Cameroon | Advice: IMF homily against fuel subsidies

In the report of the consultations under Article IV of the Fund’s statutes published Monday March 30, the Cameroonian government was once again called to order by the International Monetary Fund (IMF). The Bretton Woods institution delivers its usual homily on the need to put an end to fuel subsidies, hitting the current context where prices at the pump are soaring due to the war in the Middle East

In the communiqué of the IMF Executive Board, the directors call on Cameroon to continue efforts aimed at strengthening revenue mobilization and intensifying initiatives in the areas of expenditure control, expenditure efficiency and public investment management in order to provide room for maneuver for expenditure infrastructure and social reforms are also essential.

We can blame it for everything, but the Bretton Woods Institution is constant in its crusade against fuel subsidies. As it tells all its members, the Fund once again reminded the Cameroonian government: “the effects of the recent rise in oil prices, fueled by the conflict in the Middle East, should be contained in the short term. Oil revenue gains are expected to be partly offset by subsidies granted under the administered price regime, underscoring the need to adopt an automatic fuel pricing mechanism, as well as targeted aid to the most vulnerable populations to to mitigate fiscal risks.»

On the macroeconomic level, the Cameroonian economy is expected to recover to reach 3.3% growth in 2026, thanks to increased public investment, while inflation is expected to fall to 2.9%. The current account deficit is expected to widen to 5.3% of GDP in 2026, due to the fall in cocoa prices. In the medium term, with the realization of mining diversification, growth should reach 4.6% and the current account deficit should be reduced to 4% of GDP. However, tight liquidity and rising global interest rates could increase funding risks as large debt write-downs come due.

The IMF insists on the need for constant vigilance in the financial sector in the face of the increase in bad debts and the links between the state and the banks. They called for caution given the growing influence of the State over the banking sector, and encouraged the strengthening of governance of public banks. Furthermore, the acceleration of reforms in the fight against money laundering and the financing of terrorism is essential for Cameroon to exit the FATF gray list. IMF Directors also stressed that public enterprise reforms and fiscal transparency will be key to strengthening the resilience of public finances.