Document of The World Bank FOR OriqCLAL USE ONLY Report No. P-5079-CM NEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN OF US$150 MILLION EQUIVALENT TO THE REPUBLIC OF CAMEROON FOR A STRUCTURAL ADJUSTMENT PROGRAM MAY 16, 1989 Thls docmet has a rerted distribuion and may be nsed by redpients only In the performance of their offcial dties Its contents may not otherwise be disosed without World Bank authorization. CURRENCY EQUIVALENTS The CPA Franc (CFAF) is tied to the French franc (FF) in the ratio of FF 1 t' CFAF 50. The French franc is currently flosting. The rate of CFAF 305 to the US dollar is used for the economic projections beginning 1989190. Currency unit - CFA Franc (CFAF) US$ 1.00 - CFAF 3t5 CFAF 1.0 billion - US$ 3,3 million SYSTEM OF WEIGHTS AND MEASURES Metric System GLOSSARY OF .ACRONYMS BCD Banque Camerounaise de Developpement BZAC Banque des Etats d'Afrique Centrale BIAOC Banque Internationale pour l'Afrique Occidentale - Cameroun BICIC Banque Internationale pour le Commerce et l'Industrie - Cameroun BPPBC Banque de Paris et des Pays-Bas - Cameroun CAMAIR Cameroon Airlines CDC Cameroon Development Corporation CRTZ Cameroon Television FONADER Ponds National de Developpement Rural HEVECAM Hevea Cameroun ONCPB Office National de Commercialisation des Produits (NPMB) de Base (National Produce Marketing Board) QRs Quantitative Restrictions REFIFERCAM Regime de Fer Camerounais SCB Societe Camerounaise des Banques SGBC Societd Generale des Banques au Cameroun SNEC Socite Nationale des Eaux du Cameroun SKI Societd Nationale d'Investissements SOCAPALM Societ4 Palm SODECAO Soci4td de Developpement de Cacao SODECOTON Soci6te de Developpement de Coton SONEL Societe Nationale d'Electricite UDEAC Union Douaniere des Etats de l'Afrique Centrale FISCAL YEAR July 1 to June 30 Republic of Cameroon FOR OVm CUAL USE ONLY Structural Adjustment Loan Loan Summary Borrower: Republic of Cameroon Amount: US$150 million equivalent Terms: 17 years, including five years of grace, at the Bank's standard variable interest rate Program Descriptions The Loan would support the first phase of the Government's adjustment program for addressing key macro-economic and sectoral issues facing Cameroon over the medium-term. The objective of the program is to redress the recent substantial decline in GDP and to achieve a positive rate of per capita growth by 1995. The basic elements of the program ares (a) restructuring of public finances over the medium-term, through improved programming and budgeting of government resources, better control over government salaries. improvement in the productivity and management of the civil service, and an increase in non-oil tax revenues; (b) restructuring and rehabilitation of the public enterprise and banking sectors; (c) in agriculture, financial stabilization of the marketing structures for the principal export crop (coffee, cocoa, cotton), progressive liberalization of trade in these crops, and creation of incentives to increase food security and promote non-traditional agricultural exports; (d) deregulation of internal commerce with a view towards lowering the domestic cost structure, and rationalization of external trade regulations and effective rates of protection; (e) improvement of incentives for petroleum exploration and production; (f) reorientation of policies in the forestry, health and education sectors; and (g) establishment of specific action programs to reduce the social cost of adjustment. The program is described in detail in the Government's Declaration of Development Strategy (Annex V) and the action program is detailed in the Policy Matrix (Annex VI). The foreign exchange provided under the Loan would be used to finance essential imports. Benefits: The proposed operation would help reestablish basic financial equilibria in the banking, public enterprise and agriculture sectors and shift incentives towards production of tradeable This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - goods, thereby providing a aound basis for diversified economic growth. The operation will lead to a more efficient use of public resources, stimulate the non-oil productive sectors, and achieve a more appropriate balance between the public and private sectors. The particular benefits from public enterprise adjustment measures are the lessening of the financial burden on the Government, the increased transparency of the financial relations between the State and public enterprises, and the rationalization of resource allocation to these enterprises. Riske: The main risks associated with the proposed operation are that, as a result of social pressure and untested Government implementation capacity, the reform program would be implemented more slowly than expected, or that the measures would not be strong enough to elicit the envisaged increase in private investment and non- oil exports or to increase domestic resource mobilization sufficiently to reduce the budget deficit and conform import demand to projected levels. Estimated Disbursements: The Loan would be disbursed in three equal tranches of US$50 million. The first tranche would be available upon effectiveness, and the second and third tranches, not earlier than March 31, 1990 and December 31, 1990, respectively, upon satisfactory progress in implementation of the program. Special conditions for loan effectiveness and for release of the second and third tranches are presented in Annex III. Retroactive Financings Out of the proceeds of the loan, US$15 million (or lOZ of the total loan) will be disbursed against the country's actual imports, excluding items covered by the negative list, since March 31, 1989, i.e. less than four months prior to the expected date of l^an signing. This retroactive financing is justified by the up-front action already taken by the Government on many important elements of the structural adjustment program. - iii - CAMEROON - STRUCTURAL ADJUSTMENT PROGRAM TABLE OF CONTENTS Page PART I - THE ECONOMY A. Background g........d............. .......... B. The Current Crisis .....t... .................. C r** 2 C. The Stabilization Plan for Public Finances . .......... 3 D. Structural Issues ......................... . ... ......... 4 PART II - TME STRUCTURAL ADJUSTMENT PROGRAM A. Objectives and Approach ..................... .............. . 11 B. The First Phase of the Adjustment Program .................. 12 Public Sector Resource Management ....................... 13 Public Enterprise Reform .................................... 15 Financial and Banking Sector .. .......................... 17 Agriculture and Forestry ..... . . .*. .................... 20 Industrial Policy and Trade Reform ....................... 22 Reorientation of Sector Strategies ......* ............... 24 Social Dimensions of Adjustment . ...... ......... 25 PART III- ECONOMIC AND FINANCIAL IMPACT OF ADJUSTMENT Medium-Term Prospects for Growth ....oset or v.... th............. 26 External Capital Requirementu . . .................. 29 Creditworthiness and Risk . ...................................... 31 PART IV - THE PROPOSED LOAN ........ ......................................... 33 A. Loan History ...................... ................... 33 B. Loan Amount and Co-financing . ................. . .. ..... . 33 C. Monitorable Actions ....................................... 34 D. Program Management and Monitoring .... ..................... 37 E. Procurement, Disbursement and Auditing ..................... 38 PART V - BANK GROUP OPERATIONS AND STRATEGY .................*........ 38 PART VI - COLLABORATION WITH IMF AND OTHER DONORS .................... 40 PART VII- RECOMMENDATION ..................................... ...... .. 41 - iv - ANNEES ANNEX I - MACROECONOMIC INDICATORS AND PROJECTIONS ANNEX II - SOCIAL INDICATORS ANNEX III - SUPPLEIMENTARY LOAN DATA SHEET ANNEX IV - STATUS GE BANK GROUP OERATIONS ANNEX V - DECLARATION OF DEVELOPMENT STRATEGY ANNEX VI - MATRIX OF POLICY ACTIONS INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN OF US$ 150 MILLION EQUIVALENT tO THE REPUBLIC OF CAMEROON FOR A STRUCTURAL ADJUSTMENT PROGRAM 1. I submit the following memorandum and recommendation on a proposed loan in th- amount of USS 150 million equivalent to i Republic of Cameroon to support the Government's Structural Adjustment Program. The proposed loan would be on standard IBRD terms with 17 years maturity including 5 years of grace. 2. A Country Economic Memorandum (Report No. 6395-CM) was distributed to the Executive Directors in February 1987 and a Financial Sector Report (Report No. 6028-GM) was distributed in June 1986. The report which follows is based on the conclusions of those reports and the findings of three missions for the structural adjustment program that visited Cameroon in July 1988, November 1988 and February/March 1989. Updated country economic data are shown in Annex I. PART I - THE ECONOMY A. Backaround 3. Cameroon, with a per capita GDP of USS 955 and 10.9 million inhabitants in 1987, is one of Africa's most diverse countries in terms of human resources and natural geography. Agriculture, livestock, and forestry production are major potential sources for growth; the scope for expanding agricultural production of a wide range of products is significant given the favorable landlpopulation ratio, below-potential yields and underexploited natural resources. The mineral resource base is also diversified with reserves of oil, bauxite, iron ore and natural gas. The exploitation of hydroelectric and mineral resources, the processing of agricultural, forestry, and mineral products for export, plus selected forms of manufacturing for the regional common market, the Union Douanibre des Etats de l'Afrique Centrale (UDEAC), and other countries could significantly contribute to the economy's growth. 4. Economic growth was high (about 8 percent per annum in real terms) throughout the 1970's and until 1985. In the period after Independence, Cameroon relied heavily on agriculture, which still remains the key economic sector, employing about two-thirds of the population and generating 40 percent of export receipts. However, oil became a major source of growth after 1978 when production commenced in Cameroon. By 1984185 oil production accounted for more than 15 percent of GDP, 45 percent of government revenues and almost two-thirds of total merchandise exports. Oil production reached a peak of 8.9 million metric tonnes in 1985/86. During this period the share of agricultural production in total GDP fell from above 30 percent in the 1970's to 21 percent in 1984185. 5. Oil revenues boosted public and private spending, enabilug gross fixed inve3tment to grow at an average real rate of 7 percent during the first half of the 19809 and to maintain a high level of 20 percent of GDP. Governmwnt direct inveitment increased much faster than private sector investment and its share (excluding investment of the public enterprises) in total investment rose from one-fifth in 1979180 to one-third by 1984185. In addition, there was considerable expansion in the public enterprise sectors during 1982-1985 the sector accounted for 12.5 percent of gross fixed capital formation (but contributed only 7 percent of GDP and employed only 2 percent of the economically active population). 6. Until the mid-1980s, the Government nevertheless maintained a balanced budget, despite large capital expenditures. Given the Government's policy of using its own resources, foreign financing contributed little to the State's total financing requirements. It amounted to less than CFAP 40 billion a year. or around 6 percent of total expenditures until 1984/85. In addition until 1985/86, the Government accumulated large deposits in the domestic banking system, depositing on average CPAF 35 billion per annum of savings. Furthermore, a significant proportion of Government's receipts from the oil sector was accumulated in external reserves and the balance of payments remained consistently in eurplus. Cameroon is a member of the French Monetary Cooperation Zone, and its currency, the CFA Franc (CFAF), is freely convertible into French Francs. 7. Since Independence, the Government has sought to provide universal education at the primary level and to increase access to other levels of education for large segments of the population. The primary enrollment ratio is 107, one of the highest in West Africa. In secondary and higher education the gross enrollment ratios are 27 percent and 1.6 percent respectively. Other social indicators are shown in Annex II. 8. The population growth rate was most recently estimated at 2.9 percent based on a 1987 census. During the past decade, the urban population increased at an annual growth rate of 7 percent from 2.2 to 3.9 million. Nearly 40 percent of the population now live in towns. S. The Current Cri3is 9. Since 1985, the fall in the US$-denominated prices of Cameroon's major export commodities (oil, coffee and cocoa) and the depreciation of the US$ have exposed major structural weaknesses in the economy and have plunged it into a deep recession. Between 1985 and 1987, Cameroon's export price index in CFAF terms fell by 65 percent for oil, 24 percent for cocoa, 11 percent for coffee, and 20 percent for rubber, causing a 47 percent deterioration in the terms of trade. The balance of payments registered a current account deficit of 8.8 percent of GDP in 1986/87 compared to a surplus of 3.9 percent in 1984/85. These exogenous factors undermined Cameroon"s economic and financial viability and brought a halt to economic - 3 - growth. The economy stalled in 1986187, with GDP falling by 3 percent. It is estimated that GDP fell by 9 percent last year (1987/88) and will fall by a further 6-7 percent this year. Investment and imports are about 50 percent and 40 percent, respectively, below their levels of three years ago. 10. The fall in export earnings, together with internationally uncompetitive domestic interest rates which encouraged capital flight, resulted in a dramatic decline in Cameroon's net foreign assets from CFAF +128 billion in June 1986 to CFAF -147 billion in June 1988. This has led to a sharp contraction in the liquidity of the domestic banking system, which is, in turn, further constraining economic activity. 11. In 1986/87, Government revenues fell by CFAP 146 billion and, for the first time in Cameroon"s history, government operations recorded a large deficit (ClAF 508 billion, equivalent to 12 percent of GDP). This deficit resulted from a 28 percent fall in oil revenues between 1984/85 and 1986187, plus a continued increase in recurrent expenditurei, mainly on personnel, and the failure to scale back public investments fast enough. It was financed by (i) a build-up of domestic arrears amounting to CFAP 240 billion (mostly to domestic contractors working on investment projects), (i3) a drawdown of deposits held both externally and with the domestic banking system (exacerbating the latter's liquidity constraint). and (iii) an increase in foreign financing - public and publicly-guaranteed external debt at end 1987188 is estimated at US$ 2500 million, equivalent to 19 percent of GDP. The creation of domestic arrears has acted as an unanticipated tax on the private sector and has contributed to the slowdown in economic activity and the illiquidity of the banking system. The resolution of this proble- is an essential first step for getting the economy back on track. C. The Stabilizat-in Plan for Public Finances 12. To deal with its deteriorating finances, the Government first launched an austerity program in 1987188 to restore budgetary balance. This progrr.a succeeded in cutting the Government's deficit to 6 percent of GDP last year. Expenditures were reduced by 34 percent or ClAF 415 billion over the previous year; on the other hand, revenue also fell by CFAF 120 billion to about 80 percent of the 1986/87 level. The largest expenditure cut was the elimination of extrabudgetary spending (ClAF 250 billion) which covered a variety of recurrent and capital expenditures. In addition, capital expenditures were reduced by CFAF 212 billion (48 percent) and recurrent expenditures (excluding debt service) by CFAF 88 billion (18 percent); the latter included a freeze on wages, a 27 percent reduction in transfers and subsidies, and a 38 percent cut in goods and services. Interest payments were the nly item to increase. 13. The second year of the Government's stabilization program is supported by an 18 month Stand-by arrangement approved by the IMF in September 1988. The 1988/89 budget aims to reduce the overall deficit further to 2 percent of GDP. This is being accomplished through a further reduction of capital expenditures, which are programmed at one-third of their average 1984/85 - 1986/87 level. In addition, efforts are underway to reduce personnel expenditures by reviewing the payroll for *ghosto - .4 - woreiers and to increase nonoil tax revenues mainly through excise taxes on alcohol and petroleum products and improved tax administration. As of December 1988, the Government's budget was on track with the exception of a slight revenue shortfall, attributable to the decline in economic activity, and the accumulation of a moderate amount of external debt arrears. The Government has requested a rescheduling of these arrears, as well as a portion of current maturities, through the Paris Club. In addition a rescheduling plan for domestic arrears has been negotiated with most large domestic creditors. The Government intends to pay 15 percent in cash with the balance in negotiable, seven-year Treasury bills at the Central Bank rediscount rate, currently 9.5 percent. The cash payment may be insufficient, however, to restore liquidity in the banking system, especially since a portion of these payments will be repatriated to foreign firms that had been working through domestic contractors. Taking into account the above measures, the IMF has concluded that Cameroon remains in compliance with the September 1988 Stand-by arrangement. 14. The severe cutback in overall government expenditure during the past two years, to 60 percent of the average 1984185 - 1986/87 level, is a major cause of the slowdown in economic activity. Due to the across-the- board nature of the cuts, it has also resulted in severe underfunding of essential economic and social services and has left numerous investment projects uncompleted. The Government has recently completed reprogramming its capital expenditures based on criteria, agreed with the Bank, that aim to concentrate resources on those projects nearest completion and to emphasize the maintenance of existing assets. Nevertheless, the overall constraints on the budget will result in slower than desirable implementation of most development projects. 