- Cameroon Faces Fiscal Tightening as Fuel Subsidies Widen Budget Deficit — IMF
Cameroon faces slowing economic growth, renewed food inflation and mounting fiscal pressure from fuel subsidies, the International Monetary Fund has warned, as declining hydrocarbon production and electricity-transmission constraints weaken the country’s near-term prospects.
An IMF staff team said the economy expanded by 3.5% in 2025, matching the previous year’s performance, but was expected to lose momentum in 2026.
The services sector remains relatively resilient, but falling oil and gas output and delays in expanding electricity-transmission capacity are restricting broader economic activity.
“Cameroon’s economy grew 3.5 percent in 2025, repeating the performance of the previous year, but prospects are weakening for 2026,” said Christine Dieterich, who led the IMF mission to Yaoundé from September 17 to 30.
The assessment comes as the government confronts the difficult combination of weaker resource revenues and the rising cost of protecting consumers from elevated international petroleum prices.
Average inflation declined to 2.6% through August, giving households some relief after earlier price pressures.
The IMF expects that trend to reverse as food inflation accelerates.
That warning is significant because food accounts for a large share of household expenditure, particularly among lower-income families. Even when headline inflation remains relatively moderate, faster increases in the prices of basic foods can weaken purchasing power and increase demands for government intervention.
Cameroon’s power constraints could add to those pressures. Unreliable or insufficient electricity transmission raises operating costs for businesses, restricts industrial production and can feed into higher consumer prices.
The problem is not simply inadequate generation. Delays in transmitting available electricity to businesses and households limit the economic benefits of investments already made in power supply.
The IMF said fiscal policy weakened during 2025, with the overall deficit increasing from 1.5% of gross domestic product in 2024 to 2.1%.
A further modest deterioration is expected in 2026 as the international oil-price shock increases the cost of fuel subsidies.
Subsidies can protect households and businesses from abrupt increases in transport and production costs. But when maintained broadly for an extended period, they consume public resources that could otherwise fund infrastructure, health, education or targeted social protection.
Cameroon’s status as a hydrocarbon producer does not fully insulate it from this pressure. Declining production reduces export and government revenue, while controlled domestic fuel prices can create substantial compensation obligations for the state.
The result is a fiscal squeeze: hydrocarbon income weakens at the same time as the cost of cushioning fuel consumers rises.
“The outlook remains subject to downside risks, notably international capital market conditions, slow reform implementation, and continued security and climate-related challenges,” Ms Dieterich said.
The IMF continues to classify Cameroon as facing a high overall risk of debt distress.
That assessment does not mean the country is presently unable to meet its obligations. It indicates that adverse developments—including weaker exports, higher borrowing costs or persistent fiscal deficits—could make its debt burden difficult to sustain.
Cameroon is particularly exposed to tighter international financial conditions. Expensive commercial borrowing would raise debt-service costs and leave fewer resources for development expenditure.
The Fund is therefore urging the authorities to rely more heavily on concessional financing, which typically carries lower interest rates and longer repayment periods.
“Sustaining hard-won macroeconomic stability in a shock-prone world requires fiscal tightening, boosting domestic revenue mobilisation, and marshalling concessional financing,” the IMF said.
Fiscal tightening will nevertheless require careful calibration.
An adjustment based mainly on abrupt spending cuts could weaken growth and public services. A more sustainable programme would combine better tax administration, the reduction of poorly targeted subsidies, stronger control of public spending and protection for essential social and infrastructure expenditure.
The IMF called for faster structural reforms to improve governance around public expenditure, strengthen the management of state-owned enterprises and deepen the financial sector.
State-owned enterprises can create substantial fiscal risks when they accumulate debt, operate inefficiently or depend on repeated government support.
Improving their governance would require clearer performance targets, audited financial statements, transparent subsidies and stronger oversight of borrowing and contingent liabilities.
Public-spending reform is equally important. Cameroon needs to ensure that borrowed funds and domestic revenue are directed towards projects capable of raising productivity rather than merely increasing recurrent expenditure.
Financial-sector deepening could also improve access to credit for businesses and reduce dependence on government and foreign financing. But expansion must be accompanied by effective supervision to prevent weak lending standards and rising non-performing loans.
The mission was conducted as part of Cameroon’s Post-Financing Assessment, rather than negotiations for a new IMF-supported programme.
Such assessments apply to countries that hold IMF credit above specified thresholds but are not operating under an IMF lending arrangement or staff-monitored programme.
The process examines whether government policies and the broader macroeconomic framework are consistent with medium-term economic viability and the country’s capacity to repay the Fund.
The IMF team met representatives of the government, the regional central bank, commercial banks, civil society, development partners and the private sector.
Staff will prepare a report based on the mission’s preliminary findings. Subject to management approval, Cameroon’s assessment is expected to be considered by the IMF Executive Board in December.
The review places Cameroon in a delicate position. Its economy is still growing and inflation has eased, but the foundations supporting stability are becoming less secure.
Declining hydrocarbon output weakens a traditional source of revenue and foreign exchange. Power constraints obstruct diversification, while fuel subsidies and debt vulnerabilities restrict the government’s policy options.
Cameroon’s challenge is therefore not merely to reduce its budget deficit. It must replace declining resource income with a broader revenue base, improve the productivity of public spending and accelerate reforms capable of generating growth outside the hydrocarbon sector.
Without that transition, fiscal tightening may stabilise the immediate numbers while leaving the underlying economy vulnerable to the next external shock.
