(Business in Cameroon) - Cameroon’s public debt exploded by 489% from CFA1,904 billion in 2009 to CFA11,216 billion in 2022, the Autonomous Amortization Fund (CAA) revealed in a recent note. This large increase in debt was however offset by steady GDP growth over the period, so that the debt ratio increased by only 2.5, from 16.3% to 40.5% of GDP, we learned.
According to CAA, several reasons explain the exponential increase in external debt. These include "disbursements related to the implementation of various projects included in the DSCE (Strategic Document for Growth and Employment) and the SND30 (National Development Strategy 2020-2030); withdrawal from budget support obtained under the Economic and Financial Programs with the IMF; drawings on IMF Special Drawing Rights (SDRs); the structuring of certain domestic debts to public and private companies, through cross-debt agreements and transfers of receivables".
Other reasons include “the use of public securities issues to finance the State budget and exchange rate fluctuations, considering the currency breakdown of the external debt portfolio, where about 46.3% is subject to exchange rate fluctuations (22.1% of which is subject to fluctuations in the US dollar).
Concerning the use of public securities issues (Treasury bonds and bills), data from the General Treasury Department show that between 2010 and 2022, Cameroon raised a total of CFA4,940.9 billion in debt on Beac's public securities market and the financial market.
Risk of external debt distress
Regarding the influence of exchange rate variations on the country's public debt, CAA data reveal, for example, that between June 2021 and June 2022, the various upward variations in the exchange rate of the local currency against the US dollar caused an increase of CFA420 billion (+11.2%) in the outstanding public debt. In September 2022, this increase due to exchange rate variations was CFA573 billion, year-on-year.
Despite the country's heavy indebtedness, the CAA explains, the results of the sustainability analysis, updated in H2 2022, show that Cameroon's public debt remains sustainable (below the 70% of GDP allowed by the CEMAC multilateral surveillance criteria, ed), but with a high risk of external debt distress. Authorities are considering several measures to reduce this high risk of over-indebtedness. These include improving the absorption capacity of project loan resources by accelerating economic and financial reforms aimed at strengthening the responsibility of project implementation units, establishing terms of reference and studying the possibility of linking remuneration to performance as formulated by the IMF; strengthening the framework and monitoring of the debt of public enterprises; pursuing the policy of deepening the domestic market; improving policies aimed at import substitution and increasing export earnings, etc.
Brice R. Mbodiam