INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND CAMEROON JOINT WORLD BANK-IMF DEBT SUSTAINABILITY ANALYSIS October 2020 Prepared Jointly by the staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) Approved by Marcello Estevão (IDA) and David Owen (IMF) Cameroon: Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress: High1 Overall risk of debt distress High Granularity in the risk rating Sustainable Application of judgment No The current DSA reflects a further deteriorated outlook due to COVID-19 pandemic, including lower growth, wider fiscal Macroeconomic projections deficit and deterioration in external balances. The shock is still expected to be temporary and a gradual recovery is forecast starting from 2021. The ECF has expired without completing the final 6 th review and subsequent disbursement (20 percent of quota or SDR 55.2 million). The Cameroonian authorities have requested debt service suspension under the DSSI and received positive responses from nine official bilateral creditors to suspend debt Financing strategy service payment totaling CFAF 123.5 billion. The DSA also reflects agreed rescheduled debt service projections on about a third of SONARA’s debt, a reclassification of existing short-term debt with external suppliers as arrears, and the expectation that SONARA will no longer make use of such financing under its new business plan to operate solely as an importer. Realism tools flagged None Mechanical risk rating under the external DSA High Mechanical risk rating under the public DSA High 1 Cameroon’s Composite Indicator score is 2.76 based on the April WEO 2020 and the World Bank’s 2019 CPIA. This implies that Cameroon has medium debt-carrying capacity. This debt sustainability analysis (DSA) provides an update to the joint World Bank-IMF LIC-DSA of April 2020, in the context of the Cameroonian authorities’ request for a second disbursement under the Rapid Credit Facility (RCF-2). It reflects updated projections for the macroeconomic framework and new information on borrowing, including SONARA’s agreed debt restructuring with the creditor banks. Overall, Cameroon is at high risk of debt distress; however, debt is assessed to remain sustainable. Thresholds for two external debt service indicators and one debt stock indicator are breached under the baseline, but the debt service indicators continue their downward trajectory except for a temporary increase due to the maturing Eurobond. Debt stock indicators remain below the thresholds after a one-off breach in 2020. On balance, debt is assessed as sustainable, although at high risk of external and overall public distress. The rating is highly vulnerable to a range of risks including unsuccessful completion of SONARA’s debt restructuring, more protracted and severe disruptions due to the pandemic, and socio-political tensions. Should downside risks materialize, the authorities would likely need to identify additional measures to maintain debt sustainability. 2 1. The macroeconomic outlook has deteriorated with a more pronounced negative impact from the COVID-19 pandemic. Real GDP is expected to decline by an additional 1.6 percentage points relative to RCF-1, reaching -2.8 percent in 2020. Growth in 2021 was revised down to 3.4 percent (from 4.5 percent), reflecting a more gradual economic recovery. The current account deficit is expected to widen to 6 percent of GDP in 2020, 0.3 percentage point larger than projected at the time of the RCF-1 (including official grants). In the absence of corrective measures, the overall fiscal deficit is expected to reach CFAF 1,315 billion or 5.9 percent of GDP, 0.9 percentage point higher than RCF-1. After spending reprioritization, the overall deficit is expected to remain broadly unchanged compared to the one projected at the time of RCF-1. As this DSA reflects updated 2019 figures including fiscal position and the debt stock, total public sector debt and public and publicly guaranteed external debt have been revised to 41.7 and 29.0 percent of GDP respectively from 40.9 and 30.4 percent in RCF-1. 