AFRICAN DEVELOPMENT AFRICAN DEVELOPMENT FUND

CAMEROON

COUNTRY STRATEGY PAPER

For the 1999 – 2001 Period

COUNTRY DEPARTMENT CENTRAL REGION MARCH 2000 TABLE OF CONTENTS Page

CURRENCY EQUIVALENTS, ACRONYMS AND ABBREVIATIONS, (i-iv) EXECUTIVE SUMMARY

I. INTRODUCTION...... 1

II. RECENT DEVELOPMENTS...... 1

2.1 Macro-Economic Context...... 1 2.2 Climate of the Private Sector Enterprises...... 6 2.3 Crosscutting Issues...... 7 2.4 Main Development Constraints ...... 11

III. THE GOVERNMENT'S DEVELOPMENT AGENDA...... 12

3.1 Key Elements of the Government's Agenda ...... 12 3.2 Evaluation of the Agenda...... 16 3.3 Risks and Challenges ...... 17 3.4 Strategic Partnership...... 18

IV. BANK GROUP STRATEGY...... 22

4.1 Evaluation of the Past Strategy ...... 22 4.2 Bank Group Portfolio and Management ...... 22 4.3 Medium-Term Bank Group Strategy ...... 24 4.4 Lending Programme...... 27 4.5 Issues Requiring Dialogue...... 28

V. CONCLUSIONS AND RECOMMANDATION...... 28

5.1 Conclusions ...... 28 5.2 Recommendation…………………………………….……………………………… 28

LIST OF THE BOXES...... Page

Box 1: General Information on 1 Box 2: The Main Development Partners 21 Box 3: Participatory Approach 24

LIST OF ANNEXES

I. Map of Cameroon II. Bank Group Operations III. CSP Matrix IV. Competitive Social-Economic Indicators V. Economic and Financial Indicators VI. at Constant 1989/90 Prices VII. Table of the Financial Operations of the State VIII. Balance of Payments IX. Monetary Situation X. External Reserve Requirements MONETARY EQUIVALENTS (March 2000)

UA 1 = US$ 1.33928 UA 1 = CFAF 904.374

Financial Year : 1 July - 30 June

ACRONYMS AND ABBREVIATIONS

CIDA : Canadian International Development Agency AFD : Agence française de développement AGROCOM : Association des opérateurs économiques des filières fruits et légumes ADB : African Development Bank ABEDA : Arab Bank for Economic Development in EIB : European Investment Bank BEAC : Bank of Central African States BICIC : Banque internationale pour le commerce et l'industrie du Cameroun BICEC : Banque internationale du crédit et de l'épargne du Cameroun BMBC : Banque Méridien-BIAO-Cameroun CAC : Crédit agricole du Cameroun CAEF : Chambre d'agriculture, d'élevage et de la forêt CAMAIR : Cameroon Airlines CAMSHIP : Société de transports maritimes du Cameroun CAMTAINER : Société nationale de transport des containers et de transit du Cameroun CAMTEL : Société de télécommunications du Cameroun SAC : Structural Adjustment Credit CCIM : Chambre de commerce, de l'industrie et des mines CCAD : Comité de coordination des aides au développement CDC : Cameroon development Corporation ECA : Economic Commission for Africa ECCAS : Economic Community of Central African States CEMAC : Economic and Monetary Community of Central Africa CENAME : Centre national d'approvisionnement en médicaments essentiels CFC : Crédit foncier du Cameroun CNCE : Centre national de commerce extérieur COBAC : Banking Commission of Central Africa COPAX : Conseil consultatif pour la paix et la sécurité EPFP : Economic Policy Framework Paper CSP : Country Strategy Paper ECAM : Enquêtes camerounaises auprès des ménages PEP : Participatory Evaluation of Poverty USA : of America ADF : African Development Fund ESAF : Enhanced Structural Adjustment Facility CFAF : Franc of the African Financial Community IMF : International Monetary Fund FNE : Fonds national de l'emploi FOGAPE : Fonds de garantie et de crédit aux PME FPEC : Fédération des petites et moyennes entreprises du commerce GICAM : Groupement inter-professionnel du Cameroun ACRONYMS AND ABBREVIATIONS cont'd)

HDI : INTELCAM : Société de télécommunications internationales du Cameroun ISDH : Indicateur sexospécifique de développement humain ADPL : Agricultural Development Policy Letter SFM : Supplementary Financing Mechanism MINCOF : Ministry of Women's Affairs MINEF : Ministry of the Environment and Forest OHADA : Organization for the Harmonization of Commercial Law in Africa WHO : World Health Organization NGO : Non-Governemental Organization ONCC : Office national de café et de cacao ONPC : Office national des ports du Cameroun SAP : Structural Adjustment Programme SME : Small and Medium-Size Enterprises GDP : Gross Domestic Product PNGE : Plan national de gestion de l'environnement UNDP : United Nations Development Programme HIPC : Highly Indebted Poor Countries RRP : Regional Reform Programme SPA : Special Programme for Africa CAR : Central African Republic DRC : Democratic Republic of Congo REGIFERCAM : Régie nationale des chemins de fer du Cameroun RMDH : Rapport mondial sur le développement humain SCBC : Standard Chartered Bank of Cameroon SGBC : Société générale de Banque du Cameroun SNEC : Société nationale des eaux du Cameroun SNI : Société nationale d'investissements SOCAPALM : Société Camerounaise de palmeraies SODECOTON : Société de développement cotonnier SODEPA : Société de développement et d'exploitation des productions animales SONARA : Société nationale de raffinage SONEL : Société nationale d'électricité SOSUCAM : Société sucrière du Cameroun SYNDUSTRICAM : Syndicat des industries du Cameroun CET : Common External Tariff TA : Turnover Tax GPT : Generalized Preferential Tariff VAT : Value Added Tax UA : Unit of Account UDE : Union douanière et économique UDEAC : Central African Customs and Economic Union EU : European Union i EXECUTIVE SUMMARY

1. Endowed with abundant natural resources, Cameroon enjoyed, until 1986, sustained growth based on agricultural and . With the decline in the prices of these commodities, the country slipped into a phase of which lasted from 1987 to 1993. Consequently, as of 1988, the Government embarked on reform programme that was supported by the international community. However, owing to the reluctance of the Government to give priority to monetary adjustment, in keeping with the other countries of the franc zone, the results obtained were disappointing. It was not until after the devaluation of January 1994 that the growth rate of the country’s gross domestic product (GDP) became positive again. With effect from August 1997, the Government resolutely embarked on the implementation of a programme backed by an IMF ESAF as well as by other donor agencies, including the Bank and the . Within the context of this programme, important macro-economic and structural reform programmes were undertaken, particularly the deepening of fiscal and custom reforms under CEMAC, restructuring of the banking system, of public enterprises, incentive measures for the private sector and measures aimed at improving the competitiveness of the economy.

2. Implementation of this programme produced very encouraging macro-economic results. Indeed, the 1994-1998 period was characterized by the resumption of growth, with an average annual growth rate of 4.6%. The key macro-economic aggregates also improved during the period. The rate was brought down from 33.8% to 2%, the budget deficit was reduced from 9.2% of GDP to 3.4% of GDP and the overall balance of payments deficit from 7.8% to 5.5% of GDP. The budgetary revenue increased from 10.1% of GDP in 1993/94 to 16.2% in 1997/98 and expenditure dropped from 19.3% of GDP in 1993/94 to 17.9% in 1997/98. The share of the education budget increased from 9.1% of the total budget in 1996/97 to 11.6% in 1998/99 and that of the health budget rose from 2.5% in 1996/97 to 3.8% in 1998/99. Driven by exports of cocoa, , , timber and manufactured products, which were given a new lease of life by the devaluation, total exports grew at an average annual rate of 12.2%. Imports also increased at an average annual rate of 18.8%, in keeping with the overall trend of economic activity. Nevertheless, the trade balance remained positive during this period.

3. However, from the socio-economic point of view, the results were rather mitigated. The return to economic growth has not yet translated into a significant improvement in the living conditions of the populations. Indeed, more than half of the population still lives below the poverty line. With regard to the human development index, Cameroon ranks 134 out of 174 countries. The highest proportion of poor are found in the rural areas, particularly in the three northern provinces (Far North, North and Adamaoua). The most vulnerable categories are: women operating in the agricultural and informal sectors; small-scale subsistence farmers; craftsmen; uneducated youths and school dropouts aged between 20 and 24 years and the unemployment rate among whom is higher than 40%; and higher education graduates. With 50.7% of its population female, Cameroon ranks 110 out of 143 countries with respect to the gender-specific human development index. In the same vein, 22% of the potential workforce is unemployed. Notwithstanding the efforts deployed in the social sectors, only 41% of the population has access to safe water supply and 50% are connected to the sanitation networks. In spite of the high gross school enrolment and medical coverage rates, the education and health sectors are faced with serious problems of declining quality and uneven distribution, to the detriment of the rural areas.

4. The country is still faced with major challenges, including poverty, generalized corruption and the debt burden. Indeed, outstanding external debt was 87.9% of GDP in 1998/99 and the debt service stood at 45.4% of non-factor goods and services earnings ii and 71.2% of budget revenue. Eligibility of the country for the HIPC initiative, which should be decided in September 2000, should alleviate the debt burden. The other constraints the country has to contend with include: (i) the level of domestic savings, which still remains below that of the investments required to ensure vigorous economic growth; (ii) the weak legal framework and judiciary, which do not facilitate the development of private initiatives; (iii) lack of motivation of the civil servants owing to the low remunerations; (iv) the inefficient and expensive State interventions in the agricultural sector as well as the inefficient statutory monopolies in some sectors, particularly the public utilities sector; (v) deterioration of the security situation and the high level of nutritional deficiencies; (vi) the insufficiency of financial resources allocated to the social sectors; and (vii) deterioration of the transport infrastructure, which renders the transportation of agricultural produce more difficult and expensive.

5. In the drive to overcome these obstacles, the Government defined a medium-strategy for the 1999-2002 period, with a view to enhancing macro-economic stability and maintaining the economy on the path to sustainable development. The Government plans to: (i) promote vigorous and sustainable growth and distribute its dividends more fairly; (ii) enhance the supply and quality of the basic social services and make them more accessible to the poor; (iii) promote community development; (iv) implement specific activities in favour of the groups at risk or in difficult situations; and (v) promote the food security of the populations. From the macro-economic standpoint, the key objectives of the programme are to: (a) strengthen and increase the real GDP growth rate from 4.4% in 1998/99 to 5.5% in 2001/2002; (b) maintain the inflation rate at 2%; and (c) limit the current external deficit at 2.4% of GDP. This programme, the first phase of which will be completed in June 2000, will be backed during its second phase by a poverty reduction and growth facility of the Bretton Woods Institutions.

6. These objectives will be attained through the implementation of budgetary, monetary and financial policies, structural policies aimed at the continuation of the privatization programme, promotion of good governance, sectoral policies in the agricultural, energy and transport sectors as well as human resource development policies. The country’s external funding requirements for the 1999/2000 - 2001/2002 period are estimated at: CFAF 2,203 billion, including CFAF 534 billion under the current account (inclusive of transfers); CFAF 925 billion in debt retirement; CFAF 523 billion for fluctuations in arrears; and CFAF 221 billion for replenishing the foreign exchange reserves. The identified funding amounts to CFAF 1,265 billion, that is 57.4% of requirements, and comprises CFAF 555 billion in project financing, CFAF 288 billion in programme financing, CFAF 100 billion in private capital and CFAF 322 billion in debt rescheduling. The residual financing gap is estimated at CFAF 938 billion and efforts are being deployed to secure funding for this shortfall from participants to the Special Programme for Africa (SPA).

7. Considering the country’s constraints, this programme is relevant. It is realistic and feasible, provided that the recommended measures are stringently implemented by the Government to ensure the continued assistance of the international community. However, some strategies deserve to be supported, particularly the poverty reduction strategy, to enable it to better focus on the vulnerable groups, and the governance programme, which is expected to give priority to the critical areas of poverty, particularly the health, education and public works sectors, which are yet to become fully transparent. However, there are three risks which could hinder the implementation of the programme, namely: developments in the terms of trade of the export commodities, especially petroleum; the Government’s commitment which could be dampened by subsequent socio-political unrest and the relatively limited institutional capacity of the Government. Mitigation measures were adopted to reduce these risks. They include the priority given to the mobilization of non-oil revenue under the State iii budget, programmes for integrating into the economic fabric retrenched public sector staff and the technical assistance planned by the different donor agencies to make up for the country’s institutional shortcomings. 8. As one of Cameroon’s main donor agencies, the Bank Group will contribute to the efforts of the international community to support the Government’s programme. Since 1972, when it started its operations in the country, the Bank Group has therein 39 operations, for a net total commitment of UA 483.55 million, broken down by sector as follows: Transports (40.2%); Policy-Based Reforms (27.4%); Agriculture (17.3%); Public Utilities (2.9%); Social (11.3%); and and Industry (0.9%). As at 31 January 2000, cumulative disbursements amounted to UA 380.68 million, that is a disbursement rate of 78.7%. The active portfolio comprises 13 projects for a total of UA 178.88 million and a disbursement rate of 38.1%. Project implementation in the country has been difficult and characterized by: (i) delays in the fulfilment of the conditions precedent to the effectiveness of the loans and grants as well as delays in the physical implementation of projects; (ii) the low rate of mobilization of the national counterpart contributions; (iii) the irregular transmission of quarterly progress reports and audit reports; (iv) the weakness of the project’s accounting services; and (v) problems of communication with the Bank. It should be pointed out that in the past, project implementation also suffered from the repeated imposition of sanction on the country for arrears.

9. In February 2000, the Bank conducted a thorough review of its portfolio. It examined the situation of each project, identified the problems encountered, defined a programme of action to solve them (with a specific implementation schedule) and adopted a performance criterion for measuring the disbursement rate by 31 December 2000. The plan of action agreed upon between the project managers, the Government and the Bank is a kind of performance contract with the project and will be assessed on the basis of the disbursement rate attained at the end of the year. The overall disbursement objective is to go from the current rate of 38.1% to 62.5% by 31 December 2000.

10. Furthermore, lessons have been learnt from the project implementation experience and they could be useful in future. These involve: definition of optimal project sizes to avoid frequent reformulations as in the past; resorting systematically to contract work instead of forced account and whenever possible, limit the duties of the executing agency to the coordination of activities and monitoring-evaluation while entrusting the other duties to qualified bodies, particularly the NGOs; associating the beneficiary groups in project design and implementation; and making provision in the project costs for the auditing of the accounts as well as a significant remuneration of the accountant to be recruited through bidding.

11. For the 1999-2001 period, Bank Group operations in the public sector will focus more on poverty reduction. They take into account the past strategy from which lessons have been learnt. They will be based on the conclusions of the participatory evaluation of poverty that was conducted in 1994 by the Government. This evaluation reflects the poor peoples’ perception of their own situation, and the salient points of its poverty strategy declaration adopted in December 1998. The main concerns expressed by the poor concern the limited nature or even the non-existence of monetary income, the problems relating to hunger, nutritional deficiencies and food shortages, the health situation, long distances from the centres of economic activity, the feeling of helplessness and the inability to make oneself heard. The Bank strategy will therefore seek to contribute to addressing these concerns expressed by the poor.

