The ongoing fiscal consolidation policy in Cameroon is expected to have a positive impact on the country’s macroeconomic projections, according to the U.S. rating agency Fitch Ratings, which has just published its recent assessment.
The measures put in place include improving the mobilisation of non-oil revenues, the digitisation of tax and customs administrative procedures, as well as the reduction of tax exemptions from 2024.
In addition, new budget cuts on fuel subsidies are planned to relieve the state’s cash flow, given the 700 billion FCFA spent in 2022 on this item. The government has already made a first reduction in this subsidy and plans to repeat this measure over the next two fiscal years, according to Fitch.
These measures should result in a further increase in prices at the pump and, in general, an increase in the rate of inflation. However, without explicitly mentioning them, the agency believes that the government’s social measures, combined with the decline in wholesale prices of food and energy, will help mitigate the rise in fuel
prices. Following the first increase last February, the State also increased civil servants’ salaries by 5.2% and the minimum wage by 32%. Risks
Despite a moderate budget deficit and sustained economic growth (1.2% and 1.0% of GDP in 2023-2024 compared to 2.6% in 2021), Cameroon’s debt rate is expected to improve, from 44.7% of GDP at the end of 2022 to 39.6% in 2024.
However, the Cameroonian economy remains exposed to many risks, including instability in the English-speaking regions of the Northwest and Southwest, as well as terrorist attacks by Islamist insurgents in the Far North region, which aggravate security problems and keep spending at a high level. In addition, the uncertainty surrounding the succession of President Paul Biya, who is 90 years old and has been in power for 40 years, is a significant risk for investors.
Although it is assumed that the successor will come from the ruling party, the absence of a succession plan poses the risk of internal struggles between parties and threatens political continuity. All these considerations could lead the agency to lower its rating of the country.
Despite an uncertain global context marked by disruptions in supply chains, GDP growth in Cameroon has maintained at a moderate rate with an upward trend, from 3.5% in 2021 to 3.7% in 2022. According to Fitch’s estimates, this growth is expected to reach 4% in 2023, then 4.2% in 2024. This slight improvement will be supported by an increase in non-oil exports, including agricultural and forestry products.
