Identifier
Created
Classification
Origin
08YAOUNDE909
2008-09-19 11:20:00
CONFIDENTIAL
Embassy Yaounde
Cable title:  

IMF TEAM HEARS LITTLE FROM GRC BUT AN EARFUL FROM

Tags:  CM ECON EFIN KCOR PGOV PREL 
pdf how-to read a cable
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C O N F I D E N T I A L SECTION 01 OF 03 YAOUNDE 000909 

SIPDIS

E.O. 12958: DECL: 09/16/2018
TAGS: CM ECON EFIN KCOR PGOV PREL
SUBJECT: IMF TEAM HEARS LITTLE FROM GRC BUT AN EARFUL FROM
DONORS

Classified By: Pol/Econ Chief Scott Ticknor for reasons 1.4 (d) and (e)

C O N F I D E N T I A L SECTION 01 OF 03 YAOUNDE 000909

SIPDIS

E.O. 12958: DECL: 09/16/2018
TAGS: CM ECON EFIN KCOR PGOV PREL
SUBJECT: IMF TEAM HEARS LITTLE FROM GRC BUT AN EARFUL FROM
DONORS

Classified By: Pol/Econ Chief Scott Ticknor for reasons 1.4 (d) and (e)


1. (C) Summary: A joint IMF/World Bank/African Development
Bank (ADB) team visited Cameroon from September 1-12 for the
final assessment of its three-year program, which is
scheduled to end in January 2009. The Government of Cameroon
(GRC) did not indicate to the team whether it wants a
follow-on program. The Fund team left generally satisfied
with progress on budget and financial sector reform, and
anticipated increased real non-oil GDP growth from an
estimated 3.9% in 2007 to a predicted 4.6% in 2008. They
shared with donors their concerns about the government's
recent purchase of a costly airplane and with off-budget
"special expenses". In several meetings with the visiting
Fund team, reps from the World Bank, ADB, and bilateral
donors voiced growing frustration with governance, the
economy, and future prospects for the country. The saw a
continued role for the IMF and argued for a greater sense of
urgency from the government. Unfortunately, this visit
appeared to do nothing to press the government onto a more
urgent economic path. End summary.

The Future of the IMF Program
--------------


2. (C) The recent IMF/World Bank/ADB visit was the sixth
and final review under a three-year Fund program begun in
2006 and scheduled to end in January, 2009. The Fund team
told diplomats that the IMF remains willing to stay engaged
in Cameroon; however, the GRC is still reportedly
deliberating and still working on its Poverty Reduction
Growth Strategy (key to a future IMF program). To date it
has not indicated to the Fund what if anything it wants as a
follow-on program. The team said there would be another IMF
Mission in February/March 2009 for Article Four discussions.
If the Fund stays engaged in Cameroon, it will stress
progress on macroeconomic and public finance stability,
expenditure controls, financial sector reform, and
improvements in public sector management. The Fund and Bank
have stressed the need for a planning process that involves

consultations with civil society.

The Fund on the Economy
--------------


3. (C) The IMF team was generally satisfied with the state
of the Cameroon economy. They forecast 4.6% real GDP growth
(non-oil sector) in 2008 and around 5% growth in 2009. The
external debt is at reasonable levels and the government has
continued to reform public finance management, according to
the IMF. The team said they and the GRC agreed on 2009
budget priorities: agriculture, health, education and
energy. The Fund had concerns about the GRC's recent
purchase of a $69.5 million airplane, whose intended use is
unclear but was ostensibly purchased for use by CAMAIRCO (the
newly formed national airline, following the liquidation of
CAMAIR). The IMF also questioned the GRC's "special
expenses" off-the budget account and has asked for more
information about this item. There are also continuing
concerns about arrears from SONARA, the state owned oil
refinery. They criticized the budgetary impact of the GRC's
March decision to increase public salaries, as well as poor
progress on the privatization of CAMTEL and CAMAIR, low
public and private sector investment, poor governance, and a
weak business environment.

Donor Woes: The Sour IFIs
--------------


4. (C) In a series of meetings with the Fund team, donors
and G-8 country local Ambassadors delivered a message of
rising frustration about the current state of affairs in
Cameroon. The World Bank Res Rep pointed to the
deteriorating quality of expenditures and the increased
difficulty in getting government data. The government has
lots of cash but "accounting is getting sloppy," she said,
noting what she saw as the government's weakening commitment
to public finance reform and the IMF program. The government
had yet to complete its Poverty Reduction Strategy Program,
making planning difficult. She praised some commitment to
private sector development but pointed to the chronic lack of
coordination or communication between ministries or within
the presidency. Bank staff also highlighted serious business
climate problems, noting that Cameroon dropped six points in

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the Bank's just published 2009 Doing Business Report ranking.



5. (C) The African Development Bank rep agreed that budget
execution was very weak, on a par with post-conflict
countries. The GRC is not interested in economic reforms and
lacks an economic strategy, he said. While there has been
some advancement in road building, he saw little progress in
agriculture or the electricity sector. Government data was
poor and it was getting increasingly difficult to understand
the accounting of petroleum income. It was unclear how to
stimulate higher growth, he concluded.

