0
19.1
18.3
Of which: non-oil revenue
11.0
12.3
13.0
13.5
13.5
14.0
14.6
Central government expenditure
16.1
17.9
18.9
19.5
19.4
20.5
20.7
Primary fiscal balance2
5.8
5.9
4.6
5.2
7.1
6.5
5.2
Overall fiscal balance (commitment
basis, including grants)
Debt service/paid social expenditure
(percent)
-1.0
235.4
-1.4
391.2
-3.2
173.7
-2.6
...
-0.2
...
-1.3
...
-2.3
...
External current account
(including grants)
-2.8
-2.7
-4.3
-3.2
-2.7
-2.7
-2.7
Source: Authorities and staff estimates.
1Fiscal year begins in July.
2Total revenues less non interest expenditure and foreign-financed capital expenditure.
8. The budgetary primary surplus fluctuated around 5½ percent of GDP during the
period, while the overall deficit on a commitment basis and including grants averaged some
2-3 percent of GDP, reflecting mainly the clearance of significant external and domestic
arrears.
Structural policies
9. Structural reforms have been undertaken in Cameroon since the onset of the
crisis in the 1980s and have been deepened significantly since 1996/97 in the agro-
industry, public utilities, petroleum, forestry, transport, and financial sectors in order to
create a more favorable environment for private sector activity and enhance Cameroon’s
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external competitiveness. The main reforms implemented during the period 1990/91-
1999/2000 are summarized in Box 1. (Further details on structural reforms are in Annex 1).
Box 1. Cameroon: Key Structural Reforms, 1990/91- 1999/2000
Incentive and trade policies
• Coffee and cocoa sectors completely liberalized (1991-95).
•
Price controls eliminated except for petroleum products, medicines, textbooks, pharmaceuticals, marine transport, and port
services; labor code liberalized with respect to hiring and firing (1990-94).
• Reduction of nonforestry export taxes from 15-25 percent in 1994 to zero in 1999/2000 (July 1, 1999).
•
Nontariff barriers eliminated on all imports except petroleum products (February 1994).
Financial sector reforms
• Banking sector successfully restructured (1989-92 and 1996-99) via the liquidation of numerous insolvent banks (BMBC, Credit
Agricole) and restructuring of unprofitable but viable banks (SGBC, SCBC, BICEC).
• Government debt securitized with appropriate guarantees, loan recoveries improved, and deposits in failed banks were paid out of
the proceeds of recoveries.
• Elimination of the legal requirement that at least one-third of commercial bank capital be held by Cameroonian interests (July 1,
1997).
• Enhancement of competition within the banking system with the completion of bank restructuring and the liberalization of
commissions on bank transactions (July 1998).
•
Privatization of the only remaining government-owned bank, BICEC (completed January 2000).
•
Strengthening of the regulatory and judicial framework for financial transactions.
•
Insurance sector restructured via liquidation of insolvent private insurance companies, AMACAM, CNR and restructuring of
SOCAR.
•
Preparation of a national strategy to restructure the social security system (1999).
•
Financial cooperatives required to register with Ministry of Economy and Finance (1999) and brought under the control of the
regional banking commission (COBAC), which draws up prudential rules adapted to different categories of cooperatives.
Privatization
•
Privatization of a major rubber company, HEVECAM (1996); sugar company, CAMSUCO (1998); national shipping company,
CAMSHIP (1998); mobile phone company, CAMTEL mobile (2000).
•
Second private cellular telephone company (Mobilis) started operating in January 2000.
• Adoption of a privatization strategy for the cotton company, SODECOTON (October 1998).
• Launching of pre-qualification bids for (i) the privatization of the Cameroon Development Corporation (CDC); (ii) the
privatization of the public water company (SNEC) (December 1998); (iii) the privatization of the fixed telephone company,
CAMTEL (June 1999); and the electricity company, SONEL (September 1999), railway activities concessioned to the private
sector (1999).
• Regulatory agencies for telecommunications and electricity established (1999).
Energy sector
• Completion of two annual independent audits of the national oil company’s (SNH) accounts.
• Elimination of the national oil refinery’s (SONARA) monopoly over the supply of petroleum products through the liberalization
of competing imports (July 1, 1998).
• Liberalization of distribution margins in the price formula for refined petroleum products (June 1999).
• Liberalization of refined petroleum prices and establishment of automatic adjustment mechanism.
Transport sector
• Maritime transport completely liberalized (1998), via elimination of cargo sharing rules and national preferences.
• Railway activities concessioned to the private sector (1999).
•
System of autonomous ports set up to replace the existing mega Port Authority (1999).
• Road maintenance fund set up in 1998 to provide sustainable source of funding for maintenance of priority network.
Forestry
• New forestry code and application decrees adopted (1994, 1995).
• Criteria revised for the adjudication of concessions and cutting rights (1999).
•
Forestry incentives and tax reforms begun (1997-98).
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C. Institutional Reforms
10. Since the late 1980s, administrative reforms have mainly focused on the central
government, and on efforts to rationalize the civil service and to reform expenditure
management. In general, the reforms have not had a significant impact on the provision of
public services, the improvement of governance, and the reduction of corruption. Starting
with the launch of the current PRGF arrangement, there has been more success with respect
to revenue mobilization, although further improvements are needed. Also, the privatization
program is reducing the scope for patronage and rent capture by public officials.
11. Civil service reform. The objectives of reform were to better define the mission of
Ministries, rationalize their organization and improve their efficiency. New organizational
structures and staffing plans were established for all ministries. However, except for the
Ministry of Public Works, these plans have not been implemented. On the wage front, at the
onset of the crisis, the civil service wage bill represented about 9 percent of GDP. Through
reduction of benefits and wages, the wage bill was reduced by some 25 percent in 1993/94.
In 1994, an obligatory and voluntary departure program was put into place with the financial
assistance of donors, resulting in the termination of 25,000 employees. The salary reduction
of 1993 and the 1994 devaluation, had a devastating impact on civil service morale,
absenteeism, and the quality of services provided.
12. Public expenditure management. Various efforts were made on the public
expenditure management front. In the early stages of the reform (late 1980s), these efforts
concentrated on (i) putting in place a mechanism for recording public expenditures
accurately; and (ii) rationalizing the public investment program and procedures. In the wake
of the devaluation, efforts were made to increase, albeit marginally, the share of resources
going to key development sectors (health, education, infrastructure, agriculture, and
economic management). The government began implementing an action plan to improve
public expenditure management on July 1, 1998. Finally, in 1999/2000, the government
undertook to overhaul completely the procurement system, with the aim of improving
resource allocation, accountability, and governance. An audit of the system in place was
conducted and has confirmed the existence of very serious flaws and problems of corruption.
13. Decentralization. In the current institutional setup, government functions are highly
centralized with almost all financial and human resources administered by the central
government. Local or regional level participation and involvement in key decisions are
inadequate owing to lack of resources and capacity and to the political marginalization of
local government. Consequently, at the local level, service delivery is nonexistent or
seriously deficient, and there are transparency and corruption problems. A general legislative
framework defining the roles and responsibilities of the communities and the regions has
been enacted, but the implementing rules and regulations (textes d’application) have not yet
been enacted. Although the government remains reluctant to effectively shift authority and
resources to the local level, the National Governance Program (see next paragraph) envisages
a number of interventions to improve local service delivery, in particular the transfer of
specific public functions and the development of a regulatory framework for government
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operations at the local and regional levels. Given the existing resource and capacity
constraints, Cameroon will need sustained support to implement the proposed activities and
to substantially improve the administrative capacity of the regions and communities.
14. Anticorruption efforts. In 1999, the government established a high-level ad hoc
committee for the fight against corruption, which is chaired by the Prime Minister. The
committee issues recommendations to address corruption at all levels of the society. To
monitor the implementation of the recommendations of the committee, the Prime Minister
has recently appointed a special governance watchdog. In addition, efforts have been made to
improve tax administration: audits of SNH have been carried out to ensure that all oil sector
revenues are transferred to the budget in a timely and transparent manner; also, forestry
harvesting rights are now allocated through a competitive bidding process, in the presence of
an independent observer. The same approach is to be followed in the reform of public
procurement. Some high-ranking public officials who were accused of fraud, corrupt
practices, and embezzlement of public funds have been replaced and some of them arrested.
While these activities and the establishment of the ad hoc committee are positive signals, the
government needs to continue to show achievements in this regard, as many internal and
external observers remain skeptical as to the extent of the authorities’ commitment to
effectively reduce corruption.
D. Social Policies
15. Education sector. Education quality and enrollment rates have significantly
deteriorated over the last decade, to the point where such a decline is unique for a country
that has not experienced civil war or conflict. After coming close to universal primary
education in the late 1980s, enrollment rates have fallen to only 65 percent of the relevant
age group in primary education and to less than 50 percent in secondary education7
(Figure 1). At the same time, quality has deteriorated, as suggested by record repetition rates,
estimated at 28 percent each year, as well as by substandard achievement scores. This decline
seems to have been triggered by the drastic fiscal constraints of the early 1990s, which, in
turn, brought about lower salaries for teachers, reduced allocations for materials, and
neglected infrastructure.
16. In 1995, the government organized a national forum on education (les Etats
Généraux), which resulted in Parliament approving an Education Orientation Law in 1998.
This law could potentially serve as a basis for the development of an education strategy that
brings together all stakeholders around specific tasks geared to improve the access, quality
and equity of educational services. However, it has not been implemented yet for lack of
political commitment. At the same time, a number of measures were taken, that are likely to

