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

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Annexes
7 Challenges and Risks
In this section, we analyse the projected evolution of the debt stock and debt service from
2008 onwards. We use the projections made by the Caisse Autonome d’Amortissement
(CAA) and the IMF. We will then analyse the major risks related to the debt sustainability.
Finally we discuss the challenges the country faces for debt management.
7.1 The Debt Stock
As analysed in subsection 4.1, the NPV of external debt in 2008 was about 9.5% of GDP,
45% of exports and 52% of government revenues. As the sustainability thresholds set
under the HIPC Initiative are 40%, 150% and 250%, respectively, it is clear that the debt
stock at that point of time was sustainable, being well below the thresholds. The Debt
Sustainability Analysis (or DSA) published by the IMF in June 2008 also underlines the
sustainability of Cameroon’s external debt. It qualified the risk of debt distress as “low”.
This conclusion remains valid even under a certain number of projected shocks, such as a
weaker GDP growth. In figure 28 we represent the external debt by creditors at the end of
2007. This debt was contracted mainly in Euros (70%) and US dollars (17%).
Figure 28 Cameroonian External Debt Structure, end 2007
7% | Other official bilateral
0% | Commercial
7% | African Development Bank Group
17% | World Bank Group
3% | IMF
14% | Other multilateral creditors
52% | Paris Club
Sources: Cameroonian authorities; and IDA and IMF staff estimates and projections.
After the implementation of the HIPC Initiative for Cameroon and the accompanying
additional bilateral and multilateral debt relief has been implemented, the Paris Club
countries remain the most important creditors, even though their relative share has declined
from 69% in 1999 to 52% at the end of 2007. Commercial debt has almost been
Coming to Terms with Reality
eliminated. The government is trying to obtain debt alleviation comparable to the HIPC
term from some private creditors, who keep insisting on full repayment of the principal.
With 17% of total external debt the World Bank Group remains an important creditor.
Figure 29 CAA Projections of total external debt, 2009-2027:
Billions of CFA Francs
500
450
400
350
300
250
200
150
100
50
0
2009
2010
Multilateral Bilateral (Paris Club) Bilateral (Non-Paris Club) Commercial (Arrears)
Source: CAA 2008
2011
2012
2013
2014
2015
Figure 29 shows the projections of external debt made by the CAA for the years 2009-
2027. The total external debt projected for 2009 is 450 billion FCFA, less than one tenth of
the external debt at the end of 2004, two years before Completion Point (5,000 billion
FCFA). Figure 29 shows a continuous negative trend of projected external debt between
2009 and 2028. According to the CAA projections, the non-Paris Club debt would decrease
even faster.
7.2 The Debt Service
2016
2017
2018
Because of the decreasing debt stock the debt service between 2009 and 2028 is also
projected to follow a negative trend, although with some fluctuations linked to the time
structure of debt. This is shown by figure 30. In 2006 the interest paid by the Government
on external debt was approximately 87 billion FCFA. By 2029 the interest due is projected
to fall to 47 billion FCFA.
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
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