Enhanced Structural Adjustment Facility
Medium-Term Economic and Financial Policy Framework Paper (1999/2000–2001/02)
Prepared by the Cameroonian Authorities in collaboration with the staffs
of the International Monetary Fund and the World Bank
August 9, 1999
- Recent Economic Developments
- Main Objectives and Strategy for 1999/2000–2001/02
- Macroeconomic Policies
- Structural Policies
- Improving Governance and Strengthening the Judiciary System
- Specific Sectoral Policies
- Social Policies and Fight Against Poverty
- Improvements in Statistics
- Technical Assistance
- External Sector Outlook, Financing Requirements, and Debt Management
- Key Policy Measures Implemented During the First Two Years of the ESAF-Supported Program
- Summary and Timetable of Policy Measures, 1999/2000–2001/02
- Selected Economic and Financial Indicators, 1995/96–2001/02
- Income and Social Indicators
- External Financing Requirements and Sources, 1995/96–2001/02
1. Since July 1997, the government of Cameroon has successfully implemented a medium-term economic recovery program covering the period 1997/98–1999/2000 (July-June). The program is supported by a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF), and by assistance from the World Bank and other multilateral and bilateral donors. This document updates and extends the policy framework paper (PFP) for 1998/99-2000/01 dated July 30, 1998. It sets out Cameroon’s next phase of adjustment and identifies economic policies that the government is to implement for 1999/2000–2001/02. The policies are designed to achieve and maintain a high rate of economic growth that would ensure an increase in per capita income and a reduction in poverty. The government’s strategy will continue to aim at maintaining macroeconomic stability and consolidating and deepening ongoing reforms to further liberalize and modernize the economy and improve competitiveness. To that effect, government policies will center on consolidating public finances; strengthening the role of the private sector; promoting a competitive business environment; enhancing regional integration, developing human resources; and implementing effective strategies to fight poverty.
II. Recent Economic Developments
2. Performance during the first two years of the program has been satisfactory, despite the adverse effects of a difficult external environment. The budgetary outcome for 1998/99 was consistent with the program objectives, with both the primary budget surplus and the overall budget deficit on track. Non-oil revenue collection continues to improve with the strengthening of the administration of the tax department and the smooth implementation of the value-added tax (VAT) introduced in January 1999. Despite the impact of weak international markets during the first eight months of 1998/99, oil revenues were slightly higher than programmed for the year, benefiting from the recovery of international oil prices from March 1999. Expenditure reforms concentrated in 1998/99 on strengthening management and control, and an action plan to improve public expenditure management was adopted in December 1998. As part of these efforts, an independent company was appointed to undertake an audit, starting in July 1999, of the procurement system and of the ten largest public procurement contracts awarded in 1998/99. This audit is be completed by end-December 1999.
3. The worsening of the external environment in the second year of the program resulted in a sharp deterioration in the terms of trade of 16 percent and weaker growth performance than expected in 1998/99. Real GDP growth declined from 5 percent in 1997/98 to 4½ percent in 1998/99, despite signs of a recovery of oil and non-oil exports in the second half of the year. Consumer price inflation was contained at 2.9 percent on average in 1998/99. The external current account deficit (including grants) is estimated to have widened from 2¾ percent of GDP in 1997/98 to about 4 ½ percent of GDP in 1998/99 as a result of sharp declines in nearly all the major export commodity markets. Nevertheless, with the gradual recovery of oil and non-oil export prices in the second half of the year, the external current account position was slightly better than expected for the year as a whole. Monetary pressures, which were heavily influenced in the first half of 1998/99 by the uncertainty surrounding the impact of the introduction of the euro on the CFA franc, have eased. Monetary developments are now more in line with program objectives, with a more normal rate of expansion of credit to the private sector, an improvement of the net foreign asset position of the banking system, and a recovery of deposits.
4. Virtually all the structural performance criteria and benchmarks for 1998/99 were implemented as programmed. Progress in the implementation of the privatization program has been encouraging, with the launching of prequalification invitations for the Cameroon Development Corporation in December 1998, the privatization of the sugar company (CAMSUCO), and the near completion of negotiations for the sale of the palm oil company (SOCAPALM). The focus of the privatization program has now shifted to the public utilities sector and infrastructure improvement. In the telecommunications sector, a successful bidder was selected for the second mobile telephone network in May 1999, and the concession agreement signed July 7, 1999. The invitation for prequalification tenders for the privatization of CAMTEL and a call for bids for the privatization of CAMTEL-Mobile were launched in June 1999. A new legislative and regulatory framework for the electricity sector was adopted in December 1998, and a privatization strategy for the electricity company (SONEL) was adopted in June 1999. An audit of the accounts of the water company (SNEC) for the 1996/97 financial year was completed in May 1999, thus permitting an acceleration of the second round of bidding for the privatization of the company.