7 However, these figures mask large regional differences with the North, Adamoua and Far
North provinces showing much lower levels of literacy and school enrollment (particularly
female enrollment).
- 14 -
contribute to a further deterioration of the situation. Parent-teacher associations—an
important source of financial and in-kind assistance to schools—have been essentially
eliminated and replaced, since 1996, by administratively selected school management
committees that demand compulsory fees from parents. The use of these fees is
nontransparent. In 1998/99, a monopoly over the publication and distribution of schoolbooks
was granted by the then Minister of Education to a company in which he himself has a major
interest. In response to civil society’s and donors’ concerns about these issues, the
government recently removed the Minister of Education from his post and agreed to annul
that company's monopoly on schoolbooks.
17. Health sector. Following the economic crisis of the last decade, Cameroon’s health
system has deteriorated significantly (see Tables 2 and 3). The drastic reduction of
government spending in the health sector and the fall in household income led to the
reduction of investment and decline in the access, quality and utilization of health services,
particularly in rural areas. As in education, most health expenditures continue to be financed
by the households which spend about US$20 per capita per year, as compared to $6.40 for
the government. Infectious diseases (malaria and tuberculosis, among others) remain the
principal causes of mortality. The AIDS epidemic is increasing in both urban and rural areas
and is likely to reach catastrophic proportions in the next one-two years if it is not urgently
addressed. The health status of women and children has deteriorated more: the maternal
mortality rate is high, at 550 per 100,000 live births, and under 5 mortality rates have
significantly increased from 126 to 151 per 1,000 live births during the period from 1991 to
1998. The health of children and mothers is also significantly affected by nutrition problems.
18. To reverse this trend, the government has taken a series of measures, launched
between 1990 and 1996, with the support of IDA and other donors, that aim at decreasing the
infant, child, and maternal mortality rates. These include the decentralization of health care
Figure 1. C am eroon: Evolu tion of G ross En rollm en t R atios by G en der, 1989/90-1998/99
( percent)
60
65
70
75
80
85
90
95
100
105
1989/90
1990/91
1995/96
1996/97
1997/98
1998/99
Boys
Girls
TO TA L
- 15 -
delivery, the adoption of new regulations for drug procurement and distribution, the
reorganization of the health sector, and the strengthening of community participation through
health committees. Most of these activities are ongoing, but so far, their implementation has
been lackluster, and there has been a deterioration in health service delivery or in health
indicators. Indeed, as in the education sector, corruption is a problem: for example, the sick
are frequently required to make up-front payments to health service personnel, and financial
controls at health service centers are inadequate. As with the education sector, in response to
civil society’s and donors' concerns about mismanagement of the sector and the lack of
transparency, the Minister of Health has been removed from his post.
Table 2. Cameroon: Trends in Key Health Indicators, 1991 and 1999
Indicator
1991
1998
Total fertility rate
5.8
5.2
Percent of pregnant women with at least 1 prenatal consultation
79
79
Percent of pregnant women receiving at least 1 tetanus injection
69
69
Percent of births attended by trained personnel
64
58
Percent of children aged 12-23 months completely vaccinated
41
36
Infant mortality rate (per 1,000 live births)
65
77
Neonatal mortality rate (per 1,000 live births)
33
37
Under 5 childhood mortality rate (per 1,000 live births)
126
151
Source: Demographic and Health Surveys (1991 and 1998).
19. HIV/AIDS: The 1998 Joint UN Program on HIV/AIDS (UNAIDS) figures for
Cameroon show the HIV rate at 7 percent among adults. By the mid-1990s, more than
15 percent of the army and truck drivers were HIV-positive, and rates among commercial sex
workers in Yaoundé and Douala exceeded 20 percent. Today, these rates are undoubtedly
higher. Unofficial estimates put the HIV rate among adults closer to 10 percent. Research on
the HIV/AIDS epidemic in Southern Africa has demonstrated that, once the HIV prevalence
rate surpasses 5 percent, it soars rapidly. With the national rate near 7 percent over a year
ago, Cameroon is, therefore, at the most perilous point in the epidemic. The HIV/AIDS
epidemic is no longer just a public health issue. If not contained, it will be the greatest single
threat to the development of Cameroon, as it decimates the labor force, shortens life
expectancy, exhausts savings, fractures and impoverishes families, orphans millions, and
shreds the fabric of society.
- 16 -
Table 3: Health Status in Cameroon and in Comparable African Countries1
Country
Life
expectancy at
birth
(years)
Infant
mortality
(per 1000 live
births)
Under-five
mortality (per
1000 live
births,
Maternal
mortality (per
100,000 live
births)
Total fertility
rate (no. of
children per
woman)
Vaccination
rates (percent
immunized with
DPT3)
Child malnutrition
(percent
underweight <5 yr.
old, 1990-96)
Cameroon
56
77
151
550
5.2
36
29
Cote d’Ivoire
55
88
138
600
5.6
47
24
Ghana
60
71
110
740
5.0
59
27
Uganda
40
99
141
550
6.7
38
26
Madagascar
58
96
162
600
6.0
40
36
Sub-Saharan
Africa
52
91
151
822
5.6
55
32
Source: World Bank and WHO.
1Cameroon data are for the latest available year, 1998; Madagascar data are for 1996; and data for the other countries and Africa
are mean values for 1990-96.
E. Poverty Outcomes and Living Standards
20. The achievements in the macroeconomic area since 1996 have been important in
preventing any further degradation of average living standards. Yet the impact of growth on
the poor is not known: poverty monitoring has been infrequent and erratic throughout the
1990s. About 51 percent of the population was unable to meet a minimum consumption
basket (poverty line) in 1996, and 23 percent were unable to meet even the food component
of this basket (extreme poverty line). The cumulative growth of per capita private
consumption in 1996-2000 is expected to be 3.8 percent. If no shifts in income distribution
accompanied this growth, the poverty rate would be 48 percent in 2000 and the extreme
poverty rate 22 percent; however, these estimates will be verifiable only after the next
household consumption survey. Other poverty indicators point to limited progress in the
1990s. The 1998 Demographic and Health Survey found a chronic malnutrition (stunting)
rate of 29 percent among children under 3 compared with a 23 percent rate in 1991. Box 2
presents details on Cameroon's profile of poverty.
21. In 1996, it was estimated that about 86 percent of the poor population lived in the
rural areas for whom agricultural incomes constitute a key determinant of welfare. Export
agriculture suffered greatly in 1986-93 owing to falling world prices, low productivity and
inefficient marketing of products, and the majority of farmers who fell below the poverty line
in 1996 were observed to be export crop producers. The 1994 devaluation and the subsequent
reduction and elimination (by July 1999) of agricultural export duties improved the incentive
environment, but, after an initial surge of production, the supply response has not been
sustained. Value-added in food crop production has increased since the devaluation in per
capita terms and as a share of GDP. Agro-processing has also increased as a share of GDP.
Overall, agricultural performance has been relatively buoyant, and this suggests a priori that
the rural poor may have been able to achieve some modest gains in income in the last few
years. Against this positive hypothesis must be weighed the more intractable effects of
- 17 -
longer-term structural constraints. These include land degradation and deforestation, a slash-
and-burn production system, the weaknesses in support services of all sorts for poor farmers
and for women, and the structural inefficiencies remaining in the domestic and export
marketing subsectors. The combined impact of all these factors on the poor will be assessed
by the next household consumption survey, which is a high priority.
Box 2. Cameroon: Profile of Poverty
The latest nationwide household consumption survey was conducted in 1996. The definition of income poverty used
by government in analyzing its results was CFAF 148,000 (about US$290) per adult equivalent per year, or US$0.80
per day. Adjustments were made for regional price differences. The definition of poverty represents the estimated cost
of a minimum consumption basket, two-thirds of which is for food expenditures. As is usual in such studies, income
includes the estimated value of subsistence consumption and imputed rent for those households owning their own
homes. The definition does not place a value on most other unpaid household activities, many of which are provided
by female household members. Major findings of the survey include:
• Nationally, some 6.5 million people or about 51 percent of the population, fell below the poverty threshold, and
close to 3 million, or about 23 percent of the population, could not afford even the food component of the
consumption basket—characterized by government as a situation of extreme poverty.
• The survey confirmed a high degree of inequality in 1996, although less than in a similar survey in 1984. Income
inequalities were found to be greater in the urban areas than the rural areas. Differences in living standards were
apparent by gender, region and socio-economic group.
• Household consumption data do not permit a gender disaggregation, but other measures of living standards such
as nutrition levels, health access and educational attainment, show a marked disadvantage for women.
• Rural/urban poverty. Poverty was found to be overwhelmingly a rural phenomenon, with the rural areas home
to 86 percent of the poor. The rural poverty rate averaged 61 percent, affecting all age and socio-economic
groups which is more than twice as high as in 1984. Higher rates of poverty were observed among export crop
farmers than among food crop farmers. Urban poverty, while numerically less important, is a serious and
growing problem. In Yaoundé and Douala, poverty was mostly concentrated in the younger segments of the
populations. In other urban areas, it was found to be more prevalent among older groups.
• Education. The gross school enrollment rate for children aged 6 to 14 years was 76.3 percent in 1996 and 80.7
percent in 1998. Rates average about 7 percentage points lower among girls than among boys. Enrollments rates
also differ markedly by region. In the urban areas, rates exceed 90 percent, whereas in the rural savanna region
the rate was only 33.4 percent in 1996 with an unusually wide gender gap. Of all children not going to school,
85.6 percent had never registered in any school, 9.7 percent had dropped out for financial reasons, and 4.7
percent had dropped out for other reasons.
• Health. Morbidity is relatively high, with one-fifth of the population reporting a sickness in the previous two
weeks. On average, a medical consultation of some sort was sought in about half the cases of illness. The
distribution of hospitals by region shows that in the far north, there are 100,000 inhabitants per hospital,
compared with 30,000 per hospital in the south. The population-per-hospital-bed ratio varies, ranging from 287
in the west to 1,465 in the north.
• Water supply. On average, 44.2 percent of households had access to safe drinking water (tapped or quality-
controlled). In the main towns, seven households in ten had access to potable water, compared with only two in
the rural areas.
• The demographics underlying Cameroon’s poverty situation remain a daunting long term challenge. Population
growth is about 2.9 percent annually and the rate of growth of the working age population is even higher. There
is, therefore, a rapid growth in labor supply, which has coincided with declining labor force quality, as indicated
by average years of schooling, health standards, and literacy rates. For much of the last two decades, the growth
of labor demand, itself a derivative of economic demand, has failed to keep pace, thus creating a very difficult
context for the poor person in search of a livelihood. More buoyant demand for labor at the low productivity end
of the scale, coupled with efforts to raise the productivity of, and returns to, the labor of the poor, is the key to
both more rapid growth and accelerated poverty reduction.
Source: World Bank. A 1999 Update of the Cameroon poverty profile. World Bank. (In process).
- 18 -
II. MEDIUM TERM POLICY CHALLENGES, SOURCES OF GROWTH,
AND POVERTY REDUCTION
A. Poverty Reduction Strategy and Participation
22. Successive governments have been slow to respond to the challenge posed by
poverty; and indeed the first comprehensive statement of intent by the government was the
"Déclaration de la Stratégie Nationale de Lutte Contre la Pauvreté (DSNLCP)," published in
December 1998. This declaration, prepared following consultations with civil society,
outlines 11 strategic axes for reducing poverty. These go beyond the present economic
reform program and call for reinforced actions in many cross-cutting areas and in the social
sectors. The process of converting the axes into concrete action plans was initiated in 1999.
Meanwhile, the enhanced HIPC Initiative has given substantial motivation to this process by
offering a more concrete operational vehicle (the PRSP), the prospect of a reduced debt
burden and the possibility of freeing up additional resources for poverty programs. The PRSP
preparation process, therefore, has immense significance as a process for assuring that
economic and sectoral policies are restructured to take advantage of this opportunity and to
channel resources more directly into poverty reducing activities and programs.
23. The government’s main objectives for the coming three years are to (i) complete the
implementation of ongoing macroeconomic and structural reforms and enhance their impact
and sustainability; and (ii) introduce a “second generation” of reforms aimed at bringing the
poor more fully into the growth process and building a basis for long-term social
development. To build a tight link between the prospective reduction in debt payments and
poverty outcomes, it will be necessary to focus more sharply on the efficiency and targeting
of public expenditures and to shift resources in favor of development activities, notably
health, education, rural development, and infrastructure. The elaboration and implementation
of the PRSP are central to this process and the reform objectives. Given the weakness of past
stakeholder consultation processes in Cameroon, an active involvement of beneficiaries and
stakeholders in the PRSP process, and in the subsequent implementation, monitoring, and
evaluation of poverty policies, will be necessary.
24. Poverty reduction strategy. The context for poverty reduction is characterized by
rapid demographic growth, declining literacy rates and health standards, a growing threat
from HIV/AIDS, and marked gender and regional disparities. Moreover, many of the
prerequisites for rapid progress in poverty reduction are absent. There is little experience
with participatory approaches; the mechanisms for decentralized actions to equalize key
economic and social services across regions are not well developed; and low governance
standards are an issue impeding many potential approaches. The issues are complex,
requiring cross-cutting approaches that go beyond customary institutional lines.
25. These are key themes for a successful poverty reduction strategy: (i) improving living
standards and poverty outcomes, through high rates of pro-poor economic growth that will
support a buoyant economic climate, increased employment and income-generating
opportunities, active management of economic shocks, and the strengthening of governance;
- 19 -
(ii) taking urgent actions to address the growing risks implied by the spread of HIV/AIDS;
(iii) addressing long-term population growth through reductions in the total fertility rate
based on education, child survival, and reproductive health services; (iv) improving
productivity of labor (time use) in rural areas, with a focus on health standards, first-stage
mechanization, continuity in land use, access to safe water and improved physical
accessibility; (v) improving the quality of the urban labor supply and containing labor costs
through higher educational attainments and skills training, a focus on youth unemployment,
and containment of the urban cost of living; and (vi) equalizing the availability of public
services, including the elimination of gender differences in health, education, nutritional
standards, and access to infrastructure, with a major shift in public resources toward under
served regions.
26. Participation. A participatory approach to poverty diagnosis, policy design,
implementation of policies, and monitoring and evaluation will be essential for establishing a
national consensus on the strategy and activities of the PRSP and to build a commitment to
the strategy across all levels of Cameroonian society.8 The government will therefore need to
mainstream participatory approaches, build partnerships with civil society and other
development partners, and establish a poverty-monitoring and evaluation system. Key
challenges for the government will be to build mutual trust between itself and civil society,
find ways to listen to the poor, and reflect the diversity of poverty problems in the key
programs.
27. The government has defined a participatory approach and its subsequent
implementation following a seminar in January, 2000 where invited members of sectoral
ministries, national NGOs, and interested donors contributed to the formulation of
participatory methods and objectives. Following on from this, substantial consultations with
diverse rural and urban groups in the ten provinces were held in April. Following the
documentation of this participatory analysis, a national seminar to define national and
regional poverty strategies will be held in late May. With the successful completion of this
first phase, the government will continue with a second round of participation that will take
up the issues of effective policy response, the participatory definition of indicators, and the
establishment of participatory monitoring and evaluation (M&E).
28. The outcomes and results of the participatory process will be important inputs into the
elaboration of the PRSP. So far, the preparation of the interim PRSP has proceeded