15. The financial crisis has also prompted the Government to take a closer look at its public and parapublic enterprises that absorbed large amounts o.; Dublic resources in recent years and drained liquidity from the banking sy.tem through a combination of non-performing loans, unpaid crop credit and a build-up of arrears to domestic suppliers. A Public Enterprise Rehabilitation Commission was set up in July 1986 to recommend measures to reduce the heavy burden of this sector on public finances, improve companies' performance, and rationalize state participation. Since August 1987, the Commission has shown considerable energy and determination in pursuing its mandate and has carried out audits on companies which have led to recommendations concerning their restructuring, privatization or liquidation. It has also evaluated their cross-claims and debts. A review of the institutional, regulatory, and macroeconomic environment has been carried out concurrentlt with these audits to assess and rationalize the environment for the companies that are to be retained in the Government's portfolio. The policies examined relate to pricing, trade, credit, employment, wages, investment, and privileges that these companies currently enjoy. D. Structural Issues Public Finance Management ;.. With the drop in oil revenues, the need for a tight budgetary policy has become an urgent task for the Government. The challenge is to control expenditures without excessive costs in terms of growth foregone. Restoration of equilibrium vill require that the Government erhances its domestic revenue effort and adjusts spending to a level consistent with available resources. Non-oil tax revenues have been eroded in the 1980's and need to be increased from their current level of 10 percent of non-oil GDP to thei: historic level of 14-15 percent, in order to attain budgetary equilibrium in the medium-term. This will require a medium term restructuring of the tax system which should be accomplished primarily by broadening the tax base and improving tax administration and compliance, rather than by increases in tax rates. For the next few years, until this restructuring can be accomplished, the Government will have to rely heavily on foreign borrowing to maintain a minimum level of capital investment consistent with reviving the economy and sustaining growth in the medium term. 17. On the recurrent expenditure side, the main effort needs to be on containing personnel expenditures. Civil service salaries are relatively high reflecting the period of high oil revenues. The existing freeze on the wage bill needs to be continued; new hiring, including graduates trained in public administration institutions, should be further reduced; and the costly system of benefits and allowances requires rationalization. The Government also needs to improve the quality of its recurrent expenditures by adopting operating standards that ministries should strive to achieve and that could be used for allocating resources based on performance. Budgetary allocations will need to be better designed than during the past two years when non-wage recurrent costs were sharply reduced with no prior planning. The sharp reductions in non-wage recurrent expenses have reduced vital maintenance of capital infrastructure and provision of services in health, education, transport, agriculture, and urban services, and could lead to dramatic repercussions on the country's future growth. 18. In general, considerable improvements are required in the mAnegement of government resources. Budget planning does not yet take place within a medium-term framework incorporating revenue and expenditure projections based on the forecast behavior of key macroeconomic variables; sectoral allocations are often made on a rather arbitrary basis especially when expenditure cuts are required due to lack of coherent sector strategies; public finance data are not presented in a consolidated form which seriously hinders effective management of scarce public resources; project appraisal, monitoring and evaluation are frequently neglected or poorly executed; and procurement procedures are often unclear and implementation slow. Bankiab Sector and Financial Policies 19. Cameroos's banking system comprises ten commercial banks with varying degre_s of state, parapublic and foreign shareholding, and three state-owned banks, of which one is a commercial bank and the other two are development banks specializing respectively in agriculture and industry. Over the past two years, the banking system has become heavily illiquid, and many individual bankR, particularly the three state-owned banks but also some large jointly-owned commercial banks, have become technically insolvent, largely on account of the accumulation of high portfolio arrears. The aggregate deficit of the banking system is estimated to range from ClAP 300 - 375 billion or almost one-third of their outstanding portfolio and approximately 102 of the country's GDP. The sinancial difficulties of the banks have led to a de facto rationing of deposit withdrawals and have severely limited their capacity to finance productive activities. The mounting disarray of the formal banking system is believed to hbve been paralleled by an expansion of the informal financial market, consisting of utontinesa and other mutual savings mechanisms, which has always been active in Cameroon and is now estimated to hold about CFAP 200- 300 billion of deposits or almost one-third of total deposits of the flnancial system. 20. This situation of banking distress has resulted from a combination of factors. The sharp decline in real GDP over 1986187-1987/88 was bound to spill over into the financial sector. The Government's budgetary difficulties since 1986 led to a reduction of public sector deposits that directly affected banking liquidity, as well as the accumulation of government arrears vis-s-vis private sector contractors, which impaired the latter's capacity to service their banking debts. Another factor was the involvement of the banking system in the provision of seasonal agricultural credit (mostly for cocoa, coffee and cotton) including for domestic marketing costs and taxes, without taking into account declining export prices, resulting in an overhang of unpaid crop credit exceeding ClAP 100 billion. Credit to public enterprises, many of which are poor performers, is estimated at some CFAP 150 billion and constitutes another source of banking arrears. Furthermore, banking management was weak, particularly in state-owned banks and those in which the state was predominant. Finally, banking control exercised by the national authorities and by BEAC (the Central Bank common to Cameroon and the other fire countries of the region) was ineffective until a start was made in 1987 to strengthen it. 21. Apart from these factors which have precipitated the current banking crisis, there are other inadequacies in the policy, regulatory and institutional framework that have impeded the efficient functioning of the financial sector and banking system. Banking profitability has been undermined by restrictive margins set on credit, by an over-extended branch network partly due to government pressure, and by excess staffing. A myriad of administratively-mandated interest rates, on both loans and deposits, has stiflFI banking competition and discouraged the introduction of new, more diversified financial instruments. Banking competition was further curtailed by the setting of quantitative Central Bank rediscount ceilings both on individual banks and individual borrowers. The relatively low Central Bank rediscount rates, of 6.5 percent and 9.5 percent respectively for preferential and normal credits, compared with the money market rates in Paris, may also have encouraged capital outflows, in light of the freedom of financial transfers within the Franc Zone. They have not been conducive to domestic savings mobilization. The lower rediscount rate of 6.5 percent for priority activities such as agriculture and SMEs may have resulted in some diversion of credits from their intended purposes, while the low banking margin '4 3 percentage points for the same activities may effectively have discouraged the banks from lending for them. Finally, although BEAC has at its disposal a vast array of control instruments and regulations including prudential banking ratios (e.g., capital adequacy and -7- liquidity ratios), these are overly complex and not systematically monitored and enforced in practice. ARriculture 22. After a period of moderate growth in the 1970's, the agriculture sector has stagnated since 1982. The unfavorable climate of 1982-84 partly accounted for this poor performance, but the stagnation can largely be explained by a longer-term decline in cash crop production. This is a cause for concern as Cameroon will have to rely on agriculture for export revenues in the face of depleted oil reserves. The Government's objectives for the sector emphasize food security, the promotion of exports and expansion of crops used by local industry, and in general an increase zn rural incomes which are about one-half the national average. However, the Government's agricultural policy has been restrictive. particularly in the pricing and marketing of export crops. 23. Pricing and Trade Policies. Weak commodity prices, the depreciation of the US dollar vis-a-vis the CFAP, dumping and subsidy of food exports from surplus countries, plus high domestic labor and intermediate costs have eroded Cameroon's competitive position for most of its tradeable crops. At current world price levels, marketing losses amount to CFAF 100 to 200 per kg of cocoa, coffee and cotton exported, vhich is estimated to represent a net drain of CFAF 50 billion per annum on public sector resources. The losses of recent years have been financed by a combination of drawdowns of previously accumulated stabilization reserves on deposit in the banking system and by unpaid crop credit. Producer prices for major export crops are set by the Government independently from world market trends. In the past, when world prices were considerably higher, relatively iow fixed producer prices for export crops resulted in heavy taxation of producers. Today, however, Cameroon's official producer prices are among the highest in francophone Africa, as a result of steady increases in the official price during recent years. But with today's depressed world prices and the tight monetary situation, the Government is facing difficulty in supporting the present producer price level. Present producer prices are projected to result in substantial and unsustainable deficits well beyond 1990. A recent diagnostic study of the National Products Marketing Board (ONCPB) indicates that the expected deficit from exporting cocoa, coffee and cotton this year will exhaust all remaining liquid reserves that ONCPB holds in the banking system and on account with the Treasury. Future financing of this deficit would require direct budgetary subsidies andlor a further deterioration in the banking system. 24. Marketing of coffee and cocoa is subject to Government regulation and control. The Government establishes an annual price schedule (barame) to regulate all costs and marketing margins, and assigns the quota and zone of marketing to specific traders and cooperatives. This system is inefficient as the lack of competition creates opportunities for traders to collect rents and it discourages cooperatives from minimizing costs. Internal marketing costs are also high compared with neighboring countries. 25. Institutional Constraints. Excessive Government interference in the administration of cooperatives and its poor management of the - 8 - delivery of farm inputs and extension services has proved very inefficient and costly; agencies have proliferated often duplicating each other's functions and their scope of activities has been defined too widely to include services which could be more efficiently provided by the private sector. 26. Food Security. In spite of its overall favorable position as regards food self-sufficiency, the country faces three food security problems. First, continuing chronic malnutrition affects about one-quarter of the rural population under five years of age spread over all provinces. Second, transitory food insecurity exists in the northern provinces due to unfavorable climatic conditions, low productivity of agriculture, and little crop diversification. Third, the food distribution system is inadequate due to the inaccessibility of some areas, poor storage and lack of processing facilities. In addition, price controls and quantitative restrictions on food imports are major policy constraints. 27. Forestry and Environment. Cameroon's forestry subsector has considerable potential for increased sustainable production, as well as for increasing government revenues. Only about 40 percent of the country's forest resources are being exploited and many lesser-known species with economic potential are being neglected. Forest exploitation is not efficiently controlled due to the lack of a land-use plan, inadequate policy in granting concessions and lice3ses for exploitation and exports, and poorly-trained staff running the Directorate of Forestry which is responsible for planning and protection in forest areas. In addition, government regulations require 60 percent of wood exploitation to be transformed into semi-finished products. Because of low conversion ratios in the wood processing industry, this has encouraged wasteful exploitation of forest resources and lower export revenues for the sector. Trade and Industrial Incentives 28. Depressed domestic demand during the past three years has put a halt to the steady growth of the manufacturing sector, which grew by about 10 percent per annum since independence. It has revealed the sector's lack of competitiveness and high costs which are the result of the long-standing protectionist policies and regulations. For more than twenty years, high trade barriers and the nature of the Investment Code increased the relative profitability of import-substitutes, leading to the establishment of highly capital-intensive activities and low value-added assembly/packaging of consumer goods. Restrictive labor legislation and price controls increased inefficiency and distorted market mechanisms. Incentives to base production on donestic resources and to produce for export markets were limited. Manufacturing relied on an escalation of protection, thereby imposing considerable costs on the rest of the economy. The resulting highly dispersed levels of effective protection distorted resource allocation among sub-sectors of industry. 29. Trade Policy. Both domestic and foreign trade are heavily regulated in Cameroon. Imports are subject to import licensing and the vast majority of locally produced goods are protected by quantitative restrictions (QRs). The tariff system is complex and results in highly dispersed tariff rates, ranging from zero to 180 percent with an average of - 9 - 45 percent. Tariff instruments include the 'entry duty' and the *customs duty' which are fixed for all UDEAC members and the "complementary import duty tax' (0-50 percent) which is fixed by each member country. Protection is aggravated by widespread exemptions from import duties through the Investment Code and other similar fiscal regimes. Exports outside the UDEAC zone are taxed at 2 percent, with the exception of coffee, cocoa and wood which are taxed at higher, specific rates. Industrial exports within UDEAC are taxed under the single tax regime for eligible firms. 30. Price Control. Domestic prices are either fixed or officially approved on a cost-plus basis. Maximum wholesale and retail margins are fixed for all goods and services with specific rates for production and distribution of domestic goods, goods under QRs and some key consumer imports. A minimum margin is guaranteed for retailing. As a result, the system is inflationary; its administration rigid and prone to abuse. The price control system is reinforced by rehulations governing entry into wholesale and retail trade (Law 80/25). 31. Investment and Fiscal Incentives. Because of its content and discretionary administration, the Investment Code is the main source of market distortions, and restrictions on competition. Investment incentives are provided through the different regimes of the 1984 Investment Code derived from the UDEAC general guidelines and the regional single tax ('taxe unique') regime. Benefits are granted for 10 to 25 years and increase with the size of the investment. Larger investments benefit from 'special conventions' with the State which freeze company-specific fiscal advantages for up to 25 yLars. Most enterprises in UDEAC, and therefore Cameroon, benefit from the Code, which grants import duty exemptions on inputs and a maximum of 5 percent import duty on capital goods. The single tax replaces all indirect taxes and is levied on the firms' operations for goods sold within UJDEAC. However, its rate varies between firms, products and UDEAC countries. It is collected from the final user. The internal turnover tax ("taxe int6rieure a la production") regime grants similar advantages to companies selling on their domestic market but is collected by the Customs Department. These incentives encourage over-investment in fixed capital, discourage the use of labor and regional integration, and cause a considerable loss of fiscal revenue. 