AFRICAN DEVELOPMENT BANKAFRICAN DEVELOPMENT FUND

CAMEROON

COUNTRY STRATEGY PAPER

For the 1999 – 2001 Period

COUNTRY DEPARTMENTCENTRAL REGION

MARCH 2000

TABLE OF CONTENTSPage

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

I. INTRODUCTION..................................................................................................... 1

II. RECENT DEVELOPMENTS ................................................................................. 1

2.1 Macro-Economic Context ............................................................................. 12.2 Climate of the Private Sector Enterprises ................................................... 62.3 Crosscutting Issues ........................................................................................ 72.4 Main Development Constraints ................................................................... 11

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

3.1 Key Elements of the Government's Agenda ............................................... 123.2 Evaluation of the Agenda .............................................................................. 163.3 Risks and Challenges .................................................................................... 173.4 Strategic Partnership......................................................................................18

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

4.1 Evaluation of the Past Strategy .................................................................... 224.2 Bank Group Portfolio and Management ..................................................... 224.3 Medium-Term Bank Group Strategy ........................................................... 244.4 Lending Programme.......................................................................................274.5 Issues Requiring Dialogue............................................................................ 28

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

5.1 Conclusions ................................................................................................... 285.2 Recommendation…………………………………….………………………………

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LIST OF THE BOXES..................................................................................................... Page

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

LIST OF ANNEXES

I. Map of CameroonII. Bank Group OperationsIII. CSP MatrixIV. Competitive Social-Economic Indicators V. Economic and Financial IndicatorsVI. Gross Domestic Product at Constant 1989/90 PricesVII. Table of the Financial Operations of the StateVIII. Balance of PaymentsIX. Monetary SituationX. External Reserve Requirements

MONETARY EQUIVALENTS(March 2000)

UA 1 = US$ 1.33928UA 1 = CFAF 904.374

Financial Year :1 July - 30 June

ACRONYMS AND ABBREVIATIONS

CIDA : Canadian International Development AgencyAFD : Agence française de développementAGROCOM : Association des opérateurs économiques des filières fruits etlégumesADB : African Development BankABEDA : Arab Bank for Economic Development in AfricaEIB : European Investment BankBEAC : Bank of Central African StatesBICIC : Banque internationale pour le commerce et l'industrie duCamerounBICEC : Banque internationale du crédit et de l'épargne du

CamerounBMBC : Banque Méridien-BIAO-CamerounCAC : Crédit agricole du CamerounCAEF : Chambre d'agriculture, d'élevage et de la forêtCAMAIR : Cameroon AirlinesCAMSHIP : Société de transports maritimes du CamerounCAMTAINER : Société nationale de transport des containers et de transit du

CamerounCAMTEL : Société de télécommunications du CamerounSAC : Structural Adjustment CreditCCIM : Chambre de commerce, de l'industrie et des minesCCAD : Comité de coordination des aides au développementCDC : Cameroon development CorporationECA : Economic Commission for AfricaECCAS : Economic Community of Central African StatesCEMAC : Economic and Monetary Community of Central AfricaCENAME : Centre national d'approvisionnement en médicaments essentiels CFC : Crédit foncier du CamerounCNCE : Centre national de commerce extérieurCOBAC : Banking Commission of Central AfricaCOPAX : Conseil consultatif pour la paix et la sécuritéEPFP : Economic Policy Framework PaperCSP : Country Strategy PaperECAM : Enquêtes camerounaises auprès des ménagesPEP : Participatory Evaluation of PovertyUSA : United States of AmericaADF : African Development FundESAF : Enhanced Structural Adjustment FacilityCFAF : Franc of the African Financial CommunityIMF : International Monetary FundFNE : Fonds national de l'emploiFOGAPE : Fonds de garantie et de crédit aux PME

FPEC : Fédération des petites et moyennes entreprises du commerceGICAM : Groupement inter-professionnel du Cameroun

ACRONYMS AND ABBREVIATIONS cont'd)

HDI : Human Development IndexINTELCAM : Société de télécommunications internationales du CamerounISDH : Indicateur sexospécifique de développement humainADPL : Agricultural Development Policy LetterSFM : Supplementary Financing MechanismMINCOF : Ministry of Women's AffairsMINEF : Ministry of the Environment and ForestOHADA : Organization for the Harmonization of Commercial Law in AfricaWHO : World Health OrganizationNGO : Non-Governemental OrganizationONCC : Office national de café et de cacaoONPC : Office national des ports du CamerounSAP : Structural Adjustment ProgrammeSME : Small and Medium-Size EnterprisesGDP : Gross Domestic ProductPNGE : Plan national de gestion de l'environnementUNDP : United Nations Development ProgrammeHIPC : Highly Indebted Poor CountriesRRP : Regional Reform ProgrammeSPA : Special Programme for AfricaCAR : Central African RepublicDRC : Democratic Republic of CongoREGIFERCAM : Régie nationale des chemins de fer du CamerounRMDH : Rapport mondial sur le développement humainSCBC : Standard Chartered Bank of CameroonSGBC : Société générale de Banque du CamerounSNEC : Société nationale des eaux du CamerounSNI : Société nationale d'investissementsSOCAPALM : Société Camerounaise de palmeraiesSODECOTON : Société de développement cotonnierSODEPA : Société de développement et d'exploitation des productionsanimalesSONARA : Société nationale de raffinageSONEL : Société nationale d'électricitéSOSUCAM : Société sucrière du CamerounSYNDUSTRICAM : Syndicat des industries du CamerounCET : Common External TariffTA : Turnover TaxGPT : Generalized Preferential TariffVAT : Value Added TaxUA : Unit of AccountUDE : Union douanière et économiqueUDEAC : Central African Customs and Economic UnionEU : European Union

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EXECUTIVE SUMMARY

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

2. Implementation of this programme produced very encouraging macro-economicresults. Indeed, the 1994-1998 period was characterized by the resumption of growth, with anaverage annual growth rate of 4.6%. The key macro-economic aggregates also improvedduring the period. The inflation rate was brought down from 33.8% to 2%, the budget deficitwas reduced from 9.2% of GDP to 3.4% of GDP and the overall balance of payments deficitfrom 7.8% to 5.5% of GDP. The budgetary revenue increased from 10.1% of GDP in1993/94 to 16.2% in 1997/98 and expenditure dropped from 19.3% of GDP in 1993/94 to17.9% in 1997/98. The share of the education budget increased from 9.1% of the total budgetin 1996/97 to 11.6% in 1998/99 and that of the health budget rose from 2.5% in 1996/97 to3.8% in 1998/99. Driven by exports of cocoa, coffee, cotton, timber and manufacturedproducts, which were given a new lease of life by the devaluation, total exports grew at anaverage annual rate of 12.2%. Imports also increased at an average annual rate of 18.8%, inkeeping with the overall trend of economic activity. Nevertheless, the trade balance remainedpositive 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 theliving conditions of the populations. Indeed, more than half of the population still lives belowthe poverty line. With regard to the human development index, Cameroon ranks 134 out of174 countries. The highest proportion of poor are found in the rural areas, particularly in thethree northern provinces (Far North, North and Adamaoua). The most vulnerable categoriesare: women operating in the agricultural and informal sectors; small-scale subsistencefarmers; craftsmen; uneducated youths and school dropouts aged between 20 and 24 years andthe 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 respectto the gender-specific human development index. In the same vein, 22% of the potentialworkforce is unemployed. Notwithstanding the efforts deployed in the social sectors, only41% of the population has access to safe water supply and 50% are connected to thesanitation 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 anduneven distribution, to the detriment of the rural areas.

4. The country is still faced with major challenges, including poverty, generalizedcorruption and the debt burden. Indeed, outstanding external debt was 87.9% of GDP in1998/99 and the debt service stood at 45.4% of non-factor goods and services export earnings

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and 71.2% of budget revenue. Eligibility of the country for the HIPC initiative, which shouldbe decided in September 2000, should alleviate the debt burden. The other constraints thecountry has to contend with include: (i) the level of domestic savings, which still remainsbelow that of the investments required to ensure vigorous economic growth; (ii) the weaklegal 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) theinefficient and expensive State interventions in the agricultural sector as well as theinefficient statutory monopolies in some sectors, particularly the public utilities sector; (v)deterioration of the food security situation and the high level of nutritional deficiencies; (vi)the insufficiency of financial resources allocated to the social sectors; and (vii) deteriorationof the transport infrastructure, which renders the transportation of agricultural produce moredifficult and expensive.

5. In the drive to overcome these obstacles, the Government defined a medium-strategyfor the 1999-2002 period, with a view to enhancing macro-economic stability and maintainingthe economy on the path to sustainable development. The Government plans to: (i) promotevigorous and sustainable growth and distribute its dividends more fairly; (ii) enhance thesupply 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 thegroups 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% in2001/2002; (b) maintain the inflation rate at 2%; and (c) limit the current external deficit at2.4% of GDP. This programme, the first phase of which will be completed in June 2000, willbe backed during its second phase by a poverty reduction and growth facility of the BrettonWoods Institutions.

6. These objectives will be attained through the implementation of budgetary, monetaryand financial policies, structural policies aimed at the continuation of the privatizationprogramme, promotion of good governance, sectoral policies in the agricultural, energy andtransport sectors as well as human resource development policies. The country’s externalfunding requirements for the 1999/2000 - 2001/2002 period are estimated at: CFAF 2,203billion, including CFAF 534 billion under the current account (inclusive of transfers); CFAF925 billion in debt retirement; CFAF 523 billion for fluctuations in arrears; and CFAF 221billion for replenishing the foreign exchange reserves. The identified funding amounts toCFAF 1,265 billion, that is 57.4% of requirements, and comprises CFAF 555 billion inproject financing, CFAF 288 billion in programme financing, CFAF 100 billion in privatecapital and CFAF 322 billion in debt rescheduling. The residual financing gap is estimated atCFAF 938 billion and efforts are being deployed to secure funding for this shortfall fromparticipants to the Special Programme for Africa (SPA).

7. Considering the country’s constraints, this programme is relevant. It is realistic andfeasible, provided that the recommended measures are stringently implemented by theGovernment to ensure the continued assistance of the international community. However,some strategies deserve to be supported, particularly the poverty reduction strategy, to enableit to better focus on the vulnerable groups, and the governance programme, which is expectedto give priority to the critical areas of poverty, particularly the health, education and publicworks sectors, which are yet to become fully transparent. However, there are three riskswhich could hinder the implementation of the programme, namely: developments in the termsof trade of the export commodities, especially petroleum; the Government’s commitmentwhich could be dampened by subsequent socio-political unrest and the relatively limitedinstitutional capacity of the Government. Mitigation measures were adopted to reduce theserisks. They include the priority given to the mobilization of non-oil revenue under the State

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budget, programmes for integrating into the economic fabric retrenched public sector staffand the technical assistance planned by the different donor agencies to make up for thecountry’s institutional shortcomings.8. As one of Cameroon’s main donor agencies, the Bank Group will contribute to theefforts 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 anet 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 Banks and Industry (0.9%). As at 31 January 2000, cumulativedisbursements amounted to UA 380.68 million, that is a disbursement rate of 78.7%. Theactive portfolio comprises 13 projects for a total of UA 178.88 million and a disbursementrate 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 andgrants as well as delays in the physical implementation of projects; (ii) the low rate ofmobilization of the national counterpart contributions; (iii) the irregular transmission ofquarterly progress reports and audit reports; (iv) the weakness of the project’s accountingservices; and (v) problems of communication with the Bank. It should be pointed out that inthe past, project implementation also suffered from the repeated imposition of sanction onthe country for arrears.

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

10. Furthermore, lessons have been learnt from the project implementation experience andthey could be useful in future. These involve: definition of optimal project sizes to avoidfrequent reformulations as in the past; resorting systematically to contract work instead offorced account and whenever possible, limit the duties of the executing agency to thecoordination of activities and monitoring-evaluation while entrusting the other duties toqualified bodies, particularly the NGOs; associating the beneficiary groups in project designand implementation; and making provision in the project costs for the auditing of the accountsas 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 moreon poverty reduction. They take into account the past strategy from which lessons have beenlearnt. They will be based on the conclusions of the participatory evaluation of poverty thatwas 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 declarationadopted in December 1998. The main concerns expressed by the poor concern the limitednature or even the non-existence of monetary income, the problems relating to hunger,nutritional deficiencies and food shortages, the health situation, long distances from thecentres of economic activity, the feeling of helplessness and the inability to make oneselfheard. The Bank strategy will therefore seek to contribute to addressing these concernsexpressed by the poor.

