Despite pressures on cash flow due to security threats, Fitch notes that all Cameroon’s external arrears were cleared at the end of September 2023.
The unpaid obligations of the State of Cameroon increased from 2.5% at the end of 2022 to 1.6% of GDP, notes the American rating agency Fitch Ratings. She maintains that the country is respecting its commitments despite significant pressure on its liquidity. If some rating agencies took into consideration the late payment of its debt to lower Cameroon’s rating, Fitch shows that this was not taken into account in its recent evaluation.
The agency notes that Cameroon was indeed late in paying its external debt last July. But, this was resolved in 18 days. “ We did not treat this as a default because we applied a deemed grace period of 30 days, given our understanding that the loan documentation does not specify an explicit grace period for debt service payments” .
For Ftich, this attitude of the Cameroonian authorities demonstrates their desire to keep their commitments. And we note an evolution on the payment of the debt. Cameroon has accumulated external arrears amounting to 0.1% of GDP in 2022, and 0.2% of GDP in the first half of 2023. But, all external arrears were cleared at the end of September 2023, underlines Fitch. According to Fich forecasts, the budgetary risk remains moderate for the State of Cameroon despite subsidies, security expenditure and domestic arrears of 261.6 billion FCFA. Or 0.9% of GDP at the end of August 2023. “ A moderate budget deficit of 1.3% of GDP in 2023 and 1.4% in 2024 in cash terms. Gross budgetary financing needs will amount on average to 4.8% of GDP in 2024-2025 with amortization of the Eurobond only 0.1% of GDP per year..However, Fitch considers financing options to be limited, given the shallow depth and increased competition in the regional international market and the prohibitive cost of issuance in the international market. The state should count on the program with the IMF. “ Fitch expects the fifth review under the IMF program to be completed in December, leading to a disbursement equivalent to 0.2% of GDP. This is important for Cameroon’s financing plan as other official creditor disbursements (0.3% of GDP in 2023) are linked to the program. Fitch assumes the government will extend or renew its program with the IMF which ends in June 2024, which could support further inflows of official donor financing “. However, budgetary risks remain regarding related security expenditure; while the 2025 presidential election could prevent the phasing out of subsidies and tax exemptions. But Fitch’s forecasts remain positive. « We expect the budget deficit on a commitment basis to narrow to 0.8% in 2023, from 1.1% of GDP in 2022. We expect it to remain broadly stable at 0.7% of GDP in 2024 and 0.8% in 2025”.