12. This strategy hinges on two basic principles: (a) action on the general condition required for poverty reduction and based on the promotion of economic growth so as to increase employment and income-earning prospects and involve the poor in decision-making iv on matters concerning them, in the drive to strengthen social cohesion and the well-being of the populations; and (b) specific actions aimed at the poor populations and which seek to improve their living conditions. The promotion of economic growth will be underpinned by: (i) the improvement in the competitiveness of the Cameroonian economy through the continuation of economic and institutional reform operations; (ii) development of the private sector through the enhancement of the business environment; (iii) the promotion of an effective public administration through the adoption of principle of good governance; and (iv) the creation of growth-supporting infrastructure, particularly transport infrastructure, to open up the production areas. The integration of the poor will be based on their participation in the decision-making process through the promotion of responsible citizenship and the strengthening of civil society. Regarding the specific actions, they concern properly-targeted activities that seek to improve the living conditions of the populations, particularly the disadvantaged groups in the poor areas, by strengthening food security, rehabilitating the living environment and conducting health activities.

13. Thus, three areas were selected for the implementation of this strategy: (i) the multi- sector; (ii) the social sector: and (iii) the transport sector. Concerning the private sector, considering the Bank’s unfortunate experience in this area, it could resume its operations therein if an effective legal and judicial framework is set up to secure investments. Similarly, the Bank could finance enclave projects given the potential in this sector. As in the past, priority will be given to the search for cofinancing to create synergies and enhance the complementarity between the different donor agencies in the drive to optimize their impact on the development of the country.

14. The financial package earmarked for Cameroon under ADF VIII stands at about UA 35.30 million, that is about UA 32.00 million in project allocations and UA 3.30 million in technical assistance. However, it should be noted that policy-based loans could be granted since the Government is satisfactorily implementing a programme supported by the international community. Operations within the context of the SFM could also be envisaged if the country obtains a sound performance and continues to honour its debt repayment terms. In addition to this financial assistance, the Bank will intensify its dialogue with the Government in the areas of economic reform, good governance, poverty reduction, private sector development and improvement of the quality of its portfolio. I. INTRODUCTION

This 1999-2001 Country strategy paper analyses Cameroon's recent economic situation, reviews its medium-term development policy as well as the Bank Group operations and proposes the Bank's operations strategy for the 1999- 2001 period, with a view to poverty reduction. It was prepared on the basis of data collected by the Bank mission of July 1999 and by the dialogue mission of December 1999. It is also based on the framework economic policy document for the 1999/2000 to 2001/2002 period prepared by the Cameroonian authorities, with the assistance of the Bretton Woods Institutions, within the context of the third year of the ESAF. In addition to the introduction, this document comprises four parts: (i) the recent economic developments; (ii) the Government's medium-term economic policy; (iii) the Bank Group strategy; and (iv) conclusions and recommendations.

II. RECENT DEVELOPMENTS

2.1 Macro-Economic Context

Background

2.1.1 Cameroon is one of the richest countries of central Africa, with abundant natural resources and a significant development potential. Until 1978, its economic growth rate stood at an average of 5% per annum mainly because of the production and export of agricultural commodities for which it had a comparative advantage. The discovery of oil in 1978 gave a new lease of life to the economy, which grew rapidly at an average annual rate of 7%. The oil sector contributed 20 % to the GDP, 44% to the State revenue and 54% to exports. In contrast, the 1987-93 period was marked by economic recession under the combined effects of the drop in the prices of the main export products, increase in the effective exchange rate and the decline in oil production. These factors resulted in a fall in the GDP growth rate, the upsetting of the macro-economic balance and recourse to external borrowing. To reverse this trend, the Government implemented during the 1987-1993 period, economic reform programmes supported by the international community. However, the results obtained were limited owing to the absence of monetary adjustments.

Box 1 : General Information on Cameroon

Cameroon is located at the border of West and Central Africa and stretches over an area of 475,000 km2. It has three types of climate: an equatorial climate in the south; a tropical climate in the centre; and a Sahelian climate in the north. At the administrative level, the country is composed of ten provinces subdivided into prefectures, sub-prefectures and districts.

Its population, estimated at 14.3 million with a density of 30.1 inhabitants per km2, grows at an annual rate of 2.7%. 47.5% of this population lives in the cities. It is relatively young, with 43.8% less than 15 years of age and about 50.5% considered to be poor. Per capita GNP stands at $610 in 1998 and the unemployment rate is 22%.

The country’s growth potential is concentrated in the agriculture and forestry sectors. Its manufacturing sector is the most developed in the CEMAC zone. The petroleum sector, which was the main source of growth at the beginning of the 1980s, is now on the decline in terms of output owing to the failure to discover new oil reserves.

2.1.2 Regarding its impact on the socio-economic situation, the period of strong growth until 1985 was characterized by be high level of poverty in the rural areas and profound inequalities in the distribution of the country's income. The government gave priority to the urban areas in the 2 choice of public investment sites. The 1986-1993 period, marked by economic recession, was characterized by serious impoverishment of all components of the society, and in particular, it was epitomized by the emergence of urban poverty. Yaounde sheltered 1% of the poor in 1983 and 20% of the poor in 1993 whereas represented 2% of the poor in 1983 and 30% in 1993.

2.1.3 With the devaluation of the CFA franc in January 1994, a new programme was adopted but it also obtained insufficient results during the 1994/95 to 1996/97 period, particularly in the area of public finance. It was not until the second half of 1997 that the government resolutely undertook to implement the indispensable reforms, within the context of the 1997/98 to 1999/2000 medium-term programme, which is currently being implemented. This programme was backed by an IMF ESAF, the Bank's SAP II and the World Bank's SAC III.

Recent Macro-economic Trends

2.1.4 GDP Growth: The 1994-98 period was characterized by the resumption of economic growth with an average rate of 4.6% in real terms. The private sector contributed 48% of this growth as a result of food production, which was encouraged by the increase in demand in the neighbouring countries and in particular by the flourishing of export crops owing to their enhanced competitiveness in the wake of the devaluation. The tertiary sector contributed 31% of GDP growth primarily because of the improvement in trade and transportation. Regarding the secondary sector, its contribution was more limited (21%) as a result of the structural weaknesses of import-substitution industries, which are too dependent on imported inputs. The growth rate of 5.2% predicted for the 1998/1999 financial year could not be attained following the fall in oil prices and the Asian crisis. The growth rate for that financial year was only 4.4 %. The reversal of the economic growth trend has not yet had an impact on the socio- economic situation of the population. In dollar terms, the per capita GNP of $610 is still below the pre-1993 level and below the African average of $663.

2.1.5 Savings and Investments: gross national savings increased during the period going from 11.2% of GDP in 1993/1994 to 15.7% in 1997/1998. However, this situation reflects two opposing trends of the public sector and the private sector. Indeed, private sector savings fell from 17% of GDP in 1993/1994 to 14.3% in 1997/98 as a result of the resumption in private consumption. In the same vein, public savings, which were negative until 1995/96, increased to 1.6% in 1997/98 following the improvement in the public finance situation. Furthermore, gross investments, which slowed down up to 1994/95, with a GDP growth rate of 14.5% as a result of the climate of uncertainty that prevailed in the business circles during the devaluation phase, the malfunctioning of the banking system and the limited public sector investment capabilities, have since picked up to reach 18.4% of GDP in 1997/98, with a relative increase in investments devoted to the social and public works sectors.

2.1.6 Inflation and Employment: After the inflationary pressures created by the devaluation, price increases have been brought under control. The inflation rate, as measured by the consumer price index, dropped from 33.8% in 1993/94 to about 2% in 1998/99. This resulted in a deceleration of the erosion, in real terms, of the income of civil servants during this period because since the 1993 salary reductions of more than 50%, their nominal income did not decline. However, they are far from their pre-1993 level. Regarding the job market, it continues to deteriorate. The job supply of households continued to increase rapidly whereas demand has been falling, particularly in the formal sector. These divergent trends resulted in pressures on the labour market and a deterioration in the living conditions of the populations. As part of the civil service reforms, there were staff retrenchments bringing the size of the civil service down to 160,000 employees from 188,000 in 1990. The unemployment rate is estimated at 22% of the workforce, thus turning employment into a critical socio-economic 3 problem in Cameroon. 2.1.7 Public Finance: the monetary adjustment of January 1994 helped to reverse the deteriorating public finance trends as of 1994/95. Fiscal revenue increased from 10.1% of GDP in 1993/94 to 16.2% in 1997/98 but it nonetheless remained below the budgeted amount as a result of the combination of tax avoidance and the weaknesses of the tax administration. As for expenditure, it dropped from 19.3% of GDP in 1993/94 to about 17.9% of GDP in 1997/98, as a result of the austerity policies pursued by the Government. Thus, the deficit of the financial operations of the State fell from 9.2% of GDP in 1993/94 to about 1.7% in 1997/98. However, during the 1998/99 financial year, the international crisis also affected the fiscal revenue objectives and the commitment base deficit rose to 3.4% of GDP. This deficit is financed primarily by programme loans and debt rescheduling. Regarding the allocation of expenditure, the share of the education budget increased from 9.1% of the total budget in 1996/97 to 11.6% in 1998/99; that of the health budget rose from 2.5% in 1996/97 to 3.8% in 1998/99. The share of the non-wage expenditure for these two sub-sectors increased from 36.1% in 1996/97 to 39.3% in 1998/99 and from 47.9% in 1996/97 to 59.4% in 1998/99, respectively. This constitutes an important effort but is still insufficient given the considerable social needs of the populations.

2.1.8 Money and Credit: Cameroon has a relatively dense banking system, comprising nine (9) commercial banks with 60 branches and a local branch of the regional central bank. On average, 37% of credits distributed in the CEMAC zone went to Cameroon. The country's monetary situation was characterized during the period by a constantly negative external assets position, on the one hand, and on the other, by the considerable share of the public sector in domestic credit (more than 50% on average). The average rate of coverage of the monetary issue stood at 3.3% compared to the standard of 20% in the BEAC zone. However, there has been an improvement in the assets situation as of 1997 as well as a slight fall in the volume of credit to the public sector and an increase in credits allocated to the private sector. During the period, the money supply fluctuated. To encourage credits to the economy and considering the fall in the inflation rate, the Bank of Central African States (BEAC) reduced its intervention rate from 14% in March 1994 to 7.5% in May 1999. It should be noted that banking institutions have a limited capacity to mobilize long-term resources and that the supply of credit, relatively prudent at present, is not adapted to the financing of SMEs. Furthermore, it should be noted that the financing needs of the poor (informal sector, small- scale farmers, small-scale businessmen etc.) are covered mainly by non-bank sources of finance (family loans, tontines etc.). To remedy this situation, the Government is enhancing the establishment of self-managed savings and credit cooperative structures in the rural areas. It is also creating restructured banks, lines of credit for small-scale entrepreneurs, financed by the donor agencies.

2.1.9 Balance of Payments: The devaluation helped to relatively improve the external competitiveness of Cameroonian products and stimulated exports, which increased at an annual average of 12.2% during the period. The share of non-oil exports rose from 57.9% of total exports in 1993/94 to 68.7% in 1998/99 thanks to the contribution of cocoa, coffee, cotton, timber and manufactured products. In the same vein, imports increased by an average of 18.8% per annum during the period, in keeping with the economic trends. The trade balance remained positive during the period. However, the weight of interest charges on external debt worsened the debt service deficit. Thus, the current account balance (including grants) remained in deficit during the period. This deficit was gradually reduced from 4.2% of GDP in 1993/94 to 2.7% in 1997/98 but it rose to 4.4% of GDP in 1998/99 as a result of the recession. Concerning the overall deficit, it fell very slightly from 7.8% of GDP in 1992/93 to 5.5% in 1998/99 owing to the level of debt amortization. It was financed mainly through debt rescheduling within the framework of the Club and the accumulation of arrears vis- à-vis creditors of the London Club. 4

Public Debt

2.1.10 In 1998/99, outstanding external debt was estimated at CFAF 4,749 billion, that is 87.9% of GDP, including 11.8% in arrears. Bilateral debt represented 67.1% of this total, multilateral debt accounts for 20.2% and commercial debt amounted to 13.7%. Regarding arrears, 88.9% of the total is owed to commercial banks and 11.1% is owed to bilateral donors not members of the . The due debt service stands at 45.4% of non-factor goods and services export earnings and 71.2% of the 1998/99 fiscal revenue. The weight of the debt service constitutes a major obstacle to sustainable growth. Annual disbursements in respect of this debt service represent a major burden on State revenue to the detriment of expenditure in the social sectors and poverty reduction activities. In spite of five debt reschedulings by the Paris Club, the latest of which was in October 1997, the situation is expected to remain difficult until the end of the ongoing programme. In 1999/2000, external debt service obligations could take up the equivalent of 65.7% of fiscal revenue and 42.2% of goods and services exports.

2.1.11 It should, however, be pointed out that Cameroon is currently eligible for the highly indebted poor countries (HIPC) initiative, which should help to reduce the country's debt burden. The final decision on eligibility for this initiative requires the adoption of a poverty reduction strategy, prepared according to the participatory approach with the involvement of all the components of the Cameroonian society. This strategy should include a plan of action and measurable objectives to be attained within a specific timeframe. Within this context, the Government and the Bretton Woods Institutions agreed on a schedule for the preparation of this document, with the objective of reaching the decision point in September 2000. With regard to the commercial debt, its rescheduling process is ongoing within the London Club and should be completed sometime during the Year 2000.

2.1.12 The volume of the internal debt is not very well known. As at 30 June 1999, its outstanding amount was estimated at CFAF 1,254 billion, that is 23.1% of GDP. Agreements have been signed with the creditors on about 69% of this outstanding debt, with well-defined repayment terms and the remaining 31% is a so-called non-structured debt noted by the Ministry of the Economy and Finance and submitted, for audit and validation, to the Autonomous Amortization Fund (Caisse autonome d' amortissement - CAA), the public institution responsible for managing the debt through an independent firm. The Government set the deadline of 29 February 2000 for the inventory of all the State's debt arrears, which have not yet been entered in the debt stock. Beyond this deadline, no claims would be entertained. In the same vein, it intends to complete the validation exercise by 31 March 2000, when the official amount of the State's debt arrears would be determined and an overall repayment schedule defined.

2.1.13 From the Bank's standpoint, it should be noted that although Cameroon is a category A country, outstanding loans from the ADB window represent 81% of total outstanding loans owed to the Bank Group. However, none of the Bank's critical exposure thresholds have been reached. Indeed, the ADB debt service represents 2.0% of exports compared to the threshold of 5%, 9% of guaranteed public debt whereas the critical threshold is 20% and the equivalent of 22% of the multilateral debt service, compared to a threshold of 35%. Similarly, Cameroon's outstanding loans owed to the ADB represent 2% of total outstanding Bank loans as against the threshold of 15 %. Furthermore, Cameroon obtained two loans of UA 9.8 million and UA 9.5 million in 1998 and 1999, respectively as part of the Bank's supplementary financing mechanism (SFM). It is also eligible for this type of financing in the 5 Year 2000.

Sectoral Overview

Primary Sector

2.1.14 Agriculture contributes about 22.5% of the country's GDP, 27% of its export earnings and 15% of budgetary income. The arable lands represent about 7,000,000 ha of which 21,000 ha are irrigated lands, out of a potential of 240,000 ha. Food production increased by 7.2% between 1994 and 1998. The main export crops are coffee, cocoa, and cotton. Their production, which had declined considerably since the sharp fall in world prices as of 1985, picked up again since the devaluation of the CFA franc in January 1994. The agricultural sector has the potential to diversify to include the production of other export commodities such as fruits and vegetables. However, its development is hindered by the difficult access to inputs and the cost of the latter, the failure of agricultural credit and the deterioration of rural infrastructure. The sector is being adjusted in keeping with the objectives defined in the 1996 Agricultural Development Policy Letter (ADPL).

