Cameroon - National assembly passes bigger 2016 fiscal budget

Cameroon’s government tabled a larger draft fiscal budget for 2016 on December 18. The draft bill will now be sent to the Senate for final approval. According to Reuters, the planned expenditure of 4,2 Trillion FCFA will be 13.5% larger than this year. Among the budget’s principal funding sources are oil revenues, non-oil tax revenues and project-related loans. Although the international oil price has slumped since mid-2014, Cameroon has managed to increase oil revenues somewhat during 2015 due to expanding hydrocarbons production. Moreover, the national budget will continue to be weighed down by the security threats posed by Boko Haram in the extreme north as Cameroon’s defense allocation is expected to increase by 20 Billion FCFA in 2016 to total 229.73 Billion FCFA. In turn, public investment will be increased by more than 375 Billion FCFA, reaching 1,526 Trillion FCFA (36% of the total budget) in 2016. This spending will be focused on infrastructure and the development of stadia related to the African Cup of Women’s Football in 2016. Finally, the authorities slashed the operating budget by 178.7 Billion FCFA for next year, as an attempt to contain the fiscal deficit and make greater room for infrastructure projects. WHY DO WE CARE?  The budget announcement comes at a time where most economies in the Central African Economic Community (CEMAC) region are in a precarious position – balancing their respective governments’ fiscal position with national public investment plans. In fact, the Banque des Etats de l’Afrique (BEAC) expects regional economic growth in 2015 to come in at less than 3%. Nevertheless, the International Monetary Fund (IMF) recently lauded the resilience of the Cameroonian economy, but also urged that tighter future budgetary discipline will be necessary to maintain robust fiscal finances. We expect Cameroon’s fiscal deficit to grow from 5.1% this year to 5.6% in 2016 as capital-related imports increase and oil revenues remain under pressure due to structurally lower international oil price. We are also of the opinion that an expected recovery in the international oil price and robust non-oil sector growth will aid Cameroon's fiscal revenue growth over the medium term balancing out import growth so that the fiscal deficit starts to narrow from 2017 onward. Analyst: Calumet Links