Editorial: Cameroon's mounting debt: Another double-edged sword.

But when it is used imprudently without transparency and in excess, the result can be disastrous, impairing government’s ability to deliver essential services to its citizens.

The IMF has just published the list of its 10 most indebted African countries with Egypt at the top and Cameroon on the ninth position of the 94 countries owing the institution as of last month.

For Egypt, it is understandable in that its standard of living and development are miles apart from those of Cameroon, which is still struggling, we have not said groping, to emerge in 2035.

There isn't any doubt that the IMF loans can provide critical financial support and help stabilise a limping economy. They traditionally come with significant responsibilities that a country must properly handle. 

Such conditions often include daunting austerity measures like good governance, which Cameroon continues to score poorly on, prudent spending, tax increases and removal of subsidies in fuel as has been witnessed in the country.

Those measures have triggered high cost of living with prices of basic commodities shattering the ceiling. For instance, a bag of rice, a common staple in the country, which sold last December at 18,000 FCFA, is today going for 45,000 FCFA, above the minimum monthly wage of 43,000 FCFA.

Isn't that the impact of a situation where debts become bad to the governed and the country? Does such a situation not lead to a variety of repercussions?

As of June, this year, Cameroon's public debts reached 13,070 billion FCFA, according to data from the national sinking fund, known by its French abbreviation, CAA. 

This is equivalent to around 43.3% of GDP, 0.8% up compared to the previous quarter and 4.9% compared to the same period last year.

The vast amount, which is 93.5%, is the direct debt of the central administration, divided into 67.5% external debts and 32.5% domestic debts. The remaining portion is shared between public enterprises and institutions (6.4%) and decentralised local authorities (0.1%).

Focusing on the external direct debts of public enterprises and institutions, it stood at 493.9 billion FCFA, at the end of June 2024, making a decline of 0.4%, from the previous quarter and a 2.5% decrease year-on-year.

According to media reports, a significant part of this debt, 95.5%, is attributed to the National Refining Company, SONARA, and the Cameroon Airlines Corporation, Camair-Co.

SONARA, which before the fire destruction, was the second most profitable company in the country, had an external debts of 410.2 billion FCFA at the end of June 2024, which is a slight increase of 1.8 billion FCFA, from the previous month; when the debts was 408.04 billion FCFA, as reported by Business in Cameroon.

Additionally, the state's contingent liabilities, mainly composed of Public-Private Partnerships, PPP, are valued at 4,901 billion FCFA, representing 16.2% of GDP. This category of liabilities also includes a small portion of debts guaranteed by the central administration.

With the crushing mountain of debts, the country has to prioritise the payment of interests at the expense of development and social services or risk default.

As indicated by several economic data, the national debt of Cameroon was "forecast to continuously increase between 2024 and 2029 to the total of 2.1 billion U.S. dollars (+10.3 percent")

Prudence dictates that Yaounde should aim to keep debts well below the estimated thresholds so that even extraordinary external shocks are unlikely to push debts levels that become damaging to growth.

The issue of debts management, especially in countries like Cameroon, where corruption is pervasive, is multifaceted and interconnected with a range of economic, social, and political factors.

Countries like Cameroon face the challenge of balancing the need for infrastructural development and social welfare programmes, with the imperative to maintain sustainable debts levels.

On the good side of the coin, the Yaounde regime has continued to make its debts sustainable, with the frequent whistle of veering towards debts stress from the IMF, World Bank and African Development Bank.

For the common man on the street, the feel-good impact should be on good roads, affordable quality health services, sufficient and constant electricity and drinking water, which are still lagging behind compared to those in the 10 top indebted countries in Africa.

This article was first published in The Guardian Post Edition No:3247 of Wednesday October 02, 2024