2.1.15 Stockbreeding represents about 4.0% of GDP, with a modest average annual growth rate of 2.3% during the period under review as a result of the financial problems of the Animal Production Development Company (Société de développement et d'exploitation des productions animales - SODEPA) and the existence of areas of peri-pneumonia infection, caused by Tsetse fly, in the areas of production. However, liberalization of the sector facilitated the resumption of stockbreeding. Forests, with an added value representing 5.3% of GDP, cover 22 million km2, of which 14 million km2 can be tapped and 7.2 million ha are effectively tapped. There are over 70 species of marketable timber. About 40% of the production is exported as logs and the rest is processed locally (timber and plywood). Recently, the Government totally prohibited the export of logs. Notwithstanding a small industrial fishing fleet, fisheries activities are mainly artisanal. They contribute 0.2% of GDP and the landings reach 100,000 metric tons per annum, including 20,000 tons from industrial fishing. Cameroon imports some 60,000 to 80,000 tons of fish per annum.

Secondary Sector

2.1.16 The secondary sector contributes 22% of GDP formation. The industrial activities are relatively diversified compared to those of other countries of the sub-region. They cover agro-industry, semi-processed goods, rubber and various intermediary and common consumer goods. The manufacturing sub-sector, which represents 12.7% of GDP, grew by an average of 6% during the period, as a result of the development of its exports to the neighbouring countries, which was stimulated by the competitiveness gains that followed the devaluation. The decline in oil production led to a reduction in the relative weight of this commodity in GDP formation. This production is estimated at 5.5 million tons per annum and the refining capacity stands at 2 million tons per year, with a capacity-utilization rate of 61.4%. The oil prospection and production incentives, to ensure replacement of the declining oil fields, are less attractive them those of the neighbouring countries.

Tertiary Sector

2.1.17 The Road Network is composed of 25,000 km of classified roads, of which only 4,000 6 km are paved. Owing to lack of maintenance, most of the road infrastructure is in a state of disrepair. Land transport is the exclusive domain of the private sector. A road fund has been set up. The railway network comprises two main lines of a total length of 1,200 km linking Douala to Ngaoundere. The network was operated by the "Régie nationale de chemin de fer" (REGIFERCAM), the management of which was privatized. In the port sub-sector, major rehabilitation works are being conducted on the Douala port. The "Office national des ports du Cameroon" (ONPC) has been restructured. In the maritime sub-sector, the State has already liberalized the maritime professions and has divested from the maritime navigation companies. In the air transport sub-sector, the national carrier Cameroon Airlines, should be privatized during the year 2000 and the domestic traffic is liberalized. Regarding the telecommunications sub-sector, national and international communications have been merged and entrusted to a new company (CAMTEL), which is being privatized. Two mobile telephone companies have been created and are managed by the private sector.

Social Sector

2.1.18 Regarding the health sector, 80% of the populations have access to health services but only 41% have access to safe drinking water and 50% have access to sanitation services. More than 50% of mortality is caused by malaria and anaemia, followed by serious respiratory infections, neonatal tetanus and malnutrition. The maternal and infant mortality rates as well as that of children under the age of 5 years stand at 550 for 100,000 live births, 69.8 per 1,000 and 104 per 1,000, respectively. HIV/AIDS constitute a major public health problem with a 5.5% prevalence rate among the adult population living in urban and semi-urban areas. In the case of education, the gross primary school enrolment rate is estimated at 97% compared to 78.3% for the rest of Africa. However, there has been a fall in the quality of the system owing to the insufficiency of staff and teaching materials as well as the problem of the excessive student population. The State is the main source of financing of the educational system but the economic crisis led to a fall in the amount of public resources allocated to this sub-sector. Parents also contribute significantly to the funding of the sub-sector. The private sector is likewise a major partner in the creation and management of schools.

2.2 Climate of the Private Sector Enterprises

2.2.1 The private sector comprises: (i) a formal sector of enterprises with national or foreign capital; (ii) an informal urban sector; and (iii) a traditional informal sector operating in the area of subsistence farming activities and rural services. The private sector provides about 66% of GDP and 90% of the jobs. More than 65% of the enterprises operating in the formal sector belong to nationals. The majority shares in the biggest enterprises in this sector are owned by foreigners, with cases of public shareholding, and the locally owned enterprises are generally small in size. More than two-thirds of the private capital is invested in the forestry sector and in agro-industry. Regarding the informal sector, its development was enhanced by the economic recession. The activities of this sector are concentrated mainly in commerce, miscellaneous services, restaurants, hotels, building construction, public works and transportation. About 64% of activities are the result of private initiatives, half of which are by women.

2.2.2 The institutional environment of the sector is made up of public support structures and private professional groups. The public structures are: (i) the Chamber of Commerce, Industry and Mines (CCIM), which serves as an observatory, ensures the promotion of the sector and provides assistance to enterprises; (ii) the National Investment Corporation (Société nationale d'investissement - SNI), which is a public holding corporation for the promotion of investments by nationals and foreigners in all sectors; (iii) the SME-guarantee- and-credit fund (FOGAPE) and the Centre for Assistance to SMEs (CAPE), which are aimed 7 at guaranteeing credits and providing management counselling; (iv) the National Centre for Foreign Trade (Centre national de commerce extérieur - CNCE) responsible for prospecting foreign markets and studying the terms for exploiting them; and (v) the Chamber of Agriculture, Stockbreeding and Forestry (CAEF), responsible for promoting these sectors. As for the professional groups, they are: (i) the Employers' Association (Groupement inter- patronal du Cameroun - GICAM), which is the lead agency of the private business institutions, with 106 enterprises and 13 professional organizations; (ii) the trade union of Cameroonian industries (syndicat des industries du Cameroun - SYNDUSTRICAM), composed of the major enterprises, which number about 50; (iii) the federation of small and medium-sized enterprises and businesses (FPEC); and (iv) the professional association of economic operators in the fruits and vegetables production and export sectors (AGROCOM).

2.2.3 The constraints to the development of the private sector are: (i) the high level of internal arrears; (ii) problems of the financial system; (iii) the complexity and unfairness of the fiscal system; (iv) the dysfunctioning of the legal system; (v) the existence of statutory monopolies; and (vi) the impact of the deterioration of physical infrastructure on trade and the cost of transactions. Within the context of the 1997/98-1999-2000 medium-term programme, a certain number of measures aimed at the development of the sector were taken, particularly the conversion of internal debt into securities, rehabilitation of the financial system, public enterprise privatization programme, and the competitiveness encouragement and improvement measures. The Government intends to continue this policy for the effective promotion of the private sector by putting special emphasis on the complete elimination of internal and external trade distortions and by ensuring the security of the investment environment (independence, credibility and efficiency of the justice system and the harmonization of commercial law within the framework of OHADA). The measures already taken within the context of the programme include the following:

2.2.4 Restructuring of the Banking Sector: this restructuring was virtually completed by the end of 1997. Two banks, the Standard Chartered Bank of Cameroon SCBC) and the Société générale de banque du Cameroun (SGBC) have been recapitalized. The Banque Méridien BIAO-Cameroun (BMBC), Crédit agricole du Cameroun (CAC) and the Banque internationale pour le commerce et l'industrie du Cameroun (BICIC) have been liquidated. The sound assets and liabilities of BICIC were transferred to the new Banque internationale du crédit et de l'épargne du Cameroun (BICEC), which has been privatized. Two other new banks, Citibank and the Commercial Bank of Cameroon have been added to the country's banking network.

2.2.5 Public Enterprise Privatization: the privatization programme has made tangible progress with World Bank support, under the third phase of the structural adjustment credit (SAC), following: (i) transfer of the management of the Cameroon National Railway Board (Régie nationale des chemins de fer du Cameroun - REGIFERCAM) to a private multinational company; (ii) privatization of the Cameroon Sugar Company (CAMSUCO), which was bought by the Société sucrière de Cameroun (SOSUCAM); (iii) ongoing negotiations for the purchase of the Société de développement du palmier à huile (SOCAPALM); and (iv) the adoption of a new legislative framework in the telecommunications sector in June 1998 and the privatization of the mobile telecommunications company called the Société de télécommunications CAMTEL mobile.

2.2.6 Incentive Policies: in the petroleum sector the monopoly of the Société nationale de raffinage (SONARA) was ended, thus opening up the sector for imports. A mechanism for the automotic monthly adjustment of oil prices, in keeping with the world market prices, was set up. A competitiveness committee, a framework for consultations between the administration and the private sector, was created and entrusted with proposing measures for improving 8 competitiveness. To improve external competitiveness, taxes on exports were progressively eliminated, with the exception of taxes on logs.

2.3 Crosscutting Issues

2.3.1 Population: the population of Cameroon was estimated at 14.3 million inhabitants in 1998. This is a very young population because the average age is 21.9 years and the proportion of the population aged less than 15 years stands at about 43.8%. The total fertility index is 5.0 children per woman. Although this figure is still high, it has dropped significantly from 6.3 children per woman in 1975. There are variations between the urban and rural areas as indicated by the figure of 3.1 children per woman in Yaounde and Douala as against 5.8 children per woman in the rural areas. The average size of households is 5.9 persons and the smallest families are found in the urban areas. Life expectancy, estimated at 54.1 years in 1998, has been increasing systematically over the past 20 years. Indeed, it was 47.6 years in 1987. Currently, 47.5% of the population lives in the urban areas and this proportion increases at an average annual rate of 4.6%.

Gender Issues:

2.3.2 The female population represents 50.7% of the overall population of the country. The proportion of households led by a woman stands at 17.2% at the national level, comprising 22.4% and 14.5% at the urban and rural levels, respectively. This proportion is even higher in the large cities. In Yaounde, for example, one out of three households are headed by women. Regarding education, the literacy rate among men and women stands at 79% and 64.6%, respectively. The gross national school enrolment rate is 97%, including 69% in the case of girls. Taking into account the distribution in space, particularly at the level of provinces, the largest disparities appear in the three provinces of the north of the country. Indeed, in the provinces of the Far North, the gross primary school enrolment rate of boys and girls stands at 104.12% and 48.91%, respectively. These disparities between provinces are caused by socio- cultural variations. Present mainly in the agricultural sector and small informal activities, women occupy about a third of the civil service jobs, including 40% in the health sector and 32% in education. In the secondary and tertiary sectors, they are found mainly in activities such as sewing, food distribution, beauty care or hairdressing. Women are often employed as households help with no control over the incomes they generate. Their work is manual and difficult as a result of the use of archaic implements.

2.3.3 According to the 1999 global human development report (HDR), Cameroon, with a gender-specific human development index (GSHDI) of 0.5 in 1997, ranks 110 out of 143 countries. This clearly shows what still needs to be done to promote the role and status of women in society. Regarding the women-in-development policies officially defined and implemented by the public authorities, the different related development plans implemented thus far, are often too optimistic on the actions to be conducted as well as the approaches likely to produce tangible results. The Ministry of Women's Affairs (MINCOF), within the context of the declaration of the poverty reduction strategy adopted by the Government, defined a matrix of actions with the following specific objectives: (i) facilitate the access of women to productive resources and enhance control of such measures; (ii) increase and promote the productivity of women's work; (iii) improve the quality of basic infrastructure; and (iv) promote the fundamental rights of women.

Poverty Reduction:

2.3.4 According to the 1999 global human development report (HDR), Cameroon, with a human development index (HDI) of 0.536 in 1997, ranks 134 out of 174 countries. It was 9 during the 1985/1995 period that most of the country's economic and social indicators deteriorated significantly. The distribution of households, on the basis of the findings of the Cameroonian surveys among households (enquêtes camerounaises auprès des ménages - ECAM), into the poor, intermediate and rich categories, changed from a 40.0-40.0-20.0 distribution in 1983/84 to a 50.5-31.4-18.1 distribution in 1996. Over the same period, the income of the farmers fell by 60% and it is estimated that in Yaounde the consumption of households was reduced by 50% in real terms. This trend shows a slide of part of the middle classes towards the living conditions and consumption patterns of the most disadvantaged population segments.

2.3.5 the most vulnerable population categories appear to be the following: (i) women operating in the agricultural and informal sectors and whose activities, for want of support, are barely profitable; (ii) small-scale farmers involved in food production and small-scale artisans in favour of whom very few incentive measures have been taken to improve their production and productivity; and (iii) uneducated youths and school dropouts aged between 20 and 24 years and more than 40% of whom are unemployed. It should be pointed out that higher education graduates are also affected as a result of the closing down of enterprises and the freezing of recruitments into the civil service.

2.3.6 Poverty is unevenly distributed between the urban and rural regions of the country. Only 13.4% of the poor live in the urban areas with the remaining 86.6% living in the rural areas. The three northern provinces, that is about 35% of the total population of the country, are by far the poorest regions of the country. This poverty stems from the area’s soudano- sahelian climate, the high demographic pressures therein, its landlocked status, weaknesses noted in its health and educational facilities and the limited dynamism of the local economic operators.

2.3.7 The Government adopted on 30 December 1998 a poverty reduction strategy declaration, through which it turned the poverty reduction objective into a priority. This strategy declaration document is very general. However, detailed sectoral plans of action are being prepared with a view to the implementation of the strategy on the basis on a participatory approach involving all the components of the Cameroonian society, bearing in mind the extended HIPC initiative.

Participatory Development

2.3.8 The Government plans to revitalize partnership between the State and the NGOs in the area of poverty reduction by preparing and adopting a status of NGOs operating in the area. A 1990 Act facilitated the creation of NGOs but did not give them a special status. As a result, they continue to be assimilated to community associations. In spite of this situation, there has been a proliferation of NGOs and associations in Cameroon and currently there are more than 500 of them. Several NGOs created on the basis of the 1990 Act governing associations, operate either by focusing on specific activities (agriculture, natural resources, water and sanitation, cottage industries or micro-enterprises etc.) or by targeting various vulnerable population segments (women, unemployed youths, small-scale farmers etc.). However, they do not always have the resources required to see through their activities. The Government is finalizing a text governing NGOs in Cameroon.

International Labour Standards

2.3.9 Cameroon joined the International Labour Organization (ILO) in 1960. It has since signed and ratified the various conventions, particularly those relating to: (i) freedom of association and the right to collective bargaining; (ii) elimination of all types of forced or 10 compulsory labour; (iii) abolition of child labour; and (iv) elimination of discrimination in the area of employment. These agreements have been integrated into the national legislation, mainly into the Labour Code, which was recently amended to adapt it to the context of economic liberalization.

2.3.10 Inconsistencies between current practices and the ratified agreements have been noted; for example there are inconsistencies with the conventions on freedom of association, collective bargaining and elimination of forced labour. Indeed, Cameroonian laws subject the legal existence of a trade union or a professional association of civil servants to prior authorization by the Minister of Local Government. Professional associations and trade unions cannot become members of a foreign professional organization without prior authorization of the Government. Working conditions within the civil service, including salaries, are set unilaterally by the State. In the same vein, a national civic service for participation in development, makes it possible to impose public interest works on citizens aged 16 to 52 years for a duration of two years and in the event of refusal to comply therewith, the citizens would be liable to a prison term of two to three years.

