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Findings
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Africa Region · Number 145 · February 2008
Findings Infobriefs reports on Good Practice in ongoing operational, economic and sector work carried out by the World
Bank and its member governments in the Africa Region. It is published monthly by the Knowledge and Learning Center
on behalf of the Region. The views expressed in Findings are those of the author/s and should not be attributed to the
World Bank Group.
Cameroon
Debt Relief Grant under the Enhanced Heavily
Indebted Poor Countries (HIPC) Debt Initiative
The objective of this operation was to provide Cameroon the assistance required by IDA
under the enhanced HIPC Debt Initiative upon Cameroon reaching the Completion Point,
thus contributing to improving Cameroon’s overall debt sustainability and supporting the
government’s implementation of its poverty reduction strategy through increased spending
from the fiscal savings.
The policy areas supported by the program are those linked to the conditions for reaching the
completion point under the enhanced HIPC debt initiative, namely: (i) preparation of a poverty
reduction strategy paper (PRSP), and satisfactory implementation for at least one year; (ii) the
maintenance of a stable macroeconomic framework and continued satisfactory performance
under the IMF’s Poverty Reduction and Growth Facility (PRGF) program; (iii) use of budgetary
savings from the interim debt service relief; (iv) the satisfactorily implementation of the struc-
tural reforms supported by the Third Structural Adjustment Credit (SAC III) financed by IDA;
(v) implementation of governance and anti-corruption measures in the areas of judicial reform,
budget execution, procurement reform, and the creation of regulatory agencies; and (vi) imple-
mentation of key social reforms, including combating malaria and HIV/AIDS.
Context
When Cameroon reached the Decision Point under the enhanced HIPC Debt Initiative in Octo-
ber 2000, the Executive Directors approved the provision of an IDA supplemental credit to
prepay outstanding IBRD debt at the Completion Point as part of IDA’s contribution to overall
HIPC debt relief initiative.
Slippages in macroeconomic management and difficulties in the implementation of the poverty
reduction strategy delayed the completion point date. In 2005, the macroeconomic framework was
strengthened through improved fiscal management, and there was progress in PRSP implementa-
tion and the adoption of governance measures. As these progresses were sustained in early 2006,
Cameroon reached completion point in April 2006 after fulfilling all agreed conditions.
The “Good Practice Infobrief” series is edited by Lawrence Mastri, AFTRL, World Bank, 1818 H Street NW, Washington D.C., 20433. Tel.
(202) 473-3308; e-mail: lmastri@worldbank.org
Impact
The program development objectives were fully achieved. IDA assistance under this pro-
gram has been fully disbursed, allowing Cameroon to repay outstanding IBRD debt. As a result
of that assistance and additional debt relief from IDA and other multilateral and bilateral
creditors under the HIPC and the Multilateral Debt Relief Initiative, Cameroon’s debt burden
has significantly improved relative to the situation before completion point. Nominal external
debt declined from US$ 6.5 billion in 2005 to US$2.1 billion in 2006, or from 39 to 11 percent of
GDP. Cameroon now faces a low risk of debt distress.
A satisfactory implementation of the PRSP — including increased spending for social and
other priority sectors — was a condition for HIPC completion point, and this condition was
deemed met in the HIPC completion document and in the third PRSP annual progress report
discussed by Executive Directors in February 2006..
Cameroon is pursuing the policies needed to maintain debt sustainability and improve PRSP
implementation with the support of its development partners, including IDA. Cameroon is
implementing a fiscal strategy anchored on preserving debt sustainability. Since 2005, fiscal
policy implementation and performance strengthened substantially as evidenced by the
completion in June 2007 by the IMF Board of the third review of the PRGF.
In addition, Cameroon is preparing a debt management strategy that will guard against the
risk of over borrowing. As for PRSP implementation, Cameroon is preparing a revised poverty
strategy with a greater focus on results. The completion of the revised strategy is expected in
the first half of 2008.
Lessons learned
Lessons from this operation — prepared and approved in a three-month span period — cannot
be drawn independently of the Third Structural Adjustment Credit (SAC II) and the HIPC pro-
cess. For the latter, a close coordination with the IMF team was critical to the successful
dialogue with the authorities along the path to completion point, thus allowing the approval of
this operation.
Other lessons could be drawn from the ICR of SAC III and include:
Formulate a realistic timeframe for the government to meet the triggers of the completion
point
Ensure that the government puts in place a strong focal point/unit to coordinate and moni-
tor the implementation of the completion point triggers and facilitate related post completion
point actions.
This brief was based on Implementation Completion Report No.567, from which more detailed informa-
tion can be obtained.
Persons accessing the Bank’s internal and external websites can find more information on Poverty Reduction by
clicking on Topics.