32. Regulatory and Institutional Environment. The business regulatory environment is often inadequate, obsolete or incomplete. Private sector wages are, for instance, regulated in accordance with extremely detailed public sector wage categories. Entry is restricted in certain sectors, and monopoly privileges are granted to certain Investment Code beneficiaries. The legislation governing contracts, incorporation, partnerships and exit from production needs to be clarified, and protection against unfzir business practices should be strengthened. Institutions supporting the private sector, and in particular small and medium scale enterprises and export activities need to be profoundly restructured. - 10 - Oil Production 33. Cameroon's oil production will decline and reserves will be depleted by the end of the century unless new discoveries are made. Although the likelihood of untapped petroleum resources is coAsidered high, new discoveries are unlikely without better incentives for oil exploration. Compared to neighboring oil-producing countries, Cameroon's legislation and taxation policy does not encourage oil companies to undertake further exploration activities and none are currently taking place. Companies are expected to bear the entire cost of exploration drilling, with the 'Soci6t6 Nationale des lydrocarburesl (SNH) reimbuzsing 60 percent of the cost only if oil is found and as and when revenues allow. In addition, exploration contracts stipulate minimum work programs which are often excessive. Moreover, the fiscal regime applied to production is not appropriate to a period of low oil prices and declining reserves, since it taxes the net cash flow of the oil industry at 87 percent. This level of taxation is a serious disincentive to further exploration and development. Human Resources 34. The constraints on budgetary resources, together vith the existing deficiencies in education and health services, pose a serious threA* to the well-being of society and the future development of the country. Without corrective action in the near future, Cameroon risks a depletion in human capital, increased health risks and increased inequity In the provision of basic socio-economic services. The Government is anxious to incorporate a social dimension in its adjustment program, but has yet to link fully the objective of poverty alleviation with the central priorities in the education and health sectors, and to formulate a coherent and financially sustainable strategy for each sector, including the protection of a minimum level of funding for basic services. At present the Government allocates the considerable funds it spends in the education and health sectors mostly on secondary and tertiary services. The rigidities in reallocating expenditures include large wage bills, an entrenched pattern of allowances for universiiy students, a penchant for modern and expensive schools and hospitals, and a lack of cost recovery policies. 35. Education. Education development in %ameroon has focussed on expansion of the formal system but very little on quality. Even so, expansion of the system has not kept pace with school-age population growth, leading to overcrowding and inadequate provision of trained teachers and vital educational inputs. Low attainment in relation to years of education and often inappropriate qualifications characterize the educated manpower in the labor market. Persistent shortages of experienced managerial, technical, and skilled manpower seriously impede economic development. On the other hand, the informal sector plays a valuable role through its extensive apprenticeship system. There is a need to improve siubstantially the standards of primary and technical education, as well as the effectiveness of vocational education, and adjust the curricula and training approaches to respond to the needs of the economy. 36. Health. Poor management of the health care system coupled with inadequate and poorly allocated expenditures threaten to compromise the - 11 - gains of the past decade in reducing mortality and morbidity. An Important part of past and future expenditures has been allocated to sophisticated hospitnls, while insufficient resources are available to operate and maintain the existing hospitals, much less new facilities. A strategy needs to be devised to reallocate expenditure patterns towards broad-based primary health care, including maternal and child health programs, and introduce cost-recovery methods throughout the spectrum of health services. The Government's population policy is cast in terms of "responsible parenthoodu, but active pursuit of this policy is limited by the same inadequate attention and financing that affects primary health care. Part II - The Structural Adjustment Program A. Objectives and Approach 37. The Government started preparing its medium-term adjustment program in early 1988. At that time it established a working level cuamittee comprised of directors and senior technicians from all major operational ministries. This committee was divided into subcommittees along functional lines and was charged with drawing up the Government's Statement of Development Strategy. The establishment of this working committee created for the first time in Cameroon an opportunity for the technical level of Government to put forward its own agenda for reform on a comprehensive economy-wide basis. The President added increased importance to this exercise in December 1988 by establishing an Interministerial Committee responsible for steering the preparation of the structural adjustment program and for monitoring its implementation. This Committee is assisted by two technical secretaridts, one dealing with the IM stabilization program and the other with the adjustment program developed in collaboration with the World Bank and the African Developmert Bank. 38. While the resulting Declaration of Development Strategy (Annex V) was developed and discussed with three joint World BanklAfDB missions over the past nine months, the Declaration is very much regarded as the Government's own program and benefits from the wide range of technicians throughout Government who have participated in its preparation and are committed to its implementation. The Government intends to publish this Declaration to inform the Cameroonian public of the specific contents of the adjustment program, as well as to mobilize the external resources from the donor community needed to finance the program. 39. The broad objectives of the Government's adjustment program can be summarized as follows: a) to reestablish a positive rate of per capita income growth; b) to reduce progressively the constraints which hinder a general opening of economic opportunities, through fostering increased competition and reducing the inefficiency of domestic markets; c) to reorient the role of the State from one of direct intervention in the production and distribution of goods - 12 - and services to one of facilitating the operation of-the private sector; d) to reoriett public services towards programs which Improve the well-being and productivity of all Cameroonians, taking into account the social dimension of adjustment. 40. The Government aims to attain these objectives through a series of measures that will: - stabilize and restructure public f:.ances over the medium- term, through improved programming and budgeting of government resources, better control over government salaries, improvements in the productivity and management of the civil service, and an increase in non-oil tax revenues; - restructure and rehabilitate the public enterprise sector; - restructure the banking sector, including improved monetary and credit policies; - stabilize the finances of the agricultural marketing structures for the principal export crops (coffee, cocoa and cotton), liberalize progressively trade in these crops, and create programs to increase food security and promote non-traditional agricultural exports; - deregulate internal commerce with a view towards lowering the domestic cost structure, and rationalize external trade regulation and effective rates of protection; - improve incentives for petroleum exploration and production; - reorient policies in the health and education sectors, especially toward the primary level, to improve human resources development; - establish specific action programs to reduce the social cost of adjustment. B. The First Phase of the Adjustment PrRram 41. Many of the above objectives are likely to require three to five years for implementation to be completed. This is particularly the case for public enterprise reform, the banking sector and administrative reform of the civil service. Also, a sustained effort will be required over the medium-term to increase non-oil tax revenues in order to stabilize public finances and cover Cameroon's increased debt burden. The Government therefore considers its Declaration of Development Strategy as a medium- term framework within which the specific actions described below and set - 13 - out in the Matrix of Policy Actions (Annex VI) represent the first 18-24 mouth phase of the adjustment program. Public Sector Resource Management 42. Under the structural adjustment program, the Government will take a series of interconnected actions to improve the mobilization and management of public sector resources. These messures aim to present a clearer and more comprehensive picture of Government finances, reestablish an equilibrium between expenditures on personnel versus goods and services, improve the management and efficiency of the civil service, and improve revenue collections while taking initial steps towards a more comprehensive rationalization of the tax system. 43. Until now annual budgets have been prepared in the absence of a clear link with the macro-economic circumstances of the country. In addition, the budget submitted to the National Assembly has not taken account of expenditures financed by sources other than tax revenues, namely, externally financed projects, and, until recently, the considerable expenditures financed by the Government's outside accounts ('comptes hors budget*). In order to present a clear'r and more comprehensive account of Government resources and expenditures, &":, Government will prepare each year a set of medium-ter.. macro-economic projections that will provide the broad parameters for the following year's budget. Within this context, the Government will draw up a rolling four-year public investment program that will include all sources of financing. This program will be based on a soon-to-be installed system designed to monitor the physical and financial execution of projects currently under implementation. This system will, in addition, produce quarterly monitoring reports that can be used by ministries to measure progress on all projects in a given sector, or, for example, all projects financed by a given external donor. In the first instance, this system will cover all projects in the Government's budget, but will eventually be extended to monitor the investment programs of the public enterprises, in particular, the portion financed by government guaranteed debt. Starting with the 1989190 budget, the first year of the investment program will appear as an annex in the annual public finance law ('Loi de Finances") which will set limits on the disbursement of externally financed projects, in order to ensure execution of the budget in line with the multi-year investment program. 44. The Government has also decided to revise its procurement procedures with the aim of reducing the administrative delays that have led to considerable cost overruns. For this purpose, it has created a separate unit as part of the Presidency, the Direction Generale des Grands Travaux du Cameroun (DGTC), that will supervise the physical execution of all major capital expenditures by the Government. The first practical steps to be taken towards improving the procurement process will include standardization of bidding documents and a program to train personnel responsible for the tendering process. In addition, procurement procedures will be reviewed and revised with a view to reducing delays and assigning specific responsibility and deadlines for the various steps to the agencies involved in the procurement process. These measures will be in place by mid 1990. - 14 - 45. As mentioned earlier, the Government has taken major efforts to stabilize public finances and reduce the budget deficit. A different kind of adjustment is now required to reestablish a balance among categories of expenditures. In this regard, the adjustment program ervisages two major efforts: establishment of minimum levels of expenditure on key development services and better control on personnel expenditure. Regarding the former, the Government intends to increase the non-wage recurrent allocations for education, health, agricultural research and extension, and road maintenance by 53 percent, or FCFA 7.6 billion in the 1989190 budget. This increase will nearly restore the level of expenditure of these key sectors to that of two years ago. In the medium-term, expenditure on these services will be adjusted to correspond with the results of operational audits for the respective ministries that will be carried out in connection with the Government's program of administrative reform (see below). 46. The Government has already achieved a 12 percent reduction in the wage bill during the past two years through a series of measures that have frozen nominal salaries, reduced the number of new recruits, purged non existent employees from the wage bill, enforced the age limit for retirement from the civil service, and reduced benefits and allowances for certain categories of personnel. The Government intends to consolidate this effort and carry it further by adopting a program of administrative reform aimed to reduce further the cost of the civil service while at the same time improving its efficiency. In the short term, these measures include improved management of the payroll system and the establishment of a scheme for voluntary departure from the civil service. In addition, the Government intends to review and revise the system of allowances for family allocations, housing and transportation while on leave, as well as the legislation governing retirement. Finally, the Government will begin a series of operational audits in 1989 that will review the mission of each ministry, in order to determine the appropriate structure and staffing level as well as the appropriate recurrent budget needed to accomplish the ministry's objectives. Management audits of four central ministries (Finance, Plan, Civil Service and Commerce and Industry) will be carried out by March 1990 and the process will be extended to key sectoral ministries later that year. These audits will be supported by the proposed economic management project that is being processed in parallel with the SAL. Civil servants identified by these audits as superfluous to the ministries' staffing requirements will be provided incentives to leave the civil service, including facilities to retrain for private sector activity. 47. The second major objective of the Government's program of administrative reform is to improve the efficiency of the civil service by introducing new policies for the evaluation of individual performance and the management of personnel files. This is a medium term program that will require approximately two years to complete. As a first step, the Government will review the laws and regulations concerning the civil service and will harmonize the statutes applying to different categories of employees, i.e. permanent civil servants, part-time and non-civil service employees. The compensation system will also be revised, in order to better balance salary and benefits. A new system of performance evaluation will be introduced based on individual performance plans, and promotion and remuneration will be based on the results of this system. In order to Improve the long term quality of the civil service, a system of career - 15 - planning and professional training will be established. Finally, overall management of the civil service will be improved by strengthening the computerization of personnel files, including all important data concerning salaries, length of service, promotion and career development and the production of coherent statistics. 48. As discussed in Part I. due to the expected secular decline of petroleum revenues during the next decade, a sustained effort to increase domestic resource mobilization will be required over a number of years, in order to restore the contribution of non-oil tax revenue to its former level of around 14-15 percent of non-oil GDP. As a start, the Government introduced a land tax in 1988/89, and cadastral surveys will soon be undertaken to extend the land tax throughout major areas of Douala and Yaound6. Also a number of measures have already been initiated to improve tax collection and reduce fiscal fraud. Among these is the requirement that all imports of a value higher than the equivalent of USS 3,300 obtain a certificate of inspection by specialized agencies in the country of export; this should improve the proper declaration of content and value for the purpose of collecting customs duty. The Government will soon begin a program of negotiating duty free import quotas for all diplomatic missions, and will strictly enforce the practice of collecting import duties on all Imports by Government ministries and agencies, including imports financed by external sources. The Government's intention is to reduce import duty exonerations as much as possible, which currently permit as much as 60 percent of imports to enter Cameroon duty free. This will require revision of the Investment Code and renegotiation of existing exonerations with current beneficiaries which will take a number of years and is not expected to yield significant increases in revenue in the short term. 49. Over the medium term, the Governmentgs adjustment program envisages a restructuring of the fiscal system. First, the individual income tax system would be rationalized to reduce its complexity, broaden the tax base and perhaps lower individual rates. To this end, a study will be completed by (December 1989). A system of unique taxpayer identification numbers will be introduced for all individual and corporate tax payers. Second, the Government intends to introduce a value added tax (VAT) in 1991192, to replace the extremely complicated current system of indirect taxes including the domestic turnover tax ("impOt sur le chiffre d'affaires interieur*), the single tax ('taxe unique") and the tax on domestic production ('taxe interieure a la production"). Since these last two taxes are comon to the UDEAC zone, introduction of the TVA will have to be coordinated at the UDEAC level. As a first step, the Government will complete a study on introduction of the VAT by December 1989. Public Enterprise Reform 50. The Government is well underway in addressing the severe financial problems of the public enterprise sector. For the past year, the Interministerial Commission for Public Enterprise Reform has been conducting diagnostic studies of the 75 public enterprises that represent the heaviest financial burden on public resources, including all commercial and state owned banks. Decisions have been taken to liquidate and/or privatize 22 of these enterprises. Liquidators have been appointed for four public enterprises and the Commission completed a privatization - 16 - strategy paper in mid-April. A proposed legal text governing the procedures by which public enterprises are to be privatized will be completed by August 1989. 