12. This strategy hinges on two basic principles: (a) action on the general conditionrequired for poverty reduction and based on the promotion of economic growth so as toincrease employment and income-earning prospects and involve the poor in decision-making

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on matters concerning them, in the drive to strengthen social cohesion and the well-being ofthe populations; and (b) specific actions aimed at the poor populations and which seek toimprove their living conditions. The promotion of economic growth will be underpinned by:(i) the improvement in the competitiveness of the Cameroonian economy through thecontinuation of economic and institutional reform operations; (ii) development of the privatesector through the enhancement of the business environment; (iii) the promotion of aneffective public administration through the adoption of principle of good governance; and (iv)the creation of growth-supporting infrastructure, particularly transport infrastructure, to openup the production areas. The integration of the poor will be based on their participation in thedecision-making process through the promotion of responsible citizenship and thestrengthening of civil society. Regarding the specific actions, they concern properly-targetedactivities that seek to improve the living conditions of the populations, particularly thedisadvantaged groups in the poor areas, by strengthening food security, rehabilitating the livingenvironment 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 operationstherein 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 thecomplementarity between the different donor agencies in the drive to optimize their impacton the development of the country.

14. The financial package earmarked for Cameroon under ADF VIII stands at about UA35.30 million, that is about UA 32.00 million in project allocations and UA 3.30 million intechnical assistance. However, it should be noted that policy-based loans could be grantedsince the Government is satisfactorily implementing a programme supported by theinternational community. Operations within the context of the SFM could also be envisaged ifthe country obtains a sound performance and continues to honour its debt repayment terms. Inaddition to this financial assistance, the Bank will intensify its dialogue with the Governmentin the areas of economic reform, good governance, poverty reduction, private sectordevelopment and improvement of the quality of its portfolio.

I. INTRODUCTION

This 1999-2001 Country strategy paper analyses Cameroon's recent economicsituation, reviews its medium-term development policy as well as the Bank Group operationsand proposes the Bank's operations strategy for the 1999- 2001 period, with a view to povertyreduction. It was prepared on the basis of data collected by the Bank mission of July 1999 andby the dialogue mission of December 1999. It is also based on the framework economicpolicy document for the 1999/2000 to 2001/2002 period prepared by the Cameroonianauthorities, with the assistance of the Bretton Woods Institutions, within the context of thethird 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 naturalresources and a significant development potential. Until 1978, its economic growth ratestood at an average of 5% per annum mainly because of the production and export ofagricultural commodities for which it had a comparative advantage. The discovery of oil in1978 gave a new lease of life to the economy, which grew rapidly at an average annual rate of7%. The oil sector contributed 20 % to the GDP, 44% to the State revenue and 54% toexports. In contrast, the 1987-93 period was marked by economic recession under thecombined effects of the drop in the prices of the main export products, increase in theeffective exchange rate and the decline in oil production. These factors resulted in a fall inthe GDP growth rate, the upsetting of the macro-economic balance and recourse to externalborrowing. To reverse this trend, the Government implemented during the 1987-1993 period,economic reform programmes supported by the international community. However, theresults 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 typesof climate: an equatorial climate in the south; a tropical climate in the centre; and a Sahelian climate in the north. At theadministrative 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 mostdeveloped 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 growthuntil 1985 was characterized by be high level of poverty in the rural areas and profoundinequalities in the distribution of the country's income. The government gave priority to theurban areas in the

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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 inparticular, it was epitomized by the emergence of urban poverty. Yaounde sheltered 1% of thepoor in 1983 and 20% of the poor in 1993 whereas Douala represented 2% of the poor in1983 and 30% in 1993.

2.1.3 With the devaluation of the CFA franc in January 1994, a new programme was adoptedbut it also obtained insufficient results during the 1994/95 to 1996/97 period, particularly inthe area of public finance. It was not until the second half of 1997 that the governmentresolutely undertook to implement the indispensable reforms, within the context of the1997/98 to 1999/2000 medium-term programme, which is currently being implemented. Thisprogramme 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 economicgrowth with an average rate of 4.6% in real terms. The private sector contributed 48% of thisgrowth as a result of food production, which was encouraged by the increase in demand in theneighbouring countries and in particular by the flourishing of export crops owing to theirenhanced competitiveness in the wake of the devaluation. The tertiary sector contributed 31%of GDP growth primarily because of the improvement in trade and transportation. Regardingthe secondary sector, its contribution was more limited (21%) as a result of the structuralweaknesses 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 attainedfollowing the fall in oil prices and the Asian crisis. The growth rate for that financial year wasonly 4.4 %. The reversal of the economic growth trend has not yet had an impact on thesocio- economic situation of the population. In dollar terms, the per capita GNP of $610 isstill 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 goingfrom 11.2% of GDP in 1993/1994 to 15.7% in 1997/1998. However, this situation reflectstwo opposing trends of the public sector and the private sector. Indeed, private sector savingsfell from 17% of GDP in 1993/1994 to 14.3% in 1997/98 as a result of the resumption inprivate 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 rateof 14.5% as a result of the climate of uncertainty that prevailed in the business circles duringthe devaluation phase, the malfunctioning of the banking system and the limited public sectorinvestment capabilities, have since picked up to reach 18.4% of GDP in 1997/98, with arelative increase in investments devoted to the social and public works sectors.

2.1.6 Inflation and Employment : After the inflationary pressures created by thedevaluation, price increases have been brought under control. The inflation rate, as measuredby the consumer price index, dropped from 33.8% in 1993/94 to about 2% in 1998/99. Thisresulted in a deceleration of the erosion, in real terms, of the income of civil servants duringthis period because since the 1993 salary reductions of more than 50%, their nominal incomedid not decline. However, they are far from their pre-1993 level. Regarding the job market, itcontinues to deteriorate. The job supply of households continued to increase rapidly whereasdemand has been falling, particularly in the formal sector. These divergent trends resulted inpressures 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 thecivil service down to 160,000 employees from 188,000 in 1990. The unemployment rate isestimated at 22% of the workforce, thus turning employment into a critical socio-economic

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problem in Cameroon.2.1.7 Public Finance: the monetary adjustment of January 1994 helped to reverse thedeteriorating public finance trends as of 1994/95. Fiscal revenue increased from 10.1% ofGDP in 1993/94 to 16.2% in 1997/98 but it nonetheless remained below the budgetedamount as a result of the combination of tax avoidance and the weaknesses of the taxadministration. As for expenditure, it dropped from 19.3% of GDP in 1993/94 to about17.9% 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 toabout 1.7% in 1997/98. However, during the 1998/99 financial year, the international crisisalso affected the fiscal revenue objectives and the commitment base deficit rose to 3.4% ofGDP. This deficit is financed primarily by programme loans and debt rescheduling. Regarding the allocation of expenditure, the share of the education budget increased from9.1% of the total budget in 1996/97 to 11.6% in 1998/99; that of the health budget rose from2.5% in 1996/97 to 3.8% in 1998/99. The share of the non-wage expenditure for these twosub-sectors increased from 36.1% in 1996/97 to 39.3% in 1998/99 and from 47.9% in1996/97 to 59.4% in 1998/99, respectively. This constitutes an important effort but is stillinsufficient 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. Onaverage, 37% of credits distributed in the CEMAC zone went to Cameroon. The country'smonetary situation was characterized during the period by a constantly negative external assetsposition, on the one hand, and on the other, by the considerable share of the public sector indomestic credit (more than 50% on average). The average rate of coverage of the monetaryissue stood at 3.3% compared to the standard of 20% in the BEAC zone. However, there hasbeen an improvement in the assets situation as of 1997 as well as a slight fall in the volume ofcredit to the public sector and an increase in credits allocated to the private sector. Duringthe period, the money supply fluctuated. To encourage credits to the economy andconsidering the fall in the inflation rate, the Bank of Central African States (BEAC) reducedits intervention rate from 14% in March 1994 to 7.5% in May 1999. It should be noted thatbanking institutions have a limited capacity to mobilize long-term resources and that thesupply 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 offinance (family loans, tontines etc.). To remedy this situation, the Government is enhancingthe 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, financedby the donor agencies.

2.1.9 Balance of Payments: The devaluation helped to relatively improve the externalcompetitiveness of Cameroonian products and stimulated exports, which increased at anannual average of 12.2% during the period. The share of non-oil exports rose from 57.9% oftotal 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 averageof 18.8% per annum during the period, in keeping with the economic trends. The tradebalance remained positive during the period. However, the weight of interest charges onexternal debt worsened the debt service deficit. Thus, the current account balance (includinggrants) remained in deficit during the period. This deficit was gradually reduced from 4.2% ofGDP in 1993/94 to 2.7% in 1997/98 but it rose to 4.4% of GDP in 1998/99 as a result of therecession. Concerning the overall deficit, it fell very slightly from 7.8% of GDP in 1992/93to 5.5% in 1998/99 owing to the level of debt amortization. It was financed mainly throughdebt rescheduling within the framework of the Paris Club and the accumulation of arrears vis-à-vis creditors of the London Club.

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Public Debt

2.1.10 In 1998/99, outstanding external debt was estimated at CFAF 4,749 billion, that is87.9% 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%. Regardingarrears, 88.9% of the total is owed to commercial banks and 11.1% is owed to bilateraldonors not members of the Paris Club. The due debt service stands at 45.4% of non-factorgoods and services export earnings and 71.2% of the 1998/99 fiscal revenue. The weight ofthe debt service constitutes a major obstacle to sustainable growth. Annual disbursements inrespect of this debt service represent a major burden on State revenue to the detriment ofexpenditure in the social sectors and poverty reduction activities. In spite of five debtreschedulings by the Paris Club, the latest of which was in October 1997, the situation isexpected to remain difficult until the end of the ongoing programme. In 1999/2000, externaldebt service obligations could take up the equivalent of 65.7% of fiscal revenue and 42.2% ofgoods and services exports.

2.1.11 It should, however, be pointed out that Cameroon is currently eligible for the highlyindebted poor countries (HIPC) initiative, which should help to reduce the country's debtburden. The final decision on eligibility for this initiative requires the adoption of a povertyreduction strategy, prepared according to the participatory approach with the involvement ofall the components of the Cameroonian society. This strategy should include a plan of actionand measurable objectives to be attained within a specific timeframe. Within this context, theGovernment and the Bretton Woods Institutions agreed on a schedule for the preparation ofthis document, with the objective of reaching the decision point in September 2000. Withregard to the commercial debt, its rescheduling process is ongoing within the London Cluband 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, itsoutstanding amount was estimated at CFAF 1,254 billion, that is 23.1% of GDP. Agreementshave been signed with the creditors on about 69% of this outstanding debt, with well-definedrepayment terms and the remaining 31% is a so-called non-structured debt noted by theMinistry of the Economy and Finance and submitted, for audit and validation, to theAutonomous Amortization Fund (Caisse autonome d' amortissement - CAA), the publicinstitution responsible for managing the debt through an independent firm. The Governmentset the deadline of 29 February 2000 for the inventory of all the State's debt arrears, whichhave not yet been entered in the debt stock. Beyond this deadline, no claims would beentertained. In the same vein, it intends to complete the validation exercise by 31 March2000, when the official amount of the State's debt arrears would be determined and an overallrepayment schedule defined.

2.1.13 From the Bank's standpoint, it should be noted that although Cameroon is a category Acountry, outstanding loans from the ADB window represent 81% of total outstanding loansowed to the Bank Group. However, none of the Bank's critical exposure thresholds have beenreached. Indeed, the ADB debt service represents 2.0% of exports compared to the thresholdof 5%, 9% of guaranteed public debt whereas the critical threshold is 20% and the equivalentof 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 loansas against the threshold of 15 %. Furthermore, Cameroon obtained two loans of UA 9.8million and UA 9.5 million in 1998 and 1999, respectively as part of the Bank'ssupplementary financing mechanism (SFM). It is also eligible for this type of financing in the

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Year 2000.