2. There are significant changes to the financing assumptions, including to reflect the DSSI and progress on the restructuring of SONARA. Notably, the ECF arrangement has expired as of end-September 2020, without completing the final 6th review and subsequent disbursement. Consequently, financing under the ECF was reduced by CFAF 45 billion (20 percent of quota or SDR 55.2 million). Financing under the RCF was increased by CFAF 90 billion to 226 billion and financing gaps over the medium-term were incorporated based on the assumption that 50 percent of the gaps would be financed locally. As the Cameroon authorities have requested debt service suspension under the DSSI and intend to adhere to the needed commitments, the DSA incorporates debt service relief agreed from nine official bilateral creditors totaling CFAF 123.5 billion (or 0.6 percent of GDP). In terms of medium-term projections, debt indicators were benchmarked against higher exports due to stronger oil and gas exports driven by additional production from explorations. On SONARA’s debt amounting to CFAF 731 billion as of end-July 2020, the DSA reflects rescheduled debt service projections in line with the restructuring agreement reached in September 2020 with local banks, representing about a third of SONARA’s debt. Discussions are ongoing with other creditors including oil traders but given the uncertainty regarding the final terms of these agreements, restructuring of this debt is not assumed in the baseline. As the agreement with the local banks is predicated on SONARA’s new business plan to operate solely as an importer, short-term debt from external oil traders is no longer expected to be rolled-over and is reclassified as arrears (0.7 percent of GDP as of end-2020). Partial clearance of these arrears including SONARA’s asset sales and conversion of debt held by SNH into SONARA shares is reflected in the baseline. The agreement with local banks also includes access to trade financing, which is expected to replace financing from external suppliers over the projection period. In addition, the DSA incorporates SONARA’s improved profitability supported by the new oil price structure for refined oil products including levy of CFAF 47.88 per liter, which has been in effect since March 2020. 3. Cameroon’s debt is assessed to be sustainable, albeit at high risk of external and overall public distress. The worsened outlook and increased financing needs are likely to weigh on Cameroon’s debt dynamics in the near-term. As in the previous DSA, two external debt service indicators breached their thresholds under the baseline scenario (debt-service-to-exports and debt- 3 service-to-revenue), along with a one-off breach for the PV of debt-to-exports ratio. While SONARA has been accumulating external arrears following the 2019 refinery fire, these obligations are not government guaranteed and are below the LIC DSF’s de minimis threshold (1 percent of GDP). With the progress made on the reprofiling of SONARA’s debt and ensuring its viability, debt service indicators are projected to continue their downward trajectory barring a temporary increase due to maturing Euro Bond (2023-2025). Moreover, thanks to stronger exports driven by higher oil and gas exports, debt dynamics are expected to improve in the medium and long term. 4. This rating is highly vulnerable to