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Economy - Development

Most of Cameroon's debt cancelled

afrol News, 19 June - Cameroon will see its external debt reduced by almost US$ 3.5 billion (euro 2.8 billion) after its main creditor countries met in Paris to discuss the country's economic development. The Cameroonian government was awarded for its growth oriented economic reform programme, focusing on privatisation efforts.

Polycarpe Abah Abah, Cameroon's Minister of Economy and Finance, had flown in to Paris to meet representatives of his government's main creditor countries, organised in the so-called Paris Club. Together, they agreed on a major package aimed at substantially reducing and restructuring Cameroon's significant debt burden.

In order "to contribute to restore Cameroon's debt sustainability," the creditor countries decided to cancel US$ 921 million (euro 730 million) in nominal terms. The amount represents the Paris Club's share of world-wide efforts in the framework of the enhanced HIPC Initiative, a programme that is to reduce the debt burden of Heavily Indebted Poor Countries (HIPCs), among which Cameroon is counted.

The creditor nations however agreed to go even further. They committed - on a bilateral basis - to grant additional debt relief to Cameroon so that the stock of the debt owed to Paris Club creditors would be reduced by a further US$ 2554 million (euro 2026 million) in nominal terms. "As a result of this agreement and additional bilateral assistance, Cameroon's debt to Paris Club creditors will be reduced from US$ 3502 million to US$ 27 million," the Paris Club concluded in a press release.

The representatives of the Paris Club creditor countries now are to present these recommendations to their respective governments, who in time will approve the debt reductions formally. The main creditors include countries such as Canada, France, Germany, Spain, the UK and the US. Governments always follow up on the recommendations, but normally are not in a hurry to formalise the debt reductions agreed upon.

This major Paris Club debt reduction came after Cameroon for years has followed the economic policy recommendations given by the International Monetary Fund (IMF) and the World Bank. Under the IMF's programmes, Cameroon had shown "determination to implement a comprehensive poverty reduction strategy and an ambitious economic programme providing the basis for sustainable economic growth," creditors praised Minister Abah.

To qualify for the debt relief, the Cameroonian government first had to reach a set of benchmarks set by the IMF, including the setting up of so-called poverty-fighting programmes that aim at fast economic growth through privatisation. Thereafter, Cameroon in April this year reached the completion point under the IMF's enhanced initiative for the Heavily Indebted Poor Countries, resulting in a World Bank debt reduction.

While the government of Cameroon now can look forward to a strongly reduced debt burden and thus allocate less budget funds for interest rates and down-payments, the IMF's and creditor nations' influence over its national budget remains intact. Also the debt cancellation was tied to a set of conditions.

"Cameroon committed to allocate the resources freed by the present treatment of the debt to priority areas identified in the country's poverty reduction strategy," the Paris Club informed. The national poverty reduction strategy in turn is a policy widely defined by the IMF and indirectly the creditor nations.

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