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BUDGETARY IMPLEMENTATION AT THE END OF SEPTEMBER 2019.

During the first nine months of the 2019 financial year, the State budget was executed in a context marked at the international level by: (i) the slowdown in global economic activity, with a growth rate estimated by the IMF at 3% in 2019 compared to 3.6% in 2018, notably due to the trade war between the United States and its partners; (ii) the resurgence of geopolitical tensions between the United States and major oil-exporting countries, notably Iran and Venezuela; (iii) the uncertainties surrounding the BREXIT negotiations between the European Union and the United Kingdom; (iv) the rise in inflation on an annual basis among some of Cameroon's main trading partners, notably in China and the United States; (v) optimistic growth prospects for sub-Saharan Africa and the CEMAC zone, after the revival of activity observed in 2018.

At the national level, the budget execution context is marked by: (i) the slowdown in national economic activity, with an estimated growth rate of 3.9% in 2019, against 4.2% in 2019 projected during the elaboration of the finance law and 4?hieved in 2018; (ii) the adoption of an amending finance law, notably following the increase in oil production and the increase in disbursements on external financing; (iii) the fire incident which destroyed a large part of the production equipment of the national refinery; (iv) the replacement of the bond issue planned on the financial market with three successful issues of Fungible Treasury Bonds (FTBs) on the BEAC money market, with significant mobilization of resources; (v) approval of the Cameroon file by the IMF Executive Board, following the satisfactory conclusion of the fourth review of the economic and financial programme, with the consequences of the disbursement of IMF and AFD budgetary support in July and August 2019; (vi) preparations for the major national dialogue convened as part of the resolution of the crisis affecting the North-West and South-West regions; (vii) security watch, especially in the Adamawa, Far North, North West and South West regions.

As for the prices of the main export products, they all fell on average over the January-September 2019 period compared to the same period in 2018. Indeed, the average price of cocoa fell by 0.2% to stand at 2 333.3 dollars a tonne. Average oil prices fell by 11.9% to $ 64.7 a barrel. That of aluminium fell by 25.6% to $ 1,597.1 a tonne. Arabica and Robusta coffee prices fell by 12.8% and 13.6% to 97.7 US/cents and 74.2 US/cents per pound respectively. The average price of rubber was 313.1 US cents/kg, down by 11.2%. Average prices for palm oil and cotton fell by 8.5% and 12.1% respectively to $ 549.9 per tonne and 78.9 US/cents per pound.

This context influenced the execution of the State budget, in terms of the mobilization of budgetary resources and the execution of budgetary expenditures. With regard to performance analysis, the resources mobilized are compared with the objectives set for the first nine months of the financial year, while the expenditure executed, which obeys budgetary regulation, is compared with the forecasts of the amending finance law.

I- BUDGETARY RESOURCES

Total budgetary resources mobilized in the first nine months of 2019 amounted to 3 784.7 billion. They rose by 247 billion (+7%) year on year. This increase is attributable to both domestic revenue and loans and donations. Compared to the target for the period set at 3,677.7 billion, they are over 107 billion, representing an achievement rate of 102.9%. This performance is due to loans and donations, which show an achievement rate of 132.5%, thus compensating for the under-achievement in internal revenue. These resources include repayments of 29.1 billion made by SONARA and SODECOTON on loans on-lent by the State.

Internal budgetary revenue was collected to the tune of 2,439.7 billion, showing an increase of 56.7 billion (+ 2.4%) compared to the same period of the 2018 financial year when it stood at 2,383 billion. This increase is mainly observed in oil revenues. The completion rate of internal revenue of 91.6% compared to 2 662.3 billion objective at the end of September 2019.

Oil revenues amounted to 431.7 billion at the end of September 2019, up by 88.1 billion (+25.6%) compared to the end of September 2018, mainly due to the increase in oil production, which offsets the 11.9?crease year on year rate in world oil prices. They comprise 352.6 billion NHC royalty and 79.1 billion oil company tax. Compared to the forecast at the end of September of 379.5 billion, they record an achievement rate of 113.7%.

