World Bank Advises Cameroon to Collect More Tax and Spend Better
Cameroon, the second-biggest economy in Central Africa, needs to improve tax collection and the quality of its public spending to spur growth, according to the World Bank.
The oil producer reduced its fiscal deficit by about 5 percentage points over six years to just 1.1% of gross domestic product in 2022, mainly by cutting public investment, the multilateral lender said in a report. But well-targeted spending is necessary to stimulate growth, it said.
“Cameroon’s fiscal consolidation was expenditure-driven, resulting in low levels of public expenditures that make it challenging to provide adequate public services and invest in public infrastructure,” it said.
The economy needs a medium-term revenue strategy to improve the effectiveness of its tax collection and spending. Social sectors like health and education have suffered from both under-investment and “inefficiencies,” according to the report.
At the same time, direct taxation has remained low and stagnant, it said. International trade taxes and levies from property and forests — which cover a third of Cameroon’s territory — have “underperformed,” leaving an over-reliance on value-added tax, according to the World Bank.
High US interest rates have made borrowing in dollars more expensive, pushing many governments to look inward. In countries like Nigeria and Kenya, fiscal measures such as introducing new taxes and scrapping subsidies have spurred popular protests.
But despite tight financing conditions, Cameroon sold $550 million of dollar bonds last month, priced to yield 10.75% through a private placement, likely indicating that the country needed urgent financing.