8 Agreed indicators to assess the success and credibility of the participatory diagnostics and
strategy definition phase are the following: (i) the focus will be on the community, regional,
and the national levels; (ii) consultation processes in rural and urban areas will be open and
inclusive; and (iii) the resulting ten provincial participatory analyses will be documented in
the people’s own words for both feedback and use in the national seminar to establish
preferred poverty strategies. Preliminary feedback suggests that the consultation in April did
comply with these indicators.
- 20 -
satisfactorily, and it is expected to be ready by September 2000. Thereafter, the government
will conduct a further round of participatory consultations and technical analyses with a view
to completing a full PRSP in the summer of 2001. A fuller description of the PRSP process
and road map is presented in Annex III.
29. The projected growth of GDP and per capita private consumption suggest that the
best outcome for 2003 would be a reduction of the poverty rate by 4 percentage points
relative to 2000. This outcome would be attained only if all parts of the population
experienced the average rate of income growth, a feature that has not characterized past
Cameroonian growth and which would imply a much sharper focus on growth of economic
activities among the poor. If this is achieved, the poverty rate would therefore be at best 44
percent in 2003. However, even this result would still leave the absolute population living in
poverty unchanged at 7.3 million. In the longer run, the International Development Goals as
applied to Cameroon, would call for a reduction of the poverty rate to 25 percent by 2015; a
net primary enrollment rate of 95 percent by 2015, with the complete elimination of the
gender gap, and a decline in infant mortality from 126 per 1,000 live births in 1998 to 42 by
2015.
B. Macroeconomic Objectives and Policies
30. The authorities are committed to establishing a macroeconomic framework that will
support the high rates of growth and public resource availability needed for environmentally
sustainable poverty reduction by (i) maintaining the low level of inflation; (ii) raising
investment and domestic savings; and (iii) strengthening external competitiveness through
efficiency-enhancing structural reforms. The government's macroeconomic objectives for the
next three years are to (i) achieve real GDP growth of at least 5 percent per year; (ii) limit
consumer price inflation to 2 percent; and (iii) contain the external current account deficit at
about 2.5-3 percent of GDP (Table 13). In the longer term, the authorities' objective is to
gradually increase the pace of real growth to 7 percent, the minimum needed for sustainable
poverty reduction.
31. Achievement of macroeconomic objectives is predicated on redressing the economy’s
structural weaknesses, which hamper economic development and job creation, through the
coordinated implementation of economic and financial policies aimed at (i) improving
overall productivity and competitiveness; (ii) strengthening production and the export base;
(iii) improving public and private savings; (iv) increasing investment, both public and
private; and (v) encouraging and promoting private sector development. In the face of the
depletion of proven oil reserves, the main sources of growth in Cameroon will have to come
from the non-oil sector through the development of agriculture and agro-industries,
especially non traditional crops and exports, forestry, and manufacturing. In the mining
sector, the aluminum industry will remain key. Public works will continue to grow in
connection with the rehabilitation of the economic and social infrastructure. The government
will focus on (i) consolidating and deepening reforms, in the electricity, water,
telecommunications, transport, and oil sectors; (ii) consolidating and concluding the
privatization program; (iii) undertaking further civil service reform; and (iv) deepening
- 21 -
financial sector reforms, notably of nonbank financial intermediaries, and overhauling the
social security system.
32. Fiscal policy will play a key role, with the goal of consolidating progress made in
recent years toward fiscal sustainability, raising non-oil revenue, reorienting expenditures
toward the social sectors and infrastructure rehabilitation, and clearing domestic arrears.
With a primary surplus (excluding foreign-financed investment) projected to average
6 percent of GDP and government investment rising by some 1 percentage point of GDP
during the coming three-year period, the government’s objective will be to contain the
overall deficit, on a commitment basis at about 1-2 percent of GDP. These objectives would
be achieved on the revenue side through a strengthening of the customs administration,
intensification of ongoing tax reforms, and implementation of measures to widen the tax
base. On the expenditure side, measures will aim at increasing expenditures and efficiency in
the social and infrastructure sectors, improving wages somewhat and decompressing them to
increase incentives, and strengthening expenditure management and controls.
33. On the revenue side, efforts will focus on improving transparency and revenue
collection in the oil, forestry, and external trade sectors, as well as ensuring timely transfers
of central government revenues to localities. In the oil sector, the focus will be on improving
the monitoring of oil sector operations to ensure the transparency and automatic transfer of
oil revenue to the treasury. In the forestry sector, efforts will concentrate on increasing
revenues through implementing the recommendations of the recently completed economic
audit of the forestry sector, in particular the forestry revenue enhancement and securitization
program. In customs, the primary area of concentration will be on improving collections and
reducing fraud. Finally, attention will also focus on improving collections of nontax
revenues, especially from user service fees.
34. The government will continue to implement its action plan for the improvement of
public expenditure management at the central government level by (i) reducing the number
of steps and players involved in budget execution; (ii) increasing the responsibility of
financial comptrollers in spending ministries; (iii) enhancing the oversight and control
functions of the Ministry of Finance and the external audit agencies; and (iv) oversight and
monitoring delegated credits. In particular, the government will conduct annual audits of
government procurement contracts and implement corrective measures. It will also adopt
new procedures for the use of the delegated credits for the Ministries of Education, Health,
and Agriculture, including publication of their monthly allocations and actual transfers, and
monitor closely their final use, based on quarterly audit reports. Budget-tracking exercises
in key social sectors, in particular the health and the education sectors, will help develop
adequate financial management mechanisms at the various levels of government.
35. On the investment front, the priority will be to improve the preparation, content, and
execution of the public investment program (PIP) through stricter project selection practices
and assessment of recurrent costs, and a strengthened project execution review process.
Regarding domestic arrears, after the completion of the audit of the stock of arrears prior to
- 22 -
the end of June 1997, the government is preparing a comprehensive multi year settlement
plan and will ensure that corresponding operations are incorporated into the budget.
36. Monetary policy, which is conducted at the regional level, will aim at consolidating
the net foreign assets position of the CFA franc zone and maintaining low inflation consistent
with a fixed exchange rate pegged to the euro. Further actions in strengthening the banking
system, enhancing the supervisory activity of the regional banking commission (COBAC),
and defining prudential norms for the nonbank financial institutions will be an important part
of the reform agenda.
37. Financial sector. Greater emphasis will be placed on financial sector development in
order to support the higher rate of economic growth necessary to reduce unemployment and
poverty, and on adequate channels to finance small- and medium-sized enterprises.
Therefore, financial cooperatives and microfinance institutions play a crucial role. The
government will build on the good progress already made in the banking and insurance
sectors to advance and deepen reform measures and ensure a greater number of beneficiaries.
The establishment of an environment conducive to the development of financial cooperatives
is an important element. The government intends to restructure the system of social
protection to increase its reach and ensure its medium- and long-term viability9.
38. External competitiveness. Achieving higher rates of growth will require further
increases in the international competitiveness of exports and import substituting activities.
Future milestones in the trade regime will include (i) a further reduction of import duties;
(ii) elimination of remaining temporary import surcharges; and (iii) improvements in customs
regimes, with a view to increasing their efficiency for bona fide direct and indirect exporters
while restricting access for other classes of operators. Additional gains in competitiveness
will come from improvements in the transport and communications sectors. In the port
sector, the emphasis will be on completing the institutional reforms as part of SAC III,
including the privatization of key industrial and commercial activities, as well as port
services, and improving the efficiency and speed of port transactions. Reductions in internal
transport costs are expected to result from improved road maintenance, following the
creation of the Road Maintenance Fund; lower costs of rail transport, following the
privatization of the railway concession; and the improved quality and availability of internal
air transport.

