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Cameroon: Extended Credit Facility - 'No Foreign Interference in Signing Agreement With IMF'

PRESS RELEASE: By Issa Tchiroma Bakary Following is the introductory statement of the Minister of Communication, Issa Tchiroma Bakary ...

By Issa Tchiroma Bakary

Following is the introductory statement of the Minister of Communication, Issa Tchiroma Bakary in a press conference he granted on July 24, 2017 on the Economic and Financial Programme with the International Monetary Fund supported by the Extended Credit Facility (ECF).

"Distinguished Journalists,

The aim of our meeting today is to provide you with some relevant information on the economic and financial programme that our country has just set in motion and which, as you are all aware, has gained the backing of the International Monetary Fund - IMF - through a financial mechanism known as the Extended Credit Facility (ECF).

I wish you all a warm welcome to this encounter.

My statement will focus on three issues, in order to appropriately respond to the concerns raised in your treatment of this issue and also for the proper information of the public.

I will start with the context, the rationale and the aims of the Programme; then, talk on what the Programme itself encapsulates; and end up with the role of the IMF and the nature of the Extended Credit Facility supporting the Programme.

With regard to the first issue, allow me to recall that it was on the initiative of the President of the Republic of Cameroon, His Excellency Paul BIYA, that CEMAC Heads of State met on 23 December 2016 in an extraordinary summit expanded to the Director General of the IMF and the French Minister for the Economy and Finance, to discuss on the economic and monetary situation of the Subregion.

Cameroon: Extended Credit Facility - 'No Foreign Interference in Signing Agreement With IMF'
At the end of their working session, the Heads of State then adopted 21 resolutions including Resolution No. 13, inviting CEMAC countries to engage in negotiations with the IMF to better structure their economic recovery efforts, against the backdrop of the shock which resulted from the drastic decline in oil prices on the world market.

As a matter of fact, the economic situation of CEMAC member countries had deteriorated significantly since 2014, bringing down the average growth rate of the sub-region from 2.1% in 2015 to less than 0.7% in 2016, with a public debt representing 44.6% of the Gross Domestic Product in 2016, as against 34.9% in 2015.

With regard to reserves, they had moved from 4 400 billion CFA Francs in 2015 to 1 900 billion CFA Francs, that is to say, from two to six months of imports in 2016.

As regards the current external balance, it remained negative until 2016, below 10.2%.

It was therefore necessary for Heads of State to devise solutions to address the crisis and create conditions for a sound and sustainable recovery for their respective economies, with the support of the IMF, by means of both national and regional efforts.

In this respect, under the leadership of the Head of State, Cameroon has contributed to leading a coordinated regional response to maintain the integrity of the monetary arrangement of the CEMAC, in other words, to preserve the economies of the community from an economic downturn that would have unprecedented consequences.

Within the CEMAC zone, the Cameroonian economy is particularly resilient, due to its greater diversification, the reliability of its industrial fabric and the dynamism of its domestic market.

However, being part of an integrated community, Cameroon began to suffer from the negative impact of the less resilient economies in the sub-region and the subsequent security-related shocks. The macroeconomic consequences were immediate, resulting in a sharp decline in international reserves of the CEMAC zone in general, and then finally to those of Cameroon specifically.

To stop this downward trend, our country developed a three-year economic and financial plan to restore the stability and external viability of the economy, while improving its competitiveness, strengthening the resilience of the financial sector and promoting a vigorous and sustainable growth.

This programme will also serve as a catalyst to mobilize foreign aid from its technical and financial partners within the framework of targeted budgetary support projects.

To support this programme which, I should make it clear, is a domestic initiative and not a programme imposed from outside, the Government signed on 26 June 2017, an agreement with the IMF whose funding is part of a mechanism referred to as the Extended Credit Facility.

This agreement relates to an amount of 483 million of Special Drawing Rights, or about 666.2 million US Dollars equivalent to approximately 400 billion CFA francs, including 102 billion CFA Francs available as soon as approval from the IMF Board of Directors is obtained.

It is important to note that this Agreement has allowed Cameroon to draw up to 175% of its own reserves whose ceiling stand today at 275 million of Special Drawing Rights.

It should also be mentioned that as a general rule, the Extended Credit Facility is the main tool that the IMF has at its disposal to provide support in the mid-term to countries facing macroeconomic imbalances.

The support granted covers a maximum period of three years.

As I indicated earlier, the agreement with the IMF for this Extended Credit Facility paves the way for additional bilateral funding.

In this regard, 887 billion CFA F are expected in addition to the funding of the IMF, from technical and financial partners, according to the following distribution:

from the African Development Bank: 377 billion CFA F;

From the World Bank: 247 billion CFA F;

From France through the French Development Agency: 197 billion CFA F;

from the European Union: 66 billion CFA F

For 2017 alone, 510 billion CFA F will be put at the disposal of Cameroon within the framework of the key reforms in some sectors considered critical to our economy.

The interest rate for the repayment of these funds is 0% with a deferred depreciation period of five and a half years and a maximum maturity period of ten years.

It is worth indicating that the three-year Programme thus supported by the ECF and the attached additional financing schemes, is based on our own growth strategy as determined by the GESP.

It also aims to achieve the social goals set by the Government.

In other words, there is no foreign interference in the signing of an agreement such as the one that Cameroon has just signed with the IMF.

Contrary to what has been aired here and there over the past few days, this is not therefore a Structural Adjustment Programme, but rather a support from technical and financial partners to the implementation of the government's in the area of economic and social development of the nation.

Better still, this commitment of our country is going to foster Cameroon's competitiveness and the growth potential in the medium term and further consolidate the national strategy in view of becoming an emerging economy by 2035.

That is, in any case, the Head of State's commitment with the entire nation. That is the legitimate aspiration of the Cameroonian people.

Distinguished Journalists, those are the insights and clarifications that I intended to give you on behalf of the Government, to make sure you better understand the substance of this Agreement that Cameroon has just signed with the international financial community, in order to give a sound information to the public.

I invite you to make use of it in a professional, objective and responsible manner.

Thank you for your kind attention." Cameroon Tribune.