5. In the transport sector, the privatization of the national railway network has been completed. The national railway company (REGIFERCAM) is being liquidated, and a concession granted to a private company (CAMRAIL). Since the adoption of the new port law in December 1998, a fundamental reform of the port sector has been initiated, with the aim of improving competitiveness through a reduction in costs and port delays, notably at the Port of Douala. A number of new port entities were created in June 1999, including the National Port Authority (APN) and independent port management authorities, and a guichet unique (one-stop-window) for the clearance of port procedures is being put in place. In addition, the Road Fund, created in August 1998 for the financing of annual road maintenance, has started operations. Considerable progress has been made in the petroleum sector, notably with the elimination of the national oil refinery’s (SONARA) monopoly of domestic market for refined petroleum products in July 1998 and the liberalization of distribution margins for refined petroleum products in June 1999. In the social sphere, a poverty-reduction strategy declaration has been issued and will serve as the basis for the reforms outlined for the third and subsequent years of the program.
III. Main Objectives and Strategy for 1999/2000–2001/02
6. Building on the positive results of the first two years of the program, the key elements of Cameroon’s medium term adjustment program are to (a) strengthen macroeconomic stability and restore external and internal viability; (b) bring the economy onto a sustainable development path; and (c) improve the social conditions of the population and substantially reduce poverty. The main macroeconomic objectives of the program for 1999/2000–2001/02 are to (a) limit inflation to 2 percent per year ; and (b) reduce the external current account to 2 ½ percent of GDP by 2001/02. Real GDP is projected to recover from 4.4 percent of GDP in 1998/99 to 5.5 percent in 2001/02, taking into account a decline of 13 percent in oil output over the period. The medium-term growth projections hinge critically on success in raising the level of investment, consolidating and deepening existing reforms, raising the domestic budgetary revenue effort, strengthening expenditure management, modernizing the civil service, continuing to rehabilitate the country’s infrastructure, and implementing efficiency-enhancing reforms to reinforce external competitiveness.
IV. Macroeconomic Policies
A. Fiscal Policies
7. During the period 1999/2000–2001/02, fiscal policy will aim at consolidating progress made in recent years toward fiscal sustainability and at raising non-oil revenue in the face of the declining trend in oil revenues, while reorienting expenditures toward the social sectors and infrastructure. To these ends, with a primary surplus (excluding foreign-financed investment) projected to average 5.3 percent of GDP and government investment rising by some 2 percentage points of GDP during the period, the government’s objective will be to contain the overall deficit on a commitment basis below 3½ percent of GDP, taking into account the need to increase social spending over time. These objectives would be achieved on the revenue side through the intensification of ongoing tax reforms (global income tax and property tax) and the implementation of measures to widen the tax base, as well as the simplification of administrative procedures to increase efficiency of the tax and customs administrations. As a result, non-oil revenue should increase to 14.8 percent of GDP in 2001/02 from 13 percent of GDP in 1998/99; oil revenue is projected to increase to an average of 3.3 percent of GDP in 1999/2000-2000/01 (2½ percent in 1998/99), only to decline to 2.4 percent of GDP in 2001/02, consistent with the projected decline in production and exports. On the expenditure side, measures will aim at increasing outlays in the social and infrastructure sectors (with noninterest expenditures targeted to increase by 1½ percent of GDP between 1998/99 and 2001/02), some improvement and decompression of wages to increase incentives, strengthening expenditure management and controls, and continuing reforms to modernize the civil service.
8. During the coming three-year period, the focus of tax reforms will be on (a) completing the reforms agreed upon at the regional level, including the elimination of import surcharges by end-June 2000; (b) simplifying the taxation on individuals with the introduction of a consolidated tax on personal income on July 1, 2001; (c) revamping forestry taxation, with a view to promoting industries with high economic value added and protecting the environment, while ensuring adequate revenue yields; (d) broadening the tax base through the reduction of unjustified exemptions and distortions; and (e) broadening the tax net through the strengthening of the taxpayer identification system and registration of taxpayers. These reforms will be accompanied by administrative measures aiming at strengthening the various public sector financial agencies.
