The Cameroonian newly appointed resident representative of the IMF in Nigeria delivers his analysis on Cameroon. He spoke a few weeks ago in an interview on STV Television.
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How do you read the current macroeconomic situation in Cameroon?
From a personal point of view, which is not that of the IMF, Cameroon’s macroeconomic situation is one of cautious optimism. I am optimistic about the enormous potential that Cameroon has, human potential, potential in terms of natural resources, and potential in terms of the attractiveness of certain sectors such as tourism which has not yet really taken off. I see enormous potential in this country, but I also say caution because the international situation is not very favorable. We are in a period of tightening financial conditions in certain countries. Most, if not all, central banks have increased their interest rates to combat inflation. Then you have many other problems like excessive debt in several countries. The fight against inflation is still not a foregone conclusion. You have the meteoric increase in population which calls for much more rigorous social policies.
Considering this year’s budget for example and other financial instruments mobilized by Cameroon, do you have the impression that good choices were made taking into account this international situation?
I think Cameroon is in a situation that is similar to many other emerging and developing countries. This is a situation where needs are present. The economic policy space is tightened by what you have monetary policy which is very busy fighting inflation. So the possibility for the central bank to revive the economy is almost zero because the priority objective is to fight against inflation. I think that for Cameroon this year, there are difficult measures that have been taken by the government. In other countries it is very complicated, for example, to reform hydrocarbon price subsidies. Cameroon has initiated this reform. This is a positive step. The reforms could be painful. This will need to be accompanied by measures that target vulnerable populations because certain reforms will have fairly significant distributive impacts. I think the government is fully aware of this. He is engaged in frank discussions with technical and financial partners.
What do you think was done half-heartedly?
We have created an economy that is extremely dependent on the outside world. We have major export products which we export to the rest of the world. Our economy is not sufficiently diversified. So the problem today is much more fundamental. This is particularly how we manage to create resilience in the face of different shocks. I carried out a study as part of my work at the IMF on the consequences of a fragmentation of the world economy between the East bloc and the West bloc for poor countries. In this study, we show that small economies like that of Cameroon would bear the brunt of the wars between the two incoming behemoths. So the shocks will come more. Cameroon’s ability to withstand these shocks essentially depends on our ability to diversify our economy. It also depends on a certain number of factors such as good governance, infrastructure, human capital, etc. So the situation in Cameroon today is much more structural than cyclical, although the situation is unfavorable.
A few days ago, the moodys rating agency downgraded Cameroon’s long-term sovereign rating from B2 to CAA1. Can you explain what this refers to?
This drop in Cameroon’s rating is the result of a series of indicators according to moodys, notably payment delays at the end of 2022 and beginning of 2023, debt service on certain contracts, etc. The problem with these notes is that they also have subjective characteristics. There are many elements that are not always measurable. Political risk is difficult to measure. The quality, for example, of the business environment, you can measure it but it is not precise. Moodys experts will look at a battery of indicators, assign a rating and then modify it with what is called judgment. They will judge a certain number of elements, notably perception. It must be said that the consequence of lowering a rating is that the loan conditions will now be a little higher. When your rating is lowered, it sends a signal to the financial market that your signing has taken a hit. The problem is that when you are going to borrow from international markets, you must be impeccable about your ability to manage your cash flow. It is very easy for agencies to lower a rating than to put you back where you were. It takes a certain amount of time when you make reforms to have a better rating.
Regarding the recent Russia Africa summit, do you and some think that it is an opening to another form of colonization? Receive massive funds and slightly open our resources to the countries of the bloc, without necessarily feeling any real development at the local level
The challenge for African countries like Cameroon is truly to successfully navigate these troubled waters in which the world economy currently finds itself. The world is increasingly divided into blocks. You have the Eastern bloc which is made up of European Americans, the Western bloc made up of countries like China and then a bloc of strategic countries like India which ensures that in this slump Indian interests are respected. For me, the African heads of state that I saw in Paris or in Saint Petersburg are part of this pragmatism. You have countries which believe that we are not going to join a bloc, geopolitical conflicts do not concern us. Today in the Sahel you have countries which have chosen to rely solely on the security support offered by Moscow. And when you make a choice you need to know what the consequences come with it.
What could be the consequences?
We did a study on the subject and we demonstrated that in a context where the world is divided into two blocs and the non-aligned countries are forced to choose a bloc, then this configuration generates a decline in the world economy ranging from of the order of 6 to 7%. Some African countries could ensure in the long term a drop in their GDP of around 15% to 20% so it is fundamental that we manage to play on this fine line of economic diplomacy where we do not take sides. Otherwise the consequences of sanctions from one or the other bloc could be terrible for our economies because we are a small economy, and because we have long benefited from international trade. A fragmentation of the global economy will have disastrous effects for us. I followed the head of state’s speech at this summit. He promoted multilateralism. For me this is the only solution.