Environment

2.3.11 The Cameroonian territory is made up four ecological areas, namely: (i) the soudano- sahelian area, which comprises the major ecological regions of Mont Mandara, the plains of the Far North and the plains of Benoue; (ii) the savannah area (the high savannahs of Adamaoua, the low savannahs of the Centre East, the high plateaus of the West and Northwest and the Tikar plain); (iii) the tropical forests area, which comprises the deteriorated forests of the central-littoral and the dense humid forests of the Southwest and the East; and (iv) the coastal and maritime area. The forest covers 47.4% of the territory and the water network and biodiversity therein are considerable.

2.3.12 The critical environmental problems are: (i) desertification in the soudano-sahelian zone; (ii) soil degradation resulting from uncontrolled felling of trees, overgrazing and extensive land use; (iii) industrial and artisanal pollution attributable to inadequate compliance with regulations governing the operation of industrial units; (iv) coastal erosion; (v) deterioration of the forest cover resulting in losses in bio-diversity; (vi) increasingly insanitary conditions caused by population increase in the urban areas within a context of economic recession which encourages the proliferation of makeshift housing; and (vii) the limited capacity of the municipalities.

2.3.13 The country has signed or ratified most of the legal instruments relating to the environment and which have a universal, regional or sub-regional scope. These instruments include: the Paris Convention of 1972 relating to the Protection of the Global, Cultural and Natural Heritage, the Rio Conventions of 1992 on Biological Diversity and Climatic Change, the Paris Convention of 1994 on Desertification, the United Nations Convention of Montego Bay of 1985 on the Law of the Sea, the Vienna Convention of 1985 and the Montreal Protocol of 1987 relating to the Protection of the Ozone Layer.

2.3.14 From the institutional standpoint, a Ministry of the Environment and Forestry (MINEF) was established in April 1992 and entrusted with the mission of defining, implementing and coordinating the national environment policy. Since 1996, the country has a National Environment Management Plan (PNGE) which advocates: (i) rational management of the agro-sylvo-pastoral area, the ecosystems and natural resources; (ii) the promotion of raw materials through ecologically viable industrial development; (iii) improvement of the urban 11 living environment (urbanization plans, reform of the land tenure system, improvement of housing conditions, rehabilitation and rational installation of public utilities and sanitation) and (iv) the development of human and institutional capacities. The framework legislation on environment management set up an inter-ministerial committee and a national environment advisory commission, responsible for organizing the participation of the private sector, NGOs and professional associations in the national environment strategies. To reconcile the conservation and sustainable tapping of the natural resources, particularly forestry resources, the Government plans to intensify the implementation of the PNGE.

2.3.15 Cameroon has the requisite legislation for protecting its environment and ensuring sustainable tapping of its forest resources. In keeping with these policies, the Government maintained a high level of taxation of the export of logs. It also introduced more competition in the granting of concessions and made the tapping of forest resources contingent upon the preparation of a development plan. 12 Regional Integration

2.3.16 Cameroon is a founding member of the UDE (Customs and Economic Union), which was created just after independence by the Brazzaville Treaty bringing together the CAR, Congo, Gabon and Chad. In 1973, this organization was transformed into a custom and economic union of central Africa (UDEAC). Subsequently, the Republic of Equatorial Guinea (REG) joined the union. The objective of this union was to create a free trade area, totally eliminate all the internal barriers, establish a common external tariff and a common customs administration. The objectives of this structure were rapidly reviewed downwards and only the preferential tariff provisions (single tax) were applied to products manufactured by enterprises of the sub-region.

2.3.17 In 1993, UDEAC adopted a regional reform programme (RRP) aimed at improving regional communications and reforming the economic and institutional environment. Within the context of the tax and custom reforms, the following instruments were created in 1994: the common external tariff (CET), in lieu of a host of taxes, aimed at encouraging industries of the sub-region and generating revenue; and the generalized preferential tax (TPG), which is applied to all the manufactured and animal products within the union. The latter tax was eliminated in January 1998. Furthermore, to give a new lease of life to integration, UDEAC was transformed into an economic and monetary union for Central Africa (CEMAC) and its treaty was signed in 1996.

2.3.18 Cameroon is also a member of the Economic Community of Central African States (ECCAS), created in 1983 and which brings together, in addition to the CEMAC countries, Angola, the DRC, Burundi, Sao Tome and Principe and Rwanda. However, its proper functioning is hindered by the budgetary difficulties of the member States and the socio- political unrest within the sub-region. Efforts are currently being deployed, with the support of the ECA, to revive this organization. Furthermore, the ECCAS Heads of State have agreed to establish a Peace and Security Advisory council (COPAX), in order to restore stability in the sub-region and create a climate conducive to private investments.

2.3.19 In general, the results obtained by these organizations are well below expectations. Intra-CEMAC trade represents only 8% of Cameroon’s foreign trade. However, considering the development of its manufacturing sector, this country is the main beneficiary of this integration. Indeed, Cameroon accounts for 96% of the intra-CEMAC exports and only 4% of its imports originate in CEMAC. The Government is aware of the challenge that regional integration represents for the country and it accordingly pays particular attention thereto. Indeed, it applies all the provisions of CEMAC’s fiscal and customs reforms and is implementing the regional transport programme, which seeks to establish inter-state road links and facilitate transit procedures. However, considering its budgetary difficulties, the country is not always up-to-date with its contributions to the sub-regional organizations.

2.4 Main Development Constraints

2.4.1 In spite of the recent improvement in its economic performance, Cameroon is still confronted with the following macro-economic, structural and sectoral constraints:

2.4.2 Macro-Economic Constraints: the budgetary balance and the balance of payments are still negative and the foreign debt is very high. Considerable internal and external payment arrears have been accumulated. The level of savings are still below that of the investments required to ensure strong and sustainable economic growth. 13 2.4.3 Structural Constraints: they concern the financial sector, the civil service and the public enterprises. The banking sector suffers from the absence of a specialized institution for the mobilization of long-term funds and investment financing. It is also affected by the slow and partial restoration of the confidence of the economic operators in spite of two successive restructuring exercises. There has been a certain amount of demotivation among the civil servants following the salary reductions which occurred since 1993 and contributed to exacerbate the problems of the administration. The public enterprises occupy a central position in the economy. The legal and judiciary framework has not been completely rehabilitated; corruption continues to bedevil the economy and the level of poverty is still high.

2.4.4 Sectoral Constraints: The agricultural sector suffers mainly from the ineffective and expensive interventions of the State in the production, marketing and processing of agricultural products. There has been a constant decline in food self-sufficiency with the attendant high levels of malnutrition. The relative drop in the amount of resources allocated to the social sectors during the economic crisis has reduced access of the population to quality health services at affordable prices and worsened the qualitative and quantitative shortcomings of the educational system. Furthermore, deterioration of the economic and social infrastructure that resulted from the contraction of construction and maintenance expenditure makes the evacuation of the production more difficult and expensive. This in return raises the costs of the transactions and contributes to the worsening of poverty in the rural areas. More specifically, the fact that transportation is not entirely liberalized, coupled with the high operating costs of the public enterprises, makes its impossible to provide transport services at competitive prices. These high transportation costs have a negative impact on the profitability of the different economic activities.

III. THE GOVERNMENT’S DEVELOPMENT AGENDA

3.1 Key Elements of the Government’s Agenda

3.1.1 To address those constraints, especially in view of the scale of poverty which affects half of the country’s population, the Government has defined a medium-term strategy for the 1999-2002 period aimed at achieving greater macroeconomic stability and maintaining the economy on the path of sustainable development. The Government intends to (i) promote strong, sustainable growth, the benefits of which will be evenly distributed; (ii) improve the supply and quality of essential social services and make them more accessible to the poor; (iii) promote community development; (iv) implement specific activities in favour of groups at risk or in a difficult situation; and (v) promote food security. The principal macroeconomic objectives of the Agenda are to: (a) improve the real GDP growth rate from 4.4% in 1998/1999 to 5.5% in 2001/2002; (b) maintain the inflation rate at 2% and (c) contain the external current account deficit at 2.4% of GDP. The second phase of the Agenda, the first phase of which is to be completed by June 2000 and is backed by an ESAF, will be backed by a Poverty Reduction and Growth Facility of the Bretton Woods institutions. Those objectives will be attained by the implementation of the following policies.

Fiscal Policy

3.1.2 The Government’s fiscal policy will aim to consolidate the achievements of the last few years with regard to the reorganization of public finance, and increase non-oil revenue, while refocusing spending on the social and infrastructure sectors. It is, therefore, planned to achieve a primary budget surplus of 5.4% of GDP, to increase public investment by approximately 2 GDP points over the period, and consequently to narrow the overall deficit (excluding grants) to under 2.4% of GDP. 14

3.1.3 In terms of revenue, efforts will be stepped up to mobilize taxes and duties through the pursuit of fiscal reforms (general income tax and tax register) and the implementation of administrative measures to broaden the tax base and simplify procedures with a view to improving the efficiency of the tax and customs authorities. Non-oil revenue should consequently rise to 14.8% of GDP in 2001/2002 from 13% of GDP in 1998/1999. Oil revenues should represent an average of 2.4% of GDP over the period, owing to the projected fall in oil production and exports.

3.1.4 With regard to spending, the principal objectives over the period are to: (i) consolidate the efforts made to improve resource allocation to priority sectors with a view to meeting essential requirements in respect of health and education, poverty reduction, and the rehabilitation and modernization of infrastructure; (ii) improve budget preparation and implementation, as well as the management and control of spending; (iii) deepen civil service reform; and (iv) improve the system of civil service salaries. Thus, credits allocated to priority sectors will rise to 5% of GDP for education and health, and to 2.5% for public works in 2001/2002, compared with under 3% of GDP and 0.7% of GDP respectively in 1998/1999.

Monetary Policy and Financial Sector Reform

3.1.5 Within the framework of the common institutions of the CEMAC Member States, the Government will continue to work towards the promotion of a sound monetary and financial policy in the sub-region, especially through measures aimed at strengthening the external backing of the and the operating resources of the Commission Bancaire d'Afrique Centrale (COBAC). The Government will cooperate with the latter body with a view to defining prudential standards applicable to non-banking institutions. It will also continue to provide support for reforms aimed at promoting the effective utilization of indirect monetary policy instruments, in order to rationalize the operations of the Central Bank on the money market and liberalize exchange rates.

3.1.6 Since the reorganization of the banking sector has been virtually completed, the Government will focus its reforms on strengthening insurance companies and other non- financial institutions, as well as on the establishment of a securities market. Also, various measures will be taken including (i) the restructuring of the Crédit Foncier du Cameroun (CFC), a housing finance institution, (ii) the restructuring of the postal savings bank; (iv) the establishment in the short term of a local capital market and, at the same time, support to efforts to establish a regional stock exchange; and (vi) the reorganization of the Cameroon Debt Collection Company, with a view to improving its performance.

Structural Policies

3.1.7 The Government will step up its efforts to promote the development of the private sector, increase factor productivity and improve external competitiveness. In that respect, State divestiture, deregulation, a reduction in transaction costs, greater production incentives and improvement of social and economic infrastructure will continue to be the main thrusts of government action. From the standpoint of incentives, the Government intends to (i) complete the implementation of the tax and customs reform (CEMAC) by abolishing import surcharges in order to promote trade; (ii) apply the CEMAC investment charter; iii) gradually lower the Common External Tariff (CET) under CEMAC while maintaining an adequate level of budget resources; (iv) simplify the procedures for establishing enterprises; and (v) carry out an inventory of all the texts relating to business law and trade regulations to ensure their 15 compliance with the provisions of the OHADA Treaty. The State's divestiture programme will focus primarily on the consolidation and deepening of the reforms of agro-industrial public enterprises and public utilities. The following enterprises are, therefore, 16 being privatized: the agro-industrial conglomerate, the Cameroon Development Corporation (CDC), the Telecommunications Companies (CAMTEL), the National Electric Power Utility (SONEL) and the Cameroon National Water Utility (SNEC).

Governance

3.1.8 In recent years, Cameroon has experienced serious problems concerning governance characterized by a fairly unstable political situation against a backdrop of contested elections and curbs on civil liberties, lack of transparency in the management of public affairs and rampant corruption. Furthermore, in 1998 and 1999, Cameroon was ranked first out of 85 countries in the Corruption Perception Index of the NGO, Transparency International. The Government, aware of the danger of that phenomenon in the promotion of private investment, has taken a certain number of measures to address it. It has just finalized its report on the National Programme on Governance with the support of UNDP, comprising five components: public administration, justice, decentralization, economic and financial management and civil society.

3.1.9 Rule of Law: In 1996, the Government adopted a new constitution allowing greater participation in political life. Following the Presidential elections in 1997, dialogue was initiated between the ruling party and an opposition party leading to the latter’s participation in the government, thus partially easing the political tension in the country. The Government remains highly centralized. The judicial system is still greatly influenced by the Executive and suffers from widespread corruption and a lack of administrative resources. Further improvements are required in the areas of civil liberties and respect of human rights. CIDA is financing a Democratic Development Support project, which backs the initiatives of public and private institutions involved in the promotion of the development of democratic values and practices and respect of the right of the individual. This support project concerns the Ministries of Justice, Communication and Local Government, as well as the National Committee on Human Rights and Freedoms and NGOs and associations operating in that area. Under the National Programme on Governance, it is planned to improve the functioning of the justice system, to ensure it becomes really independent, close to the citizens, a guarantor of the Rule of Law, and of the legal and judicial security of the population and its property.

3.1.10 Accountability: the Government has introduced a law on the general status of public enterprises, which makes managers more accountable for their actions than in the past. The Banking Law was amended to speed up the recovery of credit from dishonest customers. The latter will now no longer receive new credits through the banking system, or compete in bidding for government contracts. It also plans to make credit managers more accountable, to motivate and provide the senior managers of the tax and customs authorities with a feeling of security, as well as the accountants and cashiers of the Treasury and, on the other hand, institute proceedings in the event of poor management, the embezzlement of public funds or fraud. The Higher State Control, the public audit body, will be strengthened, as will the General Inspectorate of the Ministry of Justice.

3.1.11 Combating Corruption: some of the signs of corruption in the country are: (i) the weakness of tax and duty collection; (ii) the large number of budgeted non-wage expenditure which does not reach the beneficiaries; (iii) the award of public contracts in breach of regulations; (iv) court decisions in respect of debt collection often in favour of the debtors, without any justification; (v) the supply of goods and services in public contracts below the contractual obligations in terms of price and quality. The Government has launched a campaign to combat corruption. An ad hoc committee on corruption was established and is now focusing on five key Ministries: economy and finance, transport, public works, posts and telecommunications and security. An audit of the ten principal public contracts awarded 17 during 1998/1999 was conducted and permitted a review of the entire contract award procedure. Senior officials and employees found guilty of corruption or embezzlement of public finds have been punished. The Government is aware that corruption is, to a large extent, due to the low level of civil service salaries and the widespread poverty in the country, and intends to pay special attention to those aspects in the second phase of the reforms.

3.1.12 Transparency: on the basis of the conclusions of the audit of public contracts, the Government intends to restructure the existing system to make it more transparent. The Procurement Code will be amended and a new institutional mechanism established. In particular, new thresholds will be established for public contracts, the splitting of contracts limited and strict control of commissions guaranteed. Under the action plan to improve public spending, the Government has undertaken the preparation of quarterly reports by the Ministries of Education, Health and Public Works under the implementation of their respective budgets. It has set up a monthly monitoring mechanism for oil operations, to guarantee transparency and the automatic transfer of oil revenues to the Treasury. The National Programme on Governance provides for the promotion of transparent economic and financial management of national assets with a view to achieving sustainable human development for all. It also intends to improve the functioning of the judicial system. Citizens will, therefore, be better provided with legal information through the regular publication of the Official Journal, and a vast training programme for judges and judiciary personnel in the OHADA procedures will be prepared and implemented.