9. On non-oil revenue, the government’s priority will be to increase revenue collections, and strengthen and modernize the tax and customs directorates. To improve forestry revenues, new procedures of control and collection of forestry taxes defined in the forestry revenue security program (PSRF) will be implemented to improve forestry revenue yields. Furthermore, forestry taxation is to be overhauled, based on the recommendations of the economic, technical, and financial study of the sector. The tax directorate will be reorganized with the establishment of a large-taxpayer center, which will centralize the administration of all the taxes levied on the 200 largest enterprises. A single identification number will be assigned to each taxpayer to be used by all the tax and fiscal agencies (treasury, customs, tax and budget). The implementation of the value-added tax (VAT) introduced in January 1999 will be monitored closely—in particular the interface with VAT on imports—and collaboration with the customs directorate will be enhanced through the joint coordination unit of the tax and customs departments. In the customs area, Cameroon has benefited from a technical assistance mission from the Fiscal Affairs Department of the IMF that evaluated customs administration and proposed measures for improvement. The key elements of the customs reform are (a) the simplification and improved efficiency of controls; (b) the modernization of the customs service; (c) the more effective control of suspensive customs regimes (régimes suspensifs) and international transit trade; (d) the rationalization of exemptions; (e) the strengthening of collaboration between the customs and the preinspection shipment company (SGS); and (f) investment in human resources and equipment. To oversee these reforms, the government has established a technical committee to prepare a detailed action plan, as well as performance indicators for monitoring the reforms. These efforts will be reinforced by strengthening the motivation and efficiency of the customs and tax services and the treasury through the intensification of personnel training and the improvement of work conditions.
10. During the period 1999/2000–2001/02, the major aims of expenditure policy will be to (a) consolidate the efforts under way to meet essential needs in the priority sectors of education and health, reduce poverty, and rehabilitate and modernize infrastructure; (b) strengthen budget preparation and execution, and improve expenditure management and control; (c) deepen the reform of the civil service; and (d) improve the civil service remuneration system and decompress the wage structure to improve incentives. Spending in the priority sectors will be increased to reach 5 percent of GDP for education and health and 2.5 percent for public works in 2001/02, as against less than 3 percent of GDP for education and health and 0.7 percent for public works in 1998/99. Budget execution in these sectors will be monitored closely to ensure that resources reach their effective destination. Strategies for the education and health sectors are to be prepared in the course of 1999/2000 in the context of a three- to five-year medium-term expenditure framework (MTEF). Regular reviews of the target sectors are to be carried out with quarterly reports on budget execution. It is expected that the MTEF will be generalized and extended to other specific target sectors starting in 2000/01.
11. The government will continue to implement the measures covered by the action plan for the improvement of public expenditure management. Specifically, it will (a) conduct annual audits of major government procurement contracts and implement corrective measures if needed; (b) improve the quarterly treasury cash plans based on potential revenue and expenditure priorities beginning with the first quarter of the budget year 1999/2000; (c) establish timely and accurate monthly and annual treasury balance sheets and final accounts by ensuring that the treasury’s data management system (Patriot) becomes operational by November 1999; (d) adopt new procedures for the use of the delegated credits for the Ministries of Education, Health, and Agriculture, including publication of their monthly allocations and actual transfers, and monitor closely their final use based on quarterly audit reports; and (e) conduct periodic controls by appropriate inspection units to ensure effective implementation of expenditure management measures beginning July 1999. On domestic arrears, an audit of the stock of arrears at end-June 1997 is being carried out and will be concluded by end-March 2000. The government will prepare and implement a plan to settle audited and verified arrears and will ensure that corresponding operations are incorporated into the budget. As regards public investment, the government, in collaboration with the World Bank, will continue to improve the preparation, content, and execution of the public investment program (PIP) through stricter project selection practices and assessment of recurrent costs, and a strengthened project execution review process.
12. The government is determined to accelerate the pace of civil service reform, and a new civil service reform strategy will be prepared with the assistance of the World Bank and other donors. The new strategy will focus on increasing efficiency of the civil service through (a) the modernization of the civil service; (b) the alignment of staffing levels with the needs and objectives of the ministries and other public sector entities; (c) the rationalization and improvement of the payroll system; and (d) the identification of activities that could be transferred to the private sector. Other measures being taken to strengthen the civil service and clean up the payroll files include, notably, (a) a physical inventory and census of the legal status of all public sector employees, to be completed by end-March 2000; (b) the start of the decentralization of the payroll; and (c) the harmonization of the payroll files.
