VZCZCXRO6726
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHYD #0592/01 1631506
ZNR UUUUU ZZH
R 111506Z JUN 08
FM AMEMBASSY YAOUNDE
TO RUEHC/SECSTATE WASHDC 8996
INFO RUEHZO/AFRICAN UNION COLLECTIVE 0162
RUEHFR/AMEMBASSY PARIS 2077
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 02 YAOUNDE 000592 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: CM ECON EFIN
SUBJECT: CAMEROON'S IMF PROGRAM AT A KEY DECISION POINT 
 
 
¶1.  (SBU)  Summary:  On June 10, Pol/Econ Chief met with IMF 
Resrep for Cameroon Malangu Kabedi-Mbuyi to discuss the 
Fund's plans for Cameroon after the anticipated end of its 
three-year program later this month.  She explained that the 
GRC is currently deciding whether to pursue a new IMF Poverty 
Growth and Reduction Fund program or request a Policy Support 
Instrument (PSI), which would be advisory but not have 
disbursements.  The current program will likely be extended 
to February, 2009, she said.  Kabedi was skeptical about the 
GRC's ability to qualify for a PSI and was critical of poor 
economic performance and weak implementation of HIPC fund 
programs.  End summary. 
 
Which Way to Go? 
---------------- 
 
¶2.  (SBU)  The IMF's three-year Poverty Growth Reduction Fund 
(PGRF) in Cameroon was due to end in June 2008; however, 
according to Kabedi, Prime Minister Ephraim Inoni signed a 
Letter of Intent (LOI) this week seeking to extend the 
program until February, 2009.  The LOI will go before the 
Board at the end of June, Kabedi said, who saw the move as a 
mere legal procedure to see the program through its final 
Board review in December, 2008.  The final Mission under the 
current program will visit Cameroon in late August/early 
September to prepare for the Board meeting. 
 
¶3.  (SBU)  The GRC has three options for follow-on to the 
PGRF, Kabedi outlined: negotiate a new PGRF (something she 
thought would be easy for the government to do), leave an IMF 
program, or request a Policy Support Instrument (PSI).  While 
the GRC has not formally requested a PSI and the Minister of 
Finance says he is weighing options, the government has a 
clear preference for a PSI, according to Kabedi. 
 
¶4.  (SBU)  Cameroon would need to qualify for a PSI by 
demonstrating its ability to design and implement its own 
fiscal management programs.  A PSI would bring no 
conditionalities and no disbursements but would keep the IMF 
in an advisory role and serve as a stamp of approval for 
capital markets, enabling the GRC to raise new market 
finance, Kabedi explained.  Seeking a PSI would also have the 
political benefits of demonstrating that the government has 
"graduated" from the IMF, she added.  Kabedi was eager for 
the GRC to signal its intent "now" so there could be a smooth 
transition from the current PGRF into the next phase, noting 
this kind of transition would not be possible if a decision 
is not made by September (although a program could be 
negotiated at a later date).  She acknowledged that the 
government "feels no pressure" on this decision; because of 
high oil revenues and completion of the Highly Indebted Poor 
Country (HIPC) initiative, the GRC has substantial cash 
available and "doesn't need the IMF;  it just needs to 
understand its own need to boost the economy." 
 
Economic Views 
-------------- 
 
¶5.  (SBU)  Kabedi was highly skeptical of the GRC's ability 
to qualify for a PSI.  She noted that the IMF Mission in 
February (interrupted by civil unrest and continued in 
Washington later in the Spring) had agreed to support the 
GRC's "March measures" raising public sector salaries and 
lowering tariffs and taxes on a number of basic commodities. 
In return, the government had promised to fund the measures 
by reducing spending in non-priority sectors, Kabedi said. 
 
¶6.  (SBU)  Kabedi was downbeat about the overall economy and 
questioned the government's seriousness about economic 
reform.  She was critical of the government's very low 
revenue base, continued subsidies of fuel, slow movement on 
privatization, and lack of vision on investment and 
agriculture.  She conceded there has been progress since 2005 
on public finance reform (especially in improving 
transparency, monitoring and data collection); the government 
will soon adopt a medium-term plan to boost revenues and is 
working on a similar plan to reduce expenditures, as well as 
plans to spur private sector growth and financial sector 
reform, Kabedi said. 
 
¶7.  (SBU)  Commenting on use of the HIPC fund, she said debt 
relief funds had been appropriately transferred into the 
government's HIPC account but implementation of HIPC-funded 
projects was very poor (about 50% of the funds in the 2007 
account had been spent).  She blamed this on poor planning, 
administrative inefficiency, and slow and late 
decisionmaking.  While not discounting the possibility of 
corruption ("this is Cameroon after all"), and acknowledging 
some financing irregularities in the early days after HIPC 
completion, she thought the account had been well audited and 
 
YAOUNDE 00000592  002 OF 002 
 
 
she had "no proof of misuse". 
 
Comment 
------- 
 
¶8.  (SBU)  We share Kabedi's skepticism about the GRC's 
ability to do effective fiscal planning and policy 
implementation.  Cameroon's government is highly 
dysfunctional, failing to spend half of its annual budget. 
Decisionmaking is slow and highly centralized, planning and 
coordination are weak, and corruption is rampant.  We are 
more convinced than Kabedi appears to be that there has been 
some misuse of HIPC money.  While it is good that the GRC is 
thinking beyond needing the IMF, in our view a Fund program 
still has a useful role to play in keeping Cameroon's fiscal 
house in order and pushing the economic reform agenda. 
 
 
 
 
 
 
GARVEY