51. Decisions have also been taken to rehabilitate 38 strategic enterprises which will remain in the Government's portfolio.lt These include the major utilities, transport parastatals, research institutes and agricultural marketing organizations. Action plans have been prepared for these enterprises which identify the resources required for the financial restructuring of each enterprise's balance sheet (working capital and settlement of arrears) and establish plans for the technical rehabilitation of the enterprise, reduction in work force, and an appropriate medium-term investment program. A performance contract will be signed between the Government and the management of each enterprise. These contracts will set out performance objectives and timetables, establish areas of management autonomy and, within the context of minimizing financial transfers from the Government, identify specific obligations of the Government towards the enterprise in the case where the enterprise is required to carry out non- profitable activities. Performance contracts for 7 major enterprises will be signed by September 1989 and for another 9 major enterprises by April 1990. Diagnostic studies for a second group of 45 enterprises will be completed by December 1989, and decisions on the status of all remaining public enterprises will be taken by March 1990. 52. The estimated cost for rehabilitating the first group of enterprises (excluding banks) is estimated at CFAP 377 billion over five years. This includes approximately CFAP 25 billion for redundancy payments for approximately 14,000 employees that are estimated to become redundant in the first group. Before any employees are dismissed, however, a set of measures will be pnt in place to provide compensation for their loss of employment and to assist those who wish to enter the private sector find jobs or establish their own business. To this end facilities for retraining, and/or establishing a new business will be made available to all interested employees. 53. The Government is in the process of reviewing the results of the restructuring plans with a view to reducing the total estimated cost to a level consistent with available resources. To date, external financing has been lined up to cover about CFAF 60 billion of the total cost, and government resources could cover an additional CFAF 50 billion per annum. Additional assistance from multilateral and bilateral donors will thus be required to meet the cost of the program, and close coordination among donors and the Government is a prerequisite for its success. 54. As part of its decision making process, the Interministerial Commission also took a number of decisions concerning the institutional and macroeconomic environment in which public enterprises function. Concerning the former, the commission decided that public enterprises should function with the maximum amount of autonomy possible and that the management must 1/ Of the 75 enterprises studied, 14 are banks and financial institutions and one is the agricultural marketing board (ONCPB), which are dealt with in the following sections. - 17 - be responsible for the performance of each enterprise. The board of directors for each enterprise will ba open to members of the private sector, and members of the Government vill no longer be appointed as chairman of the board. The role of the supervising ministry will thus be significantly reduced in terms of day-to-day management of the enterprise. Nevertheless, decisions concerning the investment program, hiring and firing of staff, capital structure and borrowing will still require the prior approval of the supervising ministry. Legislation concerning these points, as well as redefining the general statutes governing the organization and operation of public enterprises will be enacted by December 1989. Public enterprises are to be classified as (a) administrative entities (*Etablissement & Caractere Administratif'), (b) state-owned enterprises ("SociOth d'Etat'), or (c) joint-ventures ('Socidtds d'Economie Mixte'). Those in the first category - research institutes and other entities with a social purpose - will continue to receive government subsidies but will have programs designed to improve their efficiency and effectiveneso. Those in the second and third categories will operate on commercial principles and will be veaned from Government subsidies. Concerning the macroeconomic environment, the Interministerial Commission adopted a series of decisions that will lead to a progressive liberalization of the commercial and trade regime. These are discussed below under the section on Industrial and Trade Reform. 55. Implementation of this extensive reform program will be monitored by the Commission, whose mandate has been extended for this purpose. The Commission is assisted by a technical Committee that has supervised the diagnostic studies and is responsible for monitoring the implementation of the action programs and maintaining a central file on performance of the public enterprise sector. A supervision committee ('Comitd de Suivia) will be established for each enterprise to negotiate and monitor the performance contract and will include representatives from the concerned ministries, the Director General of the enterprise concerned and a representative of the technical committee. Financial and Banking Sector 56. The present distress of the banking system represents a major obstacle to the resumption of normal economic activity, and its resolution is a prequisite for the success of the structural adjustment program. In collaboration with the Bank and IMF, the Government has taken initial steps to address the situation. Diagnostic studies and financial audits have been carried out or are in process for each individual bank. A comprehensive program for reforming the financial and banking sector has been formulated, which includes the following main elements: Mi) an action plan for the restructurlng of distressed banks including: (a) liquidation of Cameroon Bank, a state-owned commercial bank, and of the state-owned specialized banks BCD and FONADER; (b) restructuring of the state holding company, SNI; (c) consultations with the foreign partners in jointly-owned commercial banks (including SCB, BIAOC, SGBC and BICIC) toward the formulation of specific rehabilitation proposals for these banks, comprising financial restructuring as well as organizational reforms such as branch office closings and personnel reduction (by March 1990); (d) joint preparation with the foreign - 18 - partners of a plan for either restructuring on liquidating the BPPBCt (e) progressive divestiture of a significant portion of state shareholding in existing banks (upon completion of their rehabilitation) in favor of private Cameroonian or foreign investors. with as a corollary the withdrawal of Government from the management of these banks; and (f) the carrying-out of feasibility studies that would determine the viability of new banks with state shareholdings prior to their establishment; (ii) a program of emergency measures to relieve the banking liquidity crisis, including: (a) the settlement of government arrears vis-a-via the private sector (to be completed by September 1989); (b) the consolidation of part of government deposits with the banks; and (c) the rescheduling of a portion of outstanding debts owed to BEAC by the banks (negotiations Government-BEAC to start by June 1989); (iii) in conjunction with BEAC, the formulation of an action plan for putting the crop credit system on a sound footing. This plan will include (a) the settlement and/or rescheduling of past unpaid crop credits refinanced by BEAC (negotiations Government-BEAC to start by June 1989); and (b) new modalities to ensure the sound provision of crop credits beginning with the 1989/90 crop season, including limiting bank financing to expected export receipts and the reinforcement of control over financed stocks: (iv) in consultation with BEAC, appropriate steps to strengthen the control of banking institutions by the authorities, through the reinforcement (started since 1987) of the Inspection unit of BEAC complemented by that of the Ministry of Finance. In addition, prudential banking ratios (e.g., capital adequacy and liquidity ratios) will be more strictly monitored and enforced, following the banking restructuring; and (v) a set of selective policy reforms, to be formulated in consultation with REAC, includings (a) the gradual increase in banking margins (to be subject to annual review starting in November 1990), as a first step toward their eventual liberalization; (b) the reduction in the excessive range of interest rates (from about 40 to 4, already in force) and a gradual increase in their level, prior to their eventual liberalization; (c) studies on the reduction or abolition of taxes applicable to financial transactions (by March 1990); and (d) the preparation of legislative, regulatory and administrative measures to improve the recovery of banking loans (by March 1990). - 19 - 57. Apart from the immediate measures outlined in the preceding paragraph, the Government's program envisages more in-depth reforms of the financial and banking sector to address the following issues at the central bank levels Mi) the progressive phasing out of interest subsidies, starting with the merger of the preferential rediscount rate with the normal rediscount rate; (ii) with the return to monetary equilibria, the gradual abolition of bank-by-bank credit ceilings (for which Government will initiate consultations with BEAC, IM4 and IBID by September 1989); (iii) adjustments in the BEAC rediscount system to encourage medium- and long-term credits in relation to short-term credits; Uiv) a study (to be initiated upon completion of banking restructuring) on the establishment of a money market, which would gradually complement BEAC's rediscount system, and whose interest rates would become reference rates for the banking system; and iv) a study on the introduction of new capital market instruments such as corporate securities, commercial paper, obligations, treasury bills, mutual funds, SICAVs, etc. 58. The financial cost of restructuring the Cameroonian banking system, that is, the amount needed to settle the losses of the banks to be liquidated as well as of those to be rehabilitated, can be determined with some degree of accuracy only upon completion and review of specific proposals for their liquidation or rehabilitation. In the meantime, on the basis of available information including the financial audits recently carried out for the major commercial banks, the overall deficit of the banking system can be roughly estimated in the range of CFAF 300-375 billion. It is impossible at this stage to estimate bow the losses of jointly-owned banks will be shared between the Government and its foreign partners, particularly the five European banks holding shares in the five major Cameroonian commercial banks ranging from 35 to 49 percent, pending the outcome of ongoing bilateral negotiations between the Government and the foreign partners, as part of the preparation of rehabilitation proposals for jointly-owned commercial banks. However, the Government will most likely have to cover the bulk of these losses, as well as the losses of the state-owned banks for which the Government bears full responsibility. Actual losses will certainly differ from current estimates, depending on the success of future efforts to recover those banking credits presently considered as non-performing. Furthermore, with the expected improvements in the banking environment, it should be possible for some presently distressed banks to continue to carry on their books a moderate amount of non-performing assets and be able to gradually amortize - 20 _ these over the next several years, thr3ugh their future earnings. The aggregate deficit of CFAF 300-375 billion could conceivably be covered by the following combination of cash and non-cash modalitiess (a) consolidation by BEAC of banking debts for up to CFAF 200 billion including arrears on crop credits estimated at some CFAF 110 billion, over at least 10 years with 3 years of grace (preferably 15 years with 5 years of grace); (b) consolidation of government deposits of up to CFAF 100 billion, or about two-fifths of the CFAF 250 billion of such deposits; (c) cash contribution of up to CFAP 75 billion by the Government and other shareholders toward the financial restructuring of banks; and (d) the issuance of Government bonds bearing medium-term maturities (7-10 years) and market-based interest rates, to cover any residual balance. 59. The implementation of the agreed reform program is expected to put the Cameroonian financial and banking sector back on a sound footing, thus providing a necessary complement to the structural adjustment program. The rehabilitation of distressed banks will restore their solvency, liquidity, profitability and operational capacity, enabling them to resume and expand financing of the productive sectors. The liquidation of some banks beyond repair will stop the drain on financial resources and remove a previous source of credit misallocation. The comprehensive set of policy, regulatory and institutional reforms (e.g., interest rates, elimination of taxation on financial transactions, agricultural crop credit, banking inspection and control) -till facilitate the emergence of a new banking system with more professional standards of operation and an enhanced capacity to mobilize and allocate resiaurces. Agriculture and Forestry 60. The Government's development objectives for agriculture emphasize food security, promotion and diversification of exports and increasing rural incomes. To attain these objectives, the Government intends to support traditional farmers and livestock owners, promote the creation of modern medium-sized farms, and increase the use and transformation of domestic agricultural products. The reform program emphasizes both price and non-price incentives. 61. Pricing and Marketing Policies. The marketing of most foodcrops is handled by the private sector in a de facto environment. Given the competitive nature of these markets, price controls are not enforced. The Government intends to reduce its involvement in the production and marketing of the few basic commodities in which public enterprises are currently involved. For example, rice marketing has recently been liberalized, and responsibility for rice production and marketing will be - 21 - transferred gradually to the private sector in the North. Sugar production and marketing will also be privatized, and the palm oil industry is being restructured for eventual privatization. Domestic production of rice, palm oil and meat products suffer from competitive imports. In response to this situation, the Government has imposed additional tariffs on import substitutes such as rice, meat products, palm oil and sugar to offset the effect of export subsidies and dumping from surplus countries. 62. For the major export crops, the Government has already taken measures to reduce intermediary costs, in order to cut down the deficit from exporting these crops in 1988189. However, these measures are not sufficient to eliminate the deficit or reduce it to an affordable level. For the 1989190 season, the Government intends to implement a pricing policy that would minimize the risk of requiring a state subsidy through further reductions of the intermediary costs of both private agents and the marketing board, suspension of export taxes, and a lowering of producer prices. The Government will institute a floor producer price for coffee, cocoa and cotton, agree on the specific amount and the content of intermediary margins, and distribute the residual excess revenue, if any, afforded by the existing world price among producers, the stabilization fund and the Government in the proportion of 40-40-20 percent, respectively. The Government will also increase the price differential between superior and inferior quality arabica coffee to increase the competitiveness of this product in the world market. The new pricing system will be in effect for the 1989/90 crop season. 63. The Government also intends to liberalize the marketing system over time. As a first step, the Government intends to introduce more competition in the Northwest region where inefficient cooperatives and the marketing board currently have a monopoly over the marketing of coffee by allowing private traders to enter the market. In the 1989190 crop season, private traders will be allowed to compete with cooperatives in the internal marketing of coffee. In the 1990191 crop season, following a review of the marketing board's role in the region, the Government intends to allow cooperatives and private traders to compete with the marketing board in the export of coffee. Further liberalization will be extended to other regions and products depending on the results of the first step. The Government has also completed a financial and management audit of the National Produce Marketing Board (Office National de Commercialisation des Produits de Base, ONCPB), and the Cotton Development Agency (Societe de Ddveloppement du Coton). A performance contract between the Government and ONCPB will be signed not later than September 1. 1989 and between the Government and SODECOTON not later than December 1, 1989. Parallel with the adjustment program, the Government is working to improve export performance through rehabilitating cocoa production and related support services and is preparing an export promotion and diversification project that will include institutional reforms and support for exporting agricultural products. 