Non-oil revenues fell from 2,039.4 billion at the end of September 2018 to 2,008 billion at the end of September 2019, showing a decrease of 31.4 billion (-1.5%) between the two periods. Compared to the 2,282.7 billion forecast at the end of September, they are down by 274.7 billion, representing an achievement rate of 88%. This underperformance reflects the achievements recorded in the level of tax and non-tax revenue. Tax revenues are affected by the slowdown in economic activity, whose growth rate is below that adopted during the vote on the finance law, and which is manifested by the decline in the turnover of large companies. The underperformance in non-tax revenue is partly explained by the delay in the budgetary regularization of transferred revenue to education and health during the period under review.

Measures aimed at closing the gaps with a view to achieving the annual forecast for the recovery of non-oil revenues have been implemented since July 2019, but the efforts made are weighed down by the economic conditions which are worse than expected. They relate in particular to the strengthening of tax and customs controls, the improvement of the collection of duties and taxes paid for by the State budget, and the budgetary regularization of transferred revenue. The development and achievements of the main components of non-oil revenue are given below.

Tax revenue collected at the end of the first nine months of fiscal 2019 amounted to 1,324.3 billion compared to 1,353.8 billion in the same period of 2018, a decrease of 29.4 billion (- 2.2%) year-on-year. This drop is mainly due to VAT which decreased by 68.2 billion. It was offset by increases in PIT (+25 billion), excise duties (+8.1 billion) and registration fees and stamp duties (+4.1 billion). Compared to the 1,485.3 billion target for the period, tax revenue was down by 161 billion, representing an achievement rate of 89.2%. This underperformance is mainly observed in terms of VAT, which shows a realization rate of 74.1%, excise duties (91.3%), registration fees and stamp duties (96.5%), and STPP (97.1%). These taxes are affected by the difficulties encountered by economic operators, in particular large companies which are major taxpayers.

Customs revenue amounted to 552.6 billion at the end of September 2019 against 538.8 billion at the end of September 2018, an increase of 13.8 billion (+2.6%) year-on-year. This increase is attributable to import excise duties and import VAT, the collection of which increased by 25.1 billion and 1.2 billion respectively, thus more than proportionally compensating for the drop in import customs duties (-10.8 billion) and exit duties (-2.7 billion). Compared to the 620.4 billion forecast for the period, customs revenue is down by 67.8 billion, representing an achievement rate of 89.1%. The collection of customs revenue is linked in particular to the decline in port activity, which is characterized, among other things, by the 6% year-on-year decrease in the number manifests at the port of Douala.

Non-tax revenues fell by 44.9 billion (-30.5%) and stood at 102 billion at the end of September 2019. Compared to the 150 billion forecast for the period, they were down by 48 billion, representing a completion rate of 68%. This change can be explained in particular by the low yield of all the sub-headings with the exception of the oil transit right, which shows an increase of 6 billion on an annual basis and a realization rate of 116% compared to the objective of the period. The delay in regularization coverage of earmarked education and health revenues also affects these revenues.

Loans and donations disbursed amounted to 1,345 billion at the end of September 2019 compared to 1,154.7 billion at the end of September 2018, representing an increase of 132.5 billion (+16.5%) between the two periods. This increase is due to the acceleration of drawings on project loans, due to the improvement in the absorption capacity of external financing, and of significant issues of government securities on the BEAC money market. Loans and donations have an implementation rate of 132.5% compared to the 1,015.4 billion forecast for the period.