9 Within this framework, a strategy for the complete overhaul of the social protection system
has been prepared in collaboration with the World Bank and has been adopted by the
government. Implementation of this strategy, involving institutional as well as legislative
changes, will start in 2000-01.
- 23 -
C. Institutions, Governance, and Anticorruption
39. As indicated earlier, the quality of public services is poor, and corruption widespread.
This reflects the very poor state of governance with respect to public resource mobilization
and management, service delivery, and oversight functions. Drastic improvements in all areas
are a sine qua non of sustainable, high-level economic growth and poverty reduction.
Looking forward, efforts will focus specifically on (i) putting in place an overall governance
strategy; (ii) decentralizing service delivery; (iii) undertaking supportive reforms at the
central government level; (iv) initiating a serious effort to improve governance in the judicial
sector; and (v) ensuring the establishment of an appropriate incentives-cum-regulatory
framework and oversight institutions for private sector development.
40. Overall governance strategy. The government is developing a comprehensive
strategy to improve governance and reduce corruption. This strategy will further
operationalize the National Governance Program, which was developed by the government
with assistance from the UNDP. The strategy is to be finalized before June 2000 and a set of
specific activities will be developed together with relevant stakeholders to ensure their
backing and the creation of an effective and credible anti-corruption coalition. An initial set
of anticorruption activities would then be launched. The authorities at the highest level have
recently solicited assistance from the international financial community in this endeavor.
41. Decentralization and decentralized service delivery. Decentralization,
decentralized service delivery, and the development of alternative service delivery concepts
at the community level will be the cornerstones of the long-run governance strategy. This
would complement ongoing activities to reduce poverty by strengthening the availability of,
and access to, key public services at the local and regional levels in areas such as agriculture,
health, education, and infrastructure. The ultimate goal will be to enable the regions and
communities to deliver core services in a decentralized and more effective way by
restructuring the relationship of line agencies to regional and local governments, and by
progressively reassigning them fiscal revenue and expenditure responsibilities. Specific
attention will be given to developing integrated community action plans (CAPs). A
governance overview would map existing constraints at the various institutional levels and
help identify options for institutional reform. Beneficiary assessments will help to adequately
identify deficiencies and shape the reform agenda.
42. Supportive reforms at the central government level. The decentralized service
delivery approach will be complemented by some targeted reforms at the central government
level which are aimed at improving transparency and accountability in the public sector. Key
elements in this context are reforms in procurement, financial management and human
resource management as well as civil service reform (see Box 3). In addition the authorities
will continue ongoing efforts to improve expenditure management, tax administration and the
oversight of public sector agencies and enterprises through annual technical and financial
audits. In this context, the authorities intend, to ensure that public financial management
systems meet the following fiduciary benchmarks within the next two years: (i) regular and
timely reporting by the government to the legislative and the public on budget execution
- 24 -
during and at the end of the fiscal year; and (ii) regular and timely reports by the Supreme
Audit Institution (or independent auditors) as to the accuracy of government accounts and
compliance with financial laws and regulations.10
Box 3: Milestones for Institutions, Governance, and Anticorruption
Short term
• Adoption of governance and anti-corruption reform strategy and associated action plan.
• Modification of procurement code to make provision for the validation of contracts by an independent
observer and for ex-post audits of contracts by independent internationally reputed companies.
Medium term
• Governance. Completion of overviews of key sectors (including health and education) and identification of
points of intervention for institutional reforms.
• Anticorruption. Formation of an effective and credible anti-corruption coalition through workshops with
the participation of relevant stakeholders.
• Decentralization and decentralized service delivery. Completion of budget tracking exercises and
beneficiary assessments in key social sectors (health & education); and, on this basis, implementation of
pilot operations for decentralized service delivery.
• Procurement. Completion of a comprehensive review (Country Procurement Review); and on that basis
preparation and implementation of comprehensive procurement reform.
• Financial management. Comprehensive financial accountability assessment (CFAA) undertaken and
used to prepare an action plan to improve public finance management including provision for appropriate
deconcentration.
• Human Resource management. Preparation and implementation of an action plan for the de-
concentration of human resource management in key sectors.
• Civil service. Census and harmonization of payroll and personnel files. Adoption and implementation of
reform strategy focused on decentralized service delivery.
• Judicial sector. Adoption and implementation of a strategy for judicial reform.
• Regulatory agencies to oversee privatized companies (notably public utilities) ensuring that they are
effectively run in an independent and professional manner.
43. Judicial sector. Judicial reform is another key area of the governance reform
program. The government plans to take the steps necessary to correct deficiencies in the legal
system, the proper functioning of which is essential for investment and for the development
of the private sector, particularly the financial system. To this end, the government will
undertake a preliminary sector assessment during 2000/01, with assistance from the
international financial community, in order to effectively identify points of intervention for a
credible judicial reform.

