The Nkafu Policy Institute has released a research finding on the 2020 fiscal year in Cameroon. This was during a press conference organized at the Institute’s headquarters of the Denis & Lenora Foretia Foundation at Simbock Yaoundé. The conference was marked by a panel discussion moderated by Dr. Fuein Vera KUM FOMUNJONG -Economist and Research Fellow at the Nkafu Policy Institute; Yaoundé-Cameroon.
The panel made up of Dr. Louis-Marie KAKDEU -Director of Nkafu Fellows at the Nkafu Policy Institute and Team Leader of the Cameroon DBI Project; Yaoundé-Cameroon and Dr. Jean Cédric KOUAM -Economic Policy Analyst and Head of the Fiscal and Monetary Policy sub-section of the Economics Policy Division at Nkafu Policy Institute; Yaoundé-Cameroon focused on the 2020 budget viability, resilience, and conduciveness to the sustainability of the state’s debt and finding out whether the 2020 budget in Cameroon promotes free enterprise
The press conference had as objectives to disseminate the findings of the 2020 report on the budget in Cameroon, analyze the resilience of Cameroon’s fiscal policy for the year 2020 by focusing on the sustainability of state debt and the promotion of free enterprise and to propose recommendations to policymakers to improve debt sustainability and to develop a healthy, competitive, and diversified manufacturing sector capable of reversing the structure of foreign trade (exports and imports).
A concept note from the institute notes that in 2020, the Cameroonian economy, like most economies in the world, was hit hard by the crisis linked to the spread of the new coronavirus (Covid-19). This health shock has had significant consequences on all sectors of the economy and has led to profound changes in everyday life. For example, the fall in oil prices on world markets, the slowdown in business activity due to the closure of borders and containment measures, and the consequent drop in tax and non-tax revenues have increased the country’s budget deficit to 4.5% of GDP, compared with the previously expected outcome of 1.5% of GDP. To mitigate the effects of the coronavirus pandemic on the economy, the Government of Cameroon has adopted a series of measures including the modification of its budget for the financial year 2020. Thus, on 3 June 2020, the 2020 Finance Law promulgated on 24 December 2019 by the President of the Republic through Law N°2019/023 of 24 December 2019 was amended by Ordinance N°2020/001 of 3 June 2020. This Amended Finance Law supplements certain provisions of Law N°2019/023 of 24 December 2019 on the finance law of the Republic of Cameroon for the financial year 2020. It establishes the new 2020 budget of Cameroon at 4,409 billion CFA Francs against 4,951.7 billion CFA Francs initially planned, a decrease of 542.7 billion CFA Francs in absolute terms. The direct consequence of the decrease in the 2020 budget is the reduction in payment credits granted to ministerial departments engaged in the promotion and improvement of national competitiveness. Despite this adjustment of the state budget, the need for financing and cash flow of the economy, estimated at 1304.5 billion CFA francs before the health crisis is now 1816 billion CFA francs; hence the need to resort to debt to finance the budget deficit. The dire economic situation necessitates an assessment of the financial viability and sustainability of the debt of the State of Cameroon vis-à-vis the country’s commitments within the framework of sub-regional and continental integration
To achieve the objective of the report, secondary data was collected from various sources including the finance laws of the Republic of Cameroon, the World Bank, the International Monetary Fund, the Autonomous Amortization Fund (CAA), the Ministry of Finance, and the Ministry of Economy, Planning, and Regional Development just to name a few. Using descriptive statistics and a demonstrative approach, the study came out with the following key findings. 1) The study found out that Cameroon’s debt remains sustainable. However, the risk of external over-indebtedness remains high. As a result, the fiscal policy, whose objective is to ensure full economic growth, cannot achieve the objectives despite the government’s budgetary choices aimed at reducing the economic shocks linked to the COVID-19 pandemic. 2) It equally found that the efforts made by the Government of Cameroon as regards budgetary issues, in amending the Finance Law 2020, are very insufficient to develop a healthy, competitive, and diversified manufacturing sector, capable of reversing the structure of foreign trade (exports and imports). These efforts also remain insufficient both to increase the productivity of the economy (notably by intensifying agro-pastoral and fish farming activities as well as mining) and to sustainably promote “made in Cameroon” products, open the country to more competition, and deliver tangible results in terms of promoting the free market. Given these results, the study makes the following key recommendations:
1) Reduce the State’s lifestyle in terms of operating expenditure in all the sub-sectors of activity of the national economy. This concerns all the financial benefits of public service agents (missions abroad, perdiems, granting of vehicles, and fuel vouchers).
2) improve the level of capital or investment expenditure in all sub-sectors of activity with high competitiveness. This improvement would protect the most labor-intensive domestic sub-sectors from increased competition from foreign products.
3) Explicitly formulate an objective of competitiveness in the strategic sub-sectors of the economy of Cameroon which are still strongly influenced by the omnipresence of the state (posts & telecommunications, water & energy, transport). The challenge is to prevent the transfer of welfare from the people demanding to those offering and, in this way, to contribute to the protection of their purchasing power.
4) Increase the amounts of payment appropriations opened on programmes contributing to the promotion of competitiveness and the improvement of economic governance in the sub-sectors concerned. The aim is to ensure that the law that secures business will be properly applied. Moreover, the country’s infrastructure for logistics and the supply of energy, water, and telecommunications will be efficient and that other institutions such as education, health, social security, etc. will operate in good conditions.
5) Eliminate tax burdens that do not have a significant impact on growth, particularly those that discourage the free market. These are, for example, the tax on the right to exercise a professional activity, the taxes on specified services.
Source: Bantu Voices