3.1.13 Participation: The Government intends to promote participation through the decentralization and strengthening of civil society, which are two key aspects of the National Programme on Governance. Indeed, it intends to (i) transform the decentralized local communities into real supervisory and local community development structures for the population; and (ii) strengthen the capacity of civil society to make it more active and become more involved in the management of public affairs. The country has about 338 communes comprising 305 rural communes and around 500 NGOs and community associations which the Government wishes to become real development partners. The French Government is financing a Local Communities Development Support Project which, among others, aims to strengthen the works supervision capacity of the communes, beef up their human resources and increase their financial resources through the implementation of the local taxation reform. The European Union is also preparing a programme in support of the decentralized urban development capacities aimed at enhancing the programming and urban management capacities of local communities and increasing the participation of the population in local development. The Government is finalizing a text on the organization and structuring of NGOs.

Sectoral Policies

3.1.14 Agricultural Sector: the Government intends to pursue the implementation of the activities set out in its Agricultural Development Policy Letter which focus on: (i) improved farm productivity; (ii) the strengthening of agricultural research and extension; (iii) the establishment of basic infrastructure; (iv) the liberalization of associations and the professionalization of agriculture; (v) ongoing restructuring of the agriculture system; and (vi) the attainment of food self-sufficiency. In addition, the Government will continue to promote sustainable management and the rational utilization of forest resources, as well as environmental protection.

3.1.15 The Energy Sector: the Government’s strategy in the sector aims to (i) develop its potential through appropriate incentives and the liberalization of activities; and (ii) improve the efficiency and transparency of management in that sector. To do so, the Government will 18 adopt a legal and regulatory framework governing the mining, gas and oil sub-sectors, capable of developing offshore natural gas reserves, as well as promoting and tapping hydroelectric potential and revitalizing the distribution of hydrocarbons.

3.1.16 Transport Sector: the Government will pursue the implementation of its vast reform programme in the transport sector and of the regional transport programme. The contract for the operation of the national railways system has already been awarded to a private operator. In the port sub-sector, the port authorities will become fully autonomous, and, in each port, activities of an industrial and commercial nature will be transferred to the private sector. The implementation of the action plan adopted in December 1998 to reduce costs and transit times is being actively pursues. In the road sub-sector, the permanent financing mechanism for road maintenance has become operational, with the establishment of the Road Fund, which is mostly managed by the private sector. A biannual technical and financial audit will be conducted. The Government also intends to carry out investments concerning Inter-State links.

3.1.17 Social Sectors: in the education sector, the Government intends to (i) improve the quality of primary education and provide basic education for all; (ii) rationalize the interregional distribution of resources; (iii) increase the involvement of pupils’ parents, communities and local authorities in the management of schools; (iv) step up support to private education; (v) further decentralize the education budget, through the mechanism for the automatic delegation of investment credits. With regard to health, it aims to: (i) improve the quality of health care and increase vaccination coverage in rural areas; (ii) increase and improve the physical and financial accessibility of health care; and (iii) facilitate access to high quality, low cost generic drugs; (iv) beef up and redeploy health personnel, especially in rural areas; and (v) tighten the control and monitoring of endemic diseases.

Resource Requirements

3.1.18 The country’s external financing requirements for the 1999/2000 - 2001/2002 period are estimated at CFA.F 2,203 billion, including CFA.F 534 billion for the current account (including transfers; CFA.F 925 billion for debt amortization, CFA.F 523 billion for variations in arrears and CFA.F 221 billion for the replenishment of foreign exchange reserves. The financing identified amounts to CFA.F 1,265 billion, i.e. 57.4% of requirements and comprises CFA.F 555 billion in project financing, CFA.F 288 billion in programme financing, CFA.F 100 billion in private capital and CFA.F 322 billion in debt rescheduling. The financing gap is estimated at CFA.F 938 billion, for which financing is being sought from participants in the Special Programme for Africa (SPA).

3.2 Evaluation of the Agenda

3.2.1 Economic Management: the maintenance of macroeconomic stability and the restoration of internal and external viability are the key objectives of the Agenda. The attainment of those objectives remains linked to the performance of the non-oil sector and a favourable trend of the terms of trade for agricultural export products. It should be emphasized that, despite rising oil prices over the first half of 1999/2000, the real GDP growth rate could be reviewed downwards, because of the decline in non-oil exports, especially timber, owing to a total ban on exports of undressed timber. Furthermore, there has been slippage on the privatization programme, especially the finalization of the concessioning of SOCAPALM and the issue of invitations to bid for SONEL. But, overall, the programme is being implemented satisfactorily. The conclusions of the mid-term review of the third year of the IMF ESAF of February 2000 are, on the whole, satisfactory. 19 3.2.2 Widespread, Evenly Distributed Growth: the economy of Cameroon is fairly diversified. The ongoing deepening of structural reforms will improve its competitiveness and put it on the path of lasting and sustainable growth. The Agenda focuses in particular on social policies and poverty reduction. Indeed, spending on health and education will be maintained and even increased, from 2.5% of GDP at present to 5% in 2001/2002. A Poverty Strategy Declaration was adopted in December 1998. This document represents undoubted progress in the reflection on this issue, but should be improved upon, in particular in respect of the methodological plan and the targeting of categories of poor. It is based on an incomes approach and does not take into consideration the other dimensions of poverty. It remains too general and should focus on the poor whose profiles should be better defined, and on the projected outcomes. An operational programme is under preparation on the basis of a participatory approach, for the successful implementation of the poverty reduction strategy will depend on the level of involvement of all the constituent parts of Cameroonian society in its preparation and implementation. The finalization of the document with cohesive action plans, in particular for the health and education sub-sectors, will enable the Government to reach the Extended HIPC Initiative decision point, for, through this strategy, it will have to demonstrate its ability to be prudent in its use of the budgetary savings to be made under the Initiative.

3.2.3 Good Governance: good governance is a key component of the Government’s Agenda with the National Programme on Governance the final report on which will be submitted to the President of the Republic for approval. This report should be discussed at a donors’ roundtable, to secure the financing for its implementation. The document constitutes a good base, for it presents a sound diagnostic review of the situation. However, the action plan is not very specific. It could be improved in the critical areas related to poverty, especially health, education or infrastructure where good governance is weaker, as well as in the functioning of the justice sector. The oil sector, despite the annual SNH audits, still has some shortcomings, especially with regard to transparency in the transfer of financial resources collected to the Treasury. The Government will have to pursue its activities to improve the management of public affairs and strengthen the functioning of the judicial system. Thus, public spending controls will have to be tightened, the annual audit of the principal enterprises and public contracts systematized, and the training and retraining of legal personnel carried out.

3.2.4 Crosscutting Themes: the Agenda takes into consideration crosscutting themes such as the environment, private sector development, gender, regional integration and participation. The forestry policy which the Government intends to implement, aims to achieve sustainable and rational management of that resource. State divestiture, deregulation, a reduction in transaction costs, an increase in production incentives and the improvement of economic and social infrastructure, should permit private sector promotion. The completion of the tax and customs reform, as well as the adaptation of the texts on business law to the OHADA Treaty, will make it possible to remove the constraints on trade and investment in the sub-region and consequently strengthen regional economic integration. With regard to participation, it is planned to strengthen the capacities of civil society and to make the local communities and NGOs play a very active role. However, the Government should: (i) introduce greater transparency in granting forestry concessions and see to the implementation of forestry development plans from the standpoint of the environment; (ii) establish an effective legal and judicial environment for private sector promotion; and (iv) ensure greater involvement of civil society in the design and implementation of the poverty reduction strategy.

3.3 Risks and Challenges

3.3.1 The following risks could impact on the implementation of the Agenda: the terms of 20 trade trend, the level of commitment of the Government and its institutional capacities. In fact, the trend of export product prices (oil, agricultural produce) may compromise the set macroeconomic objectives, lead to inadequate resource allocation to priority sectors and slippage on the due dates of external debt. The reform programme, especially the privatization of public enterprises and reform of the civil service, could lead to major social disturbances following inevitable retrenchments. 21 This could weaken the Government’s resolve and lead to a slowing down in the pace of reforms and consequently jeopardize external assistance flows to the country. Furthermore, the Government’s institutional capacities may be inadequate to ensure the smooth implementation of the Agenda, especially against a backdrop of civil servants who are demotivated because of low salaries.

3.3.2 These risks could be minimized by prioritizing non-oil revenue with regard to the State Budget and the impact of ongoing measures to improve the external competitiveness of Cameroonian products. Furthermore, the ongoing programmes for the reinsertion of retrenched public sector personnel into economic circuits should mitigate the social impact of the restructuring of the public sector. Also, the technical assistance planned by the different donors could offset the institutional weakness. In addition, the civil service reform will be deepened and provide for wage incentives to motivate civil servants, especially those involved in the implementation of the Agenda.

3.4 Strategic Partnership

3.4.1 Coordination: Cameroon is a member of the consultative group network. In that respect, the World Bank, over the last five years has played a leadership role in coordinating aid. This coordination is mainly done through the implementation of structural or sectoral adjustment programmes. Under the SPA, the Bank participates in the implementation and monitoring of these different programmes and regularly exchanges information with the principal donors, namely AFD, IMF, the World Bank and the EU. However, internal aid coordination remains inadequate. To correct that the National Committee for the Coordination of Development Assistance (CCAD) was established, attached to the Office of the Prime Minister, in order to confer moral and institutional authority on aid coordination. However, despite that Committee, there is still a great need for extensive consultations between Cameroon and its development partners.

3.4.2 Aid trends: over the 1992-1996 period, the volume of external aid gradually declined from US$ 753 million in 1992, to US$ 369 million in 1996 before rising to US$ 566 million in 1997. This upswing in financial assistance occurred following the approval, in August 1997, by the IMF of its ESAF, which made it possible to release disbursements which had been suspended by several donors including the Bank. The disbursement structure was deeply modified in favour of structural adjustment programmes which represent 63.3% of the total, followed by transport, 10.9%, health 4.9% and education 4.8%. Bilateral assistance represented 52% of total assistance in 1997 compared with 78% in 1995. remained the principal donor with 37% of total aid, followed by IDA 20.8%, EU 11.3% and the IMF, 8.7%. Box 2: The Principal Development Partners

In addition to the Bank, Cameroon’s principal donors are: France, the World Bank, the European Union, and the IMF. Their principal areas of operation are:

France: is Cameroon’s principal bilateral donor. Over the past three years, its cooperation has focused on four priority areas: (i) support to the consolidation of the rule of law and the entrenchment of democracy, through good governance and improved security of property and persons; (ii) adjustment and support to economic recovery through the promotion of food and agro-industrial production, the development of the private sector, and support to institution building in the transport and commercial public services sectors; (iii) support to the social sectors and human resource development, through health education, youth and culture; (iv) the participation of civil society in development activities in rural areas, through farmers’ organizations, and in towns under the decentralization process, through local communities and various associations. This cooperation will be conducted through two mechanisms: the cooperation and cultural activities service and the Agence Française de Développement, through technical assistance, the Fonds d’Aide et de Coopération, assistance to structural adjustment and AFD project loans (public and private).

European Union: the ongoing cooperation is based on the Lome Convention IV, which since 1991, for ten years, has linked the ACP and European Union countries. It has two main themes: trade, cooperation and technical and financial cooperation. Projects and programmes are financed through the following instruments: (i) National Indicative Programmes (NIP), which are five-year programmes; at present the EDF NIP 7 and EDF NIP 8 are ongoing and focus on rural development, road infrastructure, environmental protection and decentralized development; (ii) Regional Indicative Programmes ( EDF RIP 7 and EDF 8) which focus on the implementation of the CEMAC regional reform programme, inter-State road infrastructure and the management of forestry and fisheries resources; (iii) support to structural adjustment, mainly in the form of budgetary assistance to priority Ministries; (iv) STABEX, used to support the recovery and restructuring of the agricultural export systems; (iv) the EIB which finances the public utilities sector, the industrial sector and support to the private sector. Total resources (European Commission and EIB) allocated for the 1991-2000 period are 675 million Euro, i.e. CFA. F 442 billion.

The World Bank: is the country’s principal multilateral donor with commitments of US$ 1,215.5 million broken down as follows: structural adjustment loans 58.3%, transport and urban development 19.5%, agriculture 16.9% and human resources 5.3%. Since 15 February 1994, Cameroon has been eligible for the IDA window. The ongoing programme is backed by a Structural Adjustment Credit (SAC III) approved in June 1998, for an amount of US$ 180 million, to be disbursed in two fixed three floating tranches. The fixed tranches have been disbursed. The slippage on the disbursement of the floating tranches is primarily due to the slowness in the procedure for the privatization of some public enterprises.

IMF: Since 1994, three financial arrangements have been approved for an amount of SDR 310.78 million, two Stand-by Arrangements and an Enhanced Structural Adjustment Facility. The latter, for an amount of SDR 162.12 million, was approved in August 1997. The annual arrangement for the third year was concluded in September 1999. The half-year review of this third year was conducted in February 2000 and its conclusions are satisfactory overall. The problems identified concern the delays in the privatization programme. The necessary corrective measures should be taken by May 2000, the deadline for the disbursement of the second tranche of this third year.

3.4.3 Cofinancing: Over the last two years, the Bank has focused, in particular, on cofinancing. Four (4) of the five (5) projects and programmes approved over that period were cofinanced, i.e. 80% of the total number of operations. These were: (i) SAP II with the IMF, IDA, France and the EU; (ii) the Project for Poverty Reduction and Action in favour of Women, with UNDP; (iii) the Fisheries and Livestock Development Activities and Micro- Credit Operations with ABEDA, and (iv) the National Agricultural Research and Extension Programme) with IDA. These cofinancings have made it possible to increase the synergies between the different institutions in particular the confirmation of SAP financing with the Bretton Woods institutions; the complementarities between agricultural research and agricultural extension with IDA; poverty reduction activities and their monitoring and evaluation with UNDP; and the livestock and fisheries development activities and micro-credit operations with ABEDA. Under the current programming cycle, the efforts to seek cofinanciers will be pursued. The Bretton Woods institutions will be contacted regarding the financing of the reform programme, UNDP and CIDA regarding governance, and the AFD and European Union for transport sector projects. 22

IV. BANK GROUP STRATEGY

4.1 Evaluation of the Past Strategy

4.1.1 The objective of the Bank's past operations strategy covering the 1996-1998 period was to restore the macro-economic balances, increase agricultural production and develop human resources. Considering the country's sound performance, an extended programme was adopted in its favour for an amount of UA 42.84 million. The breakdown of the sectoral allocation of project loans was as follows: 40% to agriculture; and 60% to the social sector. This allocation was utilized to the tune of 95%, with the agricultural sector taking up 40.2% of the total (agricultural research, agricultural extension, rural forestry, stockbreeding and fisheries) and the social sector taking up the remaining 59.8% (education, poverty reduction and actions in favour of women, water supply studies and projects, sanitation and rural electrification). In the area of reform support, a structural adjustment loan was granted as well as two supplementary financing mechanism operations, for a total amount of UA 32.5 million.