13. The government intends to restructure the system of social protection to ensure its medium- and long-term viability. Within this framework, a strategy for the complete overhaul of the social protection system is being prepared with the collaboration of the World Bank and will be completed by end-December 1999. Implementation of this strategy, involving legislative as well as institutional changes, will start in 2000/01.
B. Monetary Issues and Financial Sector Reform
14. The government will continue to promote sound financial and monetary policies in the region within the framework of the common financial institutions of the Central African Economic and Monetary Community (CEMAC). In particular, the government will continue to lend its full support to increasing foreign exchange coverage, strengthening the supervisory activities of the regional banking commission (COBAC), and ensuring the prompt and diligent implementation of its decisions. In parallel, the government will collaborate with COBAC in defining prudential norms for nonbank financial institutions. It is expected that these norms will be finalized during the first semester of 2000. The government will also continue to support reforms aimed at promoting the effective use of indirect monetary policy instruments, with a view to rationalizing the central bank’s interventions in the money market and liberalizing interest rates.
15. TWith the restructuring of the banking system largely complete, the focus of financial reforms will be shifted to insurance companies and other nonbank financial institutions, as well as the development of the securities market. The privatization of the remaining government-owned commercial bank (BICEC) is due to be completed shortly, and the government is to sell its minority shares in two other banks. In the insurance sector, the government intends to complete the privatization of SOCAR and appoint a liquidator for CNR—respectively, the government insurance and reinsurance companies. Other important reforms in the financial sector include (a) the restructuring of the CFC (Crédit Foncier du Cameroun), in the context of a housing and housing finance strategy; (b) the restructuring of the postal checking and postal savings bank; and (c) the cleaning up of the savings and loans institutions within the framework of the September 1998 decree, including notably the rationalization of the licensing system by the financial authorities and the establishment, in collaboration with COBAC, of prudential norms ensuring that by July 2000 only those institutions that are licensed will operate; and (d) the establishment of a local stock market, while encouraging efforts to create a regional stock exchange by December 2000. To this effect, the government will introduce a law relating to the creation and organization of a financial market during the November 1999 parliamentary session. Finally, the loan recovery corporation (SRC) is to be reorganized to emphasize its credit collection activities, strengthen its credit recovery performance, and ensure the systematic indemnification of deposit holders on the basis of annual indemnification plans. A timetable for the completion of all commercial bank liquidations managed by the SRC will be adopted by end-September 1999 at the latest.
V. Structural Policies
16. The government will intensify its efforts to promote private sector development, enhance factor productivity, and reinforce external competitiveness. The main priority areas for policy actions will be the reduction of the role of the government, deregulation, the reduction of production costs and strengthening of incentives, and the improvement of the economic and social infrastructure. In the incentives area, Cameroon is to (a) complete the implementation of the fiscal and trade reforms envisaged under the CEMAC by eliminating import surcharges, with the aim of promoting trade; (b) work toward the adoption of the investment charter of the CEMAC; and (c) work toward the gradual reduction of the common external tariff, based on appropriate technical studies, while ensuring the preservation of adequate budgetary resources. In line with its program to improve the business environment, the government is to (a) streamline the procedures for the creation and operation of businesses; and (b) prepare an inventory of business laws and regulations and tax codes to ensure that they are consistent with the Organization for the Harmonization of Business Legislation in Africa (OHADA) treaty. At the same time, a plan of action to remove impediments to investment and business operations will be developed in cooperation with the private sector and implemented.
17. The government’s divestiture program will focus on consolidating and deepening reforms in the agro-industry, public utilities, transport, petroleum, and financial sectors, with a view to stimulating private investment, enhancing competition and efficiency, and lowering costs. In this context, new regulatory frameworks have been established for the electricity, water, telecommunications, and transportation sectors, and reform strategies adopted. Reforms in the agro-industry sector are well advanced. The next step, following the privatization of the sugar and palm oil companies, will be the launching of the second round of calls for bids for the privatization of the Cameroon Development Corporation (CDC) at the end of December 1999. With the privatization of the CDC, most of the agricultural sector in Cameroon will have been transferred to the private sector, with the exception of the cotton sector, where privatization is pending the resolution of legal problems. The government is proceeding with work on the establishment of a competitive economic framework for this sector that will ensure increased incentives for producers and an appropriate structure of the sector following privatization.