a range of risks. Key downside risks include a more protracted and severe COVID-19 shock, less-than-expected oil and gas exports due to slower recovery in trading partners, socio-political tensions, and realization of contingent liabilities, including from unsuccessful or incomplete restructuring on SONARA’s debt. Allowing for new non-concessional borrowing would further weaken already compromised debt sustainability and undermine their efforts to secure international community’s support in an environment in which G20 agreed on debt service suspension on bilateral government loans for low-income countries. On the upside, a possible extension of the G20-DSSI could reduce Cameroon’s debt service burden in the near-term and provide additional resources to bolster its crisis mitigation efforts. If downside risks materialize, the authorities would likely need to identify additional measures to ensure that debt is sustainable. 4 Table 1. Cameroon: External Debt Sustainability Framework, Baseline Scenario, 2017–2020 (In percent of GDP, unless otherwise indicated) Actual Projections Average 8/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections External debt (nominal) 1/ 27.7 30.4 30.9 32.7 32.5 32.3 31.3 30.2 29.5 26.6 18.4 20.0 29.8 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 25.1 28.6 29.0 30.8 30.6 30.4 29.4 28.3 27.6 25.1 17.5 18.1 28.0 Is there a material difference between the two Yes criteria? Change in external debt 2.3 2.7 0.4 1.9 -0.2 -0.2 -1.0 -1.1 -0.7 -0.7 -0.6 Identified net debt-creating flows -1.3 -0.7 1.9 4.7 1.4 0.0 -1.0 -1.8 -2.1 -3.4 -5.0 0.6 -1.3 Non-interest current account deficit 1.9 2.5 3.4 4.4 3.6 2.2 1.5 0.7 0.5 -1.0 -2.9 2.8 0.9 Deficit in balance of goods and services 2.0 2.9 3.5 5.0 4.4 3.3 2.5 1.9 1.6 0.0 -2.3 2.8 2.0 Exports 18.7 18.9 19.9 14.5 16.0 16.6 16.8 16.9 16.8 15.5 13.5 Debt Accumulation Imports 20.6 21.8 23.4 19.5 20.4 19.9 19.3 18.8 18.5 15.5 11.2 3.0 34 Net current transfers (negative = inflow) -1.2 -1.2 -1.3 -1.2 -1.3 -1.4 -1.2 -1.2 -1.2 -1.1 -0.9 -1.1 -1.2 of which: official -0.2 -0.2 -0.3 -0.4 -0.4 -0.4 -0.3 -0.3 -0.2 -0.2 -0.1 33 Other current account flows (negative = net inflow) 1.1 0.8 1.2 0.6 0.5 0.3 0.2 0.1 0.0 0.1 0.3 1.1 0.2 2.5 32 Net FDI (negative = inflow) -2.3 -1.7 -2.3 -1.6 -2.2 -1.9 -1.9 -1.8 -1.8 -1.7 -1.6 -2.1 -1.8 Endogenous debt dynamics 2/ -1.0 -1.5 0.8 1.9 0.0 -0.3 -0.6 -0.7 -0.7 -0.7 -0.5 2.0 31 Contribution from nominal interest rate 0.8 1.1 1.0 1.1 1.0 1.0 0.9 0.8 0.8 0.7 0.5 Contribution from real GDP growth -0.8 -1.0 -1.2 0.9 -1.0 -1.3 -1.5 -1.6 -1.5 -1.4 -1.0 30 1.5 Contribution from price and exchange rate changes -0.9 -1.6 1.1 … … … … … … … … 29 Residual 3/ 3.6 3.5 -1.5 -2.8 -1.7 -0.2 0.0 0.7 1.4 2.7 4.4 1.4 0.9 of which: exceptional financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 28 27 Sustainability indicators 0.5 PV of PPG external debt-to-GDP ratio ... ... 26.4 28.7 26.6 25.9 24.6 23.3 22.5 20.4 14.4 26 PV of PPG external debt-to-exports ratio ... ... 132.4 198.0 166.5 155.5 146.5 138.0 133.9 131.3 106.7 0.0 25 PPG debt service-to-exports ratio 14.1 17.3 19.3 16.4 15.3 15.5 18.4 17.1 14.7 11.9 10.7 2020 2022 2024 2026 2028 2030 PPG debt service-to-revenue ratio 15.6 18.5 22.4 17.0 15.2 15.5 18.6 17.1 14.6 11.2 9.7 Gross external financing need (Billion of U.S. dollars) 1.5 2.6 2.9 2.2 1.9 1.6 1.6 1.2 0.9 -0.4 -4.9 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 3.5 4.1 3.9 -2.8 3.4 4.3 4.8 5.4 5.4 5.5 5.6 4.5 4.4 GDP deflator in US dollar terms (change in percent) 3.6 6.3 -3.3 3.3 10.0 2.7 2.3 2.1 2.0 1.8 1.8 -0.2 2.8 Effective interest rate (percent) 4/ 3.2 4.5 3.2 3.5 3.5 3.3 3.0 2.9 2.8 2.6 2.6 3.3 2.9 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 4.4 12.3 5.5 -27.0 25.4 11.8 8.0 8.5 7.1 5.6 6.0 5.0 5.7 of which: Private Growth of imports of G&S (US dollar terms, in percent) 2.0 16.9 7.6 -16.2 18.7 4.9 3.8 4.6 5.9 4.0 3.9 4.5 3.7 35 Grant element of new public sector borrowing (in percent) ... ... ... 