64. Institutional Reform. The Government recognizes that its excessive interference in the administration of cooperatives and in the - 22 - delivery of Inputs has proven very inefficient and costly. It intends to disengage from cooperatives to enhance their autonomy and reorganize the public support agencies. The governing legislation is being revised to deregulate the cooperative movement. The role of public support agencies will be redefined to provide more effective technical support to cooperatives and to vithdraw from interference in the cooperatives' administration. A reform program to privatize the distribution of Inputs and to phase out input subsidies is tinder implementation. Fertilizer distribution has recently been privacized and subsidies will be phased out over the next three years as part of a program agreed with USAID. The extension services will be streamlined to become more cost effective, including harmonization of services between parastatals and government ministries and the adoption of the training and visit extension system on a nation-wide basis. Research institutes will be restructured and reinforced to provide better linkage with extension services. In addition, a program to privatize veterinary services has recently started. 65. Forestry and Environment. Only about 40 percent of Cameroon's forest resources is being exploited. However, forest exploitation is not efficiently controlled due to the lack of a land use plan, inappropriate policy in the granting of concessions and licenses for exploitation and exports, and poorly trained staff. The Government is conscious of forestry and environmental problems and has completed a Tropical Forest Action Plan. The Government intends to implement the recommendations of this action plan. It will reinforce the Directorate of Forestry in forest management and streamline services provided by parastatals in forest inventory and forest plantation. The reform will involve the revision of the forestry code to authorize long-term concession arrangements in order to provide incentives for the concessionaries to maintain and control access to their areas of operation, rather than to exploit the areas on a one-time basis and move on to the next tract of forest, a prime cause of environmental degradation. The taxation system and the existing quota on log exports will be revised to provide incentives for exploitation of lesser known species and for better wood transformation. Norms and standards on wood products will be introduced to enhance the marketability of wood exports. The forestry code will also be modified to provide a legal basis for promoting agro-forestry, and for integrating local populations in the protection of national parks and reserves. Industrial Policy and Trade Reform 66. Industrial and trade policy reform is crucial to the success of the Government's adjustment program. As mentioned in the section on Public Enterprise Reform, the Interministerial Commission charged with this process has taken a number of basic decisions to liberalize and decontrol the economy and improve the incentives for production and export. Dismantling of the heavy regula.ory framework should permit a significant increase in the competitiveness and efficiency of the internal distribution system, which is necessary for Cameroon to improve its international competitiveness and establish new sources of export growth. - 23 - 67. Concerning external trade, the adjustment program will progressively eliminate quantitative restrictions (QRs) on the Import of all controlled goods, currently 180 lines in the tariff schedule. To allow adjustment of local production, QRs will be removed in three phases by 1991 for all goode except a very short list of strategic items. A first group comprising mostly consumer goods with very limited local value-added (e.g. water, paint, chemicals, non-plastic shoes, pipes, hand-tools) will be liberalised in June 1989. A second group including key intermediate and locally produced consumer goods (e.g. metals, plastics, paper, appliances, flour, batteries) will be liberalised in February 1990. The third group covering locally produced goods with high market share (e.g. soap, milk, salt, cement, garments) will be liberalised in January 1991. Given high levels of local value-added and employment, decisions on the phasing out of the remaining QRs strategic goods (i.e. vegetable oil, rice, sugar, cotton textiles) will be made in the first quarter of 1990 after analysis of the restructuring potential for the industries concerned. Tariff protection will be adjusted as necessary and will decrease over time to allow a progressive increase in external competition and an appropriate period of adjustment for domestic industries. The elimination of QRs will be complemented by the elimination of import licenses for all products not still subject to QRs; this measure will be taken in June 1989 with the elimination of the first group of QRs, prior to effectiveness of the loan. 68. The tariff retime will be further rationalized by the establisbment of a minimum import duty and the reduction of maximum cumulative duties in July 1990. This will provide a minimum amount of protection to domestic production of intermediate goods that are currently imported under low or duty free rates and will contribute to the reduction of the wide dispersion in existing effective rates of protection. Furthermore, the Government intends to support actively the process of reform of the common external tariff currently being studied by UDEAC. Finally, on the expor. side, all export taxes will be eliminated in July 1990 with the exception of export taxes on logs which will be reviewed in conjunction with the revision of the fiscal regime applicable to forest and wood products. 69. Concerning domestic commerce, the Government has embarked on a process of eliminating price controls for all goods and services with the exception of a short list of products of basic necessity. A first step was taken in this direction in January 1989 when the number of products and groups of products subject to price control was redefined and reduced from 87 to 35. The remaining categories are, nevertheless, extensive and include all inputs to products that remain subject to price control. The decontrol of prices will be fully effective in June 1989 with the elimination of the system of administered margins for all goods and services not remaining subject to price controls andlor QRs. This system currently determines the mark up for all products and services in the economy at both the wholesale and retail levels. The Government has now decided to eliminate the system of price controls except for a very short list of basic goods and services (mainly pharmaceuticals, flour, milk, - 24 - bread, rice salt, meat, petroleum products, passenger transportation, health services, water and electricity) and for a few other goods still under QRs. Price controls on the latter will be subsequently removed in parallel with the phase-out of QRs. 70. In addition to price decontrol, the Government intends to revise the re8ulatory environment governing commerce, business incorporation and partnerships, labor regulations and the Investment Code. The legislation governing commercial activity (loi 80125) will be revised by December 1989 to permit free competition at all stages of the distribution process, while protecting the consumer from unfair business practices and excessive concentration of commercial power. Second, the legislation governing business incorporation (OCode des Societesn) will be modernized in 1990 to facilitate incorporation and dissolution of companies. Third, the Labor Code will be revised by December 1990 to reduce labor market regidities. Last, the Investment Code will be revised by December 1989 to grant Incentives based on measures of performance such as value added, employment creation, training andlor export activity, rather than providing duty exemptions on imports. Eligibility under the new code will be open to all new investments, including extensions to existing production units. As a complimentary measure to promote exports, a study will be completed by December 1989 to identify appropriate export incentives, including improvements to existing institutional facilities. Reorientation of Sector Strategies 71. As a result of the wide participation of all major sector ministries in the development of the Government's structural adjustment program, the program includes a wide variety of measures to improve the performance of the economy in areas other than those described above. The matrix of policy actions presents the full extent of the Government's program, while the more important measures are summarized below: (i) increases in transportation user taxes for heavy vehicles using the road network, the ports and airports; (ii) definition of an air transport sector strategy, including a plan for rehabilitation, organization and operation of airports; (iii) formulation of operational strategies in the health and education sectors with a view towards preventing any decline in existing levels of coverage, particularly for primary services, improving quality and pertinence and recovering costs where possible; (iv) elaboration of a master plan for urban water supply and sewerage, and of a strategy for the participation of rural populations in the installation and maintenance of rural water supply systems; (v) revision of the petroleum legislation to encourage exploration by the international oil industry; - 25 - (vi) revision of the mining legislation to facilitate exploration permits and to grant mining concessions based on competitive bidding; and (vii) adoption of environmental norms and standards including regulation governing industrial wastes. Social Dimensions of Adiustment 72. The present economic crisis has led to a sharp reduction in per capita income and private consumption during the past two years, by -24 percent and -15 percent, respectively, compared with the 1985186 levels. In addition, in its zeal to redress the budget deficit, the Government sharply reduced expenditures on services that are crucial for the provision of basic needs of the poor, such as primary health and education. 73. The urban population has been most affected by the present crisis and will bear the brunt of the adjustment and restructuring measures included in the present program. The public enterprise reform will entail a curtailment of staff while the restructuring of government expenditures will reduce staff benefits and eventually the number of civil servants. Also, the envisaged tax increases will be borne mostly by the urban middle class. 74. On the other hand, the adjustment program contains a number of structural measures that will stimulate the urban private sector and facilitate the absorption of additional manpower. Among these are the gradual disengagement of the public sector from productive activities, the simplification of administrative regulations required to set up a private business, an improved incentive framework for SMEs, and the easing of liquidity problems in the banking sector. The liberalization of trade and commerce should also reduce the cost of many basic consumer goods that are produced locally, but are highly protected and expensive. Improved training policies would contribute to the strengthening of productive activities. 75. Until now, incomes in the rural sector have been protected from the harshness of the economic crisis by a system of price supports for major export commodities. However, this system is no longer sustainable in view of the negative effect on public sector resources, and official prices will have to be adjusted downwards next year. On the other hand, sectoral programs are being put in place to enhance the efficiency of cotton, cocoa, and coffee production and to cut processing and marketing costs. The foodcrop and livestock sectors will also benefit from better support services which will increase rural incomes. 76. The Government is extremely conscious of the effect that the decline in economic activity has already had on the poorer levels of the population and, for this reason, is both hesitant about proceeding too quickly with the envisaged liberalization of the economy and eager to put - 26 - in place mechanisms to assist the vulnerable groups mentioned above through the adjustment period. It is, therefore, in the process of drawing up an action program, to be supported by a proposed Bank financed SDA project (poverty alleviation and socio-economic participation) which is an advanced stage of preparation, to address these concerns. 77. The Government's SDA program is being elaborated by five working groups that deal respectively with population/health/social security, education/training, employment, the role of women in development, and the institutional framework including statistical measurement of social indicators. These working groups are developping action programs that involve all concerned parties, particularly non-government organizations, in a concerted effort to refocus and improve the social services currently available to the population. A particular emphasis will be placed on services aimed at primary health care, retraining of individuals who have lost their jobs, identification of labor intensive methods for carrying out public works and establishment of permanent household surveys to measure social conditions. Their work should generate important inputs and momentum in.o the development of human resource strategies. PART III - ECONOMIC AND FINANCIAL IMPACT OF ADJUSTMENT Medium-Term Prospects for Growth 78. Implementation of the Government's reform program is expected to arrest the three year decline in economic activity and restore the conditions necessary for a resumption of growth. The restructuring of the banking system and the settlement of government arrears to domestic suppliers, together with improved financial policies, should restore an acceptable level of liquidity to the economy and permit everyday transactions to occur on a normal basis. The restructuring of non-banking public enterprises will improve their efficiency, reduce the existing drain on public resources and increase their contribution to value added. The Government's program of administrative reform will improve control over personnel expenditures and enable the Government to stabilize its overall level of expenditure without further reductions that would jeopardize the economy's ability to respond to improved incentives and an improved financial environment. The program will also permit a restoration of key non-wage recurrent expenditures, as well as a minimum level of capital investment consistent with the growth potential of the economy. 79. In addition, the Government's program to liberalize trade and reduce administrative controls should result in a lowering of the cost structure throughout the economy. This will improve the incentive framework for the production of tradeable goods and the international competitiveness of the economy, thus enabling the economy to re-establish a growth path based on the exploitation and transformation of Cameroon's rich natural resource base. 80. With improved incentives and a resurgence of private investment, long-term growth of three percent per annum should be achievable, led by - 27 - the agriculture and manufacturing sectors. Non-oil GDP could grow by four percent per annum, while petroleum production is expected to decline by eight percent per annum.21 Restoration of a positive overall rate of growth would be a significant accomplishment following the ten year cycle of boom and bust, induced by fluctuations in world commodity prices, that allowed many structural problems to imbed themselves in the economy. 81. The resumption of sustained growth will require a restoration of the domestic investment rate in both the private and public sector. The current level of 10 percent of GDP will have to rise to 14-15 percent of GDP by 1995 (compared with 19 percent of GDP over the past decade), Implying a growth rate of 7 percent per annum over the next seven years. Since the Government will no longer have the resources to act as an engine of growth, private sector investment will have to grow faster than Government investment and regain to its pre-oil dominance of 80 percent of total investment in the economy. Import volumes will also have to Increase for growth to occur, but given the planned changes in the incentive structure (i.e., a more uniform application of import duties and a lowering of domestic costs of production), it should be possible to reduce the relative import content of industry, investment and consumption over the next decade, and contain overall import growth to about one percent per annum. 82. The macroeconomic projections shown in Annex I and summarized below are conservative in that they do not include any new oil production and oil exports. Traditional agricultural exports of coffee and cocoa are expected to grow at 3 percent per annum or slightly faster than long-term world demand as a result of improved pyxduction efficiency, switching into production of arabica coffee, and aggressive seeking of market share in the specialized cocoa Cameroon produces. Other agricultural exports, including timber, and manufactured goods are expected to grow by 4-5 percent per annim starting in 1990, as a result of government policies to lower domestic costs through deregulation and to provide better export Incentives. The growth in non-oil exports will, nevertheless, not be sufficient to compensate for the decline in oil exports over the next ten years, and the overall volume of exports of goods and non-factor services is projected to decline by 2.5 percent per annum through 1995. A positive overall growth in export volumes could occur towards the end of the next decade, however, once the negative effects of the decline in oil exports have worked themselves out of the picture. 