Economic Crisis and Structural Adjustments
Despite this apparently promising start, by the mid-1980s, a combination of factors had led Cameroon into economic crisis. These included (1) falling prices for oil and key agricultural exports and rising prices for imports; (2) overly rapid expansion of infrastructure projects and civil service/ parastatal employment; (3) high expenditures on the military; (4) sub- par growth in agriculture due to drought and declining investment in agricultural assistance in favor of other investments; (5) growing operating deficits in government and the inefficient parastatals; and (6) the siphoning off of development funds and parastatal revenues through corruption. The shortfalls were initially covered by borrowing from abroad, some of it for development projects encouraged by international agencies. By the mid-1980s, however, rising government expenditures and exploding debt service requirements could no longer be covered by tax collections and oil revenues. The growing deficits eventually rendered the government unable to pay civil servant salaries and made the government-operated marketing boards unable to pay farmers for their crops. There was also a collapse of the banking sector, which was burdened by unsecured loans to influential persons. Exports dropped precipitously, leading to a growing trade imbalance and massive capital flight. Tax evasion proliferated, and GDP fell rapidly, with per capita income declining almost by half by 1992. As a result, many former parastatal and government employees moved to the informal sector.
Faced with these difficulties, Cameroon’s government reluctantly accepted the assistance of the World Bank and the IMF and complied, albeit with considerable foot dragging, with a program of mandated structural adjustments required to obtain additional loans. The government was required to sell off or close down some parastatals and to cut the budgets and improve the efficiency of those it retained; however, the results in terms of parastatal profitability were, at best, mixed. The government also drastically cut civil service employment—including purging many who were not really working—but without cutting the military and police budgets and personnel. It also reduced civil service salaries and perquisites. Cameroon was also pressured to increase production of cash crops at the expense of food production and to devalue its currency and increase import duties to promote exports and reduce imports. It was also forced to eliminate some of the agricultural marketing boards and cooperatives that had supplied farmers with agricultural supplies and purchased export crops at guaranteed prices and to drastically cut spending on rural development, education, health care, and infrastructure in order to finance debt service. Largely unsuccessful efforts were also made to improve tax collections by anticorruption campaigns.
The results of these policies included growing unemployment and poverty, increased food imports, malnutrition in some areas where farmlands had been converted to cash crops, some return migration from the cities to rural areas, increased reliance on subsistence farming and the informal economy by people who lacked other employment, clearing additional land for agriculture, decaying infrastructure and breakdown of public services, increased school fees and lower percentages of children in school, increased reliance on local cooperative credit associations rather than banks, and increased smuggling. Indeed, the country regressed on almost all components of the human development index. Despite some debt rescheduling and forgiveness, Cameroon remained burdened with foreign debt.
Structural adjustments created an existential crisis for many citizens, who not only lost income but also had to pay more for health care and education, reducing their discretionary income. The reductions in government expenditures in almost every area, including health care, education, housing, and environmental projects, placed additional burdens on citizens. The reductions also made the projects of international NGOs and the flow of funds from abroad to indigenous NGOs increasingly crucial, contributing to the growth of the NGO sector. At the same time, declining employment opportunities in government and other formal sector jobs increased the pool of well-educated persons for whom forming or seeking employment with an NGO might be an attractive option.
After significant declines in GDP, slow economic growth of 3-4 percent annually did resume in the early years of the twenty-first century; however, the rate of growth showed a slightly declining trend between 2003 and 2007 (IMF, 2010), and the country failed to make significant strides against its heavy debt burden, unemployment, and poverty (Mentan, 2003; Endeley and Sikod, 2007; CIA, 2008). Even slow growth was temporarily interrupted by the effects of the recent global recession, which slowed growth significantly (CIA, 2009, 2010). Domestic unrest has also hindered growth. In 2008, for example, a taxi drivers’ strike grew into widespread protests centered in urban areas against the high cost of living, high unemployment, and other economic problems (Njimanted, 2010). Although the strike action was brief and quickly brought under control by government forces and concessions to some of the strikers’ demands, such events led foreign investors to see Cameroon as having a poor investment climate. Fortunately, slow growth has resumed over the past two years (CIA, 2014).