Cameroon’s Economist and a major critique of the government in place, Dieudonné Essomba has once more sounded the alarm bell, warning that the current fuel shortages presage darker days for a country that will not be able to escape World Bank-imposed Structural Adjustments.
“With an external debt of CFA F 8,000 billion in foreign currency, against CFA F 2,500 billion in revenue, which is burdened by a CFA F 1,000 billion trade deficit that is constantly increasing, how do we avoid another structural adjustment?” Essomba wonders.
He says these figures are compounded by foreign exchange reserves which are practically null, and “for a mere CFA F forty-nine billion in foreign currency, the IMF is leading the Government by a thread.”
The IMF, he says has instructed the government to end fuel subsidies. In other words, the IMF wants the government to now collect the taxes it has been waiving.
“The aim is not to replenish the State’s coffers, but to give the money to the IMF to pay off the monstrous debt Cameroon owes to its foreigner partners,” Essomba states.
He blasted government officials for often giving the impression that government gets money from other sectors to subsidize fuel.
“Some Cameroonians do not understand what is happening with fuel and the government’s communication only adds to the confusion,” he says.
“Things are quite simple. The government subsidizes fuel, which is not wrong. However, this subsidy is not a transfer of resources from other sectors to keep prices low. It is simply a waiver of taxes that the government would normally have levied on the fuel sector.
“For example, when a minister says that Cameroon has paid subsidies of CFA F three hundred billion, he is letting the message get out that the Directorate General of Taxes would have collected the money from companies to pay for fuel, which is not true. This simply means that the taxes that the state should have collected on fuel are three hundred billion. This is a shortfall, not a transfer of resources collected in another sector,” Essomba clarifies.
He explains that the current fuel shortages in Cameroon are because the government does not have enough foreign currency.
“And this is where we reach the tragic consequence of our macroeconomic governance, namely the inability of the country’s managers to distinguish between the CFA F and foreign exchange. For them, the fact that our banks have much liquidity in CFA F and that the state can access this money through the issuance of bonds is proof that the country is doing well.
However, what is important here is that it’s the foreign currency that allows us to buy abroad and not the CFA F. Even though the CFA F can be converted into the Euro, which is a foreign currency, this conversion is limited to the stock of currency at BEAC. As soon as requests for conversion of the CFA F exceed our stock of foreign currency, the conversion operation is immediately transformed into an external debt”, the Economist asserts.
He explained further that Cameroon’s external debt is constituted in two ways. It can either be in a contractual manner when the government takes money from for example China to build a dam, “This is the most visible debt, but the least dangerous.”
The second is functional, through accumulated current account deficits. He stresses that “In other words, this happens when we import too much and export too little because obviously other countries are not our slaves to give us their goods for free.”
He says Cameroon’s leaders do not have a clear grasp of these basic notions, and questioned just how Cameroon could ever envisage development based on contractual actions “without managing or reducing or even blocking the functional debt fed by the current account deficit? And how could anyone believe in the sustainability of such a development model? “
He says it’s the failure to understand these basic economic mechanisms that has led Cameroon to its current mountain of debt, and for which the IMF now requires Cameroon to begin to collect taxes on fuel to repay.
“I laugh at these little jokers who shout everywhere that the government cannot accept IMF terms. Is the government going to do what it wants? By playing the fool and hence not getting the money from the IMF we will find ourselves without fuel at all,” he emphasizes.
Noting that the current fuel prices are not a one-off, he says Cameroon must follow through the “terrible instructions of the IMF, who are bailiffs and auctioneers for defaulting countries (like Cameroon).”
And then a more ominous warning: “Cameroonians must therefore be prepared to lead the miserable life of a pauper for another twenty years. Contrary to what they believe, they will be subjected to price increases, falling incomes, especially public service salary downsizing and the sell-off of the few state enterprises that survived the first structural adjustment, and finally, devaluation.”
“There is absolutely nothing that can save us from this miserable fate. And contrary to the bluster, the Cameroon government can and will do nothing,” Essomba concludes.