Cameroon suffered from high debt costs in the 1980s and early 1990s. Higher interest rates from the oil price shock in the late 1970s made borrowing for large infrastructure projects costly, and was combined with inefficient government spending and a collapse in export prices. This led Cameroon’s debt to GDP ratio to rise to a high point of 114% by 1995. However, a series of structural changes to Cameroon’s economy, advised by multilateral institutions, along with debt cancellation by various development partners – helped stabilise Cameroon’s debt situation.
Key Projections for 2021
Debt to GDP Ratio
In the 2010s, Cameroon enjoyed an average economic growth rate of 4.5% due to improvements in the services sector as well as higher consumption and investment. However, amid falling oil prices and security issues, the oil-producing country has experienced rising levels of public debt over time, more than doubling from 15.1% of GDP in 2011 to 34% by 2018 in line with key infrastructure and pro-poor projects. There was also a six-fold increase in the fiscal deficit from 1.0% of GDP in 2010 to 6.1% in 2016, though the country later oversaw a deficit reduction to 2.3% in 2019. This is because of efforts to broaden the revenue base, manage tax exemptions, improve tax administration and address tax evasion.
The largest threats to Cameroon’s growth are internal and regional. Long seen as an oasis of stability in conflict-ridden Central Africa, Cameroon now faces security risks on multiple fronts. The terrorist activities of Boko Haram in the border regions as well as secessionist movements in the English-speaking regions of the largely Francophone country have stifled infrastructure growth, putting pressure on the national fiscal capacity.
Another challenge is the large stock of undisbursed loans, accounting for 23% of GDP in 2017. This is due to inefficiencies and delays in the implementation of projects as well as the presence of non-performing projects, which may hurt the confidence of creditors if left unabated. Nevertheless, as far as disbursed loans are concerned, the Cameroonian government is not overburdened with interest payments, which took up only 4% of state expenditure in 2017. This is in part due to the fact that Cameroon has negotiated low average interest rates on its new external debt commitments, and has a substantial share of grants in its loan portfolio, accounting for nearly a third of all new loans. Data on loans and in debt and fiscal space in general was limited due to time lags and limited accessibility through the government’s data portals. However, instrument coverage and debt management strategies are fully transparent, leaving Cameroon mid-range in the reports Debt Transparency Index.
Revenue and Budget Balance
Projected debt service to China vs Other creditors (USD Thousands)
China – both through “official” and “non-official loans, is the largest individual financer of Cameroon, accounting for almost 40% of Cameroon’s external debt stocks and total debt servicing costs. Cameroon borrowed almost $1 billion from China to finance the Kribi port, and $678 million for a water supply project from the Sanaga river. In early 2019, the Chinese government wrote off the interest-free inter-government debt that Cameroon had not paid to China, totalling about $78.4 million.
China Debt : GDP Ratio (%)
External Debt Stock to China vs. Other Countries (USD millions)
Cameroon does not have a high level of public debt, but the rapid pace of debt growth has raised concerns about vulnerability, compounded by abovementioned political challenges and uncertainty. In the IMF’s debt sustainability analysis, the IMF maintains that Cameroon has sufficient capacity to monitor and manage public debt, though there is room for improvement in terms of coordination between the Ministry of Finance and the National Public Debt Committee. Nevertheless, the IMF says that Cameroon faces a high risk of debt distress, with the Jubilee debt campaign predicting a debt crisis in 2020, highlighting vulnerabilities in Cameroon’s ability to fulfil debt obligations.
Economic growth is expected to return to Cameroon in 2021 at a rate of 4.1% assuming global economic recovery. However, should prices of key raw material exports (such as oil and wood) continue to fall, the balance of payments may experience a longer and deeper shock, particularly as many principal repayments on Cameroon’s borrowings are due in 2022-2025. In terms of its credit worthiness, Fitch maintained Cameroon’s credit rating at ‘B’ in April 2020 – which is below investment grade and highly speculative but suggests an ability to meet current financial commitments assuming no major economic shocks – though the outlook is negative.
and The Development Reimagined Team
Statement on use of data:
This debt guide uses a compilation of data from the IMF World Economic Outlook, the World Bank, the AfDB, Trading Economics, Jubilee Debt Campaign, China Africa Research Initiative for Chinese loans, Christoph Trebesch et al. for China Debt Stock Database, DR’s dataset for debt cancellation and COVID spending, as well as the data from countries’ government websites (if applicable).
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