During the 2021 finance year, Cameroon will once again turn to the capital market to fund its budget deficit (estimated at XAF1,481.9 billion in the 2021 draft bill being reviewed by parliament).
In addition to project loans (XAF703.4 billion) and budget support (XAF260 billion) to be sought from international donors, the Cameroonian government intends to raise XAF452 billion on the capital market, according to official sources.
Specifically, the country will raise XAF350 billion by issuing public securities and source XAF120 billion via direct bank loans. As far as public securities are concerned, the government will probably turn to the money market of the Bank of Central African States-BEAC (which has become its preferred market in recent years) for the issuance of long and short-term securities. However, it could also turn to the Douala-based unified stock exchange (BVMAC) for short-term securities, even though in 2019, it started shifting most of its focus to long-term securities.
Lobbying from the BVMAC
According to our sources, Minister of Finance Louis Paul Motazé recently received officials of the Central African Securities Exchange (BVMAC). During the visit, they offered more attractive conditions for Cameroon’s fundraising on the BVMAC. Indeed, over the past two years, the country’s public treasury kept away from the said market because of the costs deemed prohibitive, the less flexible repayment terms, and the longer execution time.
Apart from the issuance of public securities, the government will solicit credit institutions for direct loans amounting to XAF102 billion. Let’s note however that the said institutions will already be solicited indirectly for public security issuance operations. Indeed, some of them are approved as Treasury Securities Specialists (SVTs) on the money market, or as stock exchange intermediaries on the unified financial market.
The XAF102 billion of direct loans the government is planning to raise from banks is barely one-tenth of the funds public administration and decentralized local authorities have in the local banking system (Ed.note: the funds were estimated at about XAF976 billion at end-August 2020).
“When the Cameroonian state goes to the banking market, it is in fact to borrow its own money,” an official from the Ministry of Finance comments ironically.