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Cameroon: Amending Finance law puts 2020 deficit at 4.5% of GDP

Cameroon: Amending Finance law puts 2020 deficit at 4.5% of GDP
  • Comments   -   Tuesday, 09 June 2020 15:22

(Business in Cameroon) - Cameroon will finally end the year 2020 with a budget deficit officially estimated at XAF986.6 billion, representing 4.5% of GDP. This indicator skyrocketed in the Amending Finance Law of June 3, 2020, compared to the initial projection of 1.5%, according to a note from the Ministry of Finance.

In addition to being well above the 3% deficit threshold imposed by the CEMAC convergence criteria, the budget deficit ("particularly monitored" in the CEMAC zone, according to the Ministry of Finance) projected in Cameroon in 2020 -following the impacts of the Coronavirus- puts the country somewhat in a delicate situation with the International Monetary Fund (IMF).

After a budget deficit of 6.1% in 2016, due to the combined effects of the oil and security shocks, and ambitious public investments (major projects, National Emergency Plan, preparation of the CAN 2016 and 2019), Cameroon signed an economic and financial program with the IMF in June 2017. This program required the country to reduce its budget deficit by 5% of GDP over 3 years.

"The situation of public finances in Cameroon improved in 2017, driven by the implementation of the economic and financial programme, with the reduction of this deficit to 4.9%. This consolidation of the budgetary situation should continue in 2018 and 2019, the budget deficit targets set in the framework of the finance laws being 2.6% and 2.1% of GDP respectively, with the ambition of eventually bringing this deficit to 1.5% in 2020, in line with the objectives of the above-mentioned programme," said the Director-General of the Budget at the annual conference of the various departments of the Ministry of Finance, in 2019, praising the results obtained thanks to the economic program.

Clearly, because of the health crisis affecting the world, Cameroon will not be able to respect its commitment with the IMF to reduce the 2020 budget deficit to only 1.5% of GDP. This is due more to the economic situation than to the inability of the Cameroonian government to establish efficiency in the management of the state budget.

On May 4, 2020, in the release informing that the administrative board of the IMF had approved the disbursement of XAF135 billion to help Cameroon fight the coronavirus pandemic, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, had already said this: “given the sudden and pressing nature of the shocks, accommodative fiscal and monetary policies are warranted to mitigate the human and economic impact of the [coronavirus] outbreak.

Because of this global economic situation that will move Cameroon into recession (-1.2%, instead of an initial growth forecast of 4%, according to the IMF) the Bretton Woods institution "approved the [Cameroonian] authorities’ request for an extension of the ECF arrangement (due to expire on June 25, 2020) to September 30, 2020, with a rephasing of access."

Brice R. Mbodiam  

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