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Cameroon’s Financial Revamp: Battling Debt While Profits Pile Up in Banks
Yaounde, Cameroon – A curious paradox is brewing in Cameroon’s economy. Despite sitting on a mountain of cash in commercial banks, the seemingly wealthy nation grapples with hefty interest payments on its bonds. This financial puzzle has prompted the government to embark on a bold reform: consolidating public funds into a Single Financial Account (CUT).
As of October 31, 2023, Cameroon’s central administration held a staggering 711.9 billion FCFA (approximately $1.2 billion) spread across 148 accounts in 16 local banks. Yet, this cash hoard hasn’t shielded the state from the burden of debt.
Government data reveals that, on October 31, 2024, Cameroon shelled out 38.75 billion FCFA (roughly $65 million) in interest payments on bonds totaling 890.54 billion FCFA ($1.5 billion).
The ambitious CUT initiative aims to address this discrepancy by bringing all public funds under the direct control of the government. In theory, this consolidation should reduce borrowing needs and streamline the management of public finances.
However, the path to reform is paved with challenges. Pierre Mba, head of the Legislation and Codification Unit at Cameroon’s General Directorate of Finance and Financial and Monetary Cooperation, acknowledged these hurdles during a thematic cafe on public finance management on November 26, 2024: "
"The new version of the Single Financial Account has not been fully delivered," he stated.
Mba emphasized the need to overcome "organizational and service quality" challenges before transferring large sums from the banks.
Banking on Stability
The potential withdrawal of over 1,300 billion FCFA (roughly $2.2 billion) in public deposits from commercial banks – nearly 18% of the total banking sector assets – has raised concerns about financial stability.
Acknowledging these worries, the Department of Public Finance has initiated consultations with Cameroon’s banking sector.
"The principle is to proceed with a gradual transfer of funds without affecting the balance of the banks," confirmed Moh Sylvester Tangongho, Director General of the Department of Finance, in an interview with Défis Actuels magazine.
This cautious approach sees the government working with individual banks to create tailored withdrawal schedules to prevent disruption.
For 2023, the target is to transfer 165.6 billion FCFA (approximately $280 million) by December 31st.
A Paradigm Shift in Financial Control
The CUT reform is ultimately about centralizing control over Cameroon’s finances.
"By concentrating public funds at CUT, the state hopes to reduce its short-term funding needs," the government explained. "In addition, centralized finance would strengthen transparency and efficiency in the use of public funds."
But achieving this vision requires a significant internal overhaul.
"The treasury must be organized, updated and able to perform the banking functions of the Public Finance Department," urged Mba. This means the government will need to provide banking services like those offered by commercial institutions to meet the needs of local authorities, hospitals, and other public entities.
Mba stressed the need for a "qualitative leap, both technically and organizationally" for the CUT to fulfill its promise. "If we withdraw this money, we will have to withdraw the response that the bank gave to public bodies…If they need their money, we shouldn’t start publishing.
Therefore the Department of Finance must organize themselves, update themselves, put themselves in order of battle so that they can fulfill the banking function of the Department of Public Finance."
His words emphasize the magnitude of the task ahead: reimagining the very fabric of Cameroon’s financial infrastructure
## Decentralized Decentralization: Can Cameroon’s Single Account Tame Debt While Empowering savings?
**An Expert Interview with Dr. Abena Atim, Economist and Senior Research Fellow at the Institute for african Finance**
**World-Today-News**: Dr. Atim, thanks for joining us today.Cameroon’s financial situation presents a fascinating paradox – flush with cash in its banks, yet burdened by ample debt. How did this unusual scenario arise?
**Dr. Atim**: The paradox highlights a critical issue: fragmentation and inefficiency in public financial management. Cameroon, like many developing nations, suffers from dispersed public funds siloed across numerous accounts. This分散化 weakens the government’s bargaining power and limits its ability to utilize funds effectively.
**World-Today-News**: The government’s Single Financial Account (CUT) initiative aims to consolidate these funds. Can you elaborate on the potential benefits and challenges of such a move?
**Dr.Atim**: The CUT aims to centralize government funds, enhancing oversight, transparency, and efficiency. It could streamline government operations, facilitate better investment decisions, and possibly reduce borrowing needs, thus lessening the burden of interest payments. However, challenges remain.
**World-Today-News**: Such as?
**Dr. Atim**: A centralized system requires robust technological infrastructure and stringent anti-corruption safeguards to prevent misuse of funds. Cameroon needs to ensure the CUT doesn’t become overly bureaucratic or trigger unintended consequences like stifling local economic activity.
**World-Today-News**: You mentioned potential benefits for local banks. Can you explain this further?
**Dr. Atim**:
While the CUT concentrates public funds, it doesn’t necessarily mean banks will see a sudden withdrawal of deposits.
Efficient management of the CUT can actually lead to more strategic public-private partnerships and investments, benefiting banks in the long run.
However, there’s a risk of over-centralization leading to reduced liquidity within local banking subsystems, especially smaller institutions. careful planning and phased implementation are crucial.
**World-Today-news**: Looking ahead, do you think Cameroon’s CUT initiative has the potential to address the country’s financial challenges effectively?
**Dr. Atim**: The CUT presents a bold and necessary step towards fiscal consolidation and reduced debt burden.
However, its success hinges on robust implementation, strong institutional reforms, and a commitment to transparency and accountability.
If executed strategically, it could not only address Cameroon’s immediate financial challenges but also lay the foundation for sustainable economic growth.
**World-Today-News**: Thank you for sharing your insights, Dr.Atim.