Sectoral Overview

Primary Sector

2.1.14 Agriculture contributes about 22.5% of the country's GDP, 27% of its export earningsand 15% of budgetary income. The arable lands represent about 7,000,000 ha of which21,000 ha are irrigated lands, out of a potential of 240,000 ha. Food production increased by7.2% between 1994 and 1998. The main export crops are coffee, cocoa, bananas and cotton. Their production, which had declined considerably since the sharp fall in world prices as of1985, picked up again since the devaluation of the CFA franc in January 1994. Theagricultural sector has the potential to diversify to include the production of other exportcommodities such as fruits and vegetables. However, its development is hindered by thedifficult access to inputs and the cost of the latter, the failure of agricultural credit and thedeterioration of rural infrastructure. The sector is being adjusted in keeping with theobjectives defined in the 1996 Agricultural Development Policy Letter (ADPL).

2.1.15 Stockbreeding represents about 4.0% of GDP, with a modest average annual growthrate of 2.3% during the period under review as a result of the financial problems of the AnimalProduction Development Company (Société de développement et d'exploitation desproductions animales - SODEPA) and the existence of areas of peri-pneumonia infection,caused by Tsetse fly, in the areas of production. However, liberalization of the sectorfacilitated 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 areeffectively tapped. There are over 70 species of marketable timber. About 40% of theproduction is exported as logs and the rest is processed locally (timber and plywood). Recently, the Government totally prohibited the export of logs. Notwithstanding a smallindustrial fishing fleet, fisheries activities are mainly artisanal. They contribute 0.2% of GDPand the landings reach 100,000 metric tons per annum, including 20,000 tons from industrialfishing. 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 arerelatively diversified compared to those of other countries of the sub-region. They coveragro-industry, semi-processed goods, rubber and various intermediary and common consumergoods. The manufacturing sub-sector, which represents 12.7% of GDP, grew by an average of6% during the period, as a result of the development of its exports to the neighbouringcountries, 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 inGDP formation. This production is estimated at 5.5 million tons per annum and the refiningcapacity stands at 2 million tons per year, with a capacity-utilization rate of 61.4%. The oilprospection and production incentives, to ensure replacement of the declining oil fields, areless 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

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km are paved. Owing to lack of maintenance, most of the road infrastructure is in a state ofdisrepair. Land transport is the exclusive domain of the private sector. A road fund has beenset up. The railway network comprises two main lines of a total length of 1,200 km linkingDouala 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, majorrehabilitation works are being conducted on the Douala port. The "Office national des portsdu Cameroon" (ONPC) has been restructured. In the maritime sub-sector, the State hasalready liberalized the maritime professions and has divested from the maritime navigationcompanies. In the air transport sub-sector, the national carrier Cameroon Airlines, should beprivatized during the year 2000 and the domestic traffic is liberalized. Regarding thetelecommunications sub-sector, national and international communications have been mergedand entrusted to a new company (CAMTEL), which is being privatized. Two mobile telephonecompanies 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 butonly 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 respiratoryinfections, neonatal tetanus and malnutrition. The maternal and infant mortality rates as wellas that of children under the age of 5 years stand at 550 for 100,000 live births, 69.8 per1,000 and 104 per 1,000, respectively. HIV/AIDS constitute a major public health problemwith 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 thesystem owing to the insufficiency of staff and teaching materials as well as the problem of theexcessive student population. The State is the main source of financing of the educationalsystem but the economic crisis led to a fall in the amount of public resources allocated to thissub-sector. Parents also contribute significantly to the funding of the sub-sector. The privatesector 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 orforeign capital; (ii) an informal urban sector; and (iii) a traditional informal sector operatingin the area of subsistence farming activities and rural services. The private sector providesabout 66% of GDP and 90% of the jobs. More than 65% of the enterprises operating in theformal sector belong to nationals. The majority shares in the biggest enterprises in this sectorare owned by foreigners, with cases of public shareholding, and the locally owned enterprisesare generally small in size. More than two-thirds of the private capital is invested in theforestry sector and in agro-industry. Regarding the informal sector, its development wasenhanced by the economic recession. The activities of this sector are concentrated mainly incommerce, miscellaneous services, restaurants, hotels, building construction, public worksand transportation. About 64% of activities are the result of private initiatives, half of whichare by women.

2.2.2 The institutional environment of the sector is made up of public support structures andprivate professional groups. The public structures are: (i) the Chamber of Commerce,Industry and Mines (CCIM), which serves as an observatory, ensures the promotion of thesector and provides assistance to enterprises; (ii) the National Investment Corporation(Société nationale d'investissement - SNI), which is a public holding corporation for thepromotion 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

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at guaranteeing credits and providing management counselling; (iv) the National Centre forForeign Trade (Centre national de commerce extérieur - CNCE) responsible for prospectingforeign markets and studying the terms for exploiting them; and (v) the Chamber ofAgriculture, 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 Cameroonianindustries (syndicat des industries du Cameroun - SYNDUSTRICAM), composed of the majorenterprises, which number about 50; (iii) the federation of small and medium-sizedenterprises and businesses (FPEC); and (iv) the professional association of economicoperators 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 ofinternal arrears; (ii) problems of the financial system; (iii) the complexity and unfairness ofthe fiscal system; (iv) the dysfunctioning of the legal system; (v) the existence of statutorymonopolies; and (vi) the impact of the deterioration of physical infrastructure on trade and thecost of transactions. Within the context of the 1997/98-1999-2000 medium-termprogramme, 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 financialsystem, public enterprise privatization programme, and the competitiveness encouragementand improvement measures. The Government intends to continue this policy for the effectivepromotion of the private sector by putting special emphasis on the complete elimination ofinternal and external trade distortions and by ensuring the security of the investmentenvironment (independence, credibility and efficiency of the justice system and theharmonization of commercial law within the framework of OHADA). The measures alreadytaken within the context of the programme include the following:

2.2.4 Restructuring of the Banking Sector: this restructuring was virtually completed bythe end of 1997. Two banks, the Standard Chartered Bank of Cameroon SCBC) and theSociété générale de banque du Cameroun (SGBC) have been recapitalized. The BanqueMéridien BIAO-Cameroun (BMBC), Crédit agricole du Cameroun (CAC) and the Banqueinternationale pour le commerce et l'industrie du Cameroun (BICIC) have been liquidated. Thesound assets and liabilities of BICIC were transferred to the new Banque internationale ducrédit 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 bankingnetwork.

2.2.5 Public Enterprise Privatization: the privatization programme has made tangibleprogress 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 multinationalcompany; (ii) privatization of the Cameroon Sugar Company (CAMSUCO), which was boughtby the Société sucrière de Cameroun (SOSUCAM); (iii) ongoing negotiations for the purchaseof the Société de développement du palmier à huile (SOCAPALM); and (iv) the adoption of anew legislative framework in the telecommunications sector in June 1998 and theprivatization of the mobile telecommunications company called the Société detélécommunications CAMTEL mobile.

2.2.6 Incentive Policies: in the petroleum sector the monopoly of the Société nationale deraffinage (SONARA) was ended, thus opening up the sector for imports. A mechanism for theautomotic monthly adjustment of oil prices, in keeping with the world market prices, was setup. A competitiveness committee, a framework for consultations between the administrationand the private sector, was created and entrusted with proposing measures for improving

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competitiveness. To improve external competitiveness, taxes on exports were progressivelyeliminated, 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 in1998. This is a very young population because the average age is 21.9 years and theproportion of the population aged less than 15 years stands at about 43.8%. The total fertilityindex is 5.0 children per woman. Although this figure is still high, it has dropped significantlyfrom 6.3 children per woman in 1975. There are variations between the urban and rural areasas indicated by the figure of 3.1 children per woman in Yaounde and Douala as against 5.8children per woman in the rural areas. The average size of households is 5.9 persons and thesmallest families are found in the urban areas. Life expectancy, estimated at 54.1 years in1998, has been increasing systematically over the past 20 years. Indeed, it was 47.6 years in1987. Currently, 47.5% of the population lives in the urban areas and this proportionincreases 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. Theproportion of households led by a woman stands at 17.2% at the national level, comprising22.4% and 14.5% at the urban and rural levels, respectively. This proportion is even higher inthe 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 ofgirls. Taking into account the distribution in space, particularly at the level of provinces, thelargest disparities appear in the three provinces of the north of the country. Indeed, in theprovinces of the Far North, the gross primary school enrolment rate of boys and girls stands at104.12% 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 and32% in education. In the secondary and tertiary sectors, they are found mainly in activitiessuch as sewing, food distribution, beauty care or hairdressing. Women are often employed ashouseholds help with no control over the incomes they generate. Their work is manual anddifficult as a result of the use of archaic implements.

2.3.3 According to the 1999 global human development report (HDR), Cameroon, with agender-specific human development index (GSHDI) of 0.5 in 1997, ranks 110 out of 143countries. This clearly shows what still needs to be done to promote the role and status ofwomen in society. Regarding the women-in-development policies officially defined andimplemented by the public authorities, the different related development plans implementedthus far, are often too optimistic on the actions to be conducted as well as the approacheslikely to produce tangible results. The Ministry of Women's Affairs (MINCOF), within thecontext 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 ofwomen to productive resources and enhance control of such measures; (ii) increase andpromote 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 ahuman development index (HDI) of 0.536 in 1997, ranks 134 out of 174 countries. It was

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during the 1985/1995 period that most of the country's economic and social indicatorsdeteriorated significantly. The distribution of households, on the basis of the findings of theCameroonian surveys among households (enquêtes camerounaises auprès des ménages -ECAM), into the poor, intermediate and rich categories, changed from a 40.0-40.0-20.0distribution in 1983/84 to a 50.5-31.4-18.1 distribution in 1996. Over the same period, theincome of the farmers fell by 60% and it is estimated that in Yaounde the consumption ofhouseholds was reduced by 50% in real terms. This trend shows a slide of part of the middleclasses towards the living conditions and consumption patterns of the most disadvantagedpopulation segments.

2.3.5 the most vulnerable population categories appear to be the following: (i) womenoperating in the agricultural and informal sectors and whose activities, for want of support, arebarely profitable; (ii) small-scale farmers involved in food production and small-scale artisansin favour of whom very few incentive measures have been taken to improve their productionand productivity; and (iii) uneducated youths and school dropouts aged between 20 and 24years and more than 40% of whom are unemployed. It should be pointed out that highereducation graduates are also affected as a result of the closing down of enterprises and thefreezing 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 ruralareas. 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, weaknessesnoted in its health and educational facilities and the limited dynamism of the local economicoperators.

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

Participatory Development

2.3.8 The Government plans to revitalize partnership between the State and the NGOs in thearea of poverty reduction by preparing and adopting a status of NGOs operating in the area. A1990 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 hasbeen a proliferation of NGOs and associations in Cameroon and currently there are more than500 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 andsanitation, cottage industries or micro-enterprises etc.) or by targeting various vulnerablepopulation segments (women, unemployed youths, small-scale farmers etc.). However, theydo not always have the resources required to see through their activities. The Government isfinalizing a text governing NGOs in Cameroon.

International Labour Standards

2.3.9 Cameroon joined the International Labour Organization (ILO) in 1960. It has sincesigned and ratified the various conventions, particularly those relating to: (i) freedom ofassociation and the right to collective bargaining; (ii) elimination of all types of forced or

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compulsory labour; (iii) abolition of child labour; and (iv) elimination of discrimination in thearea 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 ofeconomic liberalization.

