Cameroon Gov’t Discussing Massive Salary Cuts as Treasury Runs Dry
The ravaging effect of the novel coronavirus pandemic is leaving several economies in the world in disarray. In the case of Cameroon, Covid-19, sources at the Ministry of Finance have hinted Timescape Magazine, has made an already bad situation worse.
Timescape Magazine’s sources reveal that the ongoing wars in the once independent state of Southern Cameroons also known as Ambazonia and against boko haram in the Far North have drained the country’s resources to the point “paying salaries at the end of each month is becoming a big problem and this has been so for a while”.
The source notes that with the advent of the coronavirus pandemic, “…our finances got worse as the lockdown prescribed in the early days as palliative measures starved the treasury of much needed value added tax (VAT) resources, very low customs revenue and a huge dip in the cost of a barrel of oil on the international market whereas we pegged the barrel of oil at $54 in the 2020 state budget and today the price has fallen so badly and even tumbled below $20 at one point”, and this forced the government to hurriedly abandon the Covid-19 containment measures.
As international borders remain close in over half the countries of the world, reducing international fluxes to the bear minimum, sectors heavily dependent on importation in Cameroon are still under stress, despite the relaxation of the Covid-19 containment measures, “…this leaves the VAT collection at an all-time low. Bars are open, hotels and other leisure businesses, but the boom is gone due to low liquidity and fear in some cases. You must also understand that with the fire incident at SONARA, we now import a huge proportion of fuel and other related products”, a Senior Official at the Ministry of Finance in Yaounde hinted.
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“Paying salaries has been a huge challenge and things were about to get out of hands just before the IMF approved a loan of $226 million under Rapid Credit Facility (RCF) to enable us arrest the situation. We would not be able to pay salaries in May if the money did not come in and quickly too”, the Senior Official who spoke on grounds of anonymity for fear of reprisals revealed.
On May 4, the IMF Board approved a disbursement under the RCF of US$ 226 million to support the authorities’ efforts in addressing Cameroon’s urgent balance of payment needs stemming from the Covid-19 pandemic and the terms of trade shocks from the sharp fall in oil prices; The IMF also approved the authorities’ request for an extension of the ECF arrangement, due to expire on June 25, 2020, to September 30, 2020 with a rephasing of access.
The facility was made available because the Cameroon government let the IMF know that: To mitigate the impact of the pandemic, it had taken several actions to contain the spread of the pandemic, increase health spending, strengthen existing social safety nets and provide support to affected businesses and households.
The project presented by Cameroon in requesting the facility prompted Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair to issue the following statement:
“Cameroon is facing serious challenges from the twin Covid-19 pandemic and terms of trade shocks. Weak global demand, depressed commodity prices, and domestic containment measures weigh on the outlook, and are causing significant adverse economic and social effects. The shocks have given rise to substantial fiscal pressures and an urgent balance of payments need.
“The authorities are taking decisive actions to limit the spread of the virus and its economic and social impact. They have implemented strong crisis containment and mitigation measures and are scaling up spending to bolster their health response. Additional measures currently under consideration will provide support to vulnerable households and firms.
“Given the sudden and pressing nature of the shocks, accommodative fiscal and monetary policies are warranted to mitigate the human and economic impact of the outbreak. However, the authorities remain committed to their reform agenda under the ECF arrangement. They plan to undertake adjustments to return to the fiscal consolidation path once the crisis abates to safeguard debt sustainability and ensure a strong recovery”.
Uncertain Future Despite IMF Bailout
In the last paragraph of his statement, Mr. Mitsuhiro made clear: “IMF emergency financing under the RCF will support the government’s efforts to mitigate the impact of the twin shocks. Additional assistance from development partners will be critical to fill the remaining financing need. Strict budgetary controls and transparency will be needed to ensure that the assistance under the RCF meets its intended objectives.” This was a warning for tougher days ahead, “…and those tough days are here; we can no longer meet our budgetary engagements, we can no longer service both the internal and external debt and our debt ceiling is getting too high by the day”, the Finance Ministry Official in Yaounde emphasized.
A director at the office of the Prime Minister of Cameroon who required anonymity to freely discuss the economy told Timescape Magazine Friday May 22 that:
“The economy of this country is now on life support, we have exhausted all options and if the war in the Anglophone regions does not end as fast as possible, things will definitely go out of hands. The government has already decided that in the months ahead, salaries of civil servants would be slashed by about one third as their own contribution to the war effort. This is necessary because right now soldiers are threatening a mutiny since money is no longer flowing as required. This salary cuts are likely to occur in September of October 2020 at the latest”.
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He regretted that the government had not taken appropriate measures to foster dialogue in the early days of the “Anglophone uprising and today we are in a fix. We have applied all techniques, including even outright bribery of some of the leaders and nothing has changed. As we speak, our budgetary lines have already been cutdown by at least 80%: most of our offices are now without supplies and some vote holders are owing their suppliers. The offices can no longer function properly, there is no material to work with”.
The information relating to the cuts in recurrent budget expenses was confirmed by other Senior officials at the ministries of External Relations, Communication, Economy, Planning and Regional Development as well as the Supreme State Audit Office. One of the officials lamented that: “Some of us had already engaged those budget lines and handed out contracts to service providers, some of whom already delivered and were just waiting for payment. Now, we are lost as to the way forward, I fear some of us may end up in detention centres because of that untimely budget slash”.
The Covid-19 pandemic is continuing its devastation of some of the biggest economies of the world, marked by bankruptcy declarations in key sectors like transportation.