COVID-19 & Cameroon Economy: Impact assessment

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BY Annie Babelle Odounlami

Cameroon Ministry of Finance: Credit Cameroon Tribune

The health pandemic currently hitting the globe has not left any country indifferent as to what its economy will become. In Cameroon, the COVID-19 pandemic has upset all macroeconomic indicators leading the country in to a recession since the start of the current financial year. Government forecasts that, economic growth dropped by around five points was prompted by a decline in public resources of over FCFA 768 billion or 11% of the forecast.

“This drop affects all components of revenue whether tax, customs, or non-tax. The oil revenues in particular fall by 70%. This is explained by the fact that, initially projected at 54.54 dollars in the finance law, the price of a barrel of crude oil stands at practically 35 dollars today,” part of the DGB’s note read. In a bid to ensure balance, the adjusted finance law ought to mend public administrations’ expenditures which will fall by 20% in their budgetary allocations.

The economic recession in Cameroon’s economy is due to waning tax revenue of -587.353 which is driven by value added taxes and turnovers of -298.017, taxes on specific products and excise duties of -69.022, import duties and taxes are at -68.411 billion, personal income taxes represent -40.794, petroleum company taxes stand at -39.947. Farther, income of petroleum sectors’ conjecture stood at FCFA 468 billion will eventually be at FCFA 286.7 billion, counting a reduction of 181.3 billion.

According to the Minister of Finance, Louis Paul Motaze, maintained that, “the economic projections that the government has made are counting on the fact that the Cameroonian economy went into recession during the fiscal year 2020 and our growth will experience a drop of about five points. So, instead of the growth projected in the initial finance law of 4%, we are projecting at the end of the year recession for negative GDP growth of -1.1%.”

Finance boss affirmed that, the budget deficit with respect to the current situation is a “minor change” planned at 1.7 percent in the initial finance law but, it should currently stand at -4.5 percent at the end of the year.

2020 Budget Adjustment: Directorate General of Budget Provides for Explanations

Cyrille Edou Alain, Directorate General of Budget, DGB, at the Ministry of Finance, MINFI, expatiated on the content, context and the scope of the order adjusting and completing certain provisions of the 2020 finance law of last June 4.

The three core goals surge from the presidential ordinance inclined to correct the current finance law. Going by an explanatory note rendered by the DGB at MINFI, the amendment is geared towards adapting the said law to the economic context of the moment thereby refocusing the law on the fight against the coronavirus as well as legalising tax relief measures announced by Prime Minister Joseph Dion Ngute, on April 30, 2020.

It is worth mentioning that the amended law does not inhibit on the budgets of all government related institutions as the National Assembly, the Senate and Elections Cameroon, ELECAM, have been spared of the economical reduction, given that their initial envelops have been maintained in the revised budget. Thus, the second half of the fiscal year is likely to be very difficult for several public administrations as the June 4 ordinance came to amend certain provisions of the December 24, 2019, on the law of finance or the year 2020.

The National Assembly’s budget stands at FCFA 20.682 billion, 15.162 billion for the Senate and FCFA 10.683 billion for Elections Cameroon. In the meantime, the Ministry of Public Works has witnessed a reduction of FCFA 80 billion and it is considered to be the biggest cut of the budget. It is preceded by the Ministry of Housing and Urban Development with -35.66 billion, the Ministry of Public Health suffered a -27.42 billion, the Ministry of Water and Energy faced a drop of -21.9 billion.

Likewise, with a deduction of 9.29 billion in its original account, the Ministry of Basic Education is ranked 11th among the ministerial departments that have suffered the most significant cuts. Barely worse than the Ministry of Defence that had a cut of nine billion meanwhile the General Delegation for National Security faced a reduction of 8.79 billion respectively.

This monetary reform however unpityingly impacts on the budgetary allocation of various institutions as they suffered a drop of about 20%. Also, the government wants to make savings in line with servicing its debts in general and the repayment of bilateral external debts that stands at -98.2 billion, capital expenditure -242 billion, while the current expenditure stands at FCFA -202.452 billion.

Support for COVID-19

The creation of the ‘Special Fund of National Solidarity for the fight against the coronavirus and its economic and social repercussions’ is financed at FCFA 180 billion in order for the expenses of the said fund to meet the set objectives in the global response plan against the deadly virus. Concerning the increase in legislative lock to allow optimal functioning, the law on financial regime of the state and other public entities states “it is said that a trust fund cannot receive more than 10% of it envelop from the general budget.”

Within the context of the present health crisis, the International Monetary Fund, IMF, the World Bank, the African Development Bank, AFD, the European Union, EU, amongst other economic and financial partners all manifested themselves via financial support and debt relief budgeted to FCFA 118 billion. “It is this advantage that gave us the possibility of adding the Special Solidarity Fund,” Louis Paul Motaze attested.

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