2.3.10 Inconsistencies between current practices and the ratified agreements have beennoted; for example there are inconsistencies with the conventions on freedom of association,collective bargaining and elimination of forced labour. Indeed, Cameroonian laws subject thelegal existence of a trade union or a professional association of civil servants to priorauthorization by the Minister of Local Government. Professional associations and tradeunions cannot become members of a foreign professional organization without priorauthorization of the Government. Working conditions within the civil service, includingsalaries, are set unilaterally by the State. In the same vein, a national civic service forparticipation in development, makes it possible to impose public interest works on citizensaged 16 to 52 years for a duration of two years and in the event of refusal to complytherewith, 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 ofthe Far North and the plains of Benoue; (ii) the savannah area (the high savannahs ofAdamaoua, the low savannahs of the Centre East, the high plateaus of the West and Northwestand the Tikar plain); (iii) the tropical forests area, which comprises the deteriorated forests ofthe central-littoral and the dense humid forests of the Southwest and the East; and (iv) thecoastal and maritime area. The forest covers 47.4% of the territory and the water network andbiodiversity therein are considerable.

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

2.3.13 The country has signed or ratified most of the legal instruments relating to theenvironment and which have a universal, regional or sub-regional scope. These instrumentsinclude: the Paris Convention of 1972 relating to the Protection of the Global, Cultural andNatural Heritage, the Rio Conventions of 1992 on Biological Diversity and Climatic Change,the Paris Convention of 1994 on Desertification, the United Nations Convention of MontegoBay of 1985 on the Law of the Sea, the Vienna Convention of 1985 and the Montreal Protocolof 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 andcoordinating the national environment policy. Since 1996, the country has a NationalEnvironment Management Plan (PNGE) which advocates: (i) rational management of theagro-sylvo-pastoral area, the ecosystems and natural resources; (ii) the promotion of rawmaterials through ecologically viable industrial development; (iii) improvement of the urban

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living environment (urbanization plans, reform of the land tenure system, improvement ofhousing conditions, rehabilitation and rational installation of public utilities and sanitation)and (iv) the development of human and institutional capacities. The framework legislation onenvironment management set up an inter-ministerial committee and a national environmentadvisory commission, responsible for organizing the participation of the private sector, NGOsand professional associations in the national environment strategies. To reconcile theconservation 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 ensuringsustainable tapping of its forest resources. In keeping with these policies, the Governmentmaintained a high level of taxation of the export of logs. It also introduced more competitionin the granting of concessions and made the tapping of forest resources contingent upon thepreparation of a development plan.

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Regional Integration

2.3.16 Cameroon is a founding member of the UDE (Customs and Economic Union), whichwas 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 andeconomic 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, totallyeliminate all the internal barriers, establish a common external tariff and a common customsadministration. The objectives of this structure were rapidly reviewed downwards and only thepreferential tariff provisions (single tax) were applied to products manufactured byenterprises of the sub-region.

2.3.17 In 1993, UDEAC adopted a regional reform programme (RRP) aimed at improvingregional communications and reforming the economic and institutional environment. Withinthe 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 industriesof the sub-region and generating revenue; and the generalized preferential tax (TPG), which isapplied to all the manufactured and animal products within the union. The latter tax waseliminated in January 1998. Furthermore, to give a new lease of life to integration, UDEACwas transformed into an economic and monetary union for Central Africa (CEMAC) and itstreaty 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 properfunctioning 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 supportof the ECA, to revive this organization. Furthermore, the ECCAS Heads of State have agreedto establish a Peace and Security Advisory council (COPAX), in order to restore stability inthe 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, consideringthe development of its manufacturing sector, this country is the main beneficiary of thisintegration. Indeed, Cameroon accounts for 96% of the intra-CEMAC exports and only 4% ofits imports originate in CEMAC. The Government is aware of the challenge that regionalintegration 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 isimplementing the regional transport programme, which seeks to establish inter-state roadlinks and facilitate transit procedures. However, considering its budgetary difficulties, thecountry 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 stillconfronted with the following macro-economic, structural and sectoral constraints:

2.4.2 Macro-Economic Constraints: the budgetary balance and the balance of paymentsare still negative and the foreign debt is very high. Considerable internal and external paymentarrears have been accumulated. The level of savings are still below that of the investmentsrequired to ensure strong and sustainable economic growth.

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2.4.3 Structural Constraints: they concern the financial sector, the civil service and thepublic enterprises. The banking sector suffers from the absence of a specialized institutionfor the mobilization of long-term funds and investment financing. It is also affected by theslow and partial restoration of the confidence of the economic operators in spite of twosuccessive restructuring exercises. There has been a certain amount of demotivation amongthe civil servants following the salary reductions which occurred since 1993 and contributedto exacerbate the problems of the administration. The public enterprises occupy a centralposition in the economy. The legal and judiciary framework has not been completelyrehabilitated; corruption continues to bedevil the economy and the level of poverty is stillhigh.

2.4.4 Sectoral Constraints: The agricultural sector suffers mainly from the ineffectiveand expensive interventions of the State in the production, marketing and processing ofagricultural products. There has been a constant decline in food self-sufficiency with theattendant high levels of malnutrition. The relative drop in the amount of resources allocatedto the social sectors during the economic crisis has reduced access of the population toquality health services at affordable prices and worsened the qualitative and quantitativeshortcomings of the educational system. Furthermore, deterioration of the economic andsocial infrastructure that resulted from the contraction of construction and maintenanceexpenditure makes the evacuation of the production more difficult and expensive. This inreturn raises the costs of the transactions and contributes to the worsening of poverty in therural areas. More specifically, the fact that transportation is not entirely liberalized, coupledwith the high operating costs of the public enterprises, makes its impossible to providetransport services at competitive prices. These high transportation costs have a negativeimpact 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 affectshalf of the country’s population, the Government has defined a medium-term strategy for the1999-2002 period aimed at achieving greater macroeconomic stability and maintaining theeconomy on the path of sustainable development. The Government intends to (i) promotestrong, sustainable growth, the benefits of which will be evenly distributed; (ii) improve thesupply 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 groupsat risk or in a difficult situation; and (v) promote food security. The principal macroeconomicobjectives of the Agenda are to: (a) improve the real GDP growth rate from 4.4% in1998/1999 to 5.5% in 2001/2002; (b) maintain the inflation rate at 2% and (c) contain theexternal current account deficit at 2.4% of GDP. The second phase of the Agenda, the firstphase of which is to be completed by June 2000 and is backed by an ESAF, will be backed by aPoverty Reduction and Growth Facility of the Bretton Woods institutions. Those objectiveswill 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 lastfew 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 toachieve a primary budget surplus of 5.4% of GDP, to increase public investment byapproximately 2 GDP points over the period, and consequently to narrow the overall deficit(excluding grants) to under 2.4% of GDP.

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

3.1.4 With regard to spending, the principal objectives over the period are to: (i) consolidatethe efforts made to improve resource allocation to priority sectors with a view to meetingessential requirements in respect of health and education, poverty reduction, and therehabilitation and modernization of infrastructure; (ii) improve budget preparation andimplementation, as well as the management and control of spending; (iii) deepen civil servicereform; and (iv) improve the system of civil service salaries. Thus, credits allocated topriority sectors will rise to 5% of GDP for education and health, and to 2.5% for public worksin 2001/2002, compared with under 3% of GDP and 0.7% of GDP respectively in1998/1999.

Monetary Policy and Financial Sector Reform

3.1.5 Within the framework of the common institutions of the CEMAC Member States, theGovernment will continue to work towards the promotion of a sound monetary and financialpolicy in the sub-region, especially through measures aimed at strengthening the externalbacking of the currency and the operating resources of the Commission Bancaire d'AfriqueCentrale (COBAC). The Government will cooperate with the latter body with a view todefining prudential standards applicable to non-banking institutions. It will also continue toprovide support for reforms aimed at promoting the effective utilization of indirect monetarypolicy instruments, in order to rationalize the operations of the Central Bank on the moneymarket and liberalize exchange rates.

3.1.6 Since the reorganization of the banking sector has been virtually completed, theGovernment will focus its reforms on strengthening insurance companies and other non-financial institutions, as well as on the establishment of a securities market. Also, variousmeasures 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) theestablishment in the short term of a local capital market and, at the same time, support toefforts to establish a regional stock exchange; and (vi) the reorganization of the CameroonDebt 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 privatesector, increase factor productivity and improve external competitiveness. In that respect,State divestiture, deregulation, a reduction in transaction costs, greater production incentivesand improvement of social and economic infrastructure will continue to be the main thrusts ofgovernment action. From the standpoint of incentives, the Government intends to (i)complete the implementation of the tax and customs reform (CEMAC) by abolishing importsurcharges in order to promote trade; (ii) apply the CEMAC investment charter; iii) graduallylower the Common External Tariff (CET) under CEMAC while maintaining an adequate levelof budget resources; (iv) simplify the procedures for establishing enterprises; and (v) carryout an inventory of all the texts relating to business law and trade regulations to ensure their

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compliance with the provisions of the OHADA Treaty. The State's divestiture programme willfocus primarily on the consolidation and deepening of the reforms of agro-industrial publicenterprises and public utilities. The following enterprises are, therefore,

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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 governancecharacterized by a fairly unstable political situation against a backdrop of contested electionsand curbs on civil liberties, lack of transparency in the management of public affairs andrampant corruption. Furthermore, in 1998 and 1999, Cameroon was ranked first out of 85countries in the Corruption Perception Index of the NGO, Transparency International. TheGovernment, 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 theNational Programme on Governance with the support of UNDP, comprising five components:public administration, justice, decentralization, economic and financial management and civilsociety.

3.1.9 Rule of Law : In 1996, the Government adopted a new constitution allowing greaterparticipation in political life. Following the Presidential elections in 1997, dialogue wasinitiated between the ruling party and an opposition party leading to the latter’s participation inthe government, thus partially easing the political tension in the country. The Governmentremains highly centralized. The judicial system is still greatly influenced by the Executive andsuffers from widespread corruption and a lack of administrative resources. Furtherimprovements are required in the areas of civil liberties and respect of human rights. CIDA isfinancing a Democratic Development Support project, which backs the initiatives of publicand private institutions involved in the promotion of the development of democratic valuesand practices and respect of the right of the individual. This support project concerns theMinistries of Justice, Communication and Local Government, as well as the NationalCommittee 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 ofthe justice system, to ensure it becomes really independent, close to the citizens, a guarantorof 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 publicenterprises, which makes managers more accountable for their actions than in the past. TheBanking Law was amended to speed up the recovery of credit from dishonest customers. Thelatter will now no longer receive new credits through the banking system, or compete inbidding for government contracts. It also plans to make credit managers more accountable, tomotivate and provide the senior managers of the tax and customs authorities with a feeling ofsecurity, 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 orfraud. The Higher State Control, the public audit body, will be strengthened, as will theGeneral Inspectorate of the Ministry of Justice.

3.1.11 Combating Corruption: some of the signs of corruption in the country are: (i) theweakness of tax and duty collection; (ii) the large number of budgeted non-wage expenditurewhich does not reach the beneficiaries; (iii) the award of public contracts in breach ofregulations; (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 thecontractual obligations in terms of price and quality. The Government has launched acampaign to combat corruption. An ad hoc committee on corruption was established and isnow focusing on five key Ministries: economy and finance, transport, public works, posts andtelecommunications and security. An audit of the ten principal public contracts awarded

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during 1998/1999 was conducted and permitted a review of the entire contract awardprocedure. Senior officials and employees found guilty of corruption or embezzlement ofpublic 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, andintends 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, theGovernment intends to restructure the existing system to make it more transparent. TheProcurement Code will be amended and a new institutional mechanism established. Inparticular, new thresholds will be established for public contracts, the splitting of contractslimited and strict control of commissions guaranteed. Under the action plan to improvepublic spending, the Government has undertaken the preparation of quarterly reports by theMinistries of Education, Health and Public Works under the implementation of theirrespective budgets. It has set up a monthly monitoring mechanism for oil operations, toguarantee transparency and the automatic transfer of oil revenues to the Treasury. TheNational Programme on Governance provides for the promotion of transparent economic andfinancial management of national assets with a view to achieving sustainable humandevelopment for all. It also intends to improve the functioning of the judicial system. Citizens will, therefore, be better provided with legal information through the regularpublication of the Official Journal, and a vast training programme for judges and judiciarypersonnel in the OHADA procedures will be prepared and implemented.