32.6 33.5 32.3 31.8 29.7 29.5 28.2 25.1 ... 30.3 Government revenues (excluding grants, in percent of GDP) 16.9 17.7 17.2 14.0 16.1 16.6 16.7 16.9 17.0 16.4 15.0 16.9 16.4 30 Aid flows (in Billion of US dollars) 5/ 3.7 4.1 4.5 1.0 0.8 0.8 0.9 0.9 0.9 0.9 1.0 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 2.3 1.7 1.6 1.4 1.3 1.2 0.8 0.6 ... 1.3 25 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 37.6 40.2 39.3 38.0 36.1 35.6 31.6 29.9 ... 35.1 Nominal GDP (Billion of US dollars) 35 39 39 39 44 48 51 55 59 84 174 20 Nominal dollar GDP growth 7.2 10.6 0.4 0.4 13.8 7.2 7.2 7.6 7.5 7.4 7.5 4.3 7.4 15 Memorandum items: 10 PV of external debt 7/ ... ... 28.2 30.6 28.5 27.8 26.5 25.2 24.4 21.8 15.3 In percent of exports ... ... 141.8 211.7 178.4 166.8 157.7 149.1 145.1 140.7 113.2 5 Total external debt service-to-exports ratio 18.2 23.0 22.5 20.5 18.4 18.0 20.9 19.5 17.1 14.0 12.2 PV of PPG external debt (in Billion of US dollars) 10.2 11.2 11.8 12.3 12.5 12.8 13.3 17.2 25.1 0 (PVt-PVt-1)/GDPt-1 (in percent) 2.4 1.6 1.2 0.5 0.5 0.9 1.0 0.6 2020 2022 2024 2026 2028 2030 Non-interest current account deficit that stabilizes debt ratio -0.4 -0.3 3.0 2.5 3.8 2.4 2.5 1.8 1.2 -0.3 -2.3 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 5 Table 2. Cameroon: Public Sector Debt Sustainability Framework, Baseline Scenario, 2017–2040 (in percent of GDP, unless otherwise indicated) Actual Projections Average 6/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections Public sector debt 1/ 37.7 39.5 41.7 43.5 43.8 43.8 43.1 41.8 40.4 35.8 31.3 27.0 40.4 Residency- of which: external debt 25.1 28.6 29.0 30.8 30.6 30.4 29.4 28.3 27.6 25.1 17.5 18.1 28.0 Definition of external/domestic debt based of which: local-currency denominated Change in public sector debt 4.4 1.8 2.2 1.8 0.3 0.0 -0.8 -1.2 -1.4 -0.7 -0.4 Is there a material difference Identified debt-creating flows 0.9 -0.2 2.0 4.7 1.1 0.1 -0.8 -1.2 -1.4 -0.8 -0.4 2.2 -0.2 Yes between the two criteria? Primary deficit 4.2 1.6 2.5 2.9 2.3 1.5 0.9 0.7 0.4 0.8 0.8 2.9 1.1 Revenue and grants 17.2 18.1 17.8 14.4 16.5 17.0 17.0 17.2 17.3 16.6 15.1 17.3 16.7 of which: grants 0.3 0.4 0.6 0.4 0.4 0.4 0.3 0.3 0.3 0.1 0.1 Public sector debt 1/ Primary (noninterest) expenditure 21.3 19.7 20.3 17.4 18.8 18.5 17.9 17.9 17.7 17.4 15.9 20.2 17.8 Automatic debt dynamics -3.3 -0.4 -0.8 1.8 -1.1 -1.4 -1.7 -1.9 -1.9 -1.6 -1.2 of which: local-currency denominated Contribution from interest rate/growth differential -1.0 -1.5 -1.4 1.8 -1.1 -1.4 -1.7 -1.9 -1.9 -1.6 -1.2 of which: foreign-currency denominated of which: contribution from average real interest rate 0.2 -0.1 0.1 0.6 0.3 0.4 0.3 0.3 0.3 0.3 0.5 of which: contribution from real GDP growth -1.1 -1.5 -1.5 1.2 -1.4 -1.8 -2.0 -2.2 -2.2 -1.9 -1.7 50 Contribution from real exchange rate depreciation -2.3 1.2 0.6 ... ... ... ... ... ... ... ... 45 Other identified debt-creating flows 0.0 -1.4 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 0.0 40 35 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25 Debt relief (HIPC and other) 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Other debt creating or reducing flow (please specify) 0.0 -1.4 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15 Residual 3.6 2.0 0.2 -2.9 -0.8 -0.1 0.0 0.0 0.0 0.1 0.0 0.7 -0.3 10 5 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 39.2 39.9 39.7 39.2 38.2 36.9 35.4 31.0 28.2 2020 2022 2024 2026 2028 2030 PV of public debt-to-revenue