18. The privatization program is expected to bring important benefits in the form of increased investment in the rehabilitation of existing infrastructure, reduced costs, and improved availability of services. In the telecommunications sector, the launching of competitive bidding for the privatization of the telecommunications company (CAMTEL) is to take place before the end of the year. With the selection of the successful bidder for the mobile telephone company, CAMTEL-Mobile, scheduled to take place before end-January 2000, there will be two competing private cellular companies. In the electricity sector, to ensure the increased investment needed to improve supply, and in accordance with the privatization strategy adopted in June 1999 with the assistance of the IFC, the invitation for prequalification bids for the privatization of the national electricity company (SONEL) is to be launched by end-October 1999. Similarly, the privatization process in the water sector is under way, with the second round of bidding for the privatization of the water company (SNEC) expected to take place by end-September 1999. The government will prepare and implement a strategy of divestiture and restructuring of the SNI (Société Nationale d’Investissement), a government holding company. Finally, the public housing organizations (MAETUR and SIC) will be reviewed and restructured based on the recommendations of the review.
19. The government will strengthen management of the enterprises remaining in its portfolio, which will be governed by a revised public enterprise law, and the technical commission for the rehabilitation of public enterprises will provide, on a yearly basis, consolidated financial statements for these enterprises. As part of the separation of postal and telecommunications activities, a new postal law was adopted in November 1998. The latter has established new rules as regards services open to competition, notably postal distribution, and created the National Postal Company of Cameroon. The postal savings fund has been restructured and its autonomy reinforced. With the implementation of these reforms, the government will abolish the telecommunications budget annexe by the end of June 2000 at the latest.
VI. Improving Governance and Strengthening the Judiciary System
20. The authorities are aware of the damaging effects of corruption on development and are determined to pursue their efforts in the fight against this menace, which constitutes a major impediment to economic activity.1 In this context, the government intends to implement a number of measures, notably the recommendations of the audit of the procurement system, the strengthening of financial and technical controls, and the annual evaluation of the main government procurement contracts. In addition, it will increase the accountability of budget administrators and improve the motivation of tax and customs officials, as well as of treasury accountants and cashiers. At the same time, the government is to intensify the application of administrative and legal sanctions against poor management, misappropriation of public funds, and fraud, in line with existing legislation. The government will continue to require annual audits of the accounts of the SNH and other public enterprises remaining in its portfolio, and ensure full transparency in privatization operations. The government audit agency (Contrôle Supérieur de l’État) and other inspection units will be reinforced to allow them to inspect regularly ministerial and public enterprise financial activities. More generally, the government is to increase the importance attached to governance issues, and finalize its national governance plan, with the support of the United Nations Development Program (UNDP), with a view to adoption and implementation during 1999/2000.
21. The strengthening of the judiciary system to ensure investor security is of critical importance for putting in place a conducive environment for business development and attracting foreign investment. To that end, the inspection and control functions of the office of the inspector-general of the Ministry of Justice will be reinforced to better monitor the operations of the judiciary and recommend appropriate improvements. In addition, the government intends to improve the dissemination of judicial information through regular publication of the official journal and the rulings from the appeal court, following the renewed publication of judiciary casebooks. A far-reaching training plan for judges and other judiciary staff on OHADA dispositions will be prepared and implemented. Finally, in response to the concerns of the business community, a diagnostic study to improve the arbitration mechanisms for addressing business litigation will be carried out by end-April 2000.
VII. Specific Sectoral Policies
A. Forestry and Environment Protection
22. The main objectives of the government’s forestry policy continue to be to promote sustainable management and rational use of the country’s forestry resources, and protect the environment. In this area, the government’s strategy will be based on the principles adopted at the summit of the central African heads of state on the conservation and sustainable management of the tropical forests. This will require (a) strengthening the state’s institutional capacity in the forestry sector; (b) improving communication and collaboration among government, civil society, and the private sector within the framework of transparent and enforceable regulations; (c) adjusting the incentive framework, and applying and improving existing regulations concerning the granting of concessions, management plans, manufacturing, exports, taxation, community participation, the protection of the environment, and biodiversity; and (d) creating the international confidence in Cameroon that will allow it to market internationally nonligneous forestry products and environmental services coming from its rich forest endowment.
