Cameroon is at high risk of debt distress, says AfDB
(Business in Cameroon) – In its 2021 outlook on African economies, the African Development Bank (AfDB) considers that “Cameroon’s public debt level is worrying”. The development bank explains that the country’s debt fell sharply in 2006 when it benefited from the Heavily Indebted Poor Countries (HIPC) initiative. But, barely a year later, this debt has returned to an upward trend, adds the ADB.
“The stock of public debt rose from 12% of GDP in 2007 to 45.8% of GDP (around two thirds external and one third internal) in September 2020 ”, he writes. This means that in 13 years, Cameroon’s public debt has quadrupled. Based on this fact, the AfDB believes that “Cameroon has the characteristics of a country at high risk of debt distress. “
As such, believes the development bank, the country’s development efforts could be compromised because a significant portion of its income is now used to repay creditors as was the case before the HIPC initiative. Incidentally, the 2021 finance law had already revealed that, as in 2018, the volume of debt service (both domestic and external) had started to increase while public investments fell slightly. For example, according to budget documents, Cameroon’s debt service increased from FCFA 727.5 billion in 2017 to FCFA 1,027 billion in 2018, while public investment increased from FCFA 1,586.9 billion in 2018. FCFA to 1,291.5 billion FCFA over the same period.
Therefore, the AfDB believes that if the country were to become over-indebted, it would become “problematic due to the need to support the economic recovery in 2021 and to carry out the major structuring projects envisaged in its new national development strategy 2020-2030. “
Note, however, that the Cameroonian authorities have always minimized these post-HIPC debt distress warnings. According to the authorities, at 45.8% of GDP at the end of September 2020 (XAF 10 164 billion), the public debt is well below the debt / GDP intolerance ratio which is 70% in the CEMAC region.
Moreover, they point out, the public debt started to increase after the HIPC Initiative due to the numerous infrastructure projects launched during the period. Indeed, in 2012, the country launched a major infrastructure construction project under the 7-year “major achievements” mandate. These infrastructures include hydroelectric dams, the bridge over the Wouri, national roads, the port of Kribi as well as cross-border roads. There are also the infrastructure projects launched as part of the Three-Year Emergency Plan (Planut) and the 2019 African Cup of Nations (CAN), which was finally rescheduled in early 2022.
Brice R. Mbodiam