and grants ratio … … 220.4 276.5 240.4 230.3 224.5 214.1 204.9 187.4 186.5 Debt service-to-revenue and grants ratio 3/ 15.3 18.1 21.6 51.6 44.6 54.0 59.5 60.0 58.6 42.6 46.4 Gross financing need 4/ 8.0 5.1 8.4 10.4 9.6 10.7 11.0 11.0 10.5 7.9 7.8 of which: held by residents Key macroeconomic and fiscal assumptions of which: held by non-residents 50 Real GDP growth (in percent) 3.5 4.1 3.9 -2.8 3.4 4.3 4.8 5.4 5.4 5.5 5.6 4.5 4.4 45 Average nominal interest rate on external debt (in percent) 3.4 3.0 2.8 2.7 2.7 2.6 2.3 2.2 2.1 2.0 2.1 2.9 2.2 40 Average real interest rate on domestic debt (in percent) -1.5 -1.6 -2.0 1.2 1.1 2.2 2.1 2.1 2.3 3.1 3.4 -1.7 2.3 35 Real exchange rate depreciation (in percent, + indicates depreciation) -10.6 4.8 2.2 … ... ... ... ... ... ... ... 2.9 ... 30 25 Inflation rate (GDP deflator, in percent) 1.5 1.6 2.0 1.2 2.2 1.7 1.8 1.9 1.9 1.8 1.8 1.8 1.8 20 Growth of real primary spending (deflated by GDP deflator, in percent) -0.5 -3.9 7.2 -17.0 11.7 3.0 1.5 5.2 4.2 5.5 3.5 8.0 3.2 15 Primary deficit that stabilizes the debt-to-GDP ratio 5/ -0.3 -0.2 0.3 1.1 1.9 1.5 1.7 1.9 1.8 1.6 1.2 0.0 1.7 10 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5 0 2020 2022 2024 2026 2028 2030 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank, government-guaranteed debt, non-guaranteed SOE debt . Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 6 Figure 1. Cameroon: Indicators of Public and Publicly Guaranteed External Debt under Alternative Scenarios, 2020–2030 7 Figure 2. Cameroon: Indicators of Public Debt Under Alternative Scenarios, 2020–2030 PV of Debt-to-GDP Ratio 60 50 40 30 20 Most extreme shock: Combined contingent liabilities 10 0 2020 2022 2024 2026 2028 2030 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 350 100 90 300 80 250 70 60 200 50 150 40 100 30 20 50 Most extreme shock: Combined contingent Most extreme shock: Combined contingent liabilities 10 liabilities 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 35% 35% Domestic medium and long-term 21% 21% Domestic short-term 44% 44% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 1.9% 1.9% Avg. maturity (incl. grace period) 21 21 Avg. grace period 5 5 Domestic MLT debt Avg. real interest rate on new borrowing 3.6% 3.6% Avg. maturity (incl. grace period) 3 3 Avg. grace period 2 2 Domestic short-term debt Avg. real interest rate 1.5% 1.5% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 8 Table 3. Cameroon: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2020–2030 (In percent) Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of debt-to GDP ratio Baseline 29 27 26 25 23 23 22 22 21 21 20 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 29 28 29 29 29 30 32 34 37 39 41 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 29 27 27 25 24 23 23 22 22 21 21 B2. Primary balance 29 27 28 27 26 26 25 25 24 24 23 B3. Exports 29 30 34 33 31 30 30 29 28 27 26 B4. Other flows 3/ 29 27 27 26 25 24 24 23 22 22 21 B5. Depreciation 29 33 29 28 26 25 25 25 24 24 24 B6. Combination of B1-B5 29 32 30 29 28 27 26 25 25 24 23 C. Tailored Tests C1. Combined contingent liabilities 29 30 31 30 30 30 30 29 29 29 28 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 29 28 29 28 26 26 25 25 24 23 23 C4. Market Financing 29 29 29 27 26 25 25 24 24 23 23 Threshold 40 40 40 40 40 40 40 40 40 40 40 PV of debt-to-exports ratio Baseline 198 167 155 146 138 134 136 133 133 132 131 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 198 177 171 170 173 181 197 211 229 248 267 0 198 167 149 135 122 113 110 103 99 95 91 B. Bound Tests B1. Real GDP growth 198 167 155 146 138 134 136 133 133 132 131 B2. Primary balance 198 170 169 162 154 152 155 152 152 151 150 B3. Exports 198 