23. In the period covered by the present PFP, specific emphasis will be placed on the effective application of the ambitious legal and regulatory framework that has been created for the forestry sector. To that effect, the government is to strengthen technical and fiscal controls of forestry activities, and an independent observer will be associated to the process of awarding forestry concessions. These actions will (a) result in increased competition and transparency in the awarding of concessions; (b) focus on design and implementation of forest management plans; (c) direct interventions to stop illegal operations and enact effective protection of parks and reserves; and (e) increase the participation of the local population in the decision-making process and the allocation of forestry exploitation benefits. In addition, an economic and financial study of the sector will be carried out by an independent consultant, which will allow for a rationalization of forestry taxation and industrialization policy.
B. Energy Production and Distribution
24. The government’s strategy for the reform of the energy sector aims to: (a) develop the sector’s potential through appropriate incentives and liberalization; and (b) increase efficiency and transparency in the management of the sector. With this aim, the government is to develop a legislative and regulatory framework for the mining, natural gas, and petroleum sectors, that will allow for the development of offshore natural gas reserves, promote and develop the country’s hydroelectric potential, and promote the distribution of petroleum products. In the petroleum sector, a global strategy (exploration and production) defining the respective roles of the national oil company (SNH) and the private sector within the newly liberalized sector is to be developed with the support of the World Bank by end-December 1999. This step will be followed by an operational audit of the SNH, to be undertaken before end-June 2000. To consolidate the liberalization of the market for refined petroleum products, the government will (a) launch a call for bids for the privatization of the petroleum storage depot, SCDP, by end-December 1999, and (b) establish a new regulatory framework ensuring nondiscriminatory access to the domestic market by new distributors before end-December 1999.
C. Agricultural Sector
25. The government is determined to further liberalize the agricultural sector. Its strategy, under preparation, is to improve sector competitiveness and enhance factor productivity, with a view to strengthening growth, increasing farmers’ income, and reducing poverty. In this context, all export taxes on nonforestry products were eliminated on July 1, 1999. Measures to enhance factor productivity are being coordinated in the context of the Agricultural Research and Extension Services Program (PNRVA). Priority will also be given to the promotion of rural feeder roads, so as to help develop trade flows between the urban and rural areas. The government also intends to improve basic infrastructure in the rural areas, as well as the quality of social and other public services delivered to them. Attaining this objective will require the continued decentralization of public administration and development of a strong partnership between the government and local communities; implementation of the pilot projects initiated in this context in 1998/99 will continue in 1999/2000. An institutional audit of the Ministries of Agriculture and Livestock will be conducted, with a view to optimizing their contribution to the development of the rural sector.
D. Transport Sector
26. The government is determined to continue to implement its reform of the transport sector. A concession for the national railway network has been granted to the private sector. In the port subsector, new management structures were created in June 1999 and are currently being established. The full independence of the new port management entities is to be established in each port, and all industrial and commercial activities are to be transferred to the private sector. In the next three years, the government is to ensure that the new framework becomes fully operational and effective. With regard to the Port of Douala, the implementation of the action plan adopted in December 1998 to reduce costs and port delays is being actively pursued. In this context, significant progress has been made in the establishment of theguichet unique (one-stop window) for port clearance procedures, with the assistance of the international community: the legislative statutes have been adopted; the main managers appointed; and simplified procedures for external commercial operations developed. It is expected to begin operation in January 2000. Furthermore, the government is monitoring the execution of the dredging contract for the access channel of the Port of Douala that was signed with an internationally reputable private sector operator in June 1999. In the road sector, the new road maintenance financing mechanism is now operational, with the establishment of the Road Fund, an agency that will be subject to a financial and operational audit twice a year. In addition, the government is to improve the budgeting of road maintenance, and strengthen the efficiency and transparency of procurement procedures, with special emphasis being placed on control activities and efficient programming and execution of road maintenance contracts, both by the Ministry of Public Works (MINTP) and the Road Fund. To this effect, the government intends to reinforce the technical expertise of the MINTP.
E. Tourism Sector
27. The government is to revive the tourism sector, in order to ensure that the sector plays an important role in economic, social, and cultural development in Cameroon. The strategy of the authorities in this sector is to (a) promote the role of the private sector to develop a professional tourism service; (b) improve the institutional framework of the sector; and (c) develop the necessary infrastructure. In this context, the management of the government hotels is to be transferred to the private sector.
