Cameroon, Central Africa’s second-largest economy, needs to strengthen its tax collection and improve public spending efficiency to boost economic growth, according to the World Bank.

Despite reducing its fiscal deficit by approximately 5 percentage points over six years to just 1.1% of GDP in 2022, largely through cuts in public investment, the World Bank emphasizes that targeted spending is crucial for sustainable growth.

“Cameroon’s fiscal consolidation was expenditure-driven, leading to low levels of public spending that hinder the provision of adequate services and infrastructure investment,” the World Bank noted in a recent report.

To enhance its economic performance, Cameroon needs a medium-term revenue strategy focused on more effective tax collection and improved allocation of resources. Social sectors like health and education have been particularly impacted by under-investment and inefficiencies.

The report also highlights the need to diversify revenue sources, as direct taxation remains low and stagnant. Cameroon’s reliance on value-added tax is compounded by underperforming international trade taxes and levies on property and forests, which cover a third of the country’s territory.

Amid rising global interest rates, borrowing costs in dollars have increased, forcing many governments to seek domestic solutions. However, Cameroon recently secured $550 million through a dollar bond sale with a yield of 10.75%, indicating an urgent need for financing despite challenging conditions.

Cameroon has faced numerous crises, including the impacts of the Covid-19 pandemic and Russia’s invasion of Ukraine. Additionally, internal conflicts have exacerbated poverty in various regions, and a decline in crude oil production has strained government revenue.

Nonetheless, the International Monetary Fund anticipates growth to accelerate from 3.3% in 2023 to 3.9% in 2024, despite a tense political atmosphere. The 91-year-old President Paul Biya, who has ruled for nearly 42 years, is expected to seek re-election in the upcoming February presidential polls, amidst increasing political repression.

Source: Bloomberg