Coming to Terms with Reality. Evaluation of the Belgian Debt Relief ...

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Annexes
Secondly FURRER and KADDER (2007) show a stabilizing effect of debt relief on public
expenditures on health between 2000 and 2005 and a contribution to the rise of public
health expenditures in 2006 and 2007.
Figure 22b Evolution of the Budget of the Ministry of Public Health (Millions of FCFA),
decomposing Debt Relief and Normal Budget:
120.000
100.000
80.000
60.000
40.000
20.000
0
1998-1999
1999-2000
Source: FURRER and KADDER (2007)
2000-2001
2001-2002
Total Debt Relief Used (HIPC, MDRI, C2D) Total expenses without debt relief
Thirdly IDA and the IMF (2007, table 3) have estimated that poverty-reducing
expenditures have increased from 17% of government expenditures in 2000 to 33% in
2006 and from 3.1% of GDP in the former year to 6.3% in the latter.
We conclude that debt relief has contributed to a fiscal surplus. But its effect is overshadowed
by that of the increasing oil price. On the other hand the share of expenditures on education,
health and infrastructure in total public expenditures has risen substantially.
5.6 Governance Indicators:
In this subsection we analyse whether governance has improved between Decision and
Completion. To do this we use a number of indicators. We start by analysing the sovereign
ratings of Cameroon by rating agencies, before focusing on the Country Policy and
Institutional Assessment (CPIA) Rating and the Kaufmann-Kraay-Mastruzzi (KKM)
index. Finally we mention the Corruption Perception Index (CPI).
The ratings by Standard & Poor’s and Fitch did not change much after Cameroon reached the
Decision Point. Standard &Poor’s gave both long and short term debt a B grade in 2003, and
downgraded it in December 2004 to respectively CCC and C, because of public finance
slippages. It then upgraded those ratings twice (in May 2006 and February 2007), so that they
2003
2004
2005
2006
2007
Coming to Terms with Reality
reached their 2003 levels. Fitch started with a B rating for both long and short term debt. In
February 2005 it downgraded long term debt to B-, because of poor budgetary management. In
June 2006 it upgraded it again to B.
The Country Policy and Institutional Assessment (CPIA) Index is published every year by the
World Bank, and “rates countries against a set of 16 criteria grouped in four clusters: (a)
economic management; (b) structural policies; (c) policies for social inclusion and equity; and (d)
public sector management and institutions” (World Bank). The final mark for the country lies
between 1, which means the rating is highly unsatisfactory for two years or more, and 6, which
means it is good for two years or more. Cameroon’s score decreased from 3.3 in 2005 to 3.2 in
2006, which puts the country in the group of “weak performers”. This is mainly due to the weak
business regulatory environment, the policies and institutions aimed at environmental sustainability
and the inefficiency of revenue mobilisation. The country kept the same rating IN 2007.
D. Kaufmann, A. Kraay, and M. Mastruzzi (2008) constructed an indicator of the quality of
governance in a country, the so-called KKM Index. This index is based on six governance
indicators (on a scale from -2,5 to 2,5), divided into three groups. This is one of the few
governance index that covers a period of more than ten years (1996-2007).
The first group covers “the process by which governments are selected, monitored and replaced”,
and is composed of two indicators: “voice and accountability” and “political stability and absence of
violence”. The former includes measures of the political process, the respect of civil liberties and the
political rights. The latter integrates the perception or likelihood that the government will be
overthrown, and the perception of internal violence. We represent both in figure 23. We observe that
there is no particular improvement in the “voice and accountability”, but the political stability
indicator has increased between 1996 and 2000 and between 2004 and 2006.
Figure 23 “Voice and Accountability” and “Political Stability and Absence of Violence”
Indicators, 1996 - 2007
Score (-2,5; 2,5)
0,0
-0,2
-0,4
-0,6
-0,8
-1,0
-1,2
-1,4
-1,6
1996
1998
2000
Political stability
voice and accountability
2002
2003
Source: Kaufmann D., A. Kraay, and M. Mastruzzi (2008)
2004
2005
2006
2007
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