2I Without new oil discoveries, the decline in petroleum production over the next ten years will be equivalent to one percent of GDP per annum and result in a contraction of the sector's contribution to GDP from 17 percent today to 5 percent in the year 2000. Oil exports are expected to decline by 10 percent per annum, which would represent a cumulative loss in foreign exchange earnings of CPAP 325 billion in nominal terms between now and 1995, despite a projected increase in world petroleum prices. - 28 - Key Economic Indicators (Base Case) Growth Rates (percent) 1987 1988 1989 1990 90-95 95-2000 GDP -2.8 -8.6 -6.0 2.4 2.3 3.4 Domestic Income -7.8 -10.0 -8.0 3.9 3.5 4.1 Exports -7.3 -3.8 -1.0 -1.7 -2.6 -0.4 Imports -9.8 -17.8 -18.0 2.3 0.3 2.0 consumption 0.9 -10.8 -6.7 2.7 2.9 3.9 investment -18.8 -19.1 -29.7 12.4 6.5 4.5 Domestic Savings -42.9 -4.7 -16.4 '3.2 7.3 4.9 Other Indicators (end of period) GDP per capita (1985 CFAP 000's) 393 348 318 316 305 313 Terms of Trade (1985-100) 53 50 47 49 58 68 Current Account (2 of GDP) -9.3 -6.8 -4.5 -4.7 -5.0 -4.3 Budget Surplus (2 of GDP) -12.6 -5.7 -1.5 -2.2 -0.4 0.1 83. Despite good growth in the non-oil economy, GDP per capita is expected to remain essentially constant over the next decade, as a result of population growth (2.9 percent per annum) and the decline of oil production. On the other hand, Cameroon's terms of trade are expected to imrove gradually over the next decade, from its current level of one-half the 1985 index to about two-thirds the 1985 index by the year 2000. This would cause domestic income to grow more rapidly than GDP, by 0.7 percent per annum, and permit a one percent per annum increase in per capita consumption during the second half of the 19909. 84. The Government's budgetary policy will contribute to the re- establishment of growth by maintaining a tight fiscal stance that avoids draining resources from the banking system and private investment. This implies limiting the budget deficit to a level slightly below expected disbursements of foreign financed investment projects, or about three percent of GDP during the next three years. Subsequently, the expected increase in non-oil tax revenue should be sufficient to attain basic budgetary equilibrium in the early 1990s. However, in addition to the structural deficit during the years of adjustment, the Government will have to mobilize considerable resources for the restructuring of public enterprises and banks over the next four to five years, which will increase the reliance on external borrowing. Budgetary policy will thus have tc. provide for a sharp increase in scheduled external debt service which las already risen from 10 percent of government revenues in 1985-87 to 27 - 29 - percent this year and is expected to average 30 percent of Goverrment revenues over the next five years. The Government's policy of administrative reform (to control and reduce wage expenditures) and revenue restructuring (to restore non-oil tax revenues to 14-15 percent of non-oil GDP) are thus key elements of the adjustment strategy. External Capital Requirements 85. The combination of declining export volumes, import requirements needed for growth and sharply higher interest payments indicate that the current account will remain in deficit throughout the next decade. It to expected to average US$625 million per annum over the next five years, equivalent tu 5 percent of GDP. Given the desirability of bringing net official reserves up to a positive level and meeting sizeable amortization payments, much of which is private non-guaranteed debt, gross capital requirements will average USS 1150 million per annum. About one- fifth of this amount can be expected from private investors and creditors in view of large undisbursed balances from these sources. The balance, about US$ 950 million per annum, will need to come from official creditors. This will require a combination of continued project loans, quick disbursing assistance, on the order of USS 250-300 million per annum over the four year period 1989190 to 1992193 and probably some debt relief. Some additional non-project assistance may be required for two to three years after this period, which indicates the long-term nature of Cameroon's financial difficulties. Rescheduling of bilateral debt with the Paris Club is expected to occur for the first time in May 1989; it would cover existing arrears as well as current maturities through the end of the existing IMP Stand-by program, i.e., March 1990. Additional reschedulings may be required during the following two years to finance the remaining gap through 1991/92 if sufficient fresh money cannot be mobilized. - 30 - Gross Capital Requirements 1988189 - 1992193 1988189 1989/90 1990/91 1991192 1992193 (in million of US$) Current Account Deficit 452 559 655 686 625 Amortization Payments 472 462 439 412 395 Incr. in Reserves (incl.IMF) -120 75 98 136 67 Reduction in Arrears 623 - - _ - Total Requirements 1427 1096 1192 1234 1087 Resources Disbursements of medium and long-term loans 456 768 937 954 889 Multilateral 109 361 397 396 387 olw IBRD (73) (193) (211) (202) (195) Bilateral 117 214 349 340 303 Private 229 191 191 218 199 Debt Relief 901 308 314 255 - Other Capital (incl. GAP) 70 20 -59 23 198 Total Resources 1427 1096 1192 1234 1087 86. The likelihood of realizing the above capital flows is supported by the large amount of committed but undisbursed project loans (US$ 1.7 billion as of June 1988) which should be disbursed within the above period, even with a rephasing of the Government's investment program. Nevertheless, an increase in the amount of official commitments to Cameroon above the average rate of the past four years (i.e., from US$ 350 million per annum to US$ 450 million p.a.) will also be required. It is expected that multilateral institutions would finance a larger share (60 percent) of the non-project assistance, while bilateral donors will increase the concessionality of their assistance from the current average grant element of 18 percent to an average grant element of 35 percent (e.g., terms of 25 years maturity, 5 years grace and 5 percent interest). In total, multilateral institutions would finance about 30 percent of Cameroon's gross capital requirements and bilateral donor. about 50 percent, one half in fresh money and one-half in debt relief. 87. In sum, Cameroon's macroeconomic prospects require a medium- term increase In indebtedness, in order to finance sufficient imports to stabilize production, increase investment and provide sufficient time for growth in non-oil exports to catch up with the decline in oil export earnings. The non-project borrowing contained in the above scenario would _ 31 - provide sufficient resources for the Government to restore essential services, complete unfinished projects more quickly than otherwise, and finance a large share of the restructuring costs of public enterprises and banks. In later years, when the cost of public enterprise restructuring would be over and budget equilibrium restored, the Government should aim to continue borrowing on a moderate net basis from external sources, as a means of financing the country's import requirements, and use these resources to reduce its indebtedness to the central bank and to transfer resources to the private sector by accumulating balances in the domestic banking system, as was the case prior to the current crisis. Creditworthiness and Risk 88. Cameroon's external debt ratios are rising quickly as a result of falling export values and the commitment of large loans on commercial terms during the past two years. Debt s,ervice on public and publicly guaranteed (PPG) debt has risen from 11 percent of exports three years ago to a projected 23 percent this year (1988189) before rescheduling; it will be 9 percent after rescheduling. In the absence of debt rescheduling, the capital inflows discussed above would increase the PPG debt service ratio moderately from 23 percent today to 29 percent in 1995 and 30 percent by the year 2000. The need to reschedule debt service over the next three years will exacerbate this pattern, however, by pushing PPG debt service up to 37 percent of exports in 1995, and 34 percent by the end of the century. Total debt service, including non-guaranteed debt, repurchases from the IDF and unidentified GAP financing would similarly remain lower than otherwise during the years of rescheduling, then average about 45 percent of exports between 1995 and the year 2000. PPG debt outstanding and disbursed would rise from 30 percent of GDP this year to 49 percent in the mid-1990's, and then decline sligthly by the year 2000. External Debt Service Ratios after Rescheduling (percent) 1986 1988 1989 1990 1991 1992 1995 2000 Debt Service I Exports Public & Publicly Guar. 11 18 9 14 17 22 37 34 Total, incl. Pvt, IHY & GAP 29 33 22 23 25 30 43 47 Debt Out. & Dsbd. I GDP PPG 19 19 30 37 43 48 49 45 Total 24 23 35 41 47 52 56 58 89. Under the adjustment scenario outlined above, gross capital flows from the IBID would amount to US$ 935 million over 5 years. On a net basis, PPG debt would rise by US$ 3045 million during 1989190 - 1993194 - 32 - after debt relief of US$ 1800 million. The Bank's net credit position would rise by USS 680 million during this period or by 22 percent of the net capital flows. Multilateral debt outstanding and disbursed as a share of PPG DOD vould rise from 27 percent in 1989 to 36 percent in 1994, as no net change in debt outstanding to commercial banks is assumed. The Bsnk/IDA share of PPG DOD would remain constant at 20 percent over the period; within this total, IBRD exposure would rise from 13 percent to 17 percent in 1994, while IDA's share of debt outstanding would decline from 7 percent to 3 percent. Debt service to the IBRD would remain at its current share of PPG debt service, about 19 percent, through 1994 and rise to 21 percent by year 2000. Debt service to the IBRD as a share of exports would rise from 5 percent to 7 percent by the end of the century. 90. While the Bank's exposure would rise over the period, PPG debt service would decline after 1995 as the effects of rescheduling work themselves through the system. For countries in the CFA zone, the key indicator is external debt service as a share of fiscal revenues. This is currently 27 percent and is expected to average 30 percent of revenues over much of the next decade. While this level is high, the public finance scenario envisages a sustained reduction in domestic debt throughout the next decade, as well as real increases in capital expenditures and recurrent services. There would thus be a margin to reduce other budget items to deal with an unforeseen revenue shortfall before endangering the service of external debt. 91. The risks in this scerario stem from a slower Implementation of the Government's reform program thain expected, or from adjustment measures that are not strong enough to elicit the envisaged increase in private investment and non-oil exports. Slippage irn the reform program would be recognized by the international community and result in lower levels of quick disbursing assistance needed to finance restructuring of the banking sector and public enterprise reform. With less external SAL- type assistance at its disposal, the Government would most likely heed its instinct to balance the budget through further cuts in expenditure, as it demonstrated in 1986187 prior to discussing a stabilization program with the IMF, which would continue the momentum of the current recession. These factors would lower overall growth by one to two percent per annum over the next decade, compared with the base case, and lead to a further decline of about 15 percent in per capita consumption and income levels by the year 2000. 92. Export revenues would also be lower, less diversified and more vulnerable to external shock. But the current account deficit would not necessarily increase, in view of continued budget austerity and the monetary discipline of the Franc Zone that strictly controls credit and borrowing by the Government from the central bank. Reserves would become increasingly negative, however, implying further drawings on the Operations Account, and debt rescheduling would be required for more years than in the base case scenario. Less debt would be outstanding, but it would be about five percentage points higher as a percent of GDP than in the base case, as would PPG debt service as a percent of exports. Debt service to the IBRD - 33 - would be lower in absolute terms, due to lover non-project disbursements, but remain about the same as a percentage of exports and total PPG debt service. Risk to the Bank would nevertheless be higher to the extent that the country grows poorer. 93. There is an upside potential to be considered in the risk analysis, however. This involves the discovery of new oil fields following an improvement in exploration incentives. A modest assumption of finding new oil reserves equivalent to 30 percent of the original fields currently under production would accelerate GDP growth by one percent per annum and export growth by five percent per annum in the second half of the 19909. This would result in a level of GDP per capita 9 percent higher than in the base case by the year 2000. Oil production would represent 13 percent of total GDP, instead of falling to 5 percent as in the base case. Initially, the current account deficit would be slightly higher as a result of investment in oil production, but this would be fully financed by private sources, and in the second half of the decade, the average current account deficit would be only two percent of GDP instead of four percent. Lower borrowing requirements and higher government reverues, which would increase sharply starting in 1997, could reduce PPG debt outstanding by six percentage points by the year 2000. The PPG debt service ratio could then be much lower, 24 percent of exports versus 34 percent in the base case. Finally, the increase in government revenues, if unspent, could yield budget surpluses of two-three percent of GDP by the year 2000. The Government would then be in a position to reduce its external debt in absolute terms during the early part of the next century. PART IV - THE PROPOSED LOAN A. Loan History 94. The proposed loan was first discussed with the Government by high-level Bank missions that visited Cameroon in August .987 and March 1988. The Government subsequently prepared an initial draft of its Declaration of Development Str.tegy that was discussed by a Bank appraisal mission in July 1988. Two subsequent missions visited Cameroon in November 1988 and February/March 1989. Negotiations were held in Washington, D.C. in May 1989; the Cameroonian delegation was headed by H.E. Mme Elisabeth Tankeu, Minister of Plan and Regional Development. Supplementary loan data are provided in Annex III. B. Loan Amount and Co-financing 95. The proposed loan would support an initial 18-24 month phase of the Government's adjustment program. It would help finance the imports needed for economic recovery and growth and would be equivalent to 7 percent of Cameroon's external capital requirements over the period July 1989 to June 1991. The domestic currency generated by the loan would support the Government's overall budget and, in particular, support an - 34 - increase In key recurrent expenditures and the financial restructuring of the public enterprise and banking sectors. The proposed loan of US$ 150 million equivalent vould be disbursed in three tranches of US$ 50 million each, subsequent to satisfactory progress with implementation of the program and of the specific actions described below. 96. The African Development Bank has participated in the three technical missions to appraise and discuss this loan, and it is expected that the AfDB would co-finance the proposed operation with a loan " approximately VA 100 million equivalent to US$ 125 million. This 1o4n would be on standard AfDB terms and would be disbursed in accordance with AfDB procurement and disbursement procedures. 97. The Export-Import Bank of Japan has expressed strong Interest in co-financing this operation with She Bank serving as administrator in an amount to be determined folloming an upcoming evaluation mission. In addition, other multilateral and bilateral donors have expressed interest in providing non-project assistance to support the Government's adjustment program. At this time, resources totalling US$ 150 million have been identified. This includes US$ 100 million of non-project assistance already committed by France and expected to be disbursed during the same period as this operation. Other potential sources of non-project assistance include the European Community (STABEX funds), Csnada and Germany. C. IMonitorable Actions Items for Negotiations 98. During negotiations it was agreed that prior to loan effectiveness the Government would undertake the followings (a) Import licence requirements for goods which are not subject to quantitative import restrictions will be eliminated; (b) Quantitative import restrictions for a first group of goods will be removed; (c) Price controls ('homologation pr4alable") will be eliminated for most except for a limited number of basic goods and services and a few goods remaining subject to quantitative import restrictions; and (d) The system for setting commercial margins for goods and services which are no longer subject to quantitative import restrictions or price controls will be removed. 