(Business in Cameroon) - Cameroonian authorities have reached with the International Monetary Fund a staff-level agreement under which Cameroon will receive $74.6 million (about CFA45.06 billion) once the ongoing third review of the ECF-EFF arrangements is completed and approved.

“The (IMF) mission has reached staff-level agreement with the Cameroonian authorities on the economic and financial policies that could support the approval of the third review of the program under the ECF and EFF arrangements. Conclusion of the third review by the IMF Executive Board scheduled in early March 2023 would enable the disbursement of SDR 55.2 million (about US$74.6 million),” the fund provider said in a January 30 statement.

As part of these arrangements, the Cameroonian government agreed to reduce fuel subsidies and accelerate structural reforms in order to create enough fiscal space to finance productive investment and optimize social spending. Last year, the country spent nearly CFA800 billion in pump price subsidies (CFA700 billion for fuel and CFA75 billion for domestic gas), according to official data. For 2023, subsidies are expected to be CFA350 billion, less than 50% of the amount needed to keep pump prices unchanged, according to IMF projections.

Since last year, the issue has been discussed between the IMF and the Cameroonian authorities. The Fund considers that subsidies for petroleum products are "costly", "unsustainable in light of current international oil price forecasts", "poorly targeted to vulnerable groups", and "have a crowding out effect on priority expenditures". "As an illustration, subsidies on petroleum products represent six times the budget allocated to agriculture, four times that of health, and more than three times that of energy and water," the IMF maintains.

Since last year, the issue has been discussed between the IMF and the Cameroonian authorities. The Fund considers that subsidies for petroleum products are costly, "unsustainable under the current international oil price projections and are poorly targeted to those in need and crowd out priority spending". " For example, the fuel subsidies represent six times the budget allocated to agriculture, four times that to health, and over three times that to energy and water.," the IMF said.

The authorities are aware of the burden of subsidizing the price of petroleum products on the state budget. However, they fear that the increase in the price of these products will lead to social tensions, as was the case in February 2008. They say the increase in the prices of fuels used for transport and the production of goods will reinforce the inflationary tensions already present. The IMF projects the inflation rate at 6% in 2023, twice the EU norm. It also indicated that “fuel subsidy reform would need to be accompanied by measures to mitigate the impact on the most vulnerable, including cash transfers”.

The Extended Credit Facility and the Extended Fund Facility for Cameroon were approved on July 29, 2021, in Washington, DC, for an amount of $689.5 million (nearly CFA375 billion). The arrangements are designed to support the country's economic and financial reform program over three years (July 2021-July 2024). Specifically, the financing under the ECF and EFF agreements is intended to support the authorities' efforts to achieve a rapid post-pandemic recovery, strengthen medium-term external and fiscal sustainability, and implement their structural reform program towards sustained, more inclusive, and diversified growth.

Aboudi Ottou and S.A.