10 The budget is voted once a year by the National Assembly.
- 25 -
44. An appropriate incentives-cum-regulatory framework and oversight institutions are
essential to promoting efficient development of the private sector which, in turn, can make a
very important contribution to growth and poverty reduction. To that end, the government
intends to (i) pursue the development of independent regulatory agencies for key sectors
(e.g., water, electricity, telephones, railways, and ports); (ii) establish similar mechanisms to
foster the development of public/private partnership in the provision of key services in the
social sectors; and (iii) establish streamlined arrangements for arbitration and dispute
resolution, with the objective of avoiding long and often nontransparent judicial proceedings.
Attention will also focus on the implementation of the competition law, in particular
regarding the abuse of dominant position and safeguards against predatory trade practices.
D. Social Sectors
45. The striking deterioration in the delivery of social services demands urgent attention
and significant improvements in these sectors will be necessary conditions for Cameroon to
move from decision to completion point in the HIPC Initiative context. In the social sectors,
detailed strategies on health and education, which will be key inputs into the overall PRSP
process, are being prepared; these will need strong coordination among central and line
ministries and government's commitment to ensure true reform. In addition, the capacity to
ensure effective implementation of these strategies should be reinforced.11
46. Education sector. The reform of the education sector is crucial. To put into practice
the principles stated in the 1998 Education Orientation Law, the authorities will have to
strengthen the strategic and regulatory framework while transferring service delivery
responsibilities either to the local administrations, to the communities or to private providers
of education. At the same time, it is necessary to develop a working partnership and define
clear relationships between the authorities and the parents associations, which contribute
considerably to the financing of the education system. Finally, improving quality will require
an overhaul of the skills and motivations of teachers through a revision of their current
statutes and pay scale, and through the decentralization of human resource management to
the school district levels.
47. The government is preparing a comprehensive sector strategy covering the primary,
secondary, and tertiary sectors. Its key (development) objectives are to increase enrollments,
especially at the primary level, internal efficiency and standard achievement scores. The
strategy is being prepared through a participatory process, and, to that end, the composition
of the Steering Committee for Strategy Preparation includes representatives of parents,
teachers, and the private education sector. The strategy, which should be ready by June 2000,
will contain aggregate preliminary estimates of operational and investment budget needs for
the next three years for primary, secondary, and tertiary systems. An action plan for
implementing key measures over the next two-three years has been agreed with the