99. Disbursement of the second tranche of US$50 million equivalent, to be disbursed not earlier than March 31, 1990, is dependent on satisfactory progress in carrying out the Structural Adjustment Program - 35 - and in particular on the following measures being taken in a manner satisfactory to the Banks (a) The Borrower has adopted its 'Loi des Finances' 1989/1990 reflecting the public investment program, the levels of non-wage recurrent expenditures for the health, education and agriculture sectors and for road maintenance, and the levels of resources allocated to the restructuring of the banking and public enterprise sectors, as determined iu agreement with the Bank. (b) Progress has been achieved in the establishment and functioning of a system to program and monitor the rolling four-year public investment program. (c) Progress has been achieved on measures to reform the public enterprise sector, includings Ci) the signature of performance contracts between the Government and key public enterprises, namely SODECAO, HEVECAM, ONCPB, SONEL, SNEC, SOCAPALM and Office C*realier; and (ii) the completion of aegotiations of performance contracts between the Borrower and the following public enterprisess CANIKR, REGIFERCAM, and SODECOTON. (d) Action plans have been adopted to liquidate CAMBANK, BCD and FONADER and to restructure key commercial banks, including SCB. Ce) For the primary export crops, li) floor producer prices for coffee, cotton and cocoa and price schedules (Cbar&mes') for coffee and cocoa, for the crop season 1989-1990, have been published at a level consistent with minimizing the risk of requiring State support; and (ii) a system for sharing residual marketing surpluses (export receipts, less producer prices and marketing margins) has been established. (f) Progress has been achieved in the implementation of measures to liberalize trade and prices and to improve the incentive framework for production and export, includings (i) the removal of quantitative import restrictions (together with import license requirements) for a second group of goodst (ii) the elimination of price controls ('homolotation pr6alable') and of the system for setting commercial margins for a second group of goods; (iii) the revision of Law No. 80125 portant orientation de l'activit4 comuerciale permitting free access to trade at all stages of distribution and eliminating monopoly privileges; (iv) the promulgation of a revised Investment Code; and (v) the completion of a study on export incentives. (g) The Borrower has taken all steps within its power, both in internally and externally, to provide adequate funding for the esecution of the Program. - 36 - 100. Disbursement of the third tranche of US$50 million equivalent, not earlier than December 31, 1990, would be dependent on continued satisfactory progress in carrying out the Structural Adjustment Program and in particular on the following measures being taken in a manner satisfactory to the Banks (a) The Borrower has adopted its "Loi de Finances' 1990/1991 reflecting the public investment program, the levels of non-wage recurrent expenditures for the health, education and agriculture sectors and for road maintenance, and the levels of resources allocated to the restructuring of the banking and public enterprise sectors, as determined in agreement with the Bank. (b) For the civil service: (i) the system of personnel benefits and allowances (family, housing and travel allowances) has been revised; (ii) decisions have been taken on organizational and personnel structure plans for the ministries responsible for finance, planning, civil service and industry and commerce; and (iii) studies on organizational and personnel structure plans for three other ministries have started. (c) Further progress has been achieved on measures to reform the public enterprise sector, including the signature of performance contracts between the Government and selected public enterprises, i.e., CAMAIR, MAETUR, MAGZI, REGIFERCAM, SODECOTON, CDC, SOTUC, CRTZ and MIDENO, and action plans for other public enterprises determined in agreement with the Bank have been prepared. (d) Progress has been achieved in the restructuring of the banking sector, includings ti) the implementation of the action plans to liquidate CAMBANK, BCD and FONADER and to restructure SCB; (ii) the adoption of an action plan to restructure SNI; and (iii) the adoption of an action plan to restructure or liquidate BPPBC. te) The role of the National Produce Marketing Board has been redefined in order to permit the private sector to assume progressively responsibilities for internal and external marketing of export crops. (f) The forestry tax regime has been modified and a revised Forestry Code has been promulgated to promote rational exploitation and long-term conservation of forestry resources. (g) Further progress has been achieved in the implementation of measures to liberalize trade and prices and improve the incentive framework for production and export, including: (i) the removal of remaining quantitative import restrictions (together with import license requirements), except for a limited number of strategic goods to be determined in agreement with the Bank, following the results of a complementary study on said goods, for a third group of goods; (ii) the eliminations of price controls - 37 _ (ohomoloogation pr6alableg) and of the system for setting commercial margins for a third group of goods; and (iii) the promulgation of a revised labor Code reducing regulatory constraints resulting in labor maket rigidity. (h) The Borrower has taken all steps within its powers, both internally and externally, to provide adequate funding for the execution of the Program. D. Program Management and Monitoring 101. The Interministerial Committee established by the President to prepare and execute the structural adjustment program in collaboration with the international financial institutions, notably the IMF, the Bank and the African Development Bank willt - supervise the formulation and execution of the Government's economic policy and sectoral objectives; coordinate the respective interventions of the various government departments; and 3 ensure the follow up of the relevant action plans drawn up by the Government. The Interministerial Committee is chaired by the Secretary General of the Presidency and includes the Ministers of Finance, Plan, Industrial Development and Commerce, Agriculture, Civil Service and the National Director of BrAC. It will meet whenever necessary but no less than once every three months. 102. To assist the Interministerial Committee, the President also established a technical committee responsible for finishing preparation of the Declaration of Development Strategy and for monitoring implementation of the adjustment program. The committee is headed by a full time senior civil servant and includes high level, competent officials from key ministries, most of whom already were part of the working committee referred to above. The committee has proven extremely cooperative and effective during the final appraisal and is considered an appropriate instrument for the monitoring of the adjustment program. To further enhance its role, the proposed economic management project will provide logistical support. 103. Following the disbursement of each tranche of the proposed loan, the Committee will submit to tIte Bank a report evaluating progress made in implementation. This report will serve as a basis for the release of the next tranche. The Committee will submit to the Bank a final report on the program's implementation upon full disbursement of the loan. - 38 - B. Procurement, Disbursement and Auditing 104. Both private and public sector imports would be eligible for financing and subject to simplified ICB procedures for amounts exceeding US$ 5.0 million equivalent. For lesser amounts, (i) imports by private entities would follow normal commercial practices; wherever possible bids would be obtained from at least two countries eligible under Bank guidelines; ,ii) imports by the public sector would be in accordance with normal Government procedures which will be improved as part of the structural adjustment program and bids would be obtained from at least three suppliers. Imports would be verified by inspection agencies as part of the Government's efforts to improve customs collections. 105. The loan will reimburse the foreign exchange cost of eligible imports (excluding luxury goods and defense items). Disbursement would be facilitated by the establishment of a US$ 20 million equivalent Special Account in the central bank (BEAC). Bank financing of imports of foodstuffs will be limited to an aggregate amount equivalent to no more than US$ 30 million. The Ministry of Finance will be responsible for collecting the supporting documentation (copies of the invoices and evidence of shipment and of payment) and for preparing withdrawal applications. Disbursements would be against Statement of Expenditures (SOEs) for eligible contracts valued at US$ 5.0 million, or less. The supporting documentation for these would be retained by the Ministry of Finance and would be made available to Bank staff during supervision and audited annually by independent auditors. The nature and origin of the goods as well as the payment date would be indicated on the SOEs. Expenditures for goods procured under invoices for US$ 20,000 equivalent or less would not be eligible for financing out of the loan proceeds. All other disbursements would be made against full documentation submitted to the Bank. The minimum withdrawal application size vould be US$l million equivalent. In order to enable the Government meet urgent foreign exchange needs, the Bank would disburse up to 10 percent of the loan for eligible imports which were paid for and entered the country after March 31, 1989. An audit report, comforming to internationally accepted standards and prepared by auditors aprpoved by the Bank, will be submitted within six months after the close of each fiscal year. PART IV - BANK GROUP OPERATIONS AND STRATEGY Past Assistance Strategy 106. Bank and IDA commitments to Cameroon as of March 31, 1989 amounted to US$ 1,282 million equivalent, of which, US$ 494 million remained undisbursed, and covered 52 projectst 25 in agriculture, 15 in transportation, four in education, three in public utilities, one small- medium scale enterprise project, two technical assistance projects and two urban projects. Transport and agriculture account respectively for about 50 percent and 38 percent of these commitments. IYC had invested in 11 enterprises, with total net loan/equity comnitments of USS 20.6 million. - 39 - 107. Until 1975, the Bank's investment strategy in Cameroon was to support the Government's development efforts in three main directionss (a) strengthening and extending the road and rail trunk systems and improving the port of Doualat (b) raising agricultural output and exports; and (c) improving education. Since 1975, however Bank lending has diversified into forestry, small- and medium-scale industry, urban development, telecoununications and a technical assistance project. In the past year, the Bank has accommodated the country's difficult financial situation by restructuring ongoing projects to cut out lower priority expenditures and reduce the burden on the Government e budget. The main objective, however, has been to help redefine sectoral priorities in light of the current financial situation, and pursue a goal of comprehensive economic reform. Discussions leading to the proposed SAL greatly contributed in reaching basic understandings on a new course of action. 108. During past years, project implementation has been exceptionally slow due to delays in project processing and cumbersome procurement procedures. Fragmentation of responsibilities, lack of coordination among various ministriesiagencies, and bottlenecks in the central procurement agency have caused these delays. These problems have worsened as a result of the country's financial problems, the Government's lack of counterpart funds, and cost overruns caused by appreciation of the CFAF vis-a-vis the US dollar. In recent months, however, a noticeable speed-up in awarding contracts has occured, as a result of the Government's reorganization of procurement responsibilities. Improved procedures are expected as part of the adjustment program. Lending Program 109. The centerpiece of Bank assistance to Cameroon over the next few years should be structural and sectoral adjustment lending in support of the Government's policy reforms, providing fast disbursing resources to meet the economy's balance of payments financing needs. This would be complimented with selected investment projects to support economic growth. The adjustment being pursued by Cameroon will necessarily take a number of years to accomplish. Accordingly, the first SAL, described in this report, is likely to be followed by others that will assist the Government to consolidate and build on the achievements of the first phase. The design and implementation of action programs for the policy reforms would be assisted through a proposed Economic Management Project which is being processed in parallel with the SAL. Also, to respond to the legitimate concerns of the Government as to the social impact that a number of the reform measures included under the adjustment program will necessarily have upon certain segments of the population, a proposed poverty alleviation and participation project is currently being prepared. 110. In agriculture, the Bank lending strategy would support the Government's objectives in assuring food security for a growing population, and increasing export revenues. The proposed lending program would deepen the policy dialogue initiated under the SAL program and finance investments - 40 - that would enhance the impact of the policy reforms. This includes a recently approved livestock project to increase meat and milk production by strengthening the role of the private sector In the provision of services and improving the reduced role of the Government in the subsector. A national extension and training project and a food security project would enhance the role of mallholders in food production and marketing and target assistance to disadvantaged groups, including women, to raise incomes and improve their accessibility to food. A forestry environment project would address the management and rational exploitation of Cameroon's rich forestry resources, as well as conservation of the ecosystem. An export promotion and diversification project would increase traditional exports and diversify the export base through policy, investment and institutional measures for increasing production and promoting new products in new markets. 111. In transportation, priority must be given to improving the efficiency of parastatals and to the maintenance of existing infrastructure. New investments would be fully integrated with development of the productive sectors such as forestry or agriculture. The lending program includes a feeder roads project designed to ease the transport constraint on production and marketing in the rural areas; and hybrid sector project combining financial restructuration of transport parastatals, sector policy improvements and a program of sector wide expenditures for maintenance and rehabilitation of infrastructure as well as selective capacity investments. 112. In the urban sector, the strategy aims to improve delivery or urban services and transfer responsibility from central government to municipalities and from the public to the private sector. This strategy relies on a three-pronged approach of improving resource mobilization, strengthening urban institutions and upgrading key infrastructure to support the development of economic activities and improve the living and working environment, in particular, in the poorest areas of cities. A Second Urban Project was recently approved and a third is programmed in a few years. 113. The Bank is encouraging the Government to formulate pertinent and sustainable strategies in the human resources sector (education/training and health) which could be supported by sector reform operations. PART VI - COLLABORATION WITH IMP AND OTHER DONORS Relations with the IMF 114. The structural adjustment program has been developed in close collaboration with the IMP and is consistent with continued implementation of the existing Stand-by arrangement. The need to restore non-wage recurrent expenditures in key sectors, maintain a minimum level of government capital expenditures and provide in the budget for the restructuring of the banking and public enterprise sectors has been - 41 - discussed with the Fund staff, and there is agreement in principle that allowance for these features of the adjustment program will be incorporated in future performance cirteria. Both institutions are keenly interested in the reestablishment of a viable banking sector, and both see the need for a significant increase in non-oil tax revenue over the medium-term. Aid Coordination 115. Given Cameroon's fairly comfortable economic and financial position ttrough 1985, concessionary aid flows have been negligible. On the other hand, it had ready access to borrowing from commercial, bilateral and multilateral sources. With the onset of the 1986 crisis, however, a number of bilateral donors have agreed to soften substantially their lending terms, in certain instances even extending IDA type conditions. Much of the aid Cameroon has received to date was obtained on an ad hoc basis and very little donor coordination took place. With the decision to embark on a structural adjustment program, which entails a detailed review of the public investment program and an assessment of ongoing and future aid flows, the Government has become aware of a greater need for aid coordination. The Government is thus considering the possibility of holding a donors' meeting, either locally or as a Consultative Group, for the purpose of coordinating future aid to ensure its use for high priority projects and presenting a case for increasing the level of concessionality in official lending to Cameroon. It is also looking towards the Bank to approach additional donors, other than the African Development Bank, to support the adjustment program. Indications are that Japan, Canada and possibly the European Community and Germany will participate in this or future SALs. The Bank has actively associated these donors as well as France, which has already approved structural adjustment type financing to Cameroon, with the preparation of the ongoing reform program. Now that the Government has finalized its Declaration of Development Strategy, it plans to present this document to the donor community as the basis for mobilizing additional resources. PART VII - RECOMMENDATION 116. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and I recommend that the Executive Directors approve the proposed loan Barber B. Conable President by Moeen A. Qureshi May 16, 1989 Washington, D.C. - 42 - ANNEX 111-RAW-414, IMT04785L A0355 Page 1 of 7 196 Par emits Or as lAS Kid-lW ftp.la.dm 001W) 10.9 om... FI.l. sa* u.1 A. htt...l Acmte Idlat *wat. Sh1 8)twPrm Waron of Grow. Somaw t"A" edet 0). toCme"a low5 Prico" iw v. us. sa 1wo 1967 too iwo itw aws 211141 Ona., Coom"et) Product e.g. 100.0 100.0 100.0 100.0 10O.0 100. 100.0 100.0 10.0 100.0 100.0 W"t ladrto TeamO 8.0 8.5 4.6 4.4 4.0 4.0 0.4 0.7 Aerileailura So.7 so.81 11.9 11.4 01.1 13.5 04.8 9199 01.1 20.4 81.1 &%&Aduf 20.81 18.6 219.9 40.6 00.0 $6.8 010.0 618.9 00.1 11.48 0.1 (at .816b wf.tctarlco) 9.8 10.0 T.9 14.7 14.0 18.9 2189 10.8 1.0. 