4.1.2 These operations helped to alleviate the country's economic problems and as such they met the expectations of the Government. This was particularly the case of policy-based lending, which sought to improve the competitiveness of the economy and reduce the debt burden. They will also contribute to poverty reduction in the country. The implementation rate of the lending programme and stringent compliance with the sectoral distribution of the allocation show that the objectives of the three-year programme have been attained and that the absorptive capacity of the country is satisfactory. Emphasis should be placed on these operations. The current programming cycle should focus on the areas which were not sufficiently covered by the past programme.

4.2 Bank Group Portfolio and Management

4.2.1 With effect from 1972, the Bank financed 39 operations in the country, including one in the private sector. Out of these 39 operations, 24 have been completed, 2 have been cancelled and 13 are ongoing. The gross amount of the commitments stands at UA 576.90 million, including UA 449.15 million from ADB resources, UA 124.18 million from ADF and UA 3.57 million from TAF resources. Two major events marked the existence of the portfolio, namely, the portfolio restructuring of June 1994 and cancellation of the non- performing project loans in 1996. Other portfolio rehabilitation measures were taken during the review and supervision missions. Thus, net commitments amount to UA 483.55 million. The private sector loan of an amount of US$ 3.6 million was approved in September 1993, for the procurement of three new . Since January 1997, the borrower has not been in a position to honour its financial commitments. This situation compelled the Bank to file several suits against the borrower. The judgement handed down in favour of the Bank is yet to be enforced and the matter is still pending before the Cameroonian courts. The sectoral configuration of the portfolio shows the predominance of the transport sector (40.2%), followed by macro-economic reform support (27.4%), agriculture (17.3%), public utilities (2.9%), the social sector (11.3%) and, finally, banks and industry (0.9%). As at 31 January 2000, cumulative disbursements amount to UA 380.68 million, that is a disbursement rate of 78.7%. The active portfolio comprises 13 projects for a total amount of UA 178.88 million and a disbursement rate of 38.1%. 23

Table 4.1 Sectoral Breakdown of the Commitments by Window (In Million UA)

Gross Net Sector No. ADB ADF TAF Disbursed % Disbursed Balance Amount Amount*

Transport 10 222.36 220.21 1.64 0.51 194.57 153.7 79.0 40.87

Multisector 4 132.43 100.00 32.43 - 132.43 132.43 100.00 0.00

Agriculture 11 106.45 57.09 48.58 0.78 83.43 50.72 60.80 32.71

Public Utilities 6 53.46 42.95 8.93 1.58 14.14 11.74 83.0 2.40

Social 6 54.74 21.44 32.60 0.70 54.72 27.83 50.9 26.89

Industry 2 7.46 7.46 - - 4.26 4.26 100.00 0.00

Total 39 576.90 449.15 124.18 3.57 483.55 380.68 78.7 102.87

· Less Cancellations 4.2.2 Project implementation is confronted with difficulties. The identified generic problems include: (i) delays in the fulfilment of the conditions precedent to the effectiveness of the loans and grants and the implementation of the projects in the field; (ii) the limited mobilization of the local counterpart contributions; (iii) the irregular submission of quarterly progress report and audit reports; (iv) the weaknesses of the accounting services of the projects; and (v) problems of communication with the Bank. It should also be noted that in the past, project implementation suffered from repeated sanctions imposed on the country due to default on arrears.

4.2.3 In February 2000, the Bank conducted a thorough review of its portfolio. It examined the situation of each project, identified the problems encountered, defined a programme of action to solve them (with a specific implementation schedule) and adopted a performance criterion for measuring the disbursement rate by 31 December 2000. The plan of action agreed upon between the project managers, the Government and the Bank is a kind of performance contract with the project and will be assessed on the basis of the disbursement rate attained by the end of the year. The overall disbursement objective is to go from the current rate of 38.1% to 62.5% by 31 December 2000.

4.2.4 The causes of the identified generic problems include the insufficient physical and financial monitoring of projects by the Government, the project managers’ lack of familiarity with the procedures for budgeting the local counterpart contributions, the inadequate qualifications of the financial managers of the projects and the shortcomings of the country’s telecommunication services. Measures have been proposed to address these problems. These measures include the creation of a physical and financial monitoring committee, chaired by the Secretary General of the Ministry of Public Investments and Land Development. The ADB Projects Monitoring Unit within the Yaounde UNDP office will serve as the committee secretariat. This committee will make site visits and will ensure that all of the Government’s commitments are honoured. A workshop on the procedures for budgeting the local counterpart contributions will be organized for the project managers. In the same vein, accountants with the requisite qualifications will be recruited into the financial services of the projects. 24

4.2.5 Regarding the lessons learnt from the project implementation experience, it was decided that for the future, it would be necessary to: ensure definition of optimal project sizes to avoid frequent reformulations as in the past; resort systematically to contract work instead of forced account and whenever possible, limit the duties of the executing agency to the coordination of activities and monitoring-evaluation while entrusting the other duties to qualified bodies, particularly the NGOs; associate the beneficiary groups in project design and implementation; and make provision in the project costs for the auditing of the accounts and significant remuneration of the accountant to be recruited after competitive bidding.

4.3 Medium-Term Bank Group Strategy

A) Public Sector Strategic Framework of Bank Group Operations

4.3.1 For the 1999-2001 period, the Bank Group’s public sector operations strategy focuses on poverty reduction in keeping with the ADF VIII orientations and the Bank’s vision. It takes into account the past operations strategy from which lessons have been learnt. It is based on the conclusions of the participatory evaluation of poverty (PEP) conducted by the Government in 1994, with the assistance of the World Bank, and these conclusions reflect the poor people’s perception of their own situation. The strategy also takes into account the salient points of the Government’s poverty reduction strategy declaration adopted in December 1998 as well as the findings of the participatory consultations conducted within the context of preparation of the CSP. The main concerns expressed by the poor, within the context of the PEP, concern the limited nature of monetary income, the problems relating to hunger, nutritional deficiencies and food shortages, the health situation, long distances from the centres of economic activity, the feeling of helplessness and the inability to make oneself heard.

Box 3 : Participatory Approach

This CSP was prepared on the basis of a participatory approach. In keeping therewith, the Bank conducted two preparatory missions. Meetings were held with all components of the Cameroonian society and their points of view have been reflected in this document.

During these consultations, plenary sessions were organized with all the sectors of the public administrations involved in the economic reforms, the executing agencies of projects financed by the Bank Group, the development NGOs and the donor agencies. Three issues were thoroughly discussed, namely the poverty reduction strategy, the national programme of good governance and the situation of the Bank Group portfolio. At the wrap-up session, three areas were recommended for Bank intervention. They are the continuation of economic reform support, the promotion of good governance, human resource development and the creation of basic infrastructure.

At the end of the preparation of the document in the Bank, a dialogue mission was conducted to discuss and validate the content of the document with all the parties involved, namely, the Government, civil society, the private sector and the donor agencies represented in Yaounde. A final consensus was obtained on the selected strategy. 25

4.3.2 These concerns were confirmed during the participatory consultations which gave priority to the promotion of strong economic growth and greater social justice, human resource development and the creation of basic infrastructure. To help address these concerns, the proposed strategy will concentrate on two major areas: (i) the general conditions for poverty reduction, based, on the one hand, on the creation of a stable macro- economic environment so as to promote economic growth and increase employment and income-generating prospects, and on the other, involvement of the poor in decision-making on matters concerning them, in the drive to enhance social cohesion and the well-being of the populations; and (ii) specific actions aimed at the poor populations and which seek to improve their living conditions. These strategic orientations stem from the choice of the selected areas of operation.

Proposed Areas of Operation

4.3.3 The implementation of this strategy will require interventions in the three main sectors, namely: (i) multisector operations; (ii) the social sector; and (iii) the transport sector.

Multisector

4.3.4 Economic Reform Support: The Bank will continue its structural adjustment programme support to deepen the reforms and consolidate the achievements so as to enhance the macro-economic viability. Within this context, measures will be taken to: (i) mobilize and efficiently manage public resources; (ii) promote the private sector; and (iii) complete the restructuring of the public sector (public enterprises, civil service and the financial sector). The Bank’s operations will be conducted jointly with the Bretton Woods Institutions, within the context of the new strategic framework for poverty reduction. Furthermore, the country will continue to be assisted under the supplementary financing mechanism, provided it continues to obtain sound performances.

4.3.5 Support to the National Programme of Governance: the Bank will assist the Government in the implementation of the national programme of governance and, in particular, in its poverty reduction efforts through: (i) the improvement in the operation of the judicial system, especially in the case of businesses to ensure greater expediency of the judicial procedures and the enforcement of court decisions; (ii) the enhancement of economic and financial management by ensuring an optimal allocation of public resources and efficient control of their utilization; and (iii) enhancement of the possibilities of action of civil society in order to make it a major partner of the public authorities. With regard to the administration of justice, it will be necessary to make material resources available to the judiciary, assist in the revision of legal texts and train judges, particularly for the application of the OHADA provisions. Concerning economic and financial management, the services responsible for investment programming and the public finance control structures will be strengthened both by supplying them with the resources they require to perform their duties and through training. In the case of civil society, it will be assisted in the areas of organization, training and for the creation of an appropriate legal framework for the non- governmental organizations as well as the establishment of more effective mechanisms for the internal operation of the associations. During the meeting of the donor agencies scheduled for the presentation of the programme of governance, the Bank will seek cofinancing partners. The UNDP and CIDA have already expressed their desire to participate in such a partnership. 26

Social Sector

4.3.6 In this sector, the Bank will help the Government to improve the health of the populations in the poorest health districts by increasing their access to integrated and quality health care and by ensuring the participation of the local communities in the management and financing of the health activities. The Actions to be undertaken will involve the strengthening of the health services and the creation of a health information system. It will also back-up actions aimed at turning around the falling coverage of food needs of the populations by enhancing local production. In the same vein, it will address the issue of the deteriorating nutritional situation of the poorest population segments and the structural food insecurity of the densely populated regions with a highly unstable climate. The Bank will also assist the Government in the creation of the infrastructure required to fight diseases, improve public health and the living conditions of the populations and ensure their well-being. The water and sanitation needs of the populations are still poorly covered.

Transport Sector

4.3.7 The Bank will help the Government to improve its road transport network and to open up the regions with a high agricultural potential as well as a high density of poor populations and facilitate inter-state transport in order to promote regional integration. The Cameroonian road network is inadequate. The evacuation of agricultural produce as well as trade with the neighbouring countries, particularly Chad, CAR, Gabon and REG, are difficult because of the poor state of the roads and the complex transit procedures. Priority itineraries were defined within the framework of the regional transport programme, which is supported by a European Union and the "Agence française de développement". The Bank will cofinance the programme with these two donor agencies.

Justification of the Areas Selected

4.3.8 The different areas are selected on the basis of their ability to contribute to poverty reduction. The planned reforms will facilitate the creation of a stable macro-economic environment, improve the competitiveness of the Cameroonian economy and develop the private sector. All of these factors will contribute to the promotion of a strong and income- generating growth, which could be beneficial to poor populations. The establishment of principles of good governance will restore confidence and attract more investments, which in turn will increase the production capacities and create more jobs. With a more effective public administration, the supply of essential services to the poor will be enhanced. The programme designed to strengthen the capacities of civil society will ensure active participation of the poor populations in the life of the nation. Furthermore, the development of transport infrastructure will open up the farming areas and accordingly facilitate the transportation of agricultural produce to the growth markets. Regarding the planned social development activities (particularly the extension of health care services as well as the water, sanitation and food security components), they will help to improve the living conditions of the poor populations and ensure their well-being.

B) Private Sector

4.3.9 Numerous opportunities are available to the private sector in Cameroon, particularly in the industrial sector. These opportunities include: tourism, agro-industry, the wood sector, off-season vegetables, tropical flowers and fruits, tanning, cottage industry, processing of cotton and seafoods etc… The business climate should be rehabilitated to facilitate the 27

materialization of these prospects. The Bank has an unfortunate experience in this sector with the only private sector operation it financed in the country. However, the ongoing reforms should create an effective legal and judicial framework for securing private investments. This new context should enable the Bank to resume its operations in the sector. Furthermore, possibilities for the financing of enclave projects do exist. The Bank’s policy in this area, widely publicised in the country, has proven to be very attractive to the authorities of the country. Moreover, within the context of the AMINA project, the Bank could support the structures, with a view to backing up the small-scale rural producers, particularly women.

4.4 Lending Programme

The indicative financial package earmarked for Cameroon under ADF VIII stands at UA 35.30 million, that is about UA 32.00 million in project allocations in favour of the social and transport sectors, and UA 3.30 million in technical assistance in support of the good governance programme. A policy-based loan could be granted to the country given the satisfactory implementation of the programme and the operations conducted within the context of the SFM, provided the country obtains a sound performance and continues to honour its debt repayment terms. The breakdown of this allocation by sector, by year and by lending instrument is given in the table below.

Breakdown by Sector (In Million UA)

Year Sector 1999 2000 2001 Total %

Social - 8.0 14.0 22.0 62.4 Transport - 10.0 - 10.0 28.3 Multisector - - 3.3 3.3 9.3 Total - 18.0 17.3 35.3 100.0

Breakdown by Lending Instrument (In Million UA)

Year Instrument 1999 2000 2001 Total % Project Loan - 18.0 14.0 32.0 90.7 Technical - - 3.3 3.3 9.3 Assistance Total - 18.0 17.3 35.3 100.0

4.5 Issues Requiring Dialogue

4.5.1 Dialogue has been initiated with the Government on the following areas: economic reforms; good governance; poverty reduction, private sector development and the situation of the Bank Group portfolio. 28

4.5.2 Economic Reforms: The Government is continuing the implementation of its reform programme, the first phase of which will be completed in June 2000. A second phase, backed by a poverty reduction and growth facility, will be set up for the 2000-2002 period. The Bank will assist the Government during this second phase and ensure that the programme takes into account the civil service reform and the adoption of a public investment programme, which seeks to back up economic growth and focuses on sectors that have an impact on poverty reduction.

4.5.3 Good Governance : The Government has embarked on a process for the preparation and implementation a national programme of good governance in order to restore the confidence of the citizens and development partners. This programme should be validated by the international community during a roundtable meeting of donor agencies. The Bank should extend financial support to the Government to strengthen the latter’s capacity in this area and engage in dialogue with the Cameroonian authorities with a view to the implementation of this programme, particularly credible measures to fight corruption.

4.5.4 Poverty Reduction and Gender Issues: The Government adopted in December 1998, a declaration on its poverty reduction strategy. This strategy is being improved within the context of the eligibility for the HIPC initiative. Some measures have been envisaged to protect expenses allocated to the social sectors. Concerning gender issues, in spite of some progress, women are still at a disadvantage compared to men. The project for poverty reduction and actions in favour of women should help to alleviate the problem. The Bank will continue dialogue with the Government in this area to ensure that poverty reduction remains a priority in the Government's policy and that the improvement of the conditions of women continues to be an essential component thereof.

4.5.5 Private Sector Development: In spite of the private sector opportunities that exist in Cameroon, the Bank financed only one operation in the country and it proved to be unsuccessful. The weaknesses of the legal and judicial system, to a large extent, explain these difficulties. The Bank will intensify dialogue with the Government in this area so as to help it to create an environment conducive to the development of businesses.