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

Sectoral Policies

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

3.1.15 The Energy Sector: the Government’s strategy in the sector aims to (i) develop itspotential through appropriate incentives and the liberalization of activities; and (ii) improvethe efficiency and transparency of management in that sector. To do so, the Government will

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adopt a legal and regulatory framework governing the mining, gas and oil sub-sectors, capableof developing offshore natural gas reserves, as well as promoting and tapping hydroelectricpotential and revitalizing the distribution of hydrocarbons.

3.1.16 Transport Sector: the Government will pursue the implementation of its vast reformprogramme in the transport sector and of the regional transport programme. The contract forthe 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. Theimplementation of the action plan adopted in December 1998 to reduce costs and transittimes is being actively pursues. In the road sub-sector, the permanent financing mechanismfor road maintenance has become operational, with the establishment of the Road Fund, whichis mostly managed by the private sector. A biannual technical and financial audit will beconducted. The Government also intends to carry out investments concerning Inter-Statelinks.

3.1.17 Social Sectors: in the education sector, the Government intends to (i) improve thequality of primary education and provide basic education for all; (ii) rationalize theinterregional distribution of resources; (iii) increase the involvement of pupils’ parents,communities and local authorities in the management of schools; (iv) step up support toprivate education; (v) further decentralize the education budget, through the mechanism forthe automatic delegation of investment credits. With regard to health, it aims to: (i) improvethe quality of health care and increase vaccination coverage in rural areas; (ii) increase andimprove the physical and financial accessibility of health care; and (iii) facilitate access tohigh quality, low cost generic drugs; (iv) beef up and redeploy health personnel, especially inrural 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 periodare 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 variationsin arrears and CFA.F 221 billion for the replenishment of foreign exchange reserves. Thefinancing identified amounts to CFA.F 1,265 billion, i.e. 57.4% of requirements andcomprises 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 financinggap is estimated at CFA.F 938 billion, for which financing is being sought from participants inthe Special Programme for Africa (SPA).

3.2 Evaluation of the Agenda

3.2.1 Economic Management : the maintenance of macroeconomic stability and therestoration of internal and external viability are the key objectives of the Agenda. Theattainment of those objectives remains linked to the performance of the non-oil sector and afavourable trend of the terms of trade for agricultural export products. It should beemphasized that, despite rising oil prices over the first half of 1999/2000, the real GDPgrowth 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, therehas been slippage on the privatization programme, especially the finalization of theconcessioning of SOCAPALM and the issue of invitations to bid for SONEL. But, overall, theprogramme is being implemented satisfactorily. The conclusions of the mid-term review ofthe third year of the IMF ESAF of February 2000 are, on the whole, satisfactory.

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3.2.2 Widespread, Evenly Distributed Growth: the economy of Cameroon is fairlydiversified. The ongoing deepening of structural reforms will improve its competitivenessand put it on the path of lasting and sustainable growth. The Agenda focuses in particular onsocial policies and poverty reduction. Indeed, spending on health and education will bemaintained and even increased, from 2.5% of GDP at present to 5% in 2001/2002. A PovertyStrategy Declaration was adopted in December 1998. This document represents undoubtedprogress in the reflection on this issue, but should be improved upon, in particular in respectof the methodological plan and the targeting of categories of poor. It is based on an incomesapproach and does not take into consideration the other dimensions of poverty. It remains toogeneral and should focus on the poor whose profiles should be better defined, and on theprojected outcomes. An operational programme is under preparation on the basis of aparticipatory approach, for the successful implementation of the poverty reduction strategywill depend on the level of involvement of all the constituent parts of Cameroonian society inits preparation and implementation. The finalization of the document with cohesive actionplans, in particular for the health and education sub-sectors, will enable the Government toreach the Extended HIPC Initiative decision point, for, through this strategy, it will have todemonstrate its ability to be prudent in its use of the budgetary savings to be made under theInitiative.

3.2.3 Good Governance: good governance is a key component of the Government’s Agendawith the National Programme on Governance the final report on which will be submitted tothe 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 goodbase, for it presents a sound diagnostic review of the situation. However, the action plan isnot very specific. It could be improved in the critical areas related to poverty, especiallyhealth, education or infrastructure where good governance is weaker, as well as in thefunctioning of the justice sector. The oil sector, despite the annual SNH audits, still has someshortcomings, especially with regard to transparency in the transfer of financial resourcescollected to the Treasury. The Government will have to pursue its activities to improve themanagement 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 enterprisesand public contracts systematized, and the training and retraining of legal personnel carriedout.

3.2.4 Crosscutting Themes: the Agenda takes into consideration crosscutting themes suchas the environment, private sector development, gender, regional integration and participation. The forestry policy which the Government intends to implement, aims to achieve sustainableand rational management of that resource. State divestiture, deregulation, a reduction intransaction costs, an increase in production incentives and the improvement of economic andsocial infrastructure, should permit private sector promotion. The completion of the tax andcustoms 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 andconsequently strengthen regional economic integration. With regard to participation, it isplanned to strengthen the capacities of civil society and to make the local communities andNGOs play a very active role. However, the Government should: (i) introduce greatertransparency in granting forestry concessions and see to the implementation of forestrydevelopment plans from the standpoint of the environment; (ii) establish an effective legal andjudicial environment for private sector promotion; and (iv) ensure greater involvement of civilsociety 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

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trade trend, the level of commitment of the Government and its institutional capacities. Infact, the trend of export product prices (oil, agricultural produce) may compromise the setmacroeconomic objectives, lead to inadequate resource allocation to priority sectors andslippage on the due dates of external debt. The reform programme, especially theprivatization of public enterprises and reform of the civil service, could lead to major socialdisturbances following inevitable retrenchments.

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This could weaken the Government’s resolve and lead to a slowing down in the pace ofreforms and consequently jeopardize external assistance flows to the country. Furthermore,the Government’s institutional capacities may be inadequate to ensure the smoothimplementation of the Agenda, especially against a backdrop of civil servants who aredemotivated because of low salaries.

3.3.2 These risks could be minimized by prioritizing non-oil revenue with regard to the StateBudget and the impact of ongoing measures to improve the external competitiveness ofCameroonian products. Furthermore, the ongoing programmes for the reinsertion ofretrenched public sector personnel into economic circuits should mitigate the social impactof the restructuring of the public sector. Also, the technical assistance planned by thedifferent donors could offset the institutional weakness. In addition, the civil service reformwill be deepened and provide for wage incentives to motivate civil servants, especially thoseinvolved in the implementation of the Agenda.

3.4 Strategic Partnership

3.4.1 Aid Coordination: Cameroon is a member of the consultative group network. In thatrespect, the World Bank, over the last five years has played a leadership role in coordinatingaid. This coordination is mainly done through the implementation of structural or sectoraladjustment programmes. Under the SPA, the Bank participates in the implementation andmonitoring of these different programmes and regularly exchanges information with theprincipal donors, namely AFD, IMF, the World Bank and the EU. However, internal aidcoordination remains inadequate. To correct that the National Committee for theCoordination of Development Assistance (CCAD) was established, attached to the Office ofthe 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 consultationsbetween Cameroon and its development partners.

3.4.2 Aid trends : over the 1992-1996 period, the volume of external aid gradually declinedfrom US$ 753 million in 1992, to US$ 369 million in 1996 before rising to US$ 566 millionin 1997. This upswing in financial assistance occurred following the approval, in August1997, by the IMF of its ESAF, which made it possible to release disbursements which hadbeen suspended by several donors including the Bank. The disbursement structure was deeplymodified 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 assistancerepresented 52% of total assistance in 1997 compared with 78% in 1995. France remainedthe 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. Theirprincipal 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 securityof property and persons; (ii) adjustment and support to economic recovery through the promotion of food and agro-industrialproduction, the development of the private sector, and support to institution building in the transport and commercial publicservices 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 thedecentralization process, through local communities and various associations. This cooperation will be conducted through twomechanisms: the cooperation and cultural activities service and the Agence Française de Développement, through technicalassistance, 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 ACPand European Union countries. It has two main themes: trade, cooperation and technical and financial cooperation. Projects andprogrammes are financed through the following instruments: (i) National Indicative Programmes (NIP), which are five-yearprogrammes; 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 focuson the implementation of the CEMAC regional reform programme, inter-State road infrastructure and the management of forestryand 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 publicutilities sector, the industrial sector and support to the private sector. Total resources (European Commission and EIB) allocatedfor 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 15February 1994, Cameroon has been eligible for the IDA window. The ongoing programme is backed by a Structural AdjustmentCredit (SAC III) approved in June 1998, for an amount of US$ 180 million, to be disbursed in two fixed three floating tranches. Thefixed tranches have been disbursed. The slippage on the disbursement of the floating tranches is primarily due to the slowness in theprocedure 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-byArrangements and an Enhanced Structural Adjustment Facility. The latter, for an amount of SDR 162.12 million, was approved inAugust 1997. The annual arrangement for the third year was concluded in September 1999. The half-year review of this third yearwas conducted in February 2000 and its conclusions are satisfactory overall. The problems identified concern the delays in theprivatization programme. The necessary corrective measures should be taken by May 2000, the deadline for the disbursement ofthe second tranche of this third year.

3.4.3 Cofinancing: Over the last two years, the Bank has focused, in particular, oncofinancing. Four (4) of the five (5) projects and programmes approved over that period werecofinanced, 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 ofWomen, with UNDP; (iii) the Fisheries and Livestock Development Activities and Micro-Credit Operations with ABEDA, and (iv) the National Agricultural Research and ExtensionProgramme) with IDA. These cofinancings have made it possible to increase the synergiesbetween the different institutions in particular the confirmation of SAP financing with theBretton Woods institutions; the complementarities between agricultural research andagricultural extension with IDA; poverty reduction activities and their monitoring andevaluation with UNDP; and the livestock and fisheries development activities and micro-creditoperations with ABEDA. Under the current programming cycle, the efforts to seekcofinanciers will be pursued. The Bretton Woods institutions will be contacted regarding thefinancing of the reform programme, UNDP and CIDA regarding governance, and the AFD andEuropean Union for transport sector projects.

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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 periodwas to restore the macro-economic balances, increase agricultural production and develophuman resources. Considering the country's sound performance, an extended programme wasadopted in its favour for an amount of UA 42.84 million. The breakdown of the sectoralallocation 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% ofthe total (agricultural research, agricultural extension, rural forestry, stockbreeding andfisheries) and the social sector taking up the remaining 59.8% (education, poverty reductionand actions in favour of women, water supply studies and projects, sanitation and ruralelectrification). In the area of reform support, a structural adjustment loan was granted aswell as two supplementary financing mechanism operations, for a total amount of UA 32.5million.

4.1.2 These operations helped to alleviate the country's economic problems and as such theymet the expectations of the Government. This was particularly the case of policy-basedlending, which sought to improve the competitiveness of the economy and reduce the debtburden. They will also contribute to poverty reduction in the country. The implementationrate of the lending programme and stringent compliance with the sectoral distribution of theallocation show that the objectives of the three-year programme have been attained and thatthe absorptive capacity of the country is satisfactory. Emphasis should be placed on theseoperations. The current programming cycle should focus on the areas which were notsufficiently 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 onein the private sector. Out of these 39 operations, 24 have been completed, 2 have beencancelled and 13 are ongoing. The gross amount of the commitments stands at UA 576.90million, including UA 449.15 million from ADB resources, UA 124.18 million from ADFand UA 3.57 million from TAF resources. Two major events marked the existence of theportfolio, namely, the portfolio restructuring of June 1994 and cancellation of the non-performing project loans in 1996. Other portfolio rehabilitation measures were taken duringthe 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, forthe procurement of three new ships. Since January 1997, the borrower has not been in aposition to honour its financial commitments. This situation compelled the Bank to fileseveral suits against the borrower. The judgement handed down in favour of the Bank is yet tobe enforced and the matter is still pending before the Cameroonian courts. The sectoralconfiguration 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 January2000, cumulative disbursements amount to UA 380.68 million, that is a disbursement rate of78.7%. The active portfolio comprises 13 projects for a total amount of UA 178.88 millionand a disbursement rate of 38.1%.

