The Economy:

For a quarter-century following independence, Cameroon was one of the most prosperous countries in Africa. The drop in commodity prices for its principal exports--oil, cocoa, coffee, and cotton--in the mid-1980s, combined with an overvalued currency and economic mismanagement, led to a decade-long recession. Real per capita gross domestic product (GDP) fell by more than 60% from 1986 to 1994. The current account and fiscal deficits widened and foreign debt grew.

The government embarked upon a series of economic reform programs supported by the World Bank and International Monetary Fund (IMF) beginning in the late 1980s. Many of these measures have been painful; the government slashed civil service salaries by 65% in 1993. The CFA franc--the common currency of Cameroon and 13 other African states--was devalued by 50% in January 1994. The government failed to meet the conditions of the first four IMF programs.

In December 2000, the IMF approved a 3-year Enhanced Structural Adjustment Facility (ESAF) program worth $133.7 million to reduce poverty and improve social services. The successful completion of the program will allow Cameroon to receive $2 billion in debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. Pursuant to the initiative, the IMF is requiring the Cameroonian Government to enhance its macroeconomic planning and financial accountability; continue efforts to privatize the remaining non-financial parastatal enterprises; increase price competition in the banking sector; improve the judicial system; and implement good governance practices.

In late August 2003, the Board of Directors of both the IMF and World Bank approved Cameroon's Poverty Reduction Strategy Paper (PRSP) with high marks. The paper integrated the main points of the Millennium Development Goal, which outlined Cameroon's priorities in alleviating poverty and undertaking strong macroeconomic commitments in the short and long term. By late summer 2004 Cameroon had met most of its PRGF targets. A lackluster performance in the fiscal arena, however, led the country off track and resulted in Cameroon not achieving the HIPC completion point. Negotiations are currently underway to create a new program so Cameroon can eventually qualify for HIPC debt forgiveness. The privatization program has lagged because of legal and political obstacles; difficult negotiations with the government on issues such as sale price, financial disclosure, tax arrears, and overlapping debts; and in some cases, a lack of willing buyers.

France is Cameroon's main trading partner and source of private investment and foreign aid. Cameroon has a bilateral investment treaty with the United States. In addition to existing investment in the oil sector, U.S. investment in Cameroon, estimated at over $1 million, is progressively growing due primarily to both construction of the Chad-Cameroon pipeline and cobalt and nickel mining.