Fitch Ratings has affirmed Cameroon’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a Negative Outlook.

Key Rating Drivers

Ratings Affirmed; Negative Outlook: Cameroon’s ratings are supported by resilient GDP growth, a manageable debt maturity schedule and our expectations that moderate debt levels will be supported by non-oil revenue mobilisation and spending restraint. This is balanced against low GDP per capita, weak governance indicators and persistent security challenges. The Negative Outlook reflects political risks related to potential succession issues and structural weaknesses in public finance management (PFM), evidenced by weak liquidity management, late external debt payments and accumulation of domestic arrears.

Political and Potential Transition Risks: Fitch assumes the 92-year-old President Paul Biya, in power since 1982, will win the presidential election, scheduled for October 2025, guaranteeing political and policy continuity (which underpin bilateral support). Nevertheless, social and political tensions could increase in the run-up to the election, increasing concerns about political stability. The lack of a succession plan and political divisions and rivalries within the ruling party increase the risk of an eventual disorderly transition of power.

Persistent PFM Challenges: PFM weaknesses weigh on the rating, as evidenced by recurrent late external debt service payments (although settled within grace periods). It was revealed in July 2024 that Cameroon was late in making external debt payments to one commercial creditor in March 2024. Fitch understands that there have since been additional delays in non-commercial external debt payments, all of which were cured within the grace periods. Moreover, the World Bank’s budgeted financing for 2024 (USD200 million, 0.4% of GDP) was postponed to 1Q25 due to delays in implementing structural reforms.

Domestic Arrears: The authorities have made some progress in reducing domestic arrears, clearing XAF732 billion (2.3% of GDP) in 2024 using an Afreximbank loan (0.5% of GDP) and external commercial borrowing (1.9% of GDP in 2024, from 0.1% in 2023). Total arrears stood at XAF342 (1.1% of GDP) at end-2024, comprising entirely of longer-dated arrears (90 days or over), which are incorporated in our domestic debt figures. In 2023, longer-dated arrears stood at only 0.5% of GDP. We see continued risk of arrears accumulation, given weak public finance management.

Tight Financing Flexibility: The regional market remains tight, with Congo (CCC+) and Gabon (CCC) recently implementing local-currency debt exchanges to lengthen maturities in a context of liquidity pressures. Cameroon’s market access remains stronger than other countries in the regional market and it faces an easier amortisation profile. In 2024, Cameroon’s regional local-currency marketable debt was 6.1% of GDP in 2024, unchanged from 2023, with only 1.6% of GDP amortising within one year

We expect Cameroon’s funding needs will be covered through the IMF programme, ending June 2025, and official creditor support tied to the completion of the reviews (including the World Bank loan). Our baseline assumes strong support from official creditors will continue over the medium term, with a potential new IMF programme in 2026, the lack of which is a key risk for the financing plan.

Manageable Maturity Schedule:We estimate fiscal financing needs will decline to 4.7% of GDP in 2025 (from 5.7% of GDP in 2024), owing to a narrower cash deficit and lower arrears repayment. We project fiscal financing needs will increase to 5.4% of GDP in 2026 as domestic debt amortisation will amount to 2.6% of GDP from 2.1% in 2024. External debt amortisation will increase from 2.0% of GDP in 2024 to 2.1% in 2025 and 2.2% in 2026, including Eurobond payments at 0.1% of GDP per year.

Oil Revenue Drops: The fiscal deficit on a commitment basis deteriorated to 1.4% of GDP in 2024, from 0.6% in 2023, on a drop in oil revenue, from 2.9% of GDP in 2023 to 2.1% in 2024. We expect the fiscal deficit will remain at around 1% in 2025-2026. In our baseline, oil revenues will continue to decline due to lower oil prices and production, but non-oil revenues will gradually improve through revenue mobilisation measures, tax exemptions reduction, and improvement in tax and customs administrations.

Larger Cash Deficits: The fiscal deficit on a cash basis widened from 0.4% of GDP in 2023 to 3.5% in 2024, on a larger commitment fiscal deficit and net repayment of arrears. We expect the cash deficit will stabilise at 1.5% of GDP in 2025 and 2026, below the forecast 3.2% ‘B’ median, although the pace of net repayment of arrears casts uncertainty on the fiscal trajectory. There are risks of fiscal slippage from security and election-related spending over the forecast period.

Debt Lower Than Peers: We project government debt will continue to decline, although at a slower pace than in our previous forecast. We project government debt will decline from 41.7% in 2024 to 40% of GDP in 2026, below the ‘B’ median forecast of 50.6%. Our debt metrics include arrears (1.1% of GDP at end-2024), public guaranteed debt (less than 0.02% of GDP), and the debt of SONARA (1.9% of GDP).

Resilient Economic Growth: Real GDP growth increased to 3.9% in 2024 from 3.2% in 2023, and we forecast it will remain broadly stable at 3.9% in 2025 and 4.1% in 2026 (‘B’ median forecast of 4.6%), driven by agriculture, construction, and the coming on-stream of infrastructure and electricity projects. Downside risks to growth stem from geopolitical uncertainties, leading to renewed commodity price volatility, and inflationary pressures. The 2025 presidential election threatens reform implementation and increases security and social risks.

Narrowing CAD: We forecast the current account deficit (CAD) will continue to narrow to 3% of GDP in 2025 and 2026, from 4.1% in 2023 and an estimated 3.4% in 2024, owing to higher cocoa prices supporting exports. In 2025-2026, the decline in oil production will be offset by the implementation of the import substitution policy, while exports will increase thanks to stronger agricultural production.

ESG – Governance: Cameroon has an ESG Relevance Score (RS) of ‘5’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model. Cameroon has a low WBGI ranking at the 16th percentile, reflecting the absence of a recent track record of peaceful political transitions, weak institutional capacity, uneven application of the rule of law, a high level of corruption and persistent security issues.

Culled from Fitch