Table 1: Mobilization of budgetary des resources at the end of September 2019

(In billions of CFAF, except otherwise specified)

Source: MINFI/DF

II- BUDGETARY EXPENDITURE

For the first nine months of the 2019 financial year, total budgetary expenditure on the basis of payments amounted to 3,434.4 billion compared to 3,146.7 billion for the same period of 2018, showing an increase of 287.7 billion (+9.1%) between the two periods. This increase can mainly be seen in current expenditure and public debt service. They have an execution rate of 65.9% compared to the 5,212 billion provided for in the amending finance law. These expenses include a balance of 76.3 billion in loans acquired by the State and on-lent to SONARA and SODECOTON, as well as miscellaneous expenses to be adjusted of 117.4 billion.

Current expenditures increased by 183.3 billion (+11.8%) year-on-year to stand at 1,732.4 billion at the end of September 2019. Compared to the 2,451 billion forecast for the year, their execution rate is 70.7%. The evolution and achievements of the main headings of current expenditure are given below.

Personnel expenditures decreased by 0.2% year-on-year to stand at 742.9 billion at the end of September 2019. They were executed to the tune of 72% compared to the 1,032 billion annual forecast.

Expenditure on goods and services increased by 14.7 billion (+2.7%) on an annual basis and amounted to 554.6 billion at the end of September 2019. The execution rate of these expenses was 69.2% compared to the 802 billion provided for in the amending finance law.

Transfer and pension expenses amounted to 434.9 billion at the end of the first nine months of 2019, thus increasing by 170.4 billion (+64.4%) compared to the same period of the previous year, due in particular to the inclusion in the 2019 budget of support for fuel prices at the filling station, unlike the previous year. Compared to the 617 billion planned for the year, they have an execution rate of 70.5%.

Investment expenditure amounted to 903 billion at the end of September 2019 compared to 1 010 billion at the end of September 2018, showing a decrease of 107 billion (-10.6%) between the two periods. Compared to the annual forecast of 1 478 billion, the execution rate of these expenditures is 61.1%. After the acceleration of infrastructure works linked to the AFCON for men's football scheduled for 2021, these expenses are returning to their normal rate of execution. The evolution and achievements of the various headings of capital expenditure are presented below.

Capital expenditure on own resources amounted to 372.5 billion at the end of September 2019, falling by 31.9 billion (-7.9%) year on year. Compared to the forecast for the year, their execution rate is 57%.

Investment expenditure on external financing was 511 billion at the end of September 2019. It fell by 76.3 billion year-on-year (-13%). Compared to the 775 billion in the amending finance law, their execution rate is 65.9%.

Restructuring expenditures amounted to 19.5 billion at the end of September 2019 compared to 18.3 billion in the same period of the 2018 financial year. Their execution rate is 39% compared to the 50 billion annual forecast.

3- Public debt service

Public debt service stood at 722.7 billion at the end of the first nine months of 2019 against 545.9 billion in the same period of 2018, showing an increase of 176.8 billion (+32.4%) in year-on-year. This increase can be seen in the two main categories of public debt. Compared with the 1,283 billion forecast for the year, the public debt service execution rate is 56.3%.

Effective external debt service stood at 379.1 billion at the end of September 2019 against 272.7 billion at the end of September 2018, representing an increase of 106.4 billion (+39%). Its execution rate is 70.1%.

Domestic debt payments increased by 70.4 billion (+25.8%), rising from 273.2 billion at the end of September 2018 to 343.6 billion at the end of September 2019. This development can be explained by the efforts at clearing the conventional debt and domestic arrears. Compared to the 742 billion planned for the financial year, the execution rate of these payments is 46.3%.

III- BASIC BUDGETARY BALANCES

At the end of September 2019, reflecting the revenue and donations mobilized, and the expenditure (base supported) executed, the primary balance stood at -62 billion. The non-oil primary balance stood at -493.7 billion. The outlook remains favourable for compliance with the criterion on the non-oil primary balance of the economic and financial programme, set at -760 billion.

Table 2: Execution of budgetary expenditure at the end of September 2019

(In billions of CFA F, unless otherwise specified)

Source: MINFI/DF