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FM AMEMBASSY YAOUNDE
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INFO RUEHZO/AFRICAN UNION COLLECTIVE 0252
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 02 YAOUNDE 001107 
 
C O R R E C T E D  C O P Y (TEXT PARA 1) 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EINV ETRD CM
SUBJECT: CAMEROON: BANKERS' VIEWS ON FINANCIAL CRISIS 
 
YAOUNDE 00001107  001.2 OF 002 
 
 
¶1.  (U)  Summary:  The global financial crisis has not significantly 
affected Cameroon and the country will likely remain relatively 
insulated in the short term.  However, Cameroon's economy is heavily 
exposed to international commodity prices in everything from oil to 
cocoa and cobalt.  Local financial contacts are concerned that 
foreign investment and aid flows may be hurt over time.  Given 
Cameroon's sluggish growth (averaging 3 percent over the past few 
years), the Government of Cameroon will be doubly pressed to foster 
much needed growth (in incomes and jobs) in what could be more lean 
years to come.  End summary. 
 
Economy Insulated in Short Term 
------------------------------- 
 
¶2.  (U)  Cameroon's economy is reasonably well placed to withstand 
the global financial crisis in the short term.  GDP growth has 
averaged 3 percent over the past three years, with higher public 
investment and growth in construction and agriculture resulting in a 
projected jump to 4.5% growth in 2008.  Cameroon's balance of 
payments are in a slight surplus, its level of debt is low (as a 
result of significant debt forgiveness in 2006), and inflation is in 
the single digits.  Cameroon has a relatively low level of foreign 
aid dependency and exports are predicted to account for less than 
one percent of real GDP growth in 2007. 
 
¶3.  (U)  In an October 21 statement to the press, the Yaounde-based 
Governor of the Central Bank of Central Africa member states (BEAC), 
Philibert Andzembe, predicted that economic growth in the Economic 
and Monetary Community of Central Africa (CEMAC) would remain strong 
despite the global financial turmoil and likely downturn in the 
price of oil and other exports important to the region's economies. 
Nevertheless, on October 21 BEAC's Monetary Policy committee 
announced that it would lower interest rates in the CEMAC region 
from 3.5 to 2.65 percent, and BEAC revised downward its growth 
prediction for 2008, from 5.3 to 5 percent. 
 
¶4.  (U)  Antoine Nkodia, Senior Economist and Director of Research 
at BEAC told Emboff that Cameroon's banking system was largely 
insulated from the turmoil in the American financial system and said 
most Cameroonians banks were stronger since the sector was 
restructured in the early 1990s.  Nkodia opined that CEMAC economies 
were well-positioned to deal with the crisis in the short term since 
treasuries are still fat with higher-than-expected reserves in BEAC 
and spending remained reasonable (largely because only Congo 
Brazzaville has election-driven pressures to boost public spending). 
 The region will be further cushioned by excess liquidity (anywhere 
from $1 to $3 billion) driven by oil receipts, especially from 
Equatorial Guinea and Chad. 
 
But Longer Term Concerns 
------------------------ 
 
¶5.  (U)  Foreign banking contacts believe that Cameroon cannot 
escape the consequences of the global financial crisis in the medium 
term.  A global economic downturn or sluggish growth in Europe 
(which accounts for 60 percent of Cameroon's trade) will have a 
tangible impact on Cameroon's economy, which is heavily dependent on 
primary exports like oil, cocoa, timber, coffee, rubber, and 
cotton. 
 
¶6.  (U)  The tightening of global credit markets threatens to dry up 
funding for some of the large private development projects, like the 
construction of a deep water port at Kribi, the expansion of power 
production, and the inauguration of industrial mining projects in 
cobalt, bauxite, iron ore and uranium.  Foreign banking contacts in 
Cameroon point out that support from their home offices may reduce, 
making it harder to get financing for local projects, especially 
given the risks and difficulty in doing business in Cameroon. 
 
¶7.  (SBU)  Financial contacts here also believe the economic 
downturn in developed economies portends a tightening of official 
development assistance.  The Secretary General of Cameroon's main 
business chamber, GICAM, told Pol/Econ Chief that Cameroon may feel 
a serious impact by June, 2009, with drops in foreign investment, 
commodity prices and aid levels.  The local World Bank ResRep 
recently commented to Emboffs that donor funding to Cameroon may 
reduce because of the financial crisis, especially given the 
difficulty of implementing projects. 
 
Comment 
------- 
 
¶8.  (SBU)  The global financial crisis will likely hurt Cameroon 
over the longer term, perhaps most significantly in its potential 
negative impact on direct foreign investment.  Cameroon's reputation 
as a difficult place to do business has been a handicap for 
attracting foreign investment in better global economic times.  Even 
before the crisis, Cameroon's growth has been below average for 
African economies, with government policies focused on macroeconomic 
 
YAOUNDE 00001107  002.2 OF 002 
 
 
stabilization rather than on growth. 
 
¶9.  (SBU)  Lower oil prices, buoyant government revenues, and a 
highly liquid banking sector will help mitigate the impact of the 
current global crisis on the average Cameroonian pocketbook. 
Nonetheless, there is a high level of poverty, unemployment, and 
discontent which, when compounded by world-wide economic troubles, 
could contribute to future social or political instability.   Global 
food and oil price increases helped spark nationwide riots in 
February; the socio-political impact here of future global economic 
trends warrants careful monitoring. 
 
GARVEY