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

| 214 |
Annexes
Figure 30 Debt service on external debt, 2009-2028:
Billions of CFA Francs
50
45
40
35
30
25
20
15
10
5
0
Source: CAA
2009
2010
2011
2012
2013
Multilateral Bilateral (Paris Club) Bilateral (Non-Paris Club)
7.3 Major Risks:
2014
2015
2016
2017
2018
The Debt Sustainability Analysis published by the IMF in 2008 concludes that the risk of debt
distress in Cameroon during the coming years is low. Nevertheless it mentions some risks. We
discuss three of them.
The main risk is that of imprudent debt management. The country now has a very low level of
debt, and could be tempted to contract excessive new loans, even at non-concessional terms.
In order to avoid excessive debt accumulation in the future it is essential to stick to sound debt
management. The IMF stresses the importance of obtaining new loans at concessional terms.
The second major risk concerns the internal debt. It is apparently difficult to obtain clear-cut
figures on this debt, and there are risks that the internal debt will increase. One of them is the
subprime crisis: some subsidiaries of international financial groups have invested in risky
assets that could endanger the financial system and force the Government to intervene if the
international situation would worsen.
The last major risk is related to oil revenues which, as stated in section 5, are an important
source of Government revenue. In recent years high oil and commodity prices have had a
positive impact on the Government revenues and on the balance of trade, even though at the
beginning of 2008 price increases led to riots in different parts of the country. The
Government decided to draw up the 2009 budget on the basis of an oil price of 68 US$ a
barrel. If the barrel would stay at its January price level of around 35 US$, the Government
could face an important deficit. To cover an eventual deficit it resort to foreign borrowing.
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Coming to Terms with Reality
7.4 Main Challenges
To ensure the sustainability of its debt, the Government should continue its sound debt
management and clarify the risks concerning the potential increases of internal and
external debt. It should also continue its efforts started under the fiscal reform set up in
2008 to increase transparency of public expenditures and to avoid future budgetary
slippage. Concerning public revenues, it should increase its efforts aimed at the
diversification and enlargement of the tax base in order to reduce its dependency on
fluctuating oil revenues.
Sustainability of the debt also depends on economic growth. Increasing public investment
could have a positive impact on private investment including FDI on and in this way on
economic growth. A well informed source mentioned that, according to estimates of the
Ministry of Finance, an increase of public investments amounting by 100 billion FCFA
(152 million EUR) could create an extra 1% annual growth for the country. Other actions
to increase growth would be to improve the general business environment by setting up
structures that reduce the time and expenses needed to create an enterprise, by finalizing
efficiently the privatisations, by actively fighting corruption and by strengthening financial
intermediation.
| 215 |