Gov’t sets aside 671.7 billion FCFA to clear internal debts.

The optimism of the member of government comes after a delegation from the International Monetary Fund, IMF, recently left Yaounde, after a routine visit to assess the extent to which government is complying with the terms of the new agreement, signed in 2022. It paved the way for the Bretton Woods Institutions to approve the current IMF funding programme. 

The finance minister gave a breakdown of the anticipated disbursements, showing the different sectors into which the money will be channeled.

Specifically, the finance boss stated that some 30.9 billion FCFA will be used to settle debts owed academics, rents owed property owners, social debts and indemnities. 

He assured that debts in this category are expected to be cleared completely on or before the end of the current financial year.

For commercial debts government owes, which Louis Paul Motaze stated, account for 18% of all internal debts, he said government will start paying them during the current financial year, but hopes to clear the entire stock by the end of 2026.

According to the minister´s letter, settling debts on outstanding salaries will claim the biggest chunk. Here, some 303.3 billion FCFA would be disbursed. But the payment will start partially during the current fiscal year; while the remaining amount would be cleared within the 2025 financial year.

For debts arising from customs transactions, estimated at some 215.8 billion FCFA, the payment will be arranged in such a way that the entire debt is cleared in seven installments. 

The minister clarified that the total amount or stock of internal debt was arrived at after a comprehensive audit that was carried out in 2020, when the government took the decision to know the exact amount of internal debts it owed. So, the amount arrived at, (671.7 billion FCFA), covers the period year 2,000 to 2019. 

“These are debts accumulated by the different public establishments; with the different administrations accounting for some 461.5 billion FCFA; decentralized collectivities, 15.7 billion FCFA and other state establishments, 194.4 billion FCFA,” Minister Motaze further clarified.

Autonomous Sinking Fund

According to the Autonomous Sinking Fund, the debts being settled include those which investors bought treasury bonds from the money markets, including the money market of the Bank of Central African States, BEAC.

The state debt management agency explained that the debts form part of the restructured debts which the Central Bank and Commercial Banks carried out, on the one hand and the government on the other, between the months of January and March 2024. 

The Autonomous Sinking Fund also gave a break down as to the debts that will be paid to those who bought treasury bonds. The amounts are separated according to capital and interests due. 

It specified that out of some 50.3 billion FCFA that would be paid, 46.1 billion FCFA makes up the principal, while interest is made up of 4.2 billion FCFA. It further clarified that out of the 947.3 billion FCFA, government projected as money to be used to service debts in the 2024 State Budget, 220 billion FCFA still remains unpaid.

Even after government had settled these debts, the Autonomous Sinking Fund revealed that 3,494 billion FCFA would still be outstanding as internal debts. This sum is the amount accumulated as at the end of the 2023 fiscal year, covering 2020 to last year. 

The Autonomous Sinking Fund warns that if the government decides to pay this level of internal debts this year, it runs the risk of overstretching the national treasury.  

This, it says, could, in turn, cause government to default in the payment of its external debts, thereby attracting the ire of the Bretton Woods Institutions. 

Looming dilemma

But the government is counting on the African Development Bank, AfDB, and the World Bank to remit their budget support funds to Cameroon to the tune of 156 billion FCFA, soon. 

This, according to the Minister of Finance, will reduce pressure on the national treasury and enable the government meet its financial obligations to external creditors.

Government´s optimism is anchored on the content of the Enlarged Credit Facility and the terms that the two parties agreed in the Enlarged Credit Mechanism. 

But the Director of Operations at the World Bank states that Cameroon still needs to meet certain requirements due international and multi-lateral donors before the funds from the AfDB and the World Bank would be released.