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Euro-Dollar fluctuation raised Cameroon’s debt by CFA420bn in one year

Euro-Dollar fluctuation raised Cameroon’s debt by CFA420bn in one year
  • Comments   -   Friday, 12 August 2022 14:21

(Business in Cameroon) - Recent fluctuations between the euro and the U.S. dollar have increased Cameroon's debt by CFA420 billion (+11.2%) between June 2021 and June 2022. Data from the Autonomous Depreciation Fund (CAA) showed that the country’s public debt grew by a monthly average of CFA35 billion over the period.

The highest increases occurred from Q1 2022, we learned, with debt jumping to CFA172 billion between Q1 and Q2 2022 (a little more than CFA57 billion a month).  In May 2022 alone, the increase was CFA78 billion. This situation, which worsens the exposure of Cameroon's sovereign debt to foreign exchange risk was triggered by the acceleration of the fall of the euro against the dollar (which began in January 2021), following the Russia-Ukraine war and the surge in world oil prices on the international market. On July 5, 2022, for example, the euro fell by 1.5% against the U.S. dollar, reaching its lowest level in nearly 20 years. As a result, the local currency CFA, which is pegged to the euro at a fixed parity, also suffered a sharp depreciation.  On July 6, 2022, the CFA was trading on the foreign exchange market at 640.1 FCFA per dollar, according to Xe.com. This corresponds not only to a 10% drop since the beginning of the current year but also to its lowest level in more than 20 years.

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