Cameroon: towards the issuance of a new Eurobond

Cameroon plans to return to the international securities market to raise funds to finance its development. The recovery to growth envisaged this year, combined with better debt conditions under the effect of Covid-19 with reduced interests, seem to offer good timing for the country.

The difficult economic context with the deterioration of commodity prices on the international market calls for effective financing solutions to deal with a recession that is visibly marked over time. According to the International Monetary Fund (IMF), the risk of debt distress is quite high for this country due in particular to the proximity of the 2015 Eurobond maturities over the period 2023-2025. This Eurobond had ended in failure, since the public treasury had finally raised only 375 billion FCFA, (about 693 million dollars) for an expressed need of 750 billion, (1.3 billion dollars) with a interest rate around 10%.

Among the options considered by the Cameroonian government for the sustainability of indebtedness, the refinancing through the issuance of a new Eurobond which would allow, according to the Ministry of Finance, to reduce the risk of indebtedness to a level “Moderate”. This option, it is pointed out, is also favored by the IMF over the other possibilities envisaged, among others, reimbursement from own resources on the basis of provisions and refinancing through domestic bond issues.

However, the implementation of this strategy requires “an exit this year in order to benefit from the better conditions offered by the market due to Covid-19 (low interest rate) which limit the investment opportunities of holders of capital” , the government said. To do this, a prescription will be essential, especially as a “delayed release in 2022 could be subject to a high cost in a context of economic recovery in developed countries”.

According to reliable information, the refinancing of the eurobond could however be confronted with the risk of refinancing government securities such as Bons de Trésor Assimilables (BTA) and Obligations de Trésor Assimilables (OTA). in fact, the projected repayments for fiscal year 2021 amount to 525.38 billion, approximately 971 million dollars, which corresponds to the average monthly repayment of 51.73 billion (94 billion dollars) including government securities and provisions to meet the 2022 Treasury bond maturities. A schedule “in accordance with the agreement signed with the Central Bank to ensure sustainable debt service and benefit from a zero weighting”.

Except that the situation seems complex according to the Autonomous Amortization Fund (CAA), the public structure in charge of the State debt, especially since the Eurobond issued in 2015 represents an important element of the commercial debt. of the country, i.e. 46.6% of this debt and 6.7% of external debt estimated at CFAF 6,681 billion in 2020, or just over $ 12.3 billion. In addition, in accordance with the agreed timetable, from November 2023, Cameroon will have to make a first payment equivalent to CFAF 150 billion ($ 277 million) for the repayment of the main debt. In the meantime, since the issuance of this Eurobond, Cameroon has discharged an annual debt of 42 billion (77 billion dollars) in respect of the interest on these bonds issued on the European market.

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