4.5.6 The Situation of the Bank Portfolio: The performance of the Bank portfolio in Cameroon is low both in terms of the physical implementation of projects as well as the fulfilment of the conditions precedent to effectiveness. A portfolio review was conducted in February 2000 and made it possible to review each project, identify its problems, define the actions to be taken to solve them, with a specific schedule for the fulfilment of these performance criteria as well as the adoption of monitoring provisions. The Bank should intensify its dialogue with the Government for the stringent implementation of this plan of action in order to improve the performance of the portfolio.

V. CONCLUSIONS AND RECOMMENDATION

5.1 Conclusions : Since the devaluation, economic growth has picked up again in Cameroon and most of the country’s macroeconomic aggregates have improved. The Government is implementing a vast reform programme supported by the international community with a view to restoring the country’s internal and external viability. This programme, based on the reduction of poverty, should improve the living conditions of the populations. The access of the country to the extended HIPC initiative will enhance the 29

Government’s poverty reduction means of actions. Consequently, the Bank Group’s operation strategy focuses primarily on this sector.

5.2 Recommendation: The Boards are invited to consider and adopt this Cameroon Country Strategy Paper for the 1999-2001 period. ANNEX I

CAMEROON: 1999-2001 COUNTRY STRATEGY PAPER

This map has been drawn by the African Development Bank Group exclusively for the use of readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank Group and its members any judgement concerning the legal status of a territory or any approval or acceptance of these borders. ANNEXE II Page 1/2 BANK GROUP OPERATIONS

(In Million UA)

SOURCE DATE OF DATE OF DATE OF DEADLINE DISBURSEMENT SECTOR/PROJECT/STUDY FINANC. APPROVAL SIGNATURE EFFECTIVE- FOR LAST AMOUNT GROSS SITUATION NESS DISBURSEMENT APPROVED BALANCE LOAN/GRA

AGRICULTURE

1 DENG DENG Forestry Complex ADB 14/10/75 30/10/75 01/07/79 30/0694 3.25 3.25 100.00 0.00 Completed 2 Douala and Yaounde Poultry Farms ADB 19/12/80 28/01/81 03/06/82 31/12/95 5.40 5.40 100.00 0.00 Completed 3. Haute SANAGA Integrated Rural Develop. ADB 24/08/82 26/10/82 14/12/83 31/12/95 10.00 9.22 92.20 0.78 Balance Cancelled ADF 26/08/82 08/04/83 03/08/84 31/12/95 7.37 7.09 96.20 0.28 Balance Cancelled 4. Feasibility Studies of the SODEBLE Project ADF 22/08/84 13/06/85 - - 0.83 0.00 0.00 0.83 Annulé 5. Integrated Rural Dev. of South-West Prov. ADB 22/09/86 02/02/87 16/06/88 31/12/99 21.89 7.94 36.3 13.95 Balance Cancelled ADF 22/09/86 02/02/87 10/05/92 31/12/99 15.00 2.64 17.6 12.36 Ongoing 6. South-West Fisher./Stockbreed. Dev. Study ADF 24/03/87 18/08/88 25/01/90 01/06/95 0.45 0.36 79.41 0.09 Balance Cancelled 7. North-West Province Integrated Rural Dev. ADB 19/12/89 27/12/90 10/07/91 30/06/00 4.55 3.40 74.7 1.15 Ongoing ADF 19/12/89 27.12/90 21/06/91 31/12/00 9.21 6.51 70.7 2.7 Ongoing 8. Development of Agricultural SMEs ADB 14/12/92 21/10/94 18/08/95 30/06/01 12.00 4.91 40.92 7.09 Balance Cancelled 9. National Agricultural Research Support Project ADF 15/07/98 08/12/98 01/10/99 31/12/05 7.00 0.00 0.00 7.00 At Start-up Phase 10. Stockbreeding and Fisheries Dev. Project ADF 16/12/98 05/02/99 25/03/00 31/12/05 4.59 0.00 0.00 4.59 At Start-up Phase 11. Project in Support of Agro-Forestry and Rural Forestery ADF 10/02/99 05/03/99 20/10/99 31/12/06 4.13 0.00 0.00 4.13 At Start-up Phase. TAF 10/02/99 05/03/99 20/10/99 31/12/06 0.78 0.00 0.00 0.78

SUB-TOTAL 106.45 50.72 48.00 54.94

TRANSPORT

1. Construction of the new Douala Airport ADB 22/12/72 09/06/73 01/06/74 31/12/75 3.00 3.00 100.00 0.00 Completed ADB 24/06/75 14/08/75 01/06/79 30/06/76 1.11 1.11 100.00 0.00 Completed ADB 31/03/76 03/05/76 30/07/77 30/06/76 0.65 0.65 100.00 0.00 Completed 2. Extension of the Douala Port ADB 21/12/76 13/01/77 11/01/77 31/03/82 5.00 5.00 100.00 0.00 Completed ADB 18/08/77 10/12/77 11/01/77 31/03/82 5.00 5.00 100.00 0.00 Completed 3. BAMENDA-MANFE-EKOK Road Study ADB 25/09/79 23/01/80 30/09/82 30/06/94 0.95 0.65 68.65 0.30 Balance Cancelled 4. DOUALA-YAOUNDE Road ADB 28/10/80 28/01/81 13/12/82 31/12/82 10.00 10.00 100.00 0.00 Completed 5. Constr. Of the New DOUALA Passenger ADB 08/06/82 26/10/82 30/03/84 30/06/94 11.33 9.70 85.61 1.63 Completed. Balance Cancelled Station ADB 22/02/83 08/04/83 07/06/84 31/12/89 22.80 22.80 100.00 0.00 Completed 6. Realign. Of the DOUALA-YAOUNDE Railway ADF 22/02/83 13/06/89 26/03/87 31/12/94 1.64 0.00 0.00 1.64 Not Implemented, Amount Reallocated 7. YAOUNDE-KRIBI Road Study ADB 12/03/85 02/02/87 23/09/88 30/06/94 47.15 47.07 99.82 0.08 Completed. Balance Reallocated 8. EBOLOWA-MBALMAYO Road Project ADB 22/09/86 20/11/89 06/08/90 30/06/96 18.22 10.08 55.32 8.14 Balance Reallocated 9 BAFOUSSAM-FOUMBAN Road Project ADB 17/06/91 25/09/91 11/02/93 31/12/97 95.00 38.16 48.3 56.84 Ongoing (UA 16 million was cancelled ) 10 Road Programme ADF 17/06/91 18/11/91 11/02/93 31/12/95 0.51 0.48 94.00 0.03 Being Implemented.

SUB-TOTAL 222.36 153.7 69.12 68.66 ANNEX II Page 2/2 (Million UA)

SOURCE DATE OF DATE OF DATE OF DEADLINE DISBURSEMENT SECTOR/PROJECT/STUDY FINANC. APPROVAL SIGNATURE EFFECTIVE- FOR LAST AMOUNT GROSS SITUATION NESS DISBURSEMENT APPROVED BALANCE LOAN/GRA

PUBLIC UTILITIES

1 Sanitation of the Yaounde Valley Station ADF 30/10/81 26/11/81 31/10/83 30/0684 6.91 0,66 9,62 6,25 Terminated, balance reallocated 2. MAPE Dam ADB 28/08/85 10/12/85 26/06/86 30/06/94 10.62 9,88 93,03 0,74 Completed , balance cancelled 3. YAOUNDE Sanitation Study ADF 18/06/86 18/08/88 30/05/90 31/12/98 2.02 1,00 49,5 1,02 Nearing Completion 4 DOUALA Stormwater Drainage ADB 14/12/92 21/10/94 12/09/95 30/.06/01 32.33 0,00 0,00 32,33 Cancelled 5 DWSS Study in 16 Secondary Centres TAF 10/12/97 13/02/98 - 31/12/01 0.76 0,00 0,00 0,76 At start-up stage 6 Rural Electrification Master Plan TAF 10/12/97 13/02/98 17/06/99 31/12/00 0.82 0,12 14,6 0,70 Just started.

SUB-TOTAL 53.46 11.74 21.96 41.76

INDUSTRY

1 Line of Credit to BCD ADB 23/01/79 22/02/79 30/06/81 30/12/94 5.00 1,80 36,00 3,20 Terminated and balance cancelled 2 Douala Shrimp Landing Project ADB 16/09/93 20/09/93 25/10/93 31/12/95 2.46 2,46 100,00 0,00 Completed .

SUB-TOTAL 7.46 4.26 57.10 3.20

SOCIAL

1 Technical Education Teaching School ADB 24/08/82 28/10/82 02/08/84 30/06/94 12.00 12,00 100,00 0,00 Terminated, balance reallocated 2 Equipment of 6 Health Facilities ADF 14/12/88 20/11/89 10/01/91 31/12/94 6.75 6,73 99,70 0,02 Terminated, balance reallocated 3 Health Pre-Investment Study ADF 23/08/89 20/01/90 14/08/91 31/12/97 1.33 1,06 41,35 0,78 Ongoing 4 Social Dimensions of Adjustment ADB 19/11/90 27/12/90 08/07/91 31/12/97 9.44 5,38 24,89 7,09 Ongoing ADF 19/11/90 27/12/90 27/12/91 31/12/97 2.92 2,66 41,44 1,71 Ongoing 5 Poverty Reduction Project ADF 03/12/97 13/02/98 11/10/99 31/12/04 14.1 0,00 0,00 14,1 At start-up stage TAF 03/12/97 13/02/98 11/10/99 31/12/04 0.70 0,00 0,00 0,70 At start-up stage. 6. Education Poject II ADF 14/07/99 11/02/00 - 31/12/04 7.50 0,00 0,00 7,50 Awaiting effectiveness

SUB-TOTAL 54.74 27.83 45.59 26.91

MULTI-SECTOR

1. Structural Adjustment Programme ADB 23/08/89 20/11/89 30/01/90 30/06/94 100.00 100,00 100,00 0,00 Completed 1 Structural Adjustment Programme II. ADF 04/12/97 13/02/98 3004/98 31/12/00 13.02 13,020 100,00 0,00 Completed 2 Supplementary Financing Mechanism I ADF 12/11/98 08/12/98 29/01/99 31/12/99 9.87 9,87 100,00 0,00 Completed 4. Supplementary Financing Mechanism II ADF 05/02/99 05/03/99 29/06/99 05/02/00 9.54 9,54 100,00 0,00 Completed .

SUB-TOTAL 132.43 132.43 100.00 0.00

The net balance stands at UA 102.87 million and TOTAL 576.90 380.68 66.00 196.22 the net disbursement rate is 78.7%. ANNEX III Page 1/6 CAMEROON : CSP MATRIX

BANK DIAGNOSTIC STRATEGIES/ MEASURABLE SCHEDULE INSTRUMENT PROBLEMS GOVERNMENT ACTIONS INDICATORS Cofinancier or Loan Non-Loan Partner

Macroeconomic Stability and Sustainable Growth

Budgetary Policy

Reform of the fiscal policy to modernize - Reform forestry taxation. - Non-oil revenue increase from 1999-2001 SAP III IMF/World and widen the tax base. - Consolidate the introduction of VAT. 13% of GDP in 1998/99 to 14.8% Bank - Introduce a land tax based on the land register of GDP in 2001/02 Rationalization of expenditures and and the lease price. strengthening of their control. - Introduce an income tax levied on the income of natural persons. - Eliminate tax exemptions. - Allocate a taxation identification number to all the tax payers. - Conduct an annual review of the composition of public expenditure. - Allocate adequate credits to cover the consumption of the public services and avoid the accumulation of arrears. - Severely sanction employees convicted of misappropriation of public funds. - Strengthen the quarterly monitoring of the expenditure effected. ANNEX III Page 2/6

BANK DIAGNOSTIC STRATEGIES/ MEASURABLE SCHEDULE INSTRUMENT PROBLEMS GOVERNMENT ACTIONS INDICATORS

Stability of the Financial Sector

Facilitate the development of the financial - Create a securities market. - A local financial market has been 2000 SAP III IMF/World market. set up and a regional securities Bank market has been established.

Strengthen the regulation and control of - Define prudential ratios applicable to non- - COBAC has defined prudential 2000 the non-banking financial institutions, banking financial institutions. ratios for the credit cooperatives particularly the cooperative associations and they are approved by and insurance companies. MINEFI. The CIMA code is - Strengthen the insurance sector. applied. 2001 - Rehabilitate the activities of the credit cooperatives.

Foreign Trade and External Debt

Promote external competitiveness. - Eliminate surcharges levied on the - No import surcharges. 2000 SAP III IMF/World importation of flour, and cement. - A plan of action for the Bank - Continue implementation of the programme Competitiveness Committee 1999-2001 of action of the Competitiveness Committee. adopted.

- Conduct negotiations with the London Club. Alleviate the burden of external debt - Finalize the preparatory documents on the - Agreement signed with the 2000 HIPC initiative. London Club. - HIPC documents finalized. June 2000 ANNEX III Page 3/6

BANK DIAGNOSTIC STRATEGIES/ MEASURABLE SCHEDULE INSTRUMENT PROBLEMS GOVERNMENT ACTIONS INDICATORS

Regional Integration

Promote trade within the framework of - Seek financing for inter-state roads within - Financing of the inter-state roads 1999-2001 Project Loan Dialogue CEMAC. CEMAC. has been secured. - Settlement of arrears owed to ECCAS. - Arrears owed to ECCAS have 2000 Continue the rehabilitation of CEEAC. been settled.

Environmental Protection

Promote ecologically viable exploitation - After conduct of the relevant studies, levy - Study on forestry tax reform has 1999-2001 SAP III IMF/World of the forests and develop effective local forestry taxes which encourage high value- been conducted and the Bank processing industries. added activities and promote ecosystems. recommendations have been implemented.

Private Sector Development

Privatization Programme - Finalize the process for the privatization of CDC, CAMTEL, SNEC and SONEL, 2000 SAP III IMF/World Accelerate the implementation pace of the following enterprises: CDC; CAMTEL; have been fully privatized. Bank the privatization programme. SNEC; and SONEL. ANNEX III Page 4/6

BANK DIAGNOSTIC STRATEGIES/ MEASURABLE SCHEDULE INSTRUMENT PROBLEMS GOVERNMENT ACTIONS INDICATORS

Liberalization of the Economy

Continue the policy of State divestiture. - Prepare and implement the divestiture - Strategy prepared and plan of 2000-2001 SAP III IMF/World strategy and redefine the role of the “Société action defined. Bank Nationale d’Investissement”- SNI).

Infrastructure and Public Utilities - Reduce the costs and time spent in the - Restructuring of the Douala port. 1999-2001 SAP III IMF/World Douala port. - Process for pre-qualification of Bank Improve access to quality public services - Privatize the management of the water, bidders for CAMTEL, SONEL + as well as transport services, by telephone and electricity companies and SNEC completed. privatizing them and transferring the privatize road maintenance as well. - Road maintenance privatized. allocated expenses to infrastructure. - Increase the expenditure allocated to - Share of public works expenditure infrastructure. increases from 0.7% of GDP in 1998/99 to 2.5% of GDP in 2001/02

Institution Building - Adopt and implement a plan for - Legal framework rehabilitated. 1999-2001 Governance strengthening the legal and judicial system. - Support Project Improve the legal and judicial - Streamline positive law with the OHADA - Positive law streamlined with the environment and ensure the security of Treaty. OHADA Treaty. the commercial contracts.