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Table 4.1Sectoral Breakdown of the Commitments by Window

(In Million UA)

Sector No. GrossAmount

ADB ADF TAF NetAmount*

Disbursed % Disbursed Balance

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 genericproblems include: (i) delays in the fulfilment of the conditions precedent to the effectivenessof the loans and grants and the implementation of the projects in the field; (ii) the limitedmobilization of the local counterpart contributions; (iii) the irregular submission of quarterlyprogress report and audit reports; (iv) the weaknesses of the accounting services of theprojects; and (v) problems of communication with the Bank. It should also be noted that in thepast, project implementation suffered from repeated sanctions imposed on the country due todefault on arrears.

4.2.3 In February 2000, the Bank conducted a thorough review of its portfolio. It examinedthe situation of each project, identified the problems encountered, defined a programme ofaction to solve them (with a specific implementation schedule) and adopted a performancecriterion for measuring the disbursement rate by 31 December 2000. The plan of actionagreed upon between the project managers, the Government and the Bank is a kind ofperformance contract with the project and will be assessed on the basis of the disbursementrate attained by the end of the year. The overall disbursement objective is to go from thecurrent 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 andfinancial monitoring of projects by the Government, the project managers’ lack of familiaritywith the procedures for budgeting the local counterpart contributions, the inadequatequalifications of the financial managers of the projects and the shortcomings of the country’stelecommunication services. Measures have been proposed to address these problems. Thesemeasures include the creation of a physical and financial monitoring committee, chaired bythe Secretary General of the Ministry of Public Investments and Land Development. TheADB Projects Monitoring Unit within the Yaounde UNDP office will serve as the committeesecretariat. This committee will make site visits and will ensure that all of the Government’scommitments are honoured. A workshop on the procedures for budgeting the localcounterpart 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 theprojects.

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4.2.5 Regarding the lessons learnt from the project implementation experience, it wasdecided that for the future, it would be necessary to: ensure definition of optimal project sizesto avoid frequent reformulations as in the past; resort systematically to contract work insteadof forced account and whenever possible, limit the duties of the executing agency to thecoordination of activities and monitoring-evaluation while entrusting the other duties toqualified bodies, particularly the NGOs; associate the beneficiary groups in project design andimplementation; and make provision in the project costs for the auditing of the accounts andsignificant 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 focuseson poverty reduction in keeping with the ADF VIII orientations and the Bank’s vision. It takesinto account the past operations strategy from which lessons have been learnt. It is based onthe conclusions of the participatory evaluation of poverty (PEP) conducted by theGovernment in 1994, with the assistance of the World Bank, and these conclusions reflect thepoor people’s perception of their own situation. The strategy also takes into account thesalient points of the Government’s poverty reduction strategy declaration adopted inDecember 1998 as well as the findings of the participatory consultations conducted within thecontext of preparation of the CSP. The main concerns expressed by the poor, within thecontext of the PEP, concern the limited nature of monetary income, the problems relating tohunger, nutritional deficiencies and food shortages, the health situation, long distances fromthe centres of economic activity, the feeling of helplessness and the inability to make oneselfheard.

Box 3 : Participatory Approach

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

During these consultations, plenary sessions were organized with all the sectors of the public administrations involved in theeconomic 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 andthe situation of the Bank Group portfolio. At the wrap-up session, three areas were recommended for Bank intervention. Theyare the continuation of economic reform support, the promotion of good governance, human resource development and the creationof 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 ofthe document with all the parties involved, namely, the Government, civil society, the private sector and the donor agenciesrepresented in Yaounde. A final consensus was obtained on the selected strategy.

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4.3.2 These concerns were confirmed during the participatory consultations which gavepriority to the promotion of strong economic growth and greater social justice, humanresource development and the creation of basic infrastructure. To help address theseconcerns, the proposed strategy will concentrate on two major areas: (i) the generalconditions 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 andincome-generating prospects, and on the other, involvement of the poor in decision-makingon matters concerning them, in the drive to enhance social cohesion and the well-being of thepopulations; and (ii) specific actions aimed at the poor populations and which seek to improvetheir living conditions. These strategic orientations stem from the choice of the selectedareas of operation.

Proposed Areas of Operation

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

Multisector

4.3.4 Economic Reform Support: The Bank will continue its structural adjustmentprogramme support to deepen the reforms and consolidate the achievements so as to enhancethe macro-economic viability. Within this context, measures will be taken to: (i) mobilizeand efficiently manage public resources; (ii) promote the private sector; and (iii) complete therestructuring 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, withinthe context of the new strategic framework for poverty reduction. Furthermore, the countrywill continue to be assisted under the supplementary financing mechanism, provided itcontinues to obtain sound performances.

4.3.5 Support to the National Programme of Governance: the Bank will assist theGovernment in the implementation of the national programme of governance and, inparticular, in its poverty reduction efforts through: (i) the improvement in the operation of thejudicial system, especially in the case of businesses to ensure greater expediency of thejudicial procedures and the enforcement of court decisions; (ii) the enhancement ofeconomic and financial management by ensuring an optimal allocation of public resources andefficient control of their utilization; and (iii) enhancement of the possibilities of action ofcivil society in order to make it a major partner of the public authorities. With regard to theadministration of justice, it will be necessary to make material resources available to thejudiciary, assist in the revision of legal texts and train judges, particularly for the applicationof the OHADA provisions. Concerning economic and financial management, the servicesresponsible for investment programming and the public finance control structures will bestrengthened both by supplying them with the resources they require to perform their dutiesand through training. In the case of civil society, it will be assisted in the areas oforganization, training and for the creation of an appropriate legal framework for the non-governmental organizations as well as the establishment of more effective mechanisms forthe internal operation of the associations. During the meeting of the donor agenciesscheduled for the presentation of the programme of governance, the Bank will seekcofinancing partners. The UNDP and CIDA have already expressed their desire to participatein such a partnership.

26

Social Sector

4.3.6 In this sector, the Bank will help the Government to improve the health of thepopulations in the poorest health districts by increasing their access to integrated and qualityhealth care and by ensuring the participation of the local communities in the management andfinancing of the health activities. The Actions to be undertaken will involve the strengtheningof the health services and the creation of a health information system. It will also back-upactions aimed at turning around the falling coverage of food needs of the populations byenhancing local production. In the same vein, it will address the issue of the deterioratingnutritional situation of the poorest population segments and the structural food insecurity ofthe densely populated regions with a highly unstable climate. The Bank will also assist theGovernment in the creation of the infrastructure required to fight diseases, improve publichealth and the living conditions of the populations and ensure their well-being. The water andsanitation 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 openup the regions with a high agricultural potential as well as a high density of poor populationsand facilitate inter-state transport in order to promote regional integration. The Cameroonianroad network is inadequate. The evacuation of agricultural produce as well as trade with theneighbouring countries, particularly Chad, CAR, Gabon and REG, are difficult because of thepoor state of the roads and the complex transit procedures. Priority itineraries were definedwithin the framework of the regional transport programme, which is supported by a EuropeanUnion and the "Agence française de développement". The Bank will cofinance the programmewith 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 povertyreduction. The planned reforms will facilitate the creation of a stable macro-economicenvironment, improve the competitiveness of the Cameroonian economy and develop theprivate 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 ofprinciples of good governance will restore confidence and attract more investments, which inturn will increase the production capacities and create more jobs. With a more effectivepublic administration, the supply of essential services to the poor will be enhanced. Theprogramme designed to strengthen the capacities of civil society will ensure activeparticipation of the poor populations in the life of the nation. Furthermore, the developmentof transport infrastructure will open up the farming areas and accordingly facilitate thetransportation of agricultural produce to the growth markets. Regarding the planned socialdevelopment 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 ofthe poor populations and ensure their well-being.

B) Private Sector

4.3.9 Numerous opportunities are available to the private sector in Cameroon, particularly inthe industrial sector. These opportunities include: tourism, agro-industry, the wood sector,off-season vegetables, tropical flowers and fruits, tanning, cottage industry, processing ofcotton 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 withthe only private sector operation it financed in the country. However, the ongoing reformsshould create an effective legal and judicial framework for securing private investments. Thisnew 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 thecountry. Moreover, within the context of the AMINA project, the Bank could support themicrofinance 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 UA35.30 million, that is about UA 32.00 million in project allocations in favour of the social andtransport sectors, and UA 3.30 million in technical assistance in support of the goodgovernance programme. A policy-based loan could be granted to the country given thesatisfactory implementation of the programme and the operations conducted within thecontext of the SFM, provided the country obtains a sound performance and continues tohonour its debt repayment terms. The breakdown of this allocation by sector, by year and bylending instrument is given in the table below.

Breakdown by Sector(In Million UA)

YearSector 1999 2000 2001 Total %

Social - 8.0 14.0 22.0 62.4Transport - 10.0 - 10.0 28.3

Multisector - - 3.3 3.3 9.3Total - 18.0 17.3 35.3 100.0

Breakdown by Lending Instrument(In Million UA)

YearInstrument 1999 2000 2001 Total %Project Loan - 18.0 14.0 32.0 90.7

TechnicalAssistance

- - 3.3 3.3 9.3

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: economicreforms; good governance; poverty reduction, private sector development and the situation ofthe Bank Group portfolio.

28

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

4.5.3 Good Governance : The Government has embarked on a process for the preparationand implementation a national programme of good governance in order to restore theconfidence of the citizens and development partners. This programme should be validated bythe international community during a roundtable meeting of donor agencies. The Bank shouldextend financial support to the Government to strengthen the latter’s capacity in this area andengage in dialogue with the Cameroonian authorities with a view to the implementation of thisprogramme, 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 thecontext of the eligibility for the HIPC initiative. Some measures have been envisaged toprotect expenses allocated to the social sectors. Concerning gender issues, in spite of someprogress, women are still at a disadvantage compared to men. The project for povertyreduction and actions in favour of women should help to alleviate the problem. The Bank willcontinue dialogue with the Government in this area to ensure that poverty reduction remains apriority in the Government's policy and that the improvement of the conditions of womencontinues to be an essential component thereof.

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

4.5.6 The Situation of the Bank Portfolio: The performance of the Bank portfolio inCameroon is low both in terms of the physical implementation of projects as well as thefulfilment of the conditions precedent to effectiveness. A portfolio review was conducted inFebruary 2000 and made it possible to review each project, identify its problems, define theactions to be taken to solve them, with a specific schedule for the fulfilment of theseperformance criteria as well as the adoption of monitoring provisions. The Bank shouldintensify its dialogue with the Government for the stringent implementation of this plan ofaction 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 inCameroon and most of the country’s macroeconomic aggregates have improved. TheGovernment is implementing a vast reform programme supported by the internationalcommunity with a view to restoring the country’s internal and external viability. Thisprogramme, based on the reduction of poverty, should improve the living conditions of thepopulations. 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 operationstrategy focuses primarily on this sector.

5.2 Recommendation: The Boards are invited to consider and adopt this CameroonCountry 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 towhich it is attached. The names used and the borders shown do not imply on the part of the Bank Group and itsmembers 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)

DISBURSEMENTSECTOR/PROJECT/STUDY

SOURCEFINANC.

DATE OFAPPROVAL

DATE OFSIGNATURE

DATE OFEFFECTIVE-

NESS

DEADLINEFOR LAST

DISBURSEMENTAMOUNT

APPROVEDLOAN/GRA

GROSSBALANCE

SITUATION

AGRICULTURE

1 DENG DENG Forestry Complex2 Douala and Yaounde Poultry Farms3. Haute SANAGA Integrated Rural Develop.

4. Feasibility Studies of the SODEBLE Project5. Integrated Rural Dev. of South-West Prov.

6. South-West Fisher./Stockbreed. Dev. Study7. North-West Province Integrated Rural Dev.

8. Development of Agricultural SMEs9. National Agricultural Research Support Project10. Stockbreeding and Fisheries Dev. Project11. Project in Support of Agro-Forestry and Rural Forestery

ADBADBADBADFADFADBADFADFADBADFADB

ADFADF

ADFTAF

14/10/7519/12/8024/08/8226/08/8222/08/8422/09/8622/09/8624/03/8719/12/8919/12/8914/12/92

15/07/9816/12/98

10/02/9910/02/99

30/10/7528/01/8126/10/8208/04/8313/06/8502/02/8702/02/8718/08/8827/12/9027.12/9021/10/94

08/12/9805/02/99

05/03/9905/03/99

01/07/7903/06/8214/12/8303/08/84

-16/06/8810/05/9225/01/9010/07/9121/06/9118/08/95

01/10/9925/03/00

20/10/9920/10/99

30/069431/12/9531/12/9531/12/95

-31/12/9931/12/9901/06/9530/06/0031/12/0030/06/01

31/12/0531/12/05

31/12/0631/12/06

3.255.40

10.007.370.83

21.8915.000.454.559.21

12.00

7.004.59

4.130.78

3.255.409.227.090.007.942.640.363.406.514.91

0.000.00

0.000.00

100.00100.0092.20 96.20 0.00 36.3 17.679.4174.770.7

40.92

0.00 0.00

0.000.00

0.000.000.780.280.83

13.9512.360.091.152.77.09

7.004.59

4.130.78

CompletedCompleted

Balance CancelledBalance Cancelled

AnnuléBalance Cancelled

OngoingBalance Cancelled

OngoingOngoing

Balance Cancelled

At Start-up PhaseAt Start-up Phase

At Start-up Phase.

