Eurobond Refinancing: Cash-Strapped Cameroon Touts Eurobond Success as Growing Intl Confidence in "Our Resilient Economy”

On June 30, 2021, Cameroon’s Finance Minister excitedly announced that the government had succeeded in carrying out an operation to refinance a CFA F 450 billion Eurobond issued in 2015.

The said bond was to be repaid over a ten–year period, on an interest rate of 9.5%. Judging that rate to be too expensive, the government decided to re-negotiate a refinancing operation that yielded the desired results: the country got CFA F 450 billion in Eurobonds to refinance the initial bonds, this time at a much-reduced interest rate of 5.95% over 11 years.

“So, this process of re-scheduling was also aimed at reducing the interest,” says the Director-General of the Treasury, Sylvester Moh Tanghongho.

“Cameroon has made a welcoming return on the international capital market, this first semester of 2021,” Finance Minister Louis Paul Motaze announced.

Moh Sylvester, Cameroon's Director-General of the Treasury, Financial and Monetary Cooperation (C) Business in Cameroon

Even more exciting, the Treasury Boss tells Timescape Magazine, is the fact that Cameroon was soliciting just CFA F 450 billion, but investors were offering a whopping CFA F 1481.15 billion.

The government says it nevertheless borrowed only what it initially set out to get but rejoiced at the fact that so many people were excited about lending to Cameroon.

“The ordinary Cameroonian understands that we went for CFA F 450 billion and came back with CFA F 1,481 billion which is not the case,” Mr. Moh says.

“Actually, the investors after going through our documents and the meetings that we had headed by the Minister of Finance in Paris, all the discussions that we had, all the investors concluded that we had a very resilient economy and that they had to give us CFA F 1,481 billion.”

“But we took just what we came to take and that was CFA450 Billion,” Mr. Moh says. He adds that the Covid-19 pandemic, combined with security challenges to the north and west of the country, as well as falling oil prices all, did affect the country’s economy, reducing growth to 0.7%, yet this wasn’t as bad as the projected negative growth rate of -2%.

“So, in short, the resilience of our economy as can be testified by the fact that while most countries were in recession in 2020 because of the Covid-19, Cameroon came out with 0.7 percent which was quite a very big performance. Most countries all over the world, particularly developed countries, came out with minus rates,” Mr. Moh emphasizes as he tried to justify the renewed interest by investors in Cameroon.

He notes that such interest has also been boosted by Cameroon’s capacity to repay its debts regularly.

SONARA, Cameroon's lone Oil Refinery located in the restive Southern Cameroons went up in flames (C) Arab News

“Since 2016, we have never failed, nor have a delay of even one day in servicing the interests. So, it gave a lot of confidence to the investors.”

He recalls that investors were even more impressed by the fact that Cameroon had bought back 80% of the debt and will have to service the remaining 20% (some CFA F 30 billion) over which Cameroon had even bought back 80% of the debt over 2023, 2024, and 2025.

Mr. Moh waves off criticism that Cameroon was becoming too indebted, arguing that the country’s debt burden currently stands at around 42% of the GDP, way lower than the 70% ceiling set for CEMAC member states.

“And I also read that most developed countries have debt levels that are above 100 percent.

You have countries that are more than 200 percent. We cannot go citing the countries, but you can read them just by going into google you will see the level of indebtedness with respect to the GDP of most of the developed countries.  Actually, most countries depend on debt. It depends on how the debts are used, and that is where the whole debate is,” he points out.

“The debts that are contracted have to be used in projects that are profitable, that can create jobs, that can generate revenue,” Mr. Moh explains.

He says the Eurobonds issued in 2015 was to provide partial funding for President Biya’s Three-year Emergency Plan (PLANUT) aimed at accelerating growth.

The F CFA 925 billion plan prioritized seven areas of national life. These are urban planning, housing, health, agriculture, livestock, road infrastructure, water, energy, and security.

Mr. Moh says the Eurobond contracted in 2015 has ensured that significant progress is made in the effort to live up to the promise of the Presidential plan.

The country's agro-industrial sector continues to take a hit as the Southern Cameroons War of independence has mostly paralyzed the Cameroon Development Corporation, CDC- the second major employer after government. 

“If you look around us here you will see police stations that have been constructed at various places. It’s part of the money from the Eurobonds and many other sectors, even hospitals. You have Referral Hospitals that are being constructed in the regions. We did it with money from the Eurobonds and part of it went to restructuring SONARA, unfortunately, we had that fire incident. So, we paid for a lot of projects with Eurobonds money when we got them,” he argues.

He said Cameroon can make maximum benefit from the positive outlook by coming up with viable, job-creating short-term projects.

“Even if we want a billion CFA F, foreign investors would be ready to accompany us.”

And Cameroon’s economic outlook looks promising, according to the African Development Bank. As vaccinations pick up across the country and the gradual extinction of Covid-19 takes shape, “the Cameroonian economy, buoyed by the recovery of the world economy and international trade, could return to pre-pandemic growth levels as early as 2021. Growth should reach 3.5% in 2021 and 4% in 2022,” states the African Development Bank.

“The external and internal account balances would also improve substantially. Inflation will be 2.3% in both 2021 and 2022, below the 3% standard established by Central African Economic and Monetary Community,” the AfDB statement reads.

But there remain lingering fears that this optimistic outlook could be undermined by a worsening of the country’s security situation, embezzlement and corruption, and hesitancy to the Covid-19 pandemic.