11 In this context, a capacity-building project supported by IDA is envisaged.
- 26 -
authorities. In this regard, salient actions to be taken in the short term and in the medium
term are summarized in Box 4.
Box 4: Cameroon: Short-term and Medium-term Milestones for Education
Short term
• Adoption of an education sector strategy, including estimates of budgetary needs for the next three years.
• Elimination of the textbook distribution monopoly.
• Establishment of a text-book approval unit to define and publish a list of criteria for the selection of textbooks.
• Publication of a list of textbooks approved for the academic year 2000/01.
• Elimination—through the promulgation of a law and appropriate implementing regulations—of primary school
fees following the recent decision by the President of the Republic.
• Elimination of school management committees for primary schools and revision of their composition in
secondary institutions to increase representation of parents.
• Publication of a medium-term strategy to decentralize the management of teaching staffs.
• Other key measures (i) the elimination of the automatic hiring in the civil service of graduates of the teacher
training schools for secondary education; (ii) the development of objective criteria governing promotions to
headmaster and inspector levels; and (iii) the establishment of a Governance Monitoring Committee
(observatoire de la gouvernance) for the education sector.
Medium term
• Satisfactory implementation of the education sector strategy.
• Publication and operationalization of new statutes for teachers.
• Operationalization of new policies and procedures for decentralized management of teachers.
• Promulgation of new law on private education.
48. Health sector. The overarching goal of the government’s health strategy is to expand
coverage with key health interventions. The program will focus on (i) increasing access to,
quality, and efficiency of primary health care services; (ii) ensuring ongoing supply of
adequate medical supplies and essential drugs; (iii) increasing support to specific programs,
particularly HIV/AIDS and malaria, as well as diseases preventable by immunization and
maternal and child health; (iv) improving institutional and management capacity at the
Ministry of Health; (v) strengthening the partnership with the private sector, NGOs, and the
representatives of health professionals, and the other development sectors; and (vi) ensuring
sustainable health care financing, channeling adequate levels of financial resources to
- 27 -
essential interventions through the government’s budget, households, and external partners,
and reforming budgetary procedures and management of financial resources.
49. The progress and impact of the program will be measured against specific targets and
actions set out in the health strategy and in annual implementation reports by the Ministry of
Health (MOH). Key targets that will be monitored during the interim period and in the
context of the PRSP include the following: (i) 60 percent of the population will live less than
5 kilometers from a health facility as compared with 45 percent at the moment; (ii) the
proportion of viable health districts12 will have increased from 5 percent to 25 percent;
(iii) DPT3 immunization coverage will have increased from 36 percent to 70 percent;
(iv) coverage of children less than one year with vitamin A supplementation will have
reached 70 percent; (v) knowledge about protection and prevention measures against malaria
will have substantially increased (i.e. 50 percent of pregnant women will be using treated
bed-nets); and (vi) the state budget allocated to the health sector will have increased from
4 percent to 7 percent of total budget (investment and recurrent cost).
50. Measures for the next few years, distinguishing between the short-and medium-term
are summarized in Box 5.
51. HIV/AIDS: The magnitude of the threat posed by the HIV/AIDS crisis warrants an
immediate strong public statement by the President, the Prime Minister and by all relevant
ministers. Urgent action must be taken over the coming months to more effectively target
interventions toward raising awareness, aggressively promoting behavior change, and
increasing condom use in identified risk groups (sex workers, truck drivers, etc.) and among
the population at large. These elements should form a key part of an overall country strategy,
coordinated by the National Committee to Fight AIDS and supported by UNAIDS and other
donors. In particular, the government will take the following actions to lead the fight against
HIV/AIDS:
• as part of raising awareness and improving information, up to 30 minutes on national
television and radio and 60 minutes on local radio per week of free air-time will be
provided for messages and programs against HIV/AIDS through the public media (radio
and television);