254 338 320 303 294 297 288 283 277 271 B4. Other flows 3/ 198 171 164 154 145 141 143 140 139 138 137 B5. Depreciation 198 167 143 134 126 122 124 122 123 123 123 B6. Combination of B1-B5 198 237 170 233 220 213 216 209 208 206 204 C. Tailored Tests C1. Combined contingent liabilities 198 190 187 182 178 177 181 179 181 181 180 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 198 189 183 172 162 156 156 152 151 150 148 C4. Market Financing 198 167 157 148 140 135 136 133 133 132 131 Threshold 180 180 180 180 180 180 180 180 180 180 180 Debt service-to-exports ratio Baseline 16 15 16 18 17 15 11 12 11 12 12 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 16 17 17 21 20 18 15 17 16 17 19 0 16 16 16 19 18 15 11 11 8 8 7 B. Bound Tests B1. Real GDP growth 16 15 16 18 17 15 11 12 11 12 12 B2. Primary balance 16 15 16 19 18 15 12 13 12 13 13 B3. Exports 16 21 27 33 30 26 21 24 25 25 25 B4. Other flows 3/ 16 15 16 19 17 15 12 13 12 12 12 B5. Depreciation 16 15 16 18 17 14 11 12 10 11 11 B6. Combination of B1-B5 16 20 23 27 25 22 17 20 18 18 19 C. Tailored Tests C1. Combined contingent liabilities 16 15 16 19 18 16 12 13 12 13 13 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 16 17 17 21 19 16 13 14 13 13 14 C4. Market Financing 16 15 16 19 17 16 13 14 12 11 11 Threshold 15 15 15 15 15 15 15 15 15 15 15 Debt service-to-revenue ratio Baseline 17 15 16 19 17 15 11 12 11 11 11 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 17 17 17 21 20 18 14 16 15 17 18 0 17 16 16 19 18 15 11 11 8 7 6 B. Bound Tests B1. Real GDP growth 17 15 16 19 18 15 11 12 11 11 12 B2. Primary balance 17 15 16 19 18 15 12 13 12 12 13 B3. Exports 17 15 16 20 19 16 12 14 15 15 15 B4. Other flows 3/ 17 15 16 19 17 15 11 13 11 12 12 B5. Depreciation 17 19 19 23 21 18 13 15 12 13 13 B6. Combination of B1-B5 17 16 17 21 19 16 12 15 13 13 13 C. Tailored Tests C1. Combined contingent liabilities 17 15 16 19 18 16 12 13 12 12 12 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 17 18 18 22 20 17 13 13 12 13 13 C4. Market Financing 17 15 16 19 17 16 13 14 11 11 11 Threshold 18 18 18 18 18 18 18 18 18 18 18 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 9 Table 4. Cameroon: Sensitivity Analysis for Key Indicators of Public Debt, 2020–2030 Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of Debt-to-GDP Ratio Baseline 40 40 39 38 37 35 35 33 32 32 31 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 40 40 41 42 42 43 44 45 46 46 47 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 40 40 41 40 39 38 38 37 36 36 35 B2. Primary balance 40 42 45 43 42 40 39 38 37 36 35 B3. Exports 40 43 47 46 44 42 41 40 38 37 36 B4. Other flows 3/ 40 40 41 39 38 37 36 34 33 33 32 B5. Depreciation 40 46 44 41 38 36 33 31 29 27 26 B6. Combination of B1-B5 40 39 41 40 38 36 35 33 32 31 30 C. Tailored Tests C1. Combined contingent liabilities 40 54 52 51 49 46 45 43 42 41 40 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 40 42 44 45 46 45 45 44 43 42 41 C4. Market Financing 40 40 39 38 37 36 35 33 32 32 31 TOTAL public debt benchmark 55 55 55 55 55 55 55 55 55 55 55 PV of Debt-to-Revenue Ratio Baseline 277 240 230 224 214 205 204 197 194 190 187 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 277 243 240 245 247 251 261 265 272 278 285 0 52 28 28 33 28 25 22 18 16 14 13 B. Bound Tests B1. Real GDP growth 277 245 240 237 228 221 222 217 215 213 212 B2. Primary balance 277 253 262 255 243 232 231 222 218 214 210 B3. Exports 277 259 276 269 256 246 245 235 228 221 216 B4. Other flows 3/ 277 245 238 232 221 212 211 204 200 195 192 B5. Depreciation 277 282 259 243 223 206 198 184 174 165 156 B6. Combination of B1-B5 277 238 242 233 220 208 205 196 191 185 180 C. Tailored Tests C1. Combined