VIII. Social Policies and Fight Against Poverty
A. The Fight Against Poverty
28. The strategy of the government in its fight against poverty is based on the following policies: (a) promote strong, sustained, and equitable growth; (b) strengthen the supply and quality of essential social services (education, health, and drinking water) and increase access of the poor to them; (c) promote community-based development; (d) implement specific actions for groups at risk and in difficulty; and (e) ensure the increased involvement of women in economic and social development. To facilitate the participation of nongovernmental organizations in the fight against poverty, the government is to revise the existing laws and regulations governing them to ensure, in particular, their access to public aid resources. To ensure efficient implementation of this strategy, the government will request technical and financial support from its development partners. The strategies for the education and health sectors will form a critical element in the government’s fight against poverty and will concentrate on establishing greater regional equality and accountability in the distribution and use of resources. The intensification of road maintenance will help improve access of the rural poor to markets. In addition, the government attaches a high priority to labor market absorption of the workers terminated under the privatization program. A study of the social costs of privatization, including the financing of compensation plans, is being completed. An overall policy framework for the reabsorption of dismissed workers through training programs, apprenticeships, and promotion of self-employment will be developed by the National Employment Fund.
B. Human Resource Development
29. The strategy of the government for education will aim at (a) improving the quality of primary education and ensuring its access to all levels of the population; (b) promoting greater regional equality in the distribution of resources; (c) increasing the participation of parents, communities, and local authorities in school management; (d) promoting support for private sector education; and (e) strengthening decentralization of the education budget through the automatic delegation of current and investment credits. The strategy will form the basis for the preparation of the implementing decrees of the Education Orientation Law. At the operational level, the government is working toward (a) developing a sectoral strategy for education by June 2000; (b) completing an audit of education personnel at the national level, with a view to developing an action plan for their more effective use; (c) accelerating the work on school maps at the primary and secondary levels to target reductions in the pupil-teacher ratios, particularly in primary education; and (d) improving working conditions for, and increasing recruitment of, teachers in underprivileged regions. Progress in implementing the strategy is to be monitored closely through quarterly reports on budget execution and semiannual reports on the physical execution of the program. Within this framework, and to begin to make an early difference in the quality of education, some pilot units under an “integrated rural area school system” under preparation by the Ministry of Education will be reinforced, notably by improving living conditions for teachers in rural areas through the implementation of a new modular school initiative by end-May 2000. The distribution of, and access to, school textbooks will be improved, based on the recommendations of a study under preparation.
30. The main objectives of the government’s health sector policy are to (a) widen the coverage and improve the quality of the vaccination program, particularly in rural areas;2 (b) increase and improve both physical and financial access to health services; (c) increase access to generic-quality medicines at low cost; (d) strengthen and reallocate health workers, particularly in rural zones; (e) strengthen the control and the monitoring of, and the fight against, infectious diseases; and (f) promote collaboration with the private sector, as well as related sectors (education, social protection, hygiene, and sanitation).
31. To implement these policies, the government is to (a) develop a sectoral strategy; (b) accelerate the establishment of the health districts, so that about half of the country’s districts will be operational at the end of 2002; (c) strengthen and decentralize health management, and expand efforts to involve local communities and the private sector in the management, financing, and delivery of health services; and (d) take specific measures to improve public hygiene and living conditions through improvement of waste collection systems and a broadening of access to safe water. In the fight against infectious diseases and epidemics, priority will be given to malaria and tuberculosis, and to the prevention and testing of HIV/AIDS. In the area of vaccination coverage, the implementation of the National Vaccination Plan will be accelerated, with a view to increasing coverage to over 70 percent by the year 2001 for infants under 11 months of age.
IX. Improvement in Statistics
32. The government will continue to give priority to the establishment of a comprehensive database to facilitate economic management. To that effect, the government will intensify its efforts to improve the quality, coverage, and timely production of core economic and social data. It has already begun a comprehensive examination of the data system, starting with a reevaluation of the national accounts along the lines of the new system of national accounts adopted by the United Nations in 1993 (SNA93), which emphasizes a better coverage of international aid and the informal sector’s contribution to the economy. Other steps will be taken to improve the collection of data for the development of key indicators of prices, production, monetary statistics, and balance of payments. The monitoring of public finances is to be strengthened through efforts to improve budgetary monitoring, domestic and external debt data, and monitoring of the financial performance of the public enterprises remaining in the government’s portfolio. In the social area, regular household surveys to monitor poverty and social developments and establish a database on poverty will also be carried out in the context of the government’s antipoverty strategy. All these efforts are to be undertaken within the framework of the General Data Dissemination Standards (GDDS).