12 Viable districts: districts where more than 80 percent of the population lives at less than
5 kilometers, and which have management structures.
- 28 -
Box 5: Cameroon: Short-term and Medium-term Milestones for Health
Short term
• Publication of the national health map.
• Publication the national drug policy.
• Adoption of a satisfactory health sector strategy with estimates of three year budgetary needs, with a view to its
incorporation into the government budget as of 2000/2001.
• Authorize health centers to retain the share of their fee generated income actually remitted to the Ministry of
Health and identify alternative sources of financing for the National Solidarity Fund.
• Establishment of legal and institutional framework assigning to health management committees control over
and responsibility for the use of all funds generated from fees-for-service and drug revolving funds and from
the government budget, including the deposit of such proceeds into a bank account opened in the name of each
facility, with the oversight of community representatives.
• Development of a draft monitoring framework to be used by the committees (i) to assess regularly (e.g., every
six months) overall expenditures of health centers, revenues as well as delivery performance for key services,
and (ii) produce a report presented to communities.
• Preparation of legislation (i) establishing price caps on at least 30 essential low cost generic pharmaceuticals
which most likely benefit the poor; (ii) allowing pharmacies to replace brand name drugs by their generic
equivalent; and (iii) obliging them to disclose this possibility to the public.
• Adoption of staffing norms for health facilities (centers, district hospitals).
• Adoption of legislation to regulate incentives of health staff.
• Definition of a framework for enhancing collaboration and partnership with NGOs (both profit and nonprofit).
Medium term
• Publish most important regulatory texts for the implementation of the National Drug Policy.
• Finalize statutes for Centre National d’Approvisionnement de Medicaments Essentiels (CENAME) and Centres
D’Approvisionnement Pharmaceutiques Régionaux (CAPPs.)
• Publish Ministerial Circular on drug registration procedures.
• Publication of legislation (i) establishing price caps on at least 30 essential low cost generic pharmaceuticals
which most likely benefit the poor; (ii) allowing pharmacies to replace brand name drugs by their generic
equivalent; and (iii) obliging them to disclose this possibility to the public.
• Preparation of annual health budgets in the context of a Medium Term Expenditure Framework, beginning with
the budget for FY2002; and in that context increase share of health budget from 4 to 7 percent of overall budget.
•
Increase of allocation of funds to primary care/key public interventions to 45 percent of overall budget;
• Adoption of a legal framework to allow direct budget transfers to districts and/ or health centers;
• Development of criteria for performance based budgeting.
• Adoption of a comprehensive plan for the financing of health care, including adequate arrangements to guarantee
access to health care by those unable to pay.
• Establishment of a functioning, purchasing and auditing capacity at central level.
•
Implementation of new contractual arrangements to foster partnership with profit and non-profit non-
governmental providers.
• Publication and dissemination of standards for essential (medical) treatments.
- 29 -
•
the various technical ministries will develop a sector-specific strategy to fight against
HIV/AIDS. Each ministry and parastatal agency will elaborate and present a strategy to
protect their staff against HIV/AIDS. The strategies will cover aspects such as a massive
and systematic effort to raise awareness among staff and the making of condoms and
voluntary counseling and testing available to staff. Those ministries that provide a service
to the public (Agriculture, Livestock, Education, Police, Army, Public Works, and
Health) will also elaborate a strategy to disseminate messages against AIDS; and
• before September 2000, the Ministries of Health, Agriculture, Livestock, and Transport
will join forces to cover all villages in the six districts that are currently covered by the
IDA-supported health project with a pilot operation in support of participatory
community action programs to support communities in their fight against AIDS;
• before 2003, the government will support intensified and expanded activities to prevent
the spread of HIV, with education to promote the use of condoms by truck drivers, port
workers and soldiers to 50 percent and by commercial sex workers to 70 percent.
E. Improving Infrastructure
52. Improving infrastructure is key to improving growth and poverty reduction prospects
in both rural and urban areas. Priority areas remain transportation (rural roads, urban streets,
and inter city roads), communications, sanitation, potable water, electricity, and housing. The
government has concentrated its efforts in the framework of SAC III on maintaining the
existing road network, and privatizing the main suppliers of water (SNEC), electricity
(SONEL), and telecommunications (CAMTEL). Privatization will continue to play an
increasingly important role in the provision, rehabilitation, and maintenance of
infrastructure.13
53. The key concern, following the creation of the Road Maintenance Fund, is to ensure a
rapid improvement in the amount and quality of private sector-executed maintenance of the
priority road network, while completing the restructuring of the Ministries of Public Works
and of Transport and strengthening their capacity in the areas of work programming and
supervision. As regards rural roads, increased funding and a revised regulatory framework
permitting more involvement of local communities are necessary. The interim PRSP and full
PRSP will outline more detailed needs and interventions for rural and urban infrastructure.

13 With respect to infrastructure in particular, adoption of new frameworks and privatization
of the public utilities are only the first steps in the process of establishing adequate and
competitive infrastructure.
- 30 -
F. Rural Sector
54. The primary rural development objective should be to promote environmentally
sustainable growth, concentrating on improving food security at the household level,
promoting exports (cotton, rubber, palm oil, coffee, cocoa, etc), and developing agro-
industries and nontraditional agricultural exports14. Other key requirements are to implement
institutional reforms in both the Ministries of Agriculture and Livestock, increase on-farm
productivity, improve storage facilities, and facilitate the movement of agricultural
commodities from surplus to deficit areas. This will require the government to: (i) continue
to promote improvement of farm productivity through the Agricultural Research and
Extension Services Program (PNRVA); (ii) improve the collection and diffusion of market
price information to improve the efficiency of produce marketing; (iii) upgrade basic
infrastructure (irrigation and rural roads) and its management in rural areas; (iv) entrust a
leading role to local communities and farmer driven institutions for the management of
services and infrastructure in the framework of Community Action Program (CAP)-type
operations; and (v) improve the quality of social and other public services delivered to
farmers.
55. The strategy will take account of the feedback from the participatory process and will
include: (i) the formulation and implementation of programs aimed at fostering the
development of partnership arrangements between farmer-driven associations or
cooperatives, on the one hand and private sector institutions involved in the manufacturing
and distribution of inputs such as seeds, fertilizer and pesticides on the other, and (ii) the
formulation and implementation of contract farming programs, in particular within:
•
the context of privatized parastatals and a liberalized cotton sector
•
the formulation and implementation of community action program (CAP) type
operations that address, inter alia, the management of rural roads and land tenure
issues;
•
the formulation and implementation of a program for the transfer to irrigation farmers
of the management of all irrigation perimeters.
56. In the forestry sector, the main objectives are to preserve ecological stability of
production forests and protected areas; improve the contribution of the sector to the country's
development; develop economically efficient industrial processing; and ensure effective
participation of local communities in forest and savanna land management and promote
equitable revenue sharing. In the short to medium term, the priority is to ensure
implementation of the reforms being supported by SAC III: (i) implement an improved
framework for monitoring concession management plans including adoption of detailed
regulatory procedures, setting up of a guarantee system and provision of international