contingent liabilities 277 325 306 297 282 269 267 257 252 246 242 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 277 290 292 302 291 278 274 258 255 251 249 C4. Market Financing 277 241 231 226 216 206 205 197 193 190 187 Debt Service-to-Revenue Ratio Baseline 52 45 54 60 60 59 55 49 45 43 43 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 52 44 55 64 69 70 71 66 64 63 64 0 52 28 28 33 28 25 22 18 16 14 13 B. Bound Tests B1. Real GDP growth 52 45 56 63 64 63 60 54 51 49 49 B2. Primary balance 52 45 60 71 68 67 62 54 50 48 47 B3. Exports 52 45 54 61 61 60 56 51 49 46 46 B4. Other flows 3/ 52 45 54 60 60 59 55 49 46 44 43 B5. Depreciation 52 44 56 62 62 60 55 49 45 44 43 B6. Combination of B1-B5 52 43 53 65 61 60 54 48 44 42 41 C. Tailored Tests C1. Combined contingent liabilities 52 45 95 79 86 78 68 61 55 51 49 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 52 51 66 77 80 79 74 65 60 58 57 C4. Market Financing 52 45 54 60 60 60 56 50 46 43 42 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 10 Figure 3. Cameroon: Drivers of Debt Dynamics – Baseline Scenario External debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 30 80 Residual 20 Previous DSA proj. 70 DSA-2014 20 Interquartile 15 range (25-75) Price and 60 exchange rate 50 10 10 Real GDP Change in PPG growth 40 debt 3/ 0 5 30 Nominal interest rate 20 -10 0 Median Current 10 account + FDI -5 -20 0 Change in 5-year 5-year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PPG debt 3/ Contribution of Distribution across LICs 2/ historical projected -10 unexpected change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residual 40 Current DSA Previous DSA proj. 20 DSA-2014 Interquartile 80 Other debt range (25-75) creating flows 15 70 20 Real Exchange 60 rate depreciation 10 50 Real GDP Change in debt growth 40 5 0 30 Real interest rate 20 0 Primary deficit 10 -20 -5 Median 0 Change in debt 5-year 5-year Contribution of unexpected 2020 2028 2015 2016 2017 2018 2019 2021 2022 2023 2024 2025 2026 2027 2029 2030 Distribution across LICs 2/ historical projected changes change change -10 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 11 Figure 4. Cameroon: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 7 1 14 Distribution 1/ 6 12 Projected 3-yr adjustment 5 3-year PB adjustment greater In percentage points of GDP 4 than 2.5 percentage points of 10 GDP in approx. top quartile 3 In percent 8 2 0 1 6 0 -1 4 -2 2 -3 -4 -1 0 2014 2015 2016 2017 2018 2019 2020 2021 1.5 0.0 0.5 1.0 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 more -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The size 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real GDP of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is found on growth paths under different fiscal multipliers (left-hand side scale). the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (percent of GDP) (percent, 5-year average) 26 6 24 22 5 20 18 4 16 14 3 12 10 2 8 6 1 4 2 0 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital 12 Figure 5. Cameroon: Market-Financing Risk Indicators GFN 1/ EMBI 2/ Benchmarks 14 570 Values 11 753 Breach of benchmark No Yes Potential heightened liquidity needs Moderate 1/ Maximum gross financing needs (GFN) over 3-year baseline projection horizon. 2/ EMBI spreads correspond to the latest available data. 45 PV of debt-to GDP ratio PV of debt-to-exports ratio 250 40 35 200 30 25 150 20 15 100 10 50 5 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Debt service-to-exports ratio Debt service-to-revenue ratio 20 20 18 18 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Market financing Threshold Sources: Country authorities; and staff estimates and projections. 13