SUB-TOTAL 106.45 50.72 48.00 54.94

TRANSPORT

1. Construction of the new Douala Airport

2. Extension of the Douala Port

3. BAMENDA-MANFE-EKOK Road Study4. DOUALA-YAOUNDE Road5. Constr. Of the New DOUALA Passenger

Station6. Realign. Of the DOUALA-YAOUNDE

Railway7. YAOUNDE-KRIBI Road Study8. EBOLOWA-MBALMAYO Road Project9 BAFOUSSAM-FOUMBAN Road Project10 Road Programme

ADBADBADBADBADBADBADBADBADB

ADFADBADBADBADF

22/12/7224/06/7531/03/7621/12/7618/08/7725/09/7928/10/8008/06/8222/02/83

22/02/8312/03/8522/09/8617/06/9117/06/91

09/06/7314/08/7503/05/7613/01/7710/12/7723/01/8028/01/8126/10/8208/04/83

13/06/8902/02/8720/11/8925/09/9118/11/91

01/06/7401/06/7930/07/7711/01/7711/01/7730/09/8213/12/8230/03/8407/06/84

26/03/8723/09/8806/08/9011/02/9311/02/93

31/12/7530/06/7630/06/7631/03/8231/03/8230/06/9431/12/8230/06/9431/12/89

31/12/9430/06/9430/06/9631/12/9731/12/95

3.001.110.655.005.000.95

10.0011.3322.80

1.6447.1518.2295.000.51

3.001.110.655.005.000.65

10.009.70

22.80

0.0047.0710.0838.160.48

100.00100.00100.00100.00100.0068.65100.0085.61100.00

0.0099.8255.3248.3

94.00

0.000.000.000.000.000.300.001.630.00

1.640.088.1456.840.03

SUB-TOTAL 222.36 153.7 69.12 68.66

CompletedCompletedCompletedCompletedCompleted

Balance CancelledCompleted

Completed. Balance CancelledCompleted

Not Implemented, Amount ReallocatedCompleted. Balance Reallocated

Balance ReallocatedOngoing (UA 16 million was cancelled )

Being Implemented.

ANNEX IIPage 2/2

(Million UA)

DISBURSEMENTSECTOR/PROJECT/STUDY

SOURCEFINANC.

DATE OFAPPROVAL

DATE OFSIGNATURE

DATE OFEFFECTIVE-

NESS

DEADLINEFOR LAST

DISBURSEMENTAMOUNT

APPROVEDLOAN/GRA

GROSSBALANCE

SITUATION

PUBLIC UTILITIES

1 Sanitation of the Yaounde Valley Station2. MAPE Dam3. YAOUNDE Sanitation Study4 DOUALA Stormwater Drainage5 DWSS Study in 16 Secondary Centres6 Rural Electrification Master Plan

ADFADBADFADBTAFTAF

30/10/8128/08/8518/06/8614/12/9210/12/9710/12/97

26/11/8110/12/8518/08/8821/10/9413/02/9813/02/98

31/10/8326/06/8630/05/9012/09/95

-17/06/99

30/068430/06/9431/12/9830/.06/0131/12/0131/12/00

6.9110.622.02

32.330.760.82

0,669,881,000,000,000,12

9,6293,0349,50,000,0014,6

6,250,741,02

32,330,760,70

SUB-TOTAL 53.46 11.74 21.96 41.76

Terminated, balance reallocatedCompleted , balance cancelled

Nearing CompletionCancelled

At start-up stageJust started.

INDUSTRY

1 Line of Credit to BCD2 Douala Shrimp Landing Project

ADBADB

23/01/7916/09/93

22/02/7920/09/93

30/06/8125/10/93

30/12/9431/12/95

5.002.46

1,802,46

36,00100,00

3,200,00

Terminated and balance cancelledCompleted .

SUB-TOTAL 7.46 4.26 57.10 3.20

SOCIAL

1 Technical Education Teaching School2 Equipment of 6 Health Facilities3 Health Pre-Investment Study4 Social Dimensions of Adjustment

5 Poverty Reduction Project

6. Education Poject II

ADBADFADFADBADFADFTAFADF

24/08/8214/12/8823/08/8919/11/9019/11/9003/12/9703/12/9714/07/99

28/10/8220/11/8920/01/9027/12/9027/12/9013/02/9813/02/9811/02/00

02/08/8410/01/9114/08/9108/07/9127/12/9111/10/9911/10/99

-

30/06/9431/12/9431/12/9731/12/9731/12/9731/12/0431/12/0431/12/04

12.006.751.339.442.9214.10.707.50

12,006,731,065,382,660,000,000,00

100,0099,7041,3524,8941,440,000,000,00

0,000,020,787,091,7114,10,707,50

SUB-TOTAL 54.74 27.83 45.59 26.91

Terminated, balance reallocatedTerminated, balance reallocated

OngoingOngoingOngoing

At start-up stageAt start-up stage.

Awaiting effectiveness

MULTI-SECTOR

1. Structural Adjustment Programme1 Structural Adjustment Programme II.2 Supplementary Financing Mechanism I4. Supplementary Financing Mechanism II

ADBADFADFADF

23/08/8904/12/9712/11/9805/02/99

20/11/8913/02/9808/12/9805/03/99

30/01/903004/9829/01/9929/06/99

30/06/9431/12/0031/12/9905/02/00

100.0013.029.879.54

100,0013,020

9,879,54

100,00100,00100,00100,00

0,00 0,00

0,000,00

SUB-TOTAL 132.43 132.43 100.00 0.00

CompletedCompletedCompletedCompleted .

TOTAL 576.90 380.68 66.00 196.22The net balance stands at UA 102.87 million andthe net disbursement rate is 78.7%.

ANNEX IIIPage 1/6

CAMEROON : CSP MATRIX

BANK INSTRUMENTDIAGNOSTIC

PROBLEMSSTRATEGIES/

GOVERNMENT ACTIONSMEASURABLE INDICATORS

SCHEDULE

Loan Non-Loan Cofinancier orPartner

Macroeconomic Stability andSustainable Growth

Budgetary Policy

Reform of the fiscal policy to modernizeand widen the tax base.

Rationalization of expenditures andstrengthening of their control.

- Reform forestry taxation.- Consolidate the introduction of VAT.- Introduce a land tax based on the land register

and the lease price.- 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 avoidthe accumulation of arrears.

- Severely sanction employees convicted ofmisappropriation of public funds.

- Strengthen the quarterly monitoring of theexpenditure effected.

- Non-oil revenue increase from13% of GDP in 1998/99 to 14.8%of GDP in 2001/02

1999-2001 SAP III IMF/WorldBank

ANNEX IIIPage 2/6

DIAGNOSTICPROBLEMS

STRATEGIES/GOVERNMENT ACTIONS

MEASURABLE INDICATORS

SCHEDULEBANK

INSTRUMENT

Stability of the Financial Sector

Facilitate the development of the financialmarket.

Strengthen the regulation and control ofthe non-banking financial institutions,particularly the cooperative associationsand insurance companies.

- Create a securities market.

- Define prudential ratios applicable to non-banking financial institutions.

- Strengthen the insurance sector.- Rehabilitate the activities of the credit

cooperatives.

- A local financial market has beenset up and a regional securitiesmarket has been established.

- COBAC has defined prudentialratios for the credit cooperativesand they are approved byMINEFI. The CIMA code isapplied.

2000

2000

2001

SAP III IMF/WorldBank

Foreign Trade and External Debt

Promote external competitiveness.

Alleviate the burden of external debt

- Eliminate surcharges levied on theimportation of flour, maize and cement.

- Continue implementation of the programmeof action of the Competitiveness Committee.

- Conduct negotiations with the London Club.- Finalize the preparatory documents on the

HIPC initiative.

- No import surcharges.- A plan of action for the

Competitiveness Committeeadopted.

- Agreement signed with theLondon Club.

- HIPC documents finalized.

2000

1999-2001

2000

June 2000

SAP III IMF/WorldBank

ANNEX IIIPage 3/6

DIAGNOSTICPROBLEMS

STRATEGIES/GOVERNMENT ACTIONS

MEASURABLE INDICATORS

SCHEDULEBANK

INSTRUMENT

Regional Integration

Promote trade within the framework ofCEMAC.

Continue the rehabilitation of CEEAC.

- Seek financing for inter-state roads withinCEMAC.

- Settlement of arrears owed to ECCAS.

- Financing of the inter-state roadshas been secured.

- Arrears owed to ECCAS havebeen settled.

1999-2001

2000

Project Loan Dialogue

Environmental Protection

Promote ecologically viable exploitationof the forests and develop effective localprocessing industries.

- After conduct of the relevant studies, levyforestry taxes which encourage high value-added activities and promote ecosystems.

- Study on forestry tax reform hasbeen conducted and therecommendations have beenimplemented.

1999-2001 SAP III IMF/WorldBank

Private Sector Development

Privatization Programme

Accelerate the implementation pace ofthe privatization programme.

- Finalize the process for the privatization ofthe following enterprises: CDC; CAMTEL;SNEC; and SONEL.

CDC, CAMTEL, SNEC and SONEL,have been fully privatized.

2000 SAP III IMF/WorldBank

ANNEX IIIPage 4/6

DIAGNOSTICPROBLEMS

STRATEGIES/GOVERNMENT ACTIONS

MEASURABLE INDICATORS

SCHEDULEBANK

INSTRUMENT

Liberalization of the Economy

Continue the policy of State divestiture. - Prepare and implement the divestiturestrategy and redefine the role of the “SociétéNationale d’Investissement”- SNI).

- Strategy prepared and plan ofaction defined.

2000-2001 SAP III IMF/WorldBank

Infrastructure and Public Utilities

Improve access to quality public servicesas well as transport services, byprivatizing them and transferring theallocated expenses to infrastructure.

- Reduce the costs and time spent in theDouala port.

- Privatize the management of the water,telephone and electricity companies andprivatize road maintenance as well.

- Increase the expenditure allocated toinfrastructure.

- Restructuring of the Douala port.- Process for pre-qualification of

bidders for CAMTEL, SONEL +SNEC completed.

- Road maintenance privatized.- Share of public works expenditure

increases from 0.7% of GDP in1998/99 to 2.5% of GDP in2001/02

1999-2001 SAP III IMF/WorldBank

Institution Building

Improve the legal and judicialenvironment and ensure the security ofthe commercial contracts.

- Adopt and implement a plan forstrengthening the legal and judicial system.

- Streamline positive law with the OHADATreaty.

- Legal framework rehabilitated.- - Positive law streamlined with the

OHADA Treaty.

1999-2001 GovernanceSupport Project

Poverty Reduction

Human Capital

Promote human resources by developingeducation and health.

- Increase the expenditure allocated toeducation and health.

Proportion of credits allocated toeducation and health increases from 3%of GDP in 1998/99 to 5% of GDP in2001/02.

1999-2001 Education Projectongoing and HealthProject envisaged

ANNEX IIIPage 5/6

DIAGNOSTICPROBLEMS

STRATEGIES/GOVERNMENT ACTIONS

MEASURABLE INDICATORS

SCHEDULEBANK

INSTRUMENT

Gender Equality

Promote the status of women in society. - Facilitate the access of women to productiveresources;

- Increase and develop the productivity ofwomen’s work.