14 The SAC III privatization program is expected to make an important contribution in this
regard (HEVECAM, SOSUCAM, CAMSUCO, SOCAPALM, CDC and SODECOTON).
- 31 -
independent audits; (ii) setting up of a priority mechanism for community forests and
systematic public information ; (iii) reform sector taxation/incentives and industrialization
policy ; and (iv) complete an institutional audit covering ONADEF (the national forestry
office) and other forest sector agencies to recommend rationalization of the currently
inadequate institutional framework.
57. Environment. A framework law on the environment was passed in 1996, but the
drafting of implementing decrees has just started recently. Significant progress is currently
being achieved in the field within the framework of the GEF-funded National Program for
Biodiversity. Beyond biodiversity, the environmental agenda in Cameroon also includes
water resources management; solid waste management; and water and air pollution. Over the
next three years, environmental management capacity needs to be build in both government
and civil society. The government recently adopted an Emergency Action Plan for Forest and
Environment that makes provision for: gazetting and reinforcement of protected areas;
establishment of contractual accountability of logging companies against poaching; and
systematic implementation of environmental impact assessments prior to road-works and
industrial projects.
G. Petroleum Sector
58. Since 1997, a series of actions have been implemented by the government to improve
the efficiency and reduce the distribution costs of petroleum products in Cameroon and to
improve the transparency of petroleum sector activities. Domestic refining costs have been
reduced and pump prices have been liberalized. SNH is transferring oil revenues to the
treasury in a regular manner. Finally, a new petroleum code, providing additional incentives
to private investors, was adopted by the National Assembly at the end of 1999. This new
framework, together with the implementation of the Chad-Cameroon pipeline project, should
provide an environment conducive to renewed interest in hydrocarbon exploration and
production in Cameroon.
59. In order to maximize domestic revenues from hydrocarbon activities, deliver
petroleum products to domestic consumers at the lowest cost possible, and support economic
growth, additional actions, however, need to be implemented by the government. While
crude oil reserves are decreasing steadily because of very limited exploration efforts by
private investors, gas resources are relatively abundant and not yet developed. A new
contractual and fiscal framework for gas needs is therefore, to be designed and promoted, in
parallel with an aggressive promotion of deep-offshore and onshore acreage aimed at
increasing exports of crude oil. Improved reporting on hydrocarbon activities, particularly by
the SNH, strict adherence and full transparency, as well as a clearer and more streamlined
delineation of the roles and responsibilities of each party in the petroleum sector need also to
be implemented. In particular, SNH's activities should be streamlined and limited strictly to
that of liaison with the foreign oil companies operating in the country, and its staff reduced
accordingly. Providing petroleum products at the lowest cost possible to domestic consumers
would also require a larger opening of the domestic market to direct petroleum imports,
technical and financial improvements in the operations of the domestic refinery to reach
- 32 -
import parity status and a full liberalization of exports of refined products. It will also require
opening up downstream activities to new petroleum companies in order to increase
competition, adopting and enforcing a new regulatory framework, privatizing the SCDP (the
storage company) and reducing the costs of storage of refined products.
III. DEBT SUSTAINABILITY ANALYSIS (DSA)
A. Introduction
60. This debt sustainability analysis (DSA) has been prepared jointly by IMF and World
Bank staff and the Cameroonian authorities on the basis of loan-by-loan data provided by the
authorities for debt outstanding and disbursed as of June 30, 1999. The DSA evaluates
Cameroon’s prospects for attaining external debt sustainability through an examination of
critical debt indicators within the context of a 20-year macroeconomic and balance of
payments framework. Within this framework, Cameroon’s eligibility for enhanced HIPC
Initiative assistance is determined by the outcome of the NPV of debt-to-exports ratio and the
NPV of debt-to-revenues ratio at the decision point.
61. The debt service projections and resulting NPV calculations are preliminary, pending
the completion of the debt reconciliation exercise with the creditors.15 Cameroon contacted
its external creditors in August and September 1999, and to date approximately 92 percent of
the debt, including all debt with multilateral creditors, has been reconciled.16 Efforts are
continuing in order to ensure that all the data are reconciled by end-May 2000. With regard
to commercial bank creditors, a reconciliation of debt data has been virtually completed in
advance of the forthcoming London Club debt negotiations.
62. Prior to the assumption of a Naples stock-of-debt reduction, Cameroon’s public
and publicly guaranteed external debt was estimated at US$7,679 million at end-June 1999,
of which 70 percent was owed to bilateral creditors, 21 percent to multilateral creditors, and
9 percent to commercial creditors. In NPV terms, the debt before rescheduling was estimated
at US$7,178 million, equivalent to 78 percent of GDP, or 314 percent of exports of goods
and services. Even after the Paris Club rescheduling arrangements, debt service paid has been
equivalent to approximately one-third of total government revenues and about 20 percent of

15 The NPV of debt is calculated using the end-of-period exchange rates and the average
currency-specific commercial interest reference rates (CIRRs) for the six-month period ended
June 30, 1999 (Table 9).
16 The current DSA is based on a somewhat lower level of reconciled debt which was
available at end-November 1999. Figures for the Islamic Development Bank (IsDB) are
preliminary, pending clarification from the creditor on the methodology to be used to
estimate the NPV of loans.
- 33 -
exports of goods and nonfactor services for the past five years (Table 4). Moreover, actual
debt service has been in excess of expenditures on health and education. However, the
implementation of the adjustment program has put emphasis on more prudent debt
management, which has, de facto, reduced the rate of accumulation of debt. No
nonconcessional borrowing is contemplated under the current PRGF arrangement, with the
exception of borrowing related to the Chad-Cameroon pipeline project; Cameroon's general
debt management practices are described in Annex II.
B. The Structure of External Debt and Relations with Creditors
63. The baseline scenario assumes full recourse to traditional debt relief
mechanisms. Therefore, a hypothetical Naples terms stock-of-debt operation, equivalent to
an NPV reduction of 67 percent, is assumed in the baseline debt projections at June 1999 for
eligible Paris Club debt. It is assumed that other official bilateral creditors would give
comparable treatment. Arrears to commercial banks are expected to be treated in the context
of a debt- and debt-service reduction (DDSR) agreement that Cameroon envisages to reach
with the London Club (and other creditors) during 2000/01, on terms comparable to those
Table 4. Cameroon: Recent Debt Service History, 1994/95-1998/99 1/
(in millions of US dollars, unless otherwise indicated)
1994/95
1995/96
1996/97
1997/98
1998/99
Debt service due (commitment basis) 2/
671

1,134

1,045

915

992

Principal
332

647

631

516

564

Interest
338

487

414

399

428

Debt service paid (cash basis) 3/
307

510

396

768

401

Principal
146

297

237

577

194

Interest
161

213

159

191

208

Debt service due less debt service paid
363

624

649

147

590

Memorandum items:
Debt service due
as a percentage of exports of goods and services
48.3

59.5

44.3

40.4

45.4

as a percentage of government revenues
96.4

93.4

74.1

66.2

71.2

Debt service paid
as a percentage of exports of goods and services
15.0

24.9

19.6

16.1

17.8

as a percentage of government revenues
29.9

39.0

32.8

26.4

28.1

as a percentage of social expenditures
161.0

215.1

235.4

391.2

173.7

Sources: Cameroonian authorities; and staff estimates.
1/ Fiscal year begins in July.
2/ Before rescheduling.
3/ After rescheduling.
- 34 -
that would be expected under the enhanced HIPC Initiative.17 An update on the DDSR
operation is presented in Box 6 and details of the baseline scenario are presented in Box 8.
Box 6. Cameroon: Debt- and Debt-Service Reduction (DDSR) Operation with Commercial Creditors
Background
The government has carried out significant preparatory work, including the compilation of most debt data. To
design the financial and legal aspects of the operation in the preparatory and execution phases, the government
is using the services of external and well known financial and legal advisors for which it has obtained World
Bank financing. Advisors have completed most of the debt reconciliation work and are expected to finalize the
verification of the residual claims before June 30, 2000.
The commercial debt operation covers all the outstanding commercial debt. This includes loans due to
international commercial banks and to non-bank creditors. Based on work completed so far, the commercial
bank loans account for almost 90 percent of the total commercial debt in arrears.
Amounts involved
The total amount of debt identified so far is estimated at about US$730 million using the end-March 2000
exchange rates, of which about US$90 million is non-bank. The bank loans have hardly been serviced over the
past decade, and virtually all of them are in arrears. As a result, the total amount includes a substantial amount
of late interest, about a third of the total.
In addition to the above numbers, some new claims have been identified and being reconciled. The eligibility
of these claims is being validated and could change the amounts of debt included in the commercial debt
reduction operation.
Financing
Cameroon has informally contacted potential bilateral donors to finance the costs of the operation. The World
Bank, through the IDA debt reduction facility, is expected to contribute. The terms of the operation should be
comparable with those expected with the Paris Club under the enhanced HIPC Initiative. The financing package
will ensure that the operation is economically sound, and has low up-front costs.
Timetable
It is expected that negotiations with creditors could start in the third quarter of 2000, and closing could be
achieved during the first quarter of 2001.
64. After the assumption of a Naples stock-of-debt operation, the external public and
publicly-guaranteed debt amounted to US$6,358 million in nominal terms at end-June 1999.
This debt stock is estimated at US$4,896 million in NPV terms or 53 percent GDP, 214
percent of exports and 344 percent of revenues (see Table 7). As shown in Figure 3, the
outstanding nominal debt at end-June 1999 was mainly owed to official bilateral creditors,
with a 70 percent share, and multilateral institutions, which accounted for a further 26
percent of overall debt. The largest creditor grouping was then the official bilateral creditors,
with a stock of debt equivalent to 71 percent of the overall NPV of debt, or US$3,498 million

17 The DSA makes this implicit assumption, although in practice the London Club follows a
menu approach that may include outright cancellations.