Enfoque Contingencial

In 1982, the first president of sovereign Cameroon voluntarily handed over power to his constitutional successor, Prime Minister Paul Biya. At the time this political development took place, Cameroon was regarded by most international financial institutions as a middle-income developing country and one of the economic success stories in Sub-Saharan Africa. The Gross National Product had increased from 300 billion CFA in 1970 to 2,000 billion in 1982. Also, with an average growth rate of 6 percent between 1977 and 1982, Cameroon was ranked one of Africa’s most credit worthy nations, with a triple-A rating. Cameroon was also described as ‘the paradigm for African development’ and ‘an agricultural success story’ partly because of the administration’s encouragement of agricultural development rather than relying on oil production as some African countries such as Nigeria and Gabon had done following petroleum’s discovery and exploitation. Western, particularly French financial support was important in the socio-economic progress Cameroon experienced during this period. The foundation of French economic involvement in Cameroon was established in a series of financial and economic agreements between France and Ahmadou Ahidjo’s government2 in 1959 and renegotiated with only minor changes in 1973. These agreements allowed France to become heavily involved in providing financial and technical aid to almost every phase of the Ahidjo’s administration. For example, in 1960, the first year of Cameroon’s independence, French aid to Ahidjo’s administration totalled a Francs equivalent of 50 million US dollars, representing 80 percent of total revenue collected by the government (Jua 1991, Konings 1996, Takougang and Krieger 1998).

Since 1985, there has been a dramatic reversal in economic performance. GDP per capita declined by 6.3 percent per year from 1985-1993. The decline was

2 _{Ahmadou Ahidjo was the first president of independent Cameroon in 1960. He handed over power to}

precipitated by sharp drops in world prices for Cameroon’s major exports (oil, coffee and cocoa) and appreciation of the U.S. dollar, which resulted in 70 per cent deterioration in the country’s terms of trade during the period 1986-1993. The state’s oil revenues for example, decreased from 350 million U.S dollars in 1985 to 207 millions in 1988. The economic policies of the Government also contributed to the country’s economic downward spiral. Productivity declined in agriculture and other traditional growth sectors that had been neglected during the period of prosperity. Ultimately, export earning declined by 50 percent. Reckless loans by government-controlled banks created a prolonged crisis in the financial sector and forced many banks to close or liquidate. The crisis was also aggravated by massive capital flight estimated at 150 billion CFA a year, which was almost a quarter of the annual national budget. The free flow of currency between the CFA zone and France encouraged the Cameroonian elites to transfer their capital to French banks, which, moreover, supplied higher interest rates than the Cameroonian banks. A multitude of inefficient public enterprises eventually became bankrupt and created additional huge financial losses to the Government. With all these, the Cameroonian Government was not able to meet its external and domestic financial obligations. Several government projects proposed or started in the days of boom were either abandoned or suspended because of severe financial difficulties. Many foreign companies that had hitherto invested in Cameroon were forced to leave, thereby exacerbating unemployment. The government was faced with much difficulty in paying cash crops farmers and the result was that many farmers switch from the production of these crops to food crops, which could easily be sold in local markets (Konings 1996).

In a bid to reverse this trend, the government embraced the Structural Adjustment Program (SAP) prescribed by the Breton Wood Institutions as alternative development paradigms to the state-centred approach, which it declared as outmoded and unrealistic (Tanga and Mbuagbo 2002). The new approach entailed the withdrawal of the state as a major player in the economy, the introduction of neo-liberal economic principles that lay emphasis on market forces as the engine for growth and development. It also required that the state democratises and the inclusion of civil society as an integral and active agent in the restructuring process. It was widely believed by bank policy makers that civil society could be the alternative route to Africa’s development dilemma, and therefore its inclusion in the exercise became an important benchmark for continued economic assistance from the World Bank and other bi-lateral and multi-lateral donors.

Because of the large external debts servicing by the government, net transfers from multilateral funding sources became negative in the early 1990s. The system of international aid was a factor in this reversal. After much evidence of

corruption in the late 1980s and failures to fulfil the conditions of the structural adjustment programs, the international financial bodies became very wary about supplying credits. But Cameroon’s low capacity and the lack of communication also contributed to the meagre disbursement of credits.

To lighten the problems in the economy, Cameroon applied to be considered a highly indebted and poor country and the request was granted under the Enhanced Highly Indebted Poor Countries (HIPC) Initiative, though this was not intended from the beginning. In this program, some of the debts of the benefiting country are cancelled and some projects are funded. The country reached the decision point in October 2000 and got a very substantial debt cancellation of $2 billion in nominal terms ($1.26 billion NPV). This could help to reduce the amount of government revenue spent on debt servicing from 23 percent in 2000 to 10 percent by 2008 and to cut the ratio of total debt to exports from 200 percent in 2000 to 120 percent in 2001 and 100 percent in 2007 (Tamba 2001).

The meeting of the Paris Club to authorise the start of providing funds for the various projects under this program was held in January 2001. Part of the money was then disbursed to the Central Bank of Central African States to be disbursed to the Cameroon Ministry of Finance for state use, on condition that the preconditions imposed on the government are met. The effects of debt reduction have not yet been felt however because despite the availability of the first part of the money in the HIPC account in the bank, all the preconditions for making out the payment have not been met. The completion point, which the country is yet to attain still remains among other things, on drafting a final version of a plan for the Poverty Reduction and Growth Facility (PRGF). This was expected to be ready by spring 2002 but unfortunately the country has not yet produced one, which is satisfactory to the funding body.3

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