- Promote the fundamental rights of women.

- Increase in the income of thebeneficiaries of micro-creditswithin the framework of projectsfor poverty reduction and actionsin favour of women, half of thebeneficiaries of which will bewomen by the year 2003.

1999-2003 Poverty ReductionProjet; actions infavour of women areongoing

Dialogue

Programme Focusing on the Poor

Alleviate the impact of privatizations andthe civil service reform.

- Ensure the reintegration of retrenched staffinto the economic fabric through programmesprepared by the National Employment Fund.

- 6000 employees reintegrated. 1999-2001 SAP III IMF/WorldBank

Good Governance

4.1 Promote the role of civil society - Create an appropriate legal framework for theassociations and NGOs.

- Texts governing NGOs and theassociations updated.

1999-2001 Project on goodgovernance

CIDA

ANNEX IIIPage 6/6

DIAGNOSTICPROBLEMS

STRATEGIES/GOVERNMENT ACTIONS

MEASURABLE INDICATORS

SCHEDULEBANK

INSTRUMENT

Fight Against Corruption

Ensure sound management of the publicresources

- Institute proceedings in the event of poormanagement or misappropriation of publicfunds or fraud.

- Strengthen the Higher State Control Officeand the General Inspectorate of the Ministryof Justice.

- Motivate the managers of the tax and customadministrations as well as the Treasuryaccountants and cashiers.

- Control Administrationsstrengthened.

- Remunération of this category ofstaff improved.

1999-2001 Project on goodgovernance

IMF/WorldBank

Accountability and Transparency

Promote transparency in the managementof public affairs.

- Audit the public contracts award system.- Enhance the dissemination of judicial

information.- Enhance the system for the dissemination of

economic and budgetary statistics.

- Audit conducted.- Regular publication of the Official

Gazette.- Strengthened statistical bodies.

1999-2001 Project on goodgovernance

IMF/WorldBank

Annex VPage 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) Including non-oil GDPGDP DeflatorConsumer Prices (12-month average)Consumer Prices (end of period)Nominal GDP (billion CFAF)Oil Production ('000 barils/day)

-2.5-2.211.012.733.8

3 416122

3.34.1

17.030.913.4

4 130106

5.05.55.43.64.6

4 571101

5.15.02.74.17.0

4 932108

5.05.01.13.92.2

5 240115

4.44.4

-1.22.92.2

5 406119

4.85.52.12.02.0

5 785108

5.35.72.02.02.0

6 215105

5.55.72.02.02.0

6 688104

ForeignTrade

Exports (SDR)Including Crude oilImport (SDR)Exports (volume)Average Price of Oil at Export (US$/barilNominal Effective Exchange RateReal Effective Exchange RateAverage Exchange Rate (CFA/SDR)Terms of TradeNon-Oil Price Index at Export

-12.5-21.9

0;4-11.014.2

-22.7-24.7

6090.9

86.9

8.5-9.9-1.12.3

15.6-26.5-11.9

7769.9

33.3

7.5-0.813.1

7.416.7

6.56.4

743-8.6

-21.5

19.436.016.513.819.7-2.4-1.87675.1

-4.4

-6.3-16.713.411.114.5

1.5-7.7815-4.59.2

-6.0-10.4

4.28.2

12.2---

-15.9-12.6

7.615.6

4.72.3

15.2---7

2.5

7.0-7.77.05.0

14.9---

0.94.2

8.90.07.25.7

15.1---

3.14.0

Money and Credit (end of period)

Net Internal AssetsNet Claims on the Public SectorCredits to the EconomyMoney Supply (M2)Speed of Monetary Circulation (non-oilGDP/M2)

33.72.6

-9.717.7

5.0

2.22.53.46.15.1

-3.4-3.05.0

-5.16.4

-5.80.03.3

13.88.1

12.71.8

30.37.87.6

6.95.28.9

10.27.2

6.80.0

12.112.5

6.9

4.3-2.311.813.5

6.6

1.1-2.56.5

10.56.4

Sources : Cameroonian Authorities, IMF Services

Annex VPage 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 Including non-oilTotal Expenditure Recurrent Expenditure Capital Expenditure

-20.2-15.5

4.70.4

95.7

55.258.011.926.6

-72.7

22.419.810.210.638.1

10.91.97.72.7

51.1

17.123.818.210.641.7

-1.29.59.24.3

12.7

14.810.610.5

0.969.8

12.112.4

9.89.2

11.7

6.512.7

5.54.44.2

(Percentage of GDP)Gross National SavingsGross Investments

11.215.3

14.114.5

11.215.4

13.416.2

15.718.4

14.418.8

16.619.8

17.120.1

18.120.5

Financial Operations of the State

Revenue of the Central Administration including non-oil revenue Expenditure of Central AdministrationOverall Budgetary Balance (excluding grants)Primary Balance

10.17.9

19.3-9.20.8

12.910.317.9-4.93.8

14.311.216.1-1.85.4

15.111.016.1-1.05.8

16.212.317.9-1.75.9

15.513.018.9-3.44.6

16.613.519.6-2.95.2

17.314.120.0-2.65.4

17.214.819.6-2.45.4

External Sector Current Account Balance (including grants) External Public Debt

-4.2122.7

-0.497.2

-4.189.0

-2.883.5

-2.787.8

-4.487.9

-3.278.7

-3.075.9

-2.470.0

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

Due Debt ServiceDue Debt Service Compared to BudgetaryRevenueEffective Debt Service

57.2

125.443.7

48.2

96.414;9

59.5

93.424.9

44.3

74.119.6

40.4

66.216.1

45.4

71.2-

42.2

65.7-

33.2

50.0-

29.3

46.2-

Sources : Cameroonian Authorities and IMF Service

Annex VI

CAMEROONGross Domestic Product at Constant 1989/90 Prices

(in billion CFAF)

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

Primary Sector

Food Crops Export Crops Stockbreeding + Hunting Fisheries Forest

Secondary Sector

Mining Sector Manufacturing Sector Water-Electricity-Gas

Tertiary Sector

Excise Duties - …..

854.7

398.9179.6142.9

6.3126.9

661.4

166.8362.1

56.3

1 380.5

67.2

929.3

431.7208.3138.1

6.6144.6

645.4

149.7357.2

80.4

1 418.5

58.3

998.2

462.3229.5141.6

7.0157.9

674.6

142.0385.6

85.9

1 449.5

81.6

1 073.6

493.5250.5148.9

7.3173.4

726.3

151.5416.6

92.0

1 475.5

92.0

1 146.4

527.0268.3157.4

7.7185.9

781.9

161.5450.1

98.6

1 609.1

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

Private Public

Investment

Stock Variation Balance

Net External Balance

NFS Exports NFS Imports

2 398.5

2 055.5343.0

440.4

0.0

114.9

684.7569.8

2 504.5

2 158.5346.0

411.1

0.0

135.8

711.7575.9

2 646.3

2 235.8410.5

445.8

0.0

112.0

773.8661.9

2 805.1

2 457.9347.2

487.9

0.0

74.4

845.3770.8

2 943.9

2 540.9403.0

575.2

0.0

18.4

891.1872.7

Annex VIIPage 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 RevenuePetroleum Sector RevenueNon-Oil Revenue Excise Duty Special Tax on Oil Production International Trade Taxes Goods and Services Taxes Other Revenue, Net of Privatizations

34474

270433662

10,425

534107427

5828

104193

44

654143511

6550

126209

61

745204541101

58127200

55

848204647131

58143246

66

838134704174

65138275

52

Total ExpenditureRecurrent Expenditure, including:Wage BillOther Goods and ServicesGrants and Transfers Scholarships and Grants Pensions Separation Packages (POE)Due Interests On External Debt On Internal DebtInvestment Expenditure, including: Investment on External Resources Investment on Budgetary Resources Restructuring Expenditure Non-Classified Expenditure

Balance, Commitment Base

Variation in Arrears (net) External Internal

Balance, Cash Base

659545207

50482523

0240212

28114

241278

0

-315

-473-429

-44

-788

738690194106

572730

0333230

32472519

31

-204

115319

-204

-89

782732188117

77313313

350258

444413

18613

6

-422

-232-190-550

793705213130

633427

1299273

27742839

26

-48

-3256

-25ç

-51

937780259136

854529

1299270

29153

8888

-89

-516

-324-19

1

-605

1.032825275167100

5543

2283255

28194121

4727

4

-185

-4640

-86

-232

Sources : Cameroonian Authorities, IMF Service

Annex VIIPage 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

External Financing (net)AmortizationDisbursements Projects Programmes Debt ReschedulingInternal Financing (net) including:Banking System Non-bankIncome Accruing from the PrivatizationsFinancial Sector

Residual Financing Needs

788

698-210908

24175627

905634

00

0

89

-71-281287

2578

153160

12148

00

0

550

439-348759

13113633111-2419-91

0

51

-173-276103

280

75223

-4-122-6

0

605

486-282768

88177504118

6-25

1-13

0

222

181-332514121115278

4115-711-4

0

Annex VIIIPage 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

Trade Balance

Exports FOB Petroleum Products Non-oilImports, FOB

Services (net) Interest on Public Debt Others

Transfers (net) including: official : Entries Exit

-142

181

623263361

-442

-333-214-119

92640

-31

-17

305

862302561

-557

-326-232

-94

51637

-33

-110

281

884286597

-602

-408-261-148

171431

-14

-139

254

983402581

-729

-440-273-167

470

57-10

-141

209

1 084356728

-875

-414-270-144

631572-9

-239

104

986309677

-882

-413-254-158

691079

-10

Capital Account

Public Capital (net) Loan Programmes Project Loans Amortization

Private Capital (net) Petroleum Sector Others

Errors and Omissions

Balance of Payments

-116

-16170

24-210

-99-41-59

-164

-422

-266

-1867025

-281

-80-5

-75

-214

-496

-217

-2459013

-348

28238

5

1

-326

-194

-2480

28-276

542

52

79

-254

-62

-32162

88-282

-30-26

-4

0

-203

-61

-96115121

-332

35-1752

0

-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

FinancingsBEAC Including IMF Drawdowns (net) Other ReservesDebt ReschedulingDebt ReductionVariations in Arrears (net)Financing Gap

422141

6135627

83-429

0

496-7-2-5

15331

3190

326-4118

-59599

0-232

0

254-77

-4-7375

0256

0

2032335

-12504

0-324

0

300-1733

-49277

040

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) BEAC Commercial Banks

-316.0-352.6

36.6

-288.7-345.8

57.1

-278.8-288.3

9.5

-179.1-204.7

25.6

-170.5-191.3

20.7

-171.8-207.1

35.4

Internal Assets Internal Credit Net Claims on the Public Sector Net Claims on the StateCredit to Financial Institutions Credit to the EconomyOther Items (net)

1 016.5824.3476.5435.8

3.2344.6192.2

1 031.9854.7493.9447.3

4.6356.2177.2

989.6869.1450.2400.3

9.3409.7120.5

887.1832.4472.2423.512.0

348.154.7

930.6905.8462.2398.614.8

428.824.8

1 024.4999.1517.0456.4

6.7475.425.3

Money and Quasi-Money Monetary Circulation Deposits

700.5109.6590.9

743.2106.5636.7

710.894.5

616.3

708.0180.3527.3

760.1205.8554.3

852.7200.0652.7

Sources : Cameroonian Authorities and IMF Service

Annex X

CAMEROON :External Resource Requirements

(In Billion CFAF)

1999/2000 2000/2001 2001/2002 TOTAL

RESOURCE REQUIREMENTS

Current Account (including transfers)Debt AmortizationReplenishment of ReservesStock of Debt Arrears

IDENTIFIED FINANCING

Project AssistanceProgramme AssistanceDebt ReschedulingOther Capital Flows, Errors and Omission

RESIDUAL REQUIREMENTS

1,131

18737645

523

608

16594

32227

523

543

186276810

295

184940

17

248

529

161273950

362

206100

056

167

2,203

-534-925221523

1,265

555288322100

938

Sources : Cameroonian Authorities, IMF