VZCZCXRO6962
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHYD #0216/01 0611554
ZNR UUUUU ZZH
R 021554Z MAR 09
FM AMEMBASSY YAOUNDE
TO RUEHC/SECSTATE WASHDC 9747
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 02 YAOUNDE 000216 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: CM ECON EFIN PREL
SUBJECT: CAMEROON: IMF PLANS AND PERSPECTIVES 
 
¶1.  (SBU)  Summary:  The Cameroonian government has not yet 
decided what kind of follow-on it wants to the just completed 
three-year IMF Poverty Reduction program.  At the moment, the 
IMF is limited to a data-gathering and policy advisory role, 
although this will be discussed during a scheduled 
March/April IMF Mission to Cameroon.  IMF Res Rep Malangu 
Kabedi-Mbuyi is downbeat about the Cameroonian economy, 
especially the business climate, and believes the global 
economic crisis will have a much larger impact on Cameroon's 
budget and balance of payments than the Finance Minister 
realizes.  The Fund's Final Review of its three-year program 
highlighted growing concerns about the global financial 
crisis, which it thought could result in lower growth and a 
bigger balance of payments deficit.  End summary. 
The Murky Future of the Fund Program 
------------------------------------ 
 
¶2.  (U)  In a recent meeting with Pol/Econ Chief, IMF Res Rep 
Malangu Kabedi-Mbuyi explained that the IMF's 2006-2009 
Arrangement under the Poverty Reduction and Growth Facility 
(PRGF) program legally ended in January, 2009.  The 
Government of Cameroon (GRC) has not clearly indicated what 
follow-on program, if any, it wants with the IMF.  According 
to Kabedi, the GRC has three options:  1) request another 
PRGF; 2) request a Policy Support Instrument (PSI), which 
would provide a stamp of approval for the international 
financial community but would not include IMF financing and 
would not permit nonconcessional borrowing; or 3) make no 
request for a follow-on financial program, which would put 
the IMF in a surveillance role.  The Fund would collect data 
provide policy advice, while placing no conditionalities on 
borrowing. 
 
¶3.  (SBU)  Minister of Finance Essimi Menye publicly sought 
to reassure the international community that the IMF 
"gendarme" will stay, while at the same time talking about 
the need to borrow at market rates.  In the run-up to an 
Article IV Consultation Mission coming to Cameroon March 
26-April 9, Menye has told the Fund he is not ready to 
discuss a future program yet but may ask for a Mission to 
return for later discussions, which Kabedi thought might have 
to wait until August/September.  Kabedi thought the GRC's 
hesitancy about renewing an IMF program in part reflected a 
philosophical discomfort with the Fund.  (Many Cameroonians 
blame the IMF for constraining the kind of infrastructure and 
public sector growth they believe is needed to boost growth.) 
 It also stems from a desire to have more freedom to spend in 
politically-motivated ways prior to the 2011 election, she 
surmised, pointing to the GRC's interest in social housing 
schemes and stadium construction. 
 
The Global Economic Crisis and Cameroon 
--------------------------------------- 
 
¶4.  (SBU)  Kabedi thought the global economic crisis "has 
changed the landscape completely" for Cameroon and will 
ultimately limit Essimi Menye's options.  She was concerned 
that he doesn't seem to understand the relevance of the 
global situation to Cameroon, noting that the GRC will find 
it very difficult to borrow in an international capital 
market which "has gone totally dry".  The fall in world oil 
prices has already hurt Cameroon's budget forecast, with 
Cameroonian oil export prices down by about half.  This is 
compounded by an anticipated drop in non-oil exports, 
especially timber and cotton, which could seriously undermine 
Cameroon's revenues and balance of payments, she said. 
Kabedi added that some banking sources are reporting a 
slowdown in remittances.  While lower domestic demand and an 
anticipated slower development of mining projects may reduce 
import bills, this will only marginally compensate in the 
balance of payments. The bright light for Cameroon is its 
healthy foreign exchange reserves, built up by high oil 
prices, she said (IMF data put projected 2008 reserves at 
almost $4 billion, nearly 7 months of cover).  She thought 
the GRC would likely draw this down to weather the current 
storm. 
 
Economic Woes 
------------- 
 
¶5.  (SBU)  Kabedi was characteristically downbeat about 
Cameroon's economy.  She noted that, for the third year in a 
row, Cameroon dropped in the World Bank's Doing Business 
Index (down from 158 to 164 out of 181 countries), reflecting 
persistent problems with corruption, the judicial system, 
poor infrastructure and high transaction costs.  She felt 
that poverty had worsened and the government had failed to 
spend substantial amounts of debt relief funds.  In the 
context of continuing these economic problems and the global 
 
YAOUNDE 00000216  002 OF 002 
 
 
economic environment, she thought it would be best for 
Cameroon to sign on for a new PGRF, which would strengthen 
structural reforms and give Cameroon more options in an 
emergency.  With a program in place, for example, Cameroon 
would be able to access a newly introduced exogenous shock 
facility with low conditionalities and fast disbursement, 
Kabedi affirmed. 
 
The Final Review 
---------------- 
 
¶6.  (U)  The IMF's Sixth and Final Review of the PRGF, 
published in February, 2009, noted that the economic outlook 
for Cameroon is "subject to significant downside risks".  It 
predicted 3.9 percent real GDP growth in 2008, adjusted 
slightly down from previous predictions because of lower oil 
prices and the global economic crisis.  The review noted 
slightly lower annual inflation (4.9 percent), and continued 
(but slower) improvements in public finance management and 
public enterprise reform.  The global slowdown and decline in 
commodity prices could result in a widening of the current 
account deficit to about 4 percent of GDP, while dampening 
nonoil real GDP growth by about 0.3 percent and decelerating 
inflation, according to the Review.  The Review pointed to 
successes of the PRGF in improving fiscal performance and 
keeping inflation low, while overall growth and public 
enterprise reform remained slow.  Faced with a further 
erosion of oil revenues, the government, in line with the 
IMF's recommendation, would reduce nonpriority spending, 
mobilize nonoil revenues, and potentially draw on government 
deposits in the central bank, according to the Review. 
 
Comment 
------- 
 
¶7.  (SBU)  In major national speeches over the past several 
months, the Speaker of Parliament and President Paul Biya 
have alluded to the global financial situation in explaining 
why Cameroonians should expect lower budget spending. 
Nonetheless, we agree with Kabedi that most Cameroonians have 
not absorbed the potential impact of the global economic 
crisis.  Kabedi agreed with us that there is a fundamental 
lack of vision and leadership on the economic side of the 
house in Cameroon, as seen in the lack of economic planning 
and policy direction at senior levels of government.  The 
decision to let the IMF program lapse into a cloud of 
uncertainty in a year of tightening belts and global crisis 
is one more sign of poor economic leadership.  Luckily for 
Cameroon, its healthy reserves, positive growth, good debt 
position, relatively diversified economy and economic size 
(Cameroon's GDP is almost 50 percent of the size of GDP for 
the entire CEMAC Central African region) will buy it some 
time. 
 
 
 
 
GARVEY