Infrastructure Plan Leads Cameroon’s Drive for Growth

Public investment and domestic demand keep the growth rate steady.

Fuel subsidies crowd out more pro-poor spending in national budget.

Closing the infrastructure gap and improving the business environment are essential to achieve development objectives.

An IMF staff report on Cameroon’s economy projected 2014 growth at 5.5 percent, unchanged from 2013. Agriculture, which provides a livelihood to most of the poor, did not expand enough to reduce poverty and inequality, the report said. Poverty stood at close to 40 percent of the population, and social indicators such as life expectancy, infant mortality, and youth literacy, were weak.

Annual inflation, at 2.1 percent in 2013, was also steady at relatively low levels thanks to stable food prices supported by an ample supply of foodstuffs. But retail fuel prices stayed frozen at their 2009 levels, reflecting substantial fuel subsidies that crowded out more pro-poor spending in the budget, where public spending on health and education was low.

Among the main recommendations in the IMF report were policies to

• Promote higher and more inclusive growth through a shift toward social spending, a friendlier business climate, and deeper regional integration;

• Reprioritize public spending by gradually reducing fuel subsidies while providing targeted compensation to the most vulnerable; and

• Improve non-oil revenue by broadening the tax base and streamlining tax exemptions.

Reorganize the tax base

Cameroon’s fiscal challenge, the report said, is to reorganize its tax base and develop alternative forms of taxation. Positive impacts expected from an economic partnership agreement signed with the European Union include a widening of the tax base, as incomes rise. The long-term effect will ultimately depend on the authorities’ capacity to offset a reduction in customs revenue with receipts from other sources, such as the value-added tax, excise taxes, and reductions in tax exemptions.

Infrastructure projects
In an accompanying report on selected issues in Cameroon’s economy, the IMF noted that the country’s infrastructure indicators trail those of regional peers. In spite of a slight improvement in the overall quality of infrastructure in 2013, indicators are low by sub-Saharan African standards especially for roads, air transportation, and electricity. Closing the infrastructure gap is essential to achieve Cameroon’s development objective of attaining emerging market status by 2035, the report said.

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