X. Technical Assistance
33. The implementation of the government’s structural adjustment and development program will continue to put considerable demands on the country’s human resources and will necessitate technical assistance from multilateral partners (the IMF, the World Bank, the European Union, and the African Development Bank) and bilateral partners, notably France. Technical assistance from the IMF will cover the areas of customs administration, the consolidation of direct taxation on personal income, and the strengthening of the budget preparation and execution process in the framework of the plan to improve the management of public expenditures. World Bank assistance is expected for the improvement of the domestic legislative and regulatory framework, the preparation of sectoral strategies for health and education, privatization, financial sector reform, the reform of the social security system, the establishment of a database on poverty, and the public investment program. Other areas that will require external support for capacity building include the deepening of civil service reform, the modernization of management information systems, the reinforcement of the judicial system, and the strengthening of arbitration for resolution of business disputes.
XI. External Sector Outlook, Financing Requirements, and Debt Management
A. External Sector Outlook and Financial Requirements
34. The cumulative current account deficit (excluding grants) is projected to reach CFAF 564 billion over the three-year period 1999/2000–2001/02. In light of scheduled total debt amortization of CFAF 1,275 billion—of which CFAF 945 billion of public debt principal repayment—a targeted net increase in external reserves of CFAF 303 billion, and the repayment of CFAF 523 billion in arrears, Cameroon’s external financing requirements are estimated at about CFAF 2,665 billion (equivalent to US$445 million). In view of the envisaged reforms, the government expects private capital inflows, mainly from foreign direct investment and short-term trade credits, to total some CFAF 431 billion over the program period. An inflow of CFAF 555 billion is expected in concessional project assistance from bilateral and multilateral agencies in the context of the public investment program, and CFAF 418 billion in financing to support the program has been committed by bilateral and multilateral creditors, including disbursements under the third structural adjustment credit from the World Bank and the use of remaining Fund resources under the ESAF arrangement. In addition, rescheduling by Paris Club and non-Paris Club bilateral creditors is expected to provide CFAF 322 billion in exceptional financing. On this basis, the residual financing gap for the program period would amount to CFAF 940 billion. The gap for 1999/2000, estimated at CFAF 523 billion, would be covered by the restructuring of commercial debts with the London Club and non-Paris Club rescheduling, and the associated up-front costs are to be largely covered by Cameroon’s bilateral and multilateral partners. The financing gaps for the subsequent years could be covered by additional financial support from bilateral and multilateral donors, notably through debt relief.
B. Debt Management
35. The government’s medium-term strategy in the area of debt management has been to seek external debt relief by normalizing its relations with multilateral and bilateral creditors. Starting with the October 1997 Paris Club rescheduling, the government eliminated arrears to Paris Club creditors and has steadfastly implemented the provisions of the agreement. The government intends to successfully complete the first three-year ESAF arrangement in order to benefit from a possible debt-service reduction under Naples terms. The government will also continue its efforts to reach rescheduling agreements with other creditors on terms comparable to the Paris Club agreement.
36. Regarding the London Club and other commercial creditors, Cameroon intends to reach a debt- and debt-service reduction (DDSR) agreement during 1999/2000. It is expected that the negotiations with the creditors could start in September 1999 on the specifics of a DDSR operation, which could include a menu of restructuring options. If the negotiations are successful, the operation could be concluded by the third quarter of 1999/2000. The government, with the assistance of the World Bank, has undertaken to contact potential donors to help finance the considerable up-front costs of the operation.
37. On the basis of an updated debt sustainability analysis, Cameroon could be eligible for assistance under the Initiative for Heavily Indebted Poor Countries (HIPC Initiative). This conclusion would, however, need to be confirmed by a detailed loan-by-loan analysis in order to have a more complete assessment of Cameroon’s external debt sustainability. To this end the authorities have initiated the loan reconciliation process that is expected to be finalized, with the technical assistance of the Fund and the World Bank, in November 1999. In order to adequately prepare the presentation of a decision point document, the authorities have embarked on the development of ambitious sectoral strategies for the key social sectors (health and education) and for road and water supply infrastructure, and they have adopted measures aimed at reinforcing budget execution in these sectors. Beyond the envisaged debt-relief mechanisms, the long-term sustainability of Cameroon’s debt situation will depend on the country’s economic growth, the buoyancy of exports, and the availability of concessional financing.