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

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Annexes
Core Data on Cameroon:
Land area 475 000 km² (1)
Population (2007) = 18.55 mln (2)
Annual growth rate population (2000-2007) 2.3% (3)
GDP per capita (at PPP) 2,094 US$ (4)
Annual growth rate of GDP (2000-2006) 3.7% (5)
Life expectancy (2006) 50.3 years (6)
Literacy rate, ages 15 and above (2007) 72% (7)
National Poverty Line 738 FCFA (or 1.13 €) (8)
Head Count Ratio 39,9 % (9)
HDI Ranking (2006) 150 th(10)
Sources: (1) AfDB; (2) AfDB; (3) WDI and AfDB; (4) IMF, World Economic Outlook Database, October
2008; (5) WDI 2008; (6) WDI 2008; (7) ECAM III ; (8) ECAM III; (9) ECAM III; (10) UNDP.
Coming to Terms with Reality
1 Introduction:
Until the mid-1980s, Cameroon presented a model of economic growth for the rest of
Central Africa. The country is blessed with a wealth of natural resources, including fertile
land, lumber and petroleum. Unlike several of its neighbors Cameroon has not been
plagued by violent civil conflicts. The country enjoys a favorable geographic position
between Nigeria and several central African countries that provide growing markets.
Neighboring countries rely on Cameroon’s transportation system and on the port city of
Douala for links to the outside world.
But Cameroon’s economy is heavily dependent on oil revenues and can be deeply affected
by falling oil prices. Beginning in 1987 the steep decline of the oil price combined with
falling coffee and cocoa prices reduced Cameroon’s export income. As a consequence of
these developments and of the absence of an adequate policy response, between 1986 and
1994 Cameroon’s real per capita GDP fell by more than 40 percent. Current account and
fiscal deficits widened 94 , and the percentage of the population living below the national
poverty line increased dramatically. Starting in 1993 the government took a number of
measures to halt the economic decline. These included among others a reduction of wages
in the public sector and the participation in the devaluation of the Franc CFA. The
government also tried to revive the economy by undertaking some economic reforms and
structural adjustments, such as the strengthening of public finance.
During the second half of the 1980s Cameroon’s foreign debt stock increased strongly and
the country could no longer fulfill its debt obligations. Starting in 1989 and throughout the
1990s it had to apply repeatedly for debt rescheduling at the Paris Club. Under the
Enhanced HIPC Initiative (1999) Cameroon qualified for substantial debt relief. In October
2000 the country was given Decision Point status. The Interim Period under the HIPC
Initiative lasted rather long, from 2000 till the beginning of 2006. Only in April 2006 the
IMF and IDA decided that the country had satisfied the conditions set forward for the
Completion Point. This implied a substantial relief of bilateral and multilateral debt, the
latter under the Multilateral Debt Relief Initiative.
The aim of this chapter is to analyze the effects of the debt relief under the HIPC Initiative
on Cameroon’s economy. More specifically, we concentrate on the efficiency, effectiveness
and impact of the debt relief under this Initiative. By efficiency we mean the link between
the debt alleviation and the evolution of debt indicators. Our starting point in the analysis
of the effectiveness is that the direct objectives of debt alleviation are to make debt
sustainable, to make additional resources available to the government, to strengthen the
balance of payments, to improve governance and to raise investment. These evolutions in
turn should impact on the ultimate objectives of higher economic growth and poverty
alleviation.
94 The country has experienced a continuous fiscal deficit during the 90’s, with deficits of over 200billion
CFA francs in 1993 and 1998 (equivalent to approximately 9% of GDP in 1993 and 5% of GDP in 1998).
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