Poverty Reduction

Human Capital

Promote human resources by developing - Increase the expenditure allocated to Proportion of credits allocated to 1999-2001 Education Project education and health. education and health. education and health increases from 3% ongoing and Health of GDP in 1998/99 to 5% of GDP in Project envisaged 2001/02. ANNEX III Page 5/6

BANK DIAGNOSTIC STRATEGIES/ MEASURABLE SCHEDULE INSTRUMENT PROBLEMS GOVERNMENT ACTIONS INDICATORS

Gender Equality

Promote the status of women in society. - Facilitate the access of women to productive - Increase in the income of the 1999-2003 Poverty Reduction Dialogue resources; beneficiaries of micro-credits Projet; actions in - Increase and develop the productivity of within the framework of projects favour of women are women’s work. for poverty reduction and actions ongoing - Promote the fundamental rights of women. in favour of women, half of the beneficiaries of which will be women by the year 2003.

Programme Focusing on the Poor

Alleviate the impact of and - Ensure the reintegration of retrenched staff - 6000 employees reintegrated. 1999-2001 SAP III IMF/World the civil service reform. into the economic fabric through programmes Bank prepared by the National Employment Fund.

Good Governance

4.1 Promote the role of civil society - Create an appropriate legal framework for the - Texts governing NGOs and the 1999-2001 Project on good CIDA associations and NGOs. associations updated. governance ANNEX III Page 6/6

BANK DIAGNOSTIC STRATEGIES/ MEASURABLE SCHEDULE INSTRUMENT PROBLEMS GOVERNMENT ACTIONS INDICATORS

Fight Against Corruption

Ensure sound management of the public - Institute proceedings in the event of poor - Control Administrations 1999-2001 Project on good IMF/World resources management or misappropriation of public strengthened. governance Bank funds or fraud. - Remunération of this category of - Strengthen the Higher State Control Office staff improved. and the General Inspectorate of the Ministry of Justice. - Motivate the managers of the tax and custom administrations as well as the Treasury accountants and cashiers.

Accountability and Transparency

Promote transparency in the management - Audit the public contracts award system. - Audit conducted. 1999-2001 Project on good IMF/World of public affairs. - Enhance the dissemination of judicial - Regular publication of the Official governance Bank information. Gazette. - Enhance the system for the dissemination of - Strengthened statistical bodies. economic and budgetary statistics.

Annex V Page 1/2 CAMEROON : Economic and Financial Indicators

1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/2001 2001/02

(Percentage of Annual Variation, Except where Indicated)

National Accounts and Prices

GDP at Constant Prices (1989/90) -2.5 3.3 5.0 5.1 5.0 4.4 4.8 5.3 5.5 Including non-oil GDP -2.2 4.1 5.5 5.0 5.0 4.4 5.5 5.7 5.7 GDP Deflator 11.0 17.0 5.4 2.7 1.1 -1.2 2.1 2.0 2.0 Consumer Prices (12-month average) 12.7 30.9 3.6 4.1 3.9 2.9 2.0 2.0 2.0 Consumer Prices (end of period) 33.8 13.4 4.6 7.0 2.2 2.2 2.0 2.0 2.0 Nominal GDP (billion CFAF) 3 416 4 130 4 571 4 932 5 240 5 406 5 785 6 215 6 688 Oil Production ('000 barils/day) 122 106 101 108 115 119 108 105 104

ForeignTrade

Exports (SDR) -12.5 8.5 7.5 19.4 -6.3 -6.0 7.6 7.0 8.9 Including Crude oil -21.9 -9.9 -0.8 36.0 -16.7 -10.4 15.6 -7.7 0.0 Import (SDR) 0;4 -1.1 13.1 16.5 13.4 4.2 4.7 7.0 7.2 Exports (volume) -11.0 2.3 7.4 13.8 11.1 8.2 2.3 5.0 5.7 Average Price of Oil at Export (US$/baril 14.2 15.6 16.7 19.7 14.5 12.2 15.2 14.9 15.1 Nominal Effective Exchange Rate -22.7 -26.5 6.5 -2.4 1.5 - - - - Real Effective Exchange Rate -24.7 -11.9 6.4 -1.8 -7.7 - - - - Average Exchange Rate (CFA/SDR) 609 776 743 767 815 - - - - Terms of Trade 0.9 9.9 -8.6 5.1 -4.5 -15.9 7 0.9 3.1 Non-Oil Price Index at Export 86.9 33.3 -21.5 -4.4 9.2 -12.6 2.5 4.2 4.0

Money and Credit (end of period)

Net Internal Assets 33.7 2.2 -3.4 -5.8 12.7 6.9 6.8 4.3 1.1 Net Claims on the Public Sector 2.6 2.5 -3.0 0.0 1.8 5.2 0.0 -2.3 -2.5 Credits to the Economy -9.7 3.4 5.0 3.3 30.3 8.9 12.1 11.8 6.5 Money Supply (M2) 17.7 6.1 -5.1 13.8 7.8 10.2 12.5 13.5 10.5 Speed of Monetary Circulation (non-oil 5.0 5.1 6.4 8.1 7.6 7.2 6.9 6.6 6.4 GDP/M2)

Sources : Cameroonian Authorities, IMF Services Annex V Page 2/2 CAMEROON : Economic and Financial Indicators

1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/2001 2001/2002

Financial Operations of the State

Total Revenue -20.2 55.2 22.4 10.9 17.1 -1.2 14.8 12.1 6.5 Including non-oil -15.5 58.0 19.8 1.9 23.8 9.5 10.6 12.4 12.7 Total Expenditure 4.7 11.9 10.2 7.7 18.2 9.2 10.5 9.8 5.5 Recurrent Expenditure 0.4 26.6 10.6 2.7 10.6 4.3 0.9 9.2 4.4 Capital Expenditure 95.7 -72.7 38.1 51.1 41.7 12.7 69.8 11.7 4.2

(Percentage of GDP) Gross National Savings 11.2 14.1 11.2 13.4 15.7 14.4 16.6 17.1 18.1 Gross Investments 15.3 14.5 15.4 16.2 18.4 18.8 19.8 20.1 20.5 Financial Operations of the State

Revenue of the Central Administration 10.1 12.9 14.3 15.1 16.2 15.5 16.6 17.3 17.2 including non-oil revenue 7.9 10.3 11.2 11.0 12.3 13.0 13.5 14.1 14.8 Expenditure of Central Administration 19.3 17.9 16.1 16.1 17.9 18.9 19.6 20.0 19.6 Overall Budgetary Balance (excluding grants) -9.2 -4.9 -1.8 -1.0 -1.7 -3.4 -2.9 -2.6 -2.4 Primary Balance 0.8 3.8 5.4 5.8 5.9 4.6 5.2 5.4 5.4

External Sector Current Account Balance (including grants) -4.2 -0.4 -4.1 -2.8 -2.7 -4.4 -3.2 -3.0 -2.4 External Public Debt 122.7 97.2 89.0 83.5 87.8 87.9 78.7 75.9 70.0

(Percentage of Goods and Services Exports, Except Where Indicated)

Due Debt Service 57.2 48.2 59.5 44.3 40.4 45.4 42.2 33.2 29.3 Due Debt Service Compared to Budgetary Revenue 125.4 96.4 93.4 74.1 66.2 71.2 65.7 50.0 46.2 Effective Debt Service 43.7 14;9 24.9 19.6 16.1 - - - -

Sources : Cameroonian Authorities and IMF Service Annex VI

CAMEROON Gross Domestic Product at Constant 1989/90 Prices (in billion CFAF)

1993/94 1994/95 1995/96 1996/97 1997/98

Primary Sector 854.7 929.3 998.2 1 073.6 1 146.4

Food Crops 398.9 431.7 462.3 493.5 527.0 Export Crops 179.6 208.3 229.5 250.5 268.3 Stockbreeding + Hunting 142.9 138.1 141.6 148.9 157.4 Fisheries 6.3 6.6 7.0 7.3 7.7 Forest 126.9 144.6 157.9 173.4 185.9

Secondary Sector 661.4 645.4 674.6 726.3 781.9

Mining Sector 166.8 149.7 142.0 151.5 161.5 Manufacturing Sector 362.1 357.2 385.6 416.6 450.1 Water-Electricity-Gas 56.3 80.4 85.9 92.0 98.6

Tertiary Sector 1 380.5 1 418.5 1 449.5 1 475.5 1 609.1

Excise Duties - ….. 67.2 58.3 81.6 92.0 103.2

GDP at Market Prices 2 953.8 3 051.4 3 204.0 3 367.4 3 537.5

GDP at Market Prices 2953.8 3051.4 3204.0 3367.4 3537.5

Consumption 2 398.5 2 504.5 2 646.3 2 805.1 2 943.9

Private 2 055.5 2 158.5 2 235.8 2 457.9 2 540.9 Public 343.0 346.0 410.5 347.2 403.0

Investment 440.4 411.1 445.8 487.9 575.2

Stock Variation Balance 0.0 0.0 0.0 0.0 0.0

Net External Balance 114.9 135.8 112.0 74.4 18.4

NFS Exports 684.7 711.7 773.8 845.3 891.1 NFS Imports 569.8 575.9 661.9 770.8 872.7 Annex VII Page 1/2

CAMEROON : Table of the Financial Operations of the State (In Billion CFA Francs)

1993/94 1994/95 1995/96 1996/97 1997/98 1998/99

Total Revenue 344 534 654 745 848 838 Petroleum Sector Revenue 74 107 143 204 204 134 Non-Oil Revenue 270 427 511 541 647 704 Excise Duty 43 58 65 101 131 174 Special Tax on Oil Production 36 28 50 58 58 65 International Trade Taxes 62 104 126 127 143 138 Goods and Services Taxes 10,4 193 209 200 246 275 Other Revenue, Net of Privatizations 25 44 61 55 66 52

Total Expenditure 659 738 782 793 937 1.032 Recurrent Expenditure, including: 545 690 732 705 780 825 Wage Bill 207 194 188 213 259 275 Other Goods and Services 50 106 117 130 136 167 Grants and Transfers 48 57 77 63 85 100 Scholarships and Grants 25 27 31 34 45 55 Pensions 23 30 33 27 29 43 Separation Packages (POE) 0 0 13 1 1 2 Due Interests 240 333 350 299 299 283 On External Debt 212 230 258 273 270 255 On Internal Debt 28 32 44 27 29 28 Investment Expenditure, including: 114 47 44 74 153 194 Investment on External Resources 24 25 13 28 88 121 Investment on Budgetary Resources 12 19 186 39 88 47 Restructuring Expenditure 78 3 13 2 27 Non-Classified Expenditure 0 1 6 6 -89 4

Balance, Commitment Base -315 -204 -422 -48 -516 -185

Variation in Arrears (net) -473 115 -232 -3 -324 -46 External -429 319 -190 256 -19 40 Internal -44 -204 -550 -25ç 1 -86

Balance, Cash Base -788 -89 -51 -605 -232

Sources : Cameroonian Authorities, IMF Service Annex VII Page 2/2 CAMEROON : Table of the Financial Operations of the State (In Billion CFA Francs)

1993/94 1994/95 1995/96 1996/97 1997/98 1998/99

Financing 788 89 550 51 605 222

External Financing (net) 698 -71 439 -173 486 181 Amortization -210 -281 -348 -276 -282 -332 Disbursements 908 287 759 103 768 514 Projects 24 25 13 28 88 121 Programmes 175 78 113 0 177 115 Debt Rescheduling 627 153 633 75 504 278 Internal Financing (net) including: 90 160 111 223 118 41 Banking System 56 12 -24 -4 6 15 Non-bank 34 148 19 -1 -25 -7 Income Accruing from the Privatizations 0 0 -9 22 1 11 Financial Sector 0 0 1 -6 -13 -4

Residual Financing Needs 0 0 0 0 0 0 Annex VIII Page 1/2 CAMEROON : Balance of Payments (In Billion CFA Francs)

1993/94 1994/95 1995/96 1996/97 1997/98 1998/99

Current Account Balance -142 -17 -110 -139 -141 -239

Trade Balance 181 305 281 254 209 104

Exports FOB 623 862 884 983 1 084 986 Petroleum Products 263 302 286 402 356 309 Non-oil 361 561 597 581 728 677 Imports, FOB -442 -557 -602 -729 -875 -882

Services (net) -333 -326 -408 -440 -414 -413 Interest on Public Debt -214 -232 -261 -273 -270 -254 Others -119 -94 -148 -167 -144 -158

Transfers (net) 9 5 17 47 63 69 including: official : 26 16 14 0 15 10 Entries 40 37 31 57 72 79 Exit -31 -33 -14 -10 -9 -10

Capital Account -116 -266 -217 -194 -62 -61

Public Capital (net) -16 -186 -245 -248 -32 -96 Loan Programmes 170 70 90 0 162 115 Project Loans 24 25 13 28 88 121 Amortization -210 -281 -348 -276 -282 -332

Private Capital (net) -99 -80 28 54 -30 35 Petroleum Sector -41 -5 238 2 -26 -17 Others -59 -75 5 52 -4 52

Errors and Omissions -164 -214 1 79 0 0

Balance of Payments -422 -496 -326 -254 -203 -300

Annex VIII Page 2/2 CAMEROON : Balance of Payments (In Billion CFA Francs)

1993/94 1994/95 1995/96 1996/97 1997/98 1998/99

Financings 422 496 326 254 203 300 BEAC 141 -7 -41 -77 23 -17 Including IMF Drawdowns (net) 6 -2 18 -4 35 33 Other Reserves 135 -5 -59 -73 -12 -49 Debt Rescheduling 627 153 599 75 504 277 Debt Reduction 83 31 0 0 0 0 Variations in Arrears (net) -429 319 -232 256 -324 40 Financing Gap 0 0 0 0 0 0 Annex IX

CAMEROON : Monetary Situation (In Billion CFA Francs)

1993/94 1994/95 1995/96 1996/97 1997/98 1998/99

External Assets (net) -316.0 -288.7 -278.8 -179.1 -170.5 -171.8 BEAC -352.6 -345.8 -288.3 -204.7 -191.3 -207.1 Commercial Banks 36.6 57.1 9.5 25.6 20.7 35.4

Internal Assets 1 016.5 1 031.9 989.6 887.1 930.6 1 024.4 Internal Credit 824.3 854.7 869.1 832.4 905.8 999.1 Net Claims on the Public Sector 476.5 493.9 450.2 472.2 462.2 517.0 Net Claims on the State 435.8 447.3 400.3 423.5 398.6 456.4 Credit to Financial Institutions 3.2 4.6 9.3 12.0 14.8 6.7 Credit to the Economy 344.6 356.2 409.7 348.1 428.8 475.4 Other Items (net) 192.2 177.2 120.5 54.7 24.8 25.3

Money and Quasi-Money 700.5 743.2 710.8 708.0 760.1 852.7 Monetary Circulation 109.6 106.5 94.5 180.3 205.8 200.0 Deposits 590.9 636.7 616.3 527.3 554.3 652.7

Sources : Cameroonian Authorities and IMF Service Annex X

CAMEROON : External Resource Requirements (In Billion CFAF)

1999/2000 2000/2001 2001/2002 TOTAL

RESOURCE REQUIREMENTS 1,131 543 529 2,203

Current Account (including transfers) 187 186 161 -534 Debt Amortization 376 276 273 -925 Replenishment of Reserves 45 81 95 221 Stock of Debt Arrears 523 0 0 523

IDENTIFIED FINANCING 608 295 362 1,265

Project Assistance 165 184 206 555 Programme Assistance 94 94 100 288 Debt Rescheduling 322 0 0 322 Other Capital Flows, Errors and Omission 27 17 56 100

RESIDUAL REQUIREMENTS 523 248 167 938

Sources : Cameroonian Authorities, IMF