14.6 181.61 (at whible Oil) .. . .3 18.7 17.0 16.9 17.1 17.5 18.0 0.0 51.1. Smwima 47.0, 80.6 46.8 88.0, 87.4 86.8 14.61 811.0, 8.9 18.4 85.0 fta..uv al h... 06.9 8.81 8.1 -10.9 -7.5 -7.8 -11.9 -18.1 -18.9 4.5 43.4 Rivert.of on5 219.8 00.7 04.1 U8.0 20.6 99.0 99.T 81. 80.0 .99. 19.8 Iqaort of 0n 4.8 04.0 07.0 03.4 23.2 90.6 18.8 18.2 18.1 14.7 18.0 7.6.1 LT Imtuv.e 100.8 103.81 Ł01.1 00.4 13.8 13.4 68.8 84.9 00.1 91.8 94.6 Total Ow8wiU 00.0 68.4 84.8 80.6 74.2 7?. 1.0 7 4. .? 78. 17.4 78.7 Private Cansmmpgten 74.9 71.8 78.8 87. 13.2 08.1 84.0 68.9 64.8 68.7 611.61 Coatral Oaan....tA 18.0 1.6 6..7 10.1 10.0 14.0 11. 10.8 10.6 10.7 10.9 Gram. Comucti ba..tbmmt 1.3. 19.9 Is.9. 9. 10. 8. 18.81 18.6 10.9 11.0 14.1 14 9 M1A,4wt (lad. Puab.ffntr.) .. . . 20.1 U.JL 6.8 10.0 7.91 6.9 131.2 it. Central nwoermut . . . 7.8 7.2 6.8 8.8 0.0 0.0 0.0 2.8 Cee.cilt to Iugrt MA.. . 1. 1.8 18.1 18.81 18.1 18.1 14.9 14.4 T*rmof Traile "mjatm.t .. . . .1 -7.8 -10.1 -13.4 -18.0 -18.9 48.8 -4.9 Gris, nswati lumeon, .. . . 0.9 12.7 01.9 68.6 84.0 88.1 91.7 16.1 Oram. Nabtim Zacome U. . . 0.8 67.6 84.4 00.0 13.8 68.8 68.0 91.8 Oroma Ibtices Predwua .. . . 8* 95.1 90.8 98.7 98.0 97.02 8. 96.8 Grove Ocasetc swing 13.0 18.6 18.7 80.2 310.51 10.9 11.8 10.1 11.0 14.81 18.4 NO fabtor ho...w -6.7 -7.6 40.0 48.4 -4.9 42.8 4.8 -2.0 42.8 4.7 .4.9 U"t Cu"aart Trseafow. 0.0 -1.8 -1.4 -0.4 -0.8 40.9 -1.1 4a.0 40.6 4.8 4.8 Grove SiAtiomal Swying 8.8 7.8 8.4 09.4 13.4 6.4 6.9 7.6 7.7 10.1 11.8 S. Nationi AeontS Ormth M I. (1) at, iwo C...tot A-lms 199878 1978140, 199046 1t8 1S67 19ow 1969 1990 19901-9 415-9000 are". Somatic Prduct e.g. 2.8 0.8 7.4 9.9 42.8 4.6 46.0 9.4 0.8 8.4 U". ladirect Tax". 04.7 99.0 -18.1 -.4. 18.5 7.6 4.8 Agriguitwor 4.6 5.0 1.9 6.1 8.4 0.8 1.0 8.0 8.9 4.6 Zodues6y 4.4 18.? 18.8 8.8 -.4. -9.9 -11.7 0.9 -0.4 2.1 (.98) Namcfeabaoriug) 8.4 6.0 18.0 8.7 -4.7 49.0 -18.0 4.0 8.0 4.0 (of which OIlI) 2... 04. 1. 4.1 -7.8 42.7 48.2 4.8. 4.0 Service. 0.0 9.0 4.1. 48.4 -13.8 -8.6 2.0 0.5 8.0 Esaorta of an 8.7 10.6 18.0 -0.1 -7.5 43.8 -1.0 -1.7 .4.6 40.4 luporteof on 8.8 6.9 8.9 6.1 -.9. -17.6 -17.9 9.8 0.8 0.0 Total Igmpwdit.ra. 0.8 6.7 4.0 18.0 43.0 -13.2 -10.2 8.9 8.4 4.0 Total Conmt1a. 1.5 8.0 8.8 18.0 0.9 -10.8 48.7 0.7 0.9 4.0 P,i..t. Casepleft ~ 1.0 8.8 9.7 17.8 -1.4 -7.8 -4.1 8.0 8.1 4.0 Central baawoot 8.2 4.6 7.7 8.6 12.9 -99.4 -.4. 0.9 1.7 8.8 Oram. DomaUe lavatom. 81.8. 11.8 7.1 2.4 -18.8 -19.1 40.7 12.4 6.5 4.5 Private (Intl. FA6. btr.) .. . .0.5 -13.7 4.1 -95.8 18.1 7.0 8.0 central bacramont .. . .8 -13.7 -80.8 -40.6 8.0 4.6 2.8 Gram. momati 1a ~ 1.0 8.6 7.9 1.8 -7.8 -10.0 46.0 8.9 8.8 4.1 Greas National lumenA 1.6 8.6 8.7 9.1 40.8 -9.9 -4.8 2.9 8.8 4.2 Oreas. Ntlomal Poodu" 9.0 9.0 6.1 10.5 -1.8 40.8 -4.7 1.8 2.1 8.85 Oram. Somatic Saving 8.8 218.2 04.1 46.6 -40.9 -4.7 -18.4 18.2 7.8 4.9 Nat Planter lacom 7.0 9.7 40.4 -10.7 40.4 -10.6 480.6 47.6 -18.8 45.8 et Corrast Transfere is.. 1. 14.6 74.4 7.8 -47.0 6.8 -1.7 -10.7 Ova.. Natiml 06,1mg ~~~~~~~-1.0 19.0 0414.8 -2 -. .0 5.4 7.9 6 .4 - 43 - ANNE I OVImTm- 1. PZWLWS (00";M Fage 2 of 7 _ee.. PiG611 IW * Ł96t4119. C. Prig dle.. CIW " I Aabmi Pr.l 1ewM Projectlion Grano tbe (Co p__) w1o am a11 SW sam 1og. lw - am tvwa-ia 197.D 11s,0W IwV 154000 beamw Priem (193.10) 86.8 1.0 112.4 1.0 ;81o 1.- 1o 0.1 149. 7 .5 11.6 a.1 0.4 4.4 lIitit w DP0l~(1WO1tm 5A. 100. V6.8 96.9 07.9 96.1 11 191.0 7.4 10.8 7.8 0 0.4 &piolts bsj. Diter 8.4 10.0 1.7 ".a 7.7 to.e *.5 Defatiare, for MIctII vA: D.rioslt.re ate,o 57.9 100.0, Ł00.8 10.8 4.2 35.2 5.9 lumd.atrie asrter 18.3 100.0 00.8 77.8 4.1 .0. 8.8 Servie tastor 82.9 100.0 1.9 106a 10.7 9.0 *Q D. 061.. radiators (U p.m.) 195-7 1975.40 IWMO.- 1965.4 1905.85 415-990 aw aua am it Ma all VP 42.5 8. 4.8 Dowletico 2.0 2.9 9.9 1.9 8.tere of Tot Lat_ Fre 4.0 4.0 4.0 LAwr f1 lt Orm Own. _am p.c. 4.8 0.0 1.1 Arealtrev 79.8 Privet. ama tie. P.o. -8.0 0.2 1.0 Iamtr 6.7 Seiam 14.0 Import el otellt Tout t100.0 Imperts (0.WG)jVP(a) 1.80 0.67 0.89 8.80 0.18 0.81 Grew f_elol n _Soviae .0.0o 0.06 0.80 1.01 0.24 0.10 Grow leme l 1ile 0.8 0.22 0.8 8.97 0.47 0.21 l13 (p _od avorum) 5.8 1.8 2.7 -11.6 5.7 4.2 o a ga -41.8 8.7 8.8 IL lt l Ammms (b1lame of at son Pelt.): Astea Prel |iel. PVoj4Wtl*%. 1a3 a. 1Mm 196 sin tw1 IWO4 1961 to" 19O 1o"4 IO 20o OrF.. Do.ti Proie MuP. am1 8am 5 28 W71 86W 8am 87m 8am 4011 4109 40 be1.4 tries Tax"e 145 111 n 151 lee to u M Ms M M4 M goe Su Igriselterse 154 $94 95 VS4 WV g7m 1006 I=5 1 1195 117 1119 I=9 IaDeete 764 I4115 1886 184 18M I11112 1114, 1190 1168 17 119 1197 188 (Of a11iak 01040feeteriao) 61 M7 M7 so M 457 475 496 M9 89 Ws5 SW 611 (of ubla D) .. 7n 740 717 6 M7 6 81 4 48 414 Ws so Swvice. 10;6 19 15 14 87 17 10 I3 1. 1869 146 141 178s a m- , Golae. 45 -d3o -M 468 418 -M 417 -WO -87 408 4-M -37 -M pait.* of US 894 18 16 9t 114o 118 18 101t8t u 1 M M on 4 7Sperta of an me s mneo MtT1 onee 61 tte M 1 S Toft. Sexpeeditereeg am16 16 861 841 am6 am 844 8480 as" am6 am 468 Totel Consumption g 96 a1 SW a2 7o a1 on5 a9 am3 85 S1 8 Privet. CsAeetion 1961 gm 9m10 97 17 1115 .9 2441 gm Sn37 1782 30 S74 CmtWeI b.an rnmm M 482 94 86 485 M6 86 416 492 411 410 448 M7 cram DmetOc 1ave"t 497 730 79 84 8 70 418 4t M an W 7 80 Privet ClasS. P. _bt.) . 41 484 64 d 9 96 M see 8 406 438 468 6O4 cftrai brm t M 8le t 7 18 1 4 t11 19 1 1t in ine -a_iAs to iteert M 18 974 o SW M an 1 Ot 4s 111 g19 tO TWem of Trad AdJastet 47 4 -1 413 4n1 -M7 41 -488 -M -M -o 4- 44 ngtea Catiol ome 964 W86 41 am 1 8am0 3M 188O 84 a7m1 8046 4898 Cram S9oei am 9406 874 8606 86277 83 802 810 8911 8607 8404 1840 94 4 a n Oblel map,oit asi2 6749 4143 40 a4 am O6T a4 862 a8 am 86 474 Gron Dwetis Gee 418 15 W7 9 418 W 415 404 465 3 * 7 M66 754 St Pete (lame -M 4 -.us -14 -110 -78 -106 -1. -8 -181 -161 -us -15 " Coronet Transform. -19 -1 -9 46 -4 .9 - U 462 41 4 41 40 UP (bilI lam of carrw CM 15a" am 4N16 40 87611 07 a e 8m7 6746 8o" 46 46 86 W v.o. cages (thowemd CP) 418 M 84 8 816 U W811 8M S37 aS37 8 ANNEX I UtTSL 13456 F~~age 3 of 7 A. VaSe... Volvo end PriemeAt Pool i.eer roJeto Iwo aom i,s SW7 '6 1969w sm. smo sm4 iwo 11914 lowo Cdt.. ~~~~ ~~~~ ~~~~ ~~107 100 1as 4 101 10 10 10 1in 11o 1in In 141 Coae. 00~~~~~~~~~~~~~s 10 so 1no 10 In 1to 110 II19 32 1in 110 3 Oth. twig. no10 94 as a0 00 a2 is 10 10 10 1to to oil 7 10 1to 99 g0 a0 61 07 8 ad a2 a5 4 Nemte.tur. No10 10 in0 1311 141 146 in us3 16 171 1in 1 A!.mistuIe no10 a0 8 6 57 9 #I es so 76 P7 10 TotetNercb. awortw FM 10100, 0 90 94 92 90 00 7* 77 8 18 so Nergohealee Export. Vv.-Coerteet Oremoe (bl II oo 0K) C .. 6a 110 112 a4 00 U 70 78 7, 61 a0 9 1831 C40010 74 107 05 as a as a of 71 73 00 10 M. fA6rie so 6 70 a6 67 78 60 M7 96 104 114 10 OilI 106 M 419 26 24 M0 21 190 1I" 177 M8 we9 15 Kemdatar.e 2 M9 46 41 45 05 83 54 a7 S1 s 78 110 AlwalItims .. 4 a0 1S a go 26 26 go 00 131 7 61 Tote! March. SON.t #M 575 110 772 5u 476 400 490 400 490 514 5a4 s8l 761 Merchandise Lsopero . - V o i m~~~~--olm Jade 19010 * 40 Saw 0 6 102 219 211 16 1no 31561 14 14o 1 1in 10o POL end Other O.w 4000, 100 SW7 M6 M2 119 30 1UN M2 100 1" 1in M6 ottim.rlxpere 1M 10o 10 00 66 as 71 i1 is 75 6 as Other Cotmewe lood. as 1100, 121 mm 309 61 63 00 a a a SI 87 Iotegeedl.te 04.. . 100 li6 128 so 74 74 72 71 71 78 78 7 Cepitelt ods SOO16 a as 69 SI a6 64 ay as 78 P 9 Tote! Nort. lepart FMB .. 1 114 114 92 78 TY ?6 78 70 so 79 00 Nerd.ueiee jeperte - V ele.- C err~----- ale .tar Priem. (billion. 0A) Pk," Os~~~0 45 as s9 so 41 40 46 s9 so 7 87 84 ML oad otrbw rw 84 4 4 5 2 I 2 1 a 2 2 a a Other Jeporte M5 46 6m2 491 018 00 054 862 869 8a1 425 446m other Caeaeer 0oads 47 70 as 67 74 6a 64 64 U5 o7 70 74 9 Intermediae. Go.d. 19 218 21 246 1M 174 170 171 170 175 17 197 07 Capital Goaods 111 1 17 1S6. 127 1N0 115 1to 14 189 us 175n Tofte Norob. mesrte FM 42 8a8 571 M 453 679 96 405 410 411 414 400 66 Country todiese - P r i . e~~~~~~~-fc Indic". 1908 Nerdsmmdi.. Efxport. 100 70 so 46 46 49 6 a 61 U5 To 10 HereA Adl" Imeorbe 100 9 94 92 M910 M0 1no 10 10 l20 14a H" Ch. To"e. of Ted. 100 72 8 80 47 4f, 66 M6 as so so as S. Shmare of Toel X ow N C11) as eurreet prie.. C. O,oeth lilet. (5) at eOametee prlae Aeteal Projections, Actual, ProJetoIGe son iou iw11 io i9wo Lou 2uo 1966-78 1978-60 iwo-us 9iiiss-w iwo-os oS.GOa Herceadwi.. Exports Coffee 000 0.0 18.7 IS.0 17.8 1.8 2.6 . coon. 19.6 9.7 18.6 14.8 216.6 5.7 2.6 8.0 Mt. Agr!. 6.8 19.1 20.2 26.7 0.9 4.9 5.8 Oil 00.1 66.6 831.3 80.0 19.6 -4.8 -10.8 -12.61 Nao.fetereeft 6.4 8.4 12.3 12.9 14.5 6.9 4.0 4.0 Alumielue 0.1 6.0 6.6 6.1 -10.4 6.6 6.0 Tote! Morth. Exprft FO 160.0 160.0 100.0 100.0 -2.2 43.6 -. Herchm'.d!e Imports Food .. .. 8. 6,6 0.2 7.8 5.1 7.1 49.9 .4.6 POL A 0Othr berw . 12.6 0.7 0.6 0.6 0.6 -2.6 2.8 8.0 Other Sweet. .. .. 6.9 00.6 91.8 91.9 94.2 -9.9 2.0 2.S Othe Cenemer on"... . 10.9 38.7 181.8 18.4 14.8 46.6 0.0 0.6 ?aoere.diet ande .. . 44.7 41.9 41.1 40.6 40.0 .4.6 .0.8 1.7 baiftel am"d .. . 0.5 85.1 00.4 83.0 83.7 .-18.8 8.8 4.0 Tot.! Metal, lepare Wi 100.0 100.0 100.0 100.0 -7.7 0.6 2.0 - 45 - ANNME I U4%94W 60ll6S1 C_ - _MA= OP M1_ff Page 4 of 7 (1 ell Igim at Gorro" Fries) jAme Pacluel 96a 6416 A. beerSI of bam" & we ON? 0854 0573 am?1 S 1 aS m 4 03 1. reiwAsed Om me) 141 Its lm 163 18E 586 151 1"a an6 116 1646I 0m 0. Nan-Factor G"Ieem 8W 41 on? 86 456 4061 418 4814 486 Go sn1 8 906 0 D. Ipwtm or bad. & on =a4 1i09 04 0SW am 196 SW6 on0 01418 gm4 810 on6 SW8 I. u.reSgmdle (6I6) 144 185 147 118 1464 an6 109 M81 184 186 1466 1me g1m S. ".a-Fmetor ft"lo.. s90 a1" 9t 9ii so 13 89o 78 76 7 us Su s11 C. bm"* _lew. -M S" a -0 -s -s 0 -43 -a4 61 43 as 101 0 0. U.s Feeler lees.. -164 -518 -861 ~~~~~ ~~~-44 -486 49 -45 .86 -87 -my7 -5 -64 418 z _lU1.Fstswr uee 0 u t 9 8 46 UZ -1& -0 -t1 -as -0 a 4 6 0. FeelerberSew no9 2 616 81 as 46 81 0 as $60 an lnt.erem "saw") 119 2" Sy us m 1ts sit 1 m 4t1 486 473 4t nS 0 6. Nw% Carrent Truawfere a -48 49 -106 -147 .74 40 -86 -a .73 448 - -16 5. Cerrat 5eelt 1n S 0 t1 96 1 1 t7 1 07 110 11 m 1n3 e. *whrerm, nt ace 1 1 a S a 8 8 a a 6 4 4 8 b. other cerIest troe. 0 1 1 91 50 1 10 103 W0 10 Su 11 148 0. CensuS pqvrnm in6 146 1i6 19 61 176 la 1as 191 166 06 Us so6 0 0. ar _ tU A~t blues. 465 85? -401 -1171 -0 -4 -89 -6 -0 -us -8 490 -0 a. LFn- erm Capital Ut2 w on 040 as 7 -U 7 -S an "a 6 8 a" 71 1. sfl..t iestmm. 1 01 0 81 84 SI 6 66 6 a 50 9? i8 2. 0911.1. Capital Oruet 0 8. I" LT Los" (we d.t) Tat. 810 to -69 77 100 -1t as 46 843 44 47 470 a. Olahoresmst. 86~~~~~~4 867 - 818 85 406 78 667 614 an 917 IOU 1466 b. semiotr 114 r s 487 46 481 412 486 48 40 8n 46" 665 4. Other LV .toflas (ma9) t 0 H. Tl Othr lIes. (aet) -15 -8 TO on 86 8 -11 t42 4O 1o 149 10 in 1. H" OhmrtTM ceeel -Us -#r w9 46 -144 as -11 -16 -16 6 as 66 6 2. Coartal fle" N.SIt.o U. G 0 0 0 0 0 4 1o -15 a 10 16e 78 S. Erroreadbl.Omieles 185 -18 165 -16 478 0 0 0 a 0 0 0 0 1. Global Helene. 145 as 11s -48 -81 -39 -01 -018 -119 o7 87 4 0 J. F}leemeluO ceugs. toa U.t lint, -4148 -88 -2178 8a8 48 1we -78 -a8 -1i5 -or -87 -4 0 1. etCC.sdltfhr1maDr -17 0 0 0 0 10 06 0 47 -47 47 -4 0 S. DOe Manre etau. -in -6 -118 an 48 0 -98a -40 .4 Go o.1 -ue -ae9 -6a7 41 -0 Fuindnmi.l low (errsm.,.o Arrears IS" 070 -60 Deatb nel ef *O t 814 e s Oh Priucipatt 18? 01 019 111 shares of CP(Cutest CMA: 1. SIree Hene 40.1 10.6 0.0 -4.8 --.a -0.1 0.0 4;.4 4 .0 0.8 0.8 0.3 0.4 0. Tota Jtre fs3eow 5.6 8.4 .0. 0.0 1.0 1.0 2.6 8.0 8.4 3.4 8.6 8.5 5e.0 8. Ctierrt Asesst ble. 4.8 4.0 4.6 -0.8 4.8 4.9 -4.7 4.8 4.6 4.0 4.1 4.0 -4.8 4. LT Copftl Ullue (Ite 0) 6.0 0.6 0.8 1.6 1.6 0.1 0 4.4 4.7 4.4 4.0 4.1 8.7 3. U. Credit from e 3W 4.0 0.0 0.0 0.0 0.0 1.0 0.2 0.0 0.8 4. -S 4. 0.0 0.0 0.0 Nno -ru.e Ites. 0.0 CDP (ael Ilam of Car". 186) 7499.0 878 10177 1018 10265 1184 1191 1MM0 3285 IVa 1 lam186 198 Forelo. I Whue Rirs.:t 1. 1t1l. bper,..(W toPfficial) go06 -nts -4 451 -214 -180 -06 a3 50 84 84 0. Old (and ,r L.esdsprice) 0 0 0 0 0 0 0 0 0 0 0 0 8. arin bum.'... luel. Held is 066 -"ts -Us -66 -05 -166 -06 48 so 84 0 4. Gres. le. Si b.at. Isportt. 0.8 1.1 .6 4.9 -1.8 -1.8 40.8 4.1 0.0 0.8 0.3 0.0 CEdmaugo Helm (LOJIISSt 1. no. 0t. -Rt.S b05 471 a" 819 6 us us u u us 8ME us u 2. CtrU I f.24mte(11014 48 as a 100 0 4 OR 0 78 7o 03 -0 is - 46 - ANNEX I uw,.u eisa41111 669c a o UI9& OM aPage 5 of 7 Mas. Ronn t1o - 1*014/1911 Asia., Prelidmrsuy PmJeRs, A. O 10 1am iO 1ow 10 1 19t" 191 1999 i1 1994 19S 9000 1. *bi t Publicly Oar.LT 84 le 9 961 406 8o as of W6 786 749 790 O"Ielal Caeditr, 0 we 1" 41 s4o s Sys 746 8 so0 640 on Ws ghitiI.t.1t 62 so as 116 92 106 8s 87 Su 87 Ot1 9 WS of skieb 1* 4 U 6 a 7 8 t1 an i ls UR 2 211 of ableb ZA * 19 4 4 6 2 1 I 0 0 0 0 0 0 ta I176 I 9TSS 32 1o 117 14 849 8O m 4 U 4 privebo C.ditm. 814 92 40 40 187 1 10 11s 140 91 110 1 #0 Pollel pineaisiel bibsi. 2. Priva Nihrntar. ur so t6 no 2is 148 so a 76 ye 1 166 2 111 S. ToUt LT 0ismvewto at 87 e 61 am 466 766 9 4 at 917 no 148 4. Drftr h.. 0 0 0 0 0 120 9a 0 0 0 0 0 0 aI NI S,riMn T Capital 0 -e 879 467 -144 8 -1s -16 -16 8 as 8 as e. Tout loaf. D8 a tS 624 -179 97 " 406 0 on Wi O to in 196 14 B. R.eat 1. PiII. A Ambliel. O.t. LT 42 916 916 160 mJ 4 mS 8 so 8n 4n MS 0181.. Otrdium go a 84 16 in6 174 918 no soy 2 9 84 5 11steral.u 10 29 34 45 Oa 79 n 75 so so 12 141 2 --3 which d11111) 4 18 17 t 4 s8 89 46 1 so Ss 8 18 of ablcb ink 1 1 1 1 a 2 8 a a 8 4 4 6 SIIsu.t 18 Ss 8o0 S1 7 10 143 I4 17 U32 las s I"4 Prilvat Cr,diitm 84 Ss 76 61 91 97 U12 1la 114 in 101 le 139 Swa1lim 7 0 0 0 0 0 0 0 0 0 0 0 0 pia..iol 1bgbte 46 0 0 0 0 0 0 0 0 0 0 0 0 S. Pre t . LT 8 0 291 6 23S 386 387 as a so0 6 4 210 8. 1.tI LS A r 114 884 45T 42 41 472 4t6 440 412 an 415 W Su 4. 38 tNuvds.m _U 0 0 0 0 0 0 0 8 Sy 8 4 0 S. yet. zoo SW 11 854 48T 426 451 472 463 440 450 468 472 Sp 6s C. I9.t S. P11a to A PASOtgly Gar. L 14 1 12 1 26 S" 6 45 4 442 818 0181.1.1 Craditbor 41 11T 75 60 114 134 224 as an S 40 406 486 oltil brnIt 1i 97 84 47 60 69 72 92 114 in la 1 8T of obih me is1 1s 25 Ss 46 8 68 61 n 7 o e4 U 11*7 dotkhM 1 2 2 2 2 2 2 2 2 2 2 2 1 *1 lsimb is aS 41 46 so 68 3m 1n 218 242 268 Sa 28 Privae tJCrditors as 8 81 8# is 26 84 ay7 ay t7 8a a 76 SpIiwa 8 0 0 0 0 0 0 0 0 0 0 0 0 Ftbiol Ibube u 0 0 0 0 0 0 0 0 0 0 0 0 2. Priv.t.n,41mar. U Is 194 m UO 94 s 44 42 48 81 so 46 106 8. teS l LTlret no 2J_ as go gn 80 ST 412 446 47 4" mS 4. VWvS.a.e Caru. 9 0 0 0 0 a 9 9 9 * 8 0 0 S. It.rmA co sur D 0 0 0 0 0 0 0 0 0 0 0 0 S. T1 l lawl. VW&Not W 12 99 2 255 ga Su 6 421 419 478 476 6s0 (SWtIM" an me" VW) - 47 -ANN I u.RarO 01:8186 Com- offal" C4M.r .wOm Page 6 of 7 (WO slil_m at Current Ptices) 1AIs Pinot, 1 11<4/lw. Leteat Fret lsIes.~~~~~~~~~~ Frojectionss 0. Interest Debt (MO. 1*60 am 1. 107 low imS lo 1I am 1am low ii. Om *. RAI le A Pibblyl Oar. LT gm am0 gm Us Om a 46 81" NW Om 679 0tft4t0l cntfl- 111111 a"t MD I$ = ss M a m O 4 lhltit..l 46 86 61 40 91U 6 8 186 * 91* 2851 4*6 805 af tabi 1o 9 Ua So 864 4a no 76 no 16 11D 1m 161 Of ..40b U 146 US 1 Su1 1 U U S 2US 1 914 US Sll*a I ? VW on 18 114 WV gm a So SW am am 47t4 privtew Crdita S 11 4 4a8 4U 8o 6s 8 8n 7 4a7 461 o S_Ilt. 141 0 0 0 0 0 0 0 0 0 0 0 0 Flmaale lalrkea 66o 0 0 0 a 0 0 0 0 0 0 0 0 S. Privat Ibm-ar. LT 1in a" No m Su 84 84J a0 47 14t *. Total LIs-Ter 00 am g0 gm 16 00 84 41 wll 624 S7W 7 74? O"Cl 0 0 0 0 0 0 0 0 0 0 0 0 0 4. SF Crd1t i8 0 0 0 0 16 144 14 107 8o 2 -1 - S. Uwr%-Tra Debt m7 0 0 0 0 0 0 0 0 0 0 0 0 6. Total Ueel * Al Ł1b 67 a1 gm g2s am Me 46 61 am 6746 70TM i9 "2 ._ Ra_t ma SRbe Usr. of Totil fFO tlC 0.1) 1. 1WD 7.4 10.6 11.1 18.8 1.6 21.7 IS.? 14.0 1.8 18.0 17.2 1. 16.8 2. 3S 7.1 12.8 11.8 10.0 0.8 6.6 8.8 4.4 *.8 3.8 8. 8.2 2.2 8. .US 14.8 U.S 0.4 U.S 11.8 10.8 10.0 16.1 16.8 2.8 Dm.6 91.8 66.7 4. ULTSLAT14M 66.7 86.4 66.1 66.0 81.6 7.1 10.8 30.1 1.9 .?4.7 66.6 86.9 84.6 sr. .9. Deb Or (S.14C.1) 1. US 7.2 11.8 14.1 17.2 10.7 19.0 14. 18.8 16.8 17.0 We. 10.4 91.4 2. US 0.7 1.2 1.0 0.e 0.6 0.6 O. 0.? 0. 0.7 0.7 0.6 0.6 S. 3ID0 7.0 18.8 18.1 U0.1 m.6 10.8 18.0 16.1 17.0 17.7 19.8 l.0 SS.0 4. WATLAIWAL 4.9 *.6 6.8 16.0 2.6 81.0 94.4 SS.1 66.8 66.4 61.1 18.0 66.6 Oebt t to Im/Immis 0.0 1.1 1.7 2.6 8.9 4.7 4.8 *.8 8. 6.0 8.8 7.2 7.1 F. _A-te-E t Rats (a) 1. Sblte a SblitDyar. U 1Us.7 62.7 60.1 112.8 1U.2 1U.8 2S..1 2U.8 Dm8.1 S.0 7.r0.o 1n.e 249.2 1. mm Darastee Privt. 0.6 10.0 10.0 27.8 24.2 1. 16.8 18.0 1.4 1.0 91.0 0.0 11.9 8. TWotl Les@ Tom 12.4 81.7 W.o 38.? M.4 seo. 11.4 12.1 26.8 a8.6 26.1 267.0 =S.I 4. DIr Credit/laparta 0.8 0.0 0.0 0.0 0.0 6.2 7.1 7.1 8.1 1.6 0.1 -0.1 -0.1 S. _hert-Torm Dabtlart 14.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8. LT*D~ SoWjast 1.2 81.7 0.0 1.7 14.4 .6 S. 17.2 806.6 8.6 1A.1 667.8 13.1 0. ID00041P littos 1. puAle & lIl.l- Dea. LT 17.8 6.9 10.0 18.9 16.2 80.2 0.6 46.8 46.1 80.0 40.2 46.0 44.9 2. 1162m amI PrIvate 2.4 6.8 4.8 4.6 8.0 8.8 1.0 1.7 2.6 8.1 8.7 4.7 6.1 S. Total Lobe Tem 26.7 17.1 U.S S.8 26.1 86.6 66.4 46.0 66.0 8S.1 6.0 8.3 81.0 4. I CredItWP 0.1 0.0 0.0 0.0 0.0 1.0 1.2 1.2 0.0 0.6 0.0 0.0 0.0 S. shert-ers Debt/wP 8.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6. LTUD4 IT m8.8 27.2 11.8 93.8 1.1 84.4 40.6 47.1 1.6 8.8 68.0 8.8 6t0.9 cm ep) 0 0.0 0.0 0.0 0.0 0.0 0.9 0.8 0.4 1.8 S.1 s.0 7.4 NI. Oebt Svl/Arts (a) a. fbtI A Pab.Dear.LT beF.Rteeb 10.2 7.0 10.? 14.0 18.0 10.0 17.0 80.0 81.6 80.6 O.0 16.4 se.0 lb. PAIsI A PAI.Qvw.X ati _asch 10.2 7.9 10.7 14.9 1.0 0.8 1. 17.8 66.4 U4.4 84.1 J.7 *S.8 9. Prlvata Nm-Gamr. LT 2.0 U14.8 1. 1.2 14.6 22.6 6.0 6.4 4.0 s.7 4.2 8.1 9.0 go. Tor LT debt bef. Reads. 11.6 22.2 6.7? 8S.1 61.8 86.6 86.7 8?7.8 86.8 84.8 6.1 84.8 80.9 lb. Totl LT deb S. bs=*. 12.0 66.1 61.7 82.1 82.8 S .4 66.4 Ss.7 s1.1 38.0 #6.0 41.6 42.4 4. Dr' . 1.0 0.0 0.0 0.0 0.0 0.8 0.4 0.8 2.2 8.8 1.7 0.2 0.0 S. Mnterest cly en V Dabt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Go. Total (L:TtT tab.) d.re. 18.9 66.1 10.7 JS.1 .5 66.1 87.1 7.0 66.0 7.6 64.7 84.5 6.9 lb. Totl (.T+3U4 tlab.) ft.r_s 138. 6.1 10.7 1.1 s2.8 st1.7 22.6 24.2 26.4 41.8 40.0 41.9 42.4 Q(MIs00 .. 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.1 0.6 0.6 1.0 4.5 t. te I arde IRatIs (ati. Reedh.) 1. Total I 9. T.tal ats ) _ _sraad t_om I _serts * _b leVas (i sll of us 14 1111 1 211M1634gm640 Sg Dm 2n1 gm a6 850 9- t 0- I- g I 0t- n1 m- 9 as- Ot O 0 11- ("X-' -)& b% *51 sat sa *1 . usuI so w as so e u m Sw at %4 99 OS LO C * dv v.e 0 0Pt 01 P"no 5u.m1o0 w o ~~~~~~~~~~~~~~~~~~~~~~~~~~~Os os n xo s 0 0 0 ° 0 0 U sO U Ł w Ot ' t a AB to Go t tG o 26 us GM m m 111 m At soIt ftl- * I t Q~~~~~u et aus" a: oW ow mit oX