The Cynical Europeans
--------------


5. (C) The British High Commissioner (and G-8 Coordinator)
was very pessimistic, blaming corruption, conservative
preservation of the regime, and centralized power structures
for stymieing initiative and confounding coordination within
the Cameroon government. The GRC wants prosperity but is
unwilling to make the changes needed to get it, he stated,
noting that "the government can't rely on the everlasting
patience of the people." The economic measures taken after
the February riots had not worked; the few reformist voices
in government were not supported enough. Cameroon suffers
from "a massive lack of urgency," he concluded.


6. (C) The Spanish Ambassador agreed that Cameroon lacks
the political will needed to attract investment. She blamed
corruption and internal political wrangling, noting that
there are many more Spanish companies investing in Gabon than
in Cameroon.


7. (C) The German Charge voiced growing frustration with
the GRC's lack of political will to move forward across a
wide range of development projects. The EU Rep decried the
GRC's total lack of responsiveness in efforts to advance $60
million in EU projects. "We can't get the government
interested in projects they asked for...there is zero
dialogue with the Finance Minister," he said. Greek
Ambassador admitted that Greece has almost no interest in
Cameroon because of the inability to see tangible results
from its relationship. He admonished the group that
"political stability should not be confused with political
stagnation - Cameroon's stability is highly suspect." He had
low expectations for a democratic transition in 2011, when
Cameroon's next elections are scheduled.


8. (C) The French DCM was new and had little to say at the
G8 meeting. At an earlier technical-level meeting, the head
of French Cooperation noted that the French have had some
quality technical discussions with the GRC but agreed that
there was a lack of political will to improve public finance
management.

Other Views
--------------


9. (C) Canadian High Commissioner told the IMF team that
the GRC lacked the political will to make progress on reforms
and was very bad at implementing programs. He saw some
"microscopic changes" in the forestry sector, which Canada
supports, but the gains were fragile and would evaporate if
the Minister changes, he said. He questioned whether donors
are complicit by tolerating and praising the GRC. He argued
for a tougher stand against the government, querying "does
our aid help at all?"


10. (C) UNDP Acting Rep agreed that there was "no favorable
environment for reform." She was "very pessimistic" about
the GRC's commitment to fighting corruption. She thought the
projected 4.6% GDP growth was unimpressive and difficult to
assess without updated census data, which has been prepared
but not released by the presidency. Nonetheless, the UNDP
would continue to work on poverty reduction, governance, and
democratization. The Japanese Ambassador was more hopeful,
noting his government's desire to improve relations in
Africa. Japan was interested in coming into Cameroon (he
noted keen interest in Nigeria) but "there are a lot of
reservations."

Comment
--------------

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11. (C) We painted a more mixed picture to the IMF team,
sharing in the overall frustration with poor governance but
also pointing to individual GRC officials who are reformist
and some experiences on the commercial, mil-mil and other
fronts where we have benefited from cooperation from the
government. We praised historical progress on press freedoms
and the recent successful transfer of the Bakassi peninsula,
as well as a recently stepped-up government anti-corruption
effort.


12. (C) It is not clear to us whether the GRC will seek a
follow-on program. Prime Minister Inoni, in his mid-July
meeting with Treasury DAS Lowery, said the GRC wanted to
continue with a program, but many GRC officials seem to chafe
at the IMF's continued role. Some in the press speculated
that the government would renew the program but there is some
fatigue with IMF oversight and a feeling among many observers
that Cameroon no longer needs the IMF. Like most other
donors in our meetings, we encouraged the IMF to remain
engaged in Cameroon, as a constructive voice at the table
pressing for economic reforms. The World Bank Res Rep noted
the negative impact for Cameroon's credit rating and
reputation if the Fund pulls out. The diplomats urged the
Fund to press the GRC more forcefully on reforms.


13. (C) The Fund visit received extensive, positive press,
in which they praised GRC progress on reforms and hailed the
positive trend line on overall economic growth. Higher
growth in the economy is encouraging, driven mainly by
agriculture, services and public investment. However, the
growth level is not on a par with many other African
countries and not strong enough to boost Cameroon out of
poverty. Inflation is rising (the Fund revised upward its
inflation estimate for 2008, from 3.3% to 4.1%; many believe
it is higher, given rising costs of food); together with poor
social sector investment, a growing income distribution gap,
and 2.3% estimated population growth, much of the impact of
this growth will not benefit the average Cameroonian.


14. (C) The IMF team left without pressing the GRC very
hard on reforms, telling diplomats that it was not their
role to push for greater political will on reforms or
governance (except as it related specifically to the budget)
- that was the job of bilateral donors. World Bank ResRep
told Emboffs separately that the joint World Bank/IMF meeting
with Finance Minister Esseme Menye had gone very badly. The
Minister offered several inconsistent and not very convincing
explanations for why the GRC was buying a new airplane,
probably reflecting his own lack of involvement in the
decision to do so. (The Bank shares our view that the plane
is being bought for use by President Biya). Menye also
admitted to $100 million of unaccounted for expenditures on
the SNH (National Hydrocarbon Company - the oil parastatal)
budget, saying he could not explain them. World Bank Res Rep
admitted that the lack of progress and responsiveness on
public sector finance and corruption raised doubts about the
effectiveness about their own programs in Cameroon. Given
the unanimous, high level of frustration around the table of
donors, we will look for ways to step up the pressure on the
GRC, directly and in tandem with others here, to make
progress on governance and the economy.
GARVEY