Aid and other Resource Flows to Cameroon and other CEMAC countries

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Aid and other Resource Flows to Cameroon and
other CEMAC countries
Sunday A. Khan Faculty of Economics and
Management The University of Yaounde II
Cameroon
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Outline

• Introduction
• Relative importance of RIFs to CEMAC
• RIF Volatility Some Comparisons
• Conclusion and Implications

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Introduction

• Discussions on RIFs within the context of
  development finance are largely focused on aid
• The importance of other resources for Devt
  Finance seems to be minimised
• What frequency of international forums on
• Resources from International Trade (e.g. agl
  subsidies)
• Private Resource inflows
• Including Remittances
• Domestic Financial Resources
• The Monterrey Consensus however recognises other
  forms of Finance for Devt, than only aid

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Introduction 2

• Like aid, other RIFs to poorer countries help
  fill the Resource Gap
• Increase volume efficiency of investment
• Diffuse technology and best practice to local
  firms
• Capacity to import K intermediary goods
• Source of government revenue (directly or not
• Create employment opportunities
• Influence more than just economic policy
• Other RIFs finance Devt
• Promote growth and improve livelihoods,
• Just what aid is expected to do

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What we do

• Compare Official inflows with the other RIFs in
  terms of relative size and volatility
• RIFs (broadly)
• Official Flows
• Private Flows
• Income from International Trade
• Example of CEMAC countries
• Cameroon, Central Africa Republic, Chad, Congo
  Republic and Gabon.
• Equatorial Guinea Excluded

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Relative Size of RIFs

• Recent trends
• Official flows have been increasing
• Thanks in part to HIPC and MDRI
• Cameroon and Congo reached HIPC CP
• Private flows have increased esp to new oil
  producers
• Largely FDI ST bank loans
• Little portfolio flows ltd data on Remittances
• Surge in export revenue due to oil prices
• Only CAR is not producing oil in CEMAC
• Regain in Resource inflows to SSA since 2000

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• This not an argument that aid is not important

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The Volatility of Resource Inflows

• Aid volatility in the aid effectiveness/quality
  debate among other features of aid
• Paris Declaration (2005) - indictor 7
• OECDs Devt Cooperation Report (2005)
• UN Millennium Report (2005) - Rmdt 7
• World Bank IMF (Global Devt Report 2006)
• UNECA (Economic Report for Africa 2006)
• CSO position paper for Accra (Better Aid) Rmdt
  15
• Accra Agenda for Action x4
• UN SGs thematic Group on aid predictability
• Why this persistent emphasis on aid volatility
  alone?

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• All RIFs are Volatile and unpredictable
• create a lot of uncertainty around
  decision-making
• Undermine ability to design and sustain LT Devt
  plans
• The vol of RIFs and their detrimental impact on
  poor countries has been largely documented
• Lensink/Morrissey, Bulir/Hammann, Pallage/Robe,
  Gabriele et al., Fielding/Mavrotas, Odedokun,
  etc, etc
• export volatility in the 70s and aid volatility
  in the late 90s
• Since failure of Commodity Agrmts, (ICCO, ICO)
  export price stabilisation is no longer on the
  intl agenda
• We compare RIF volatilities in CEMAC countries

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Conclusion

• CEMAC countries are more dependent on exports
  than on aid 33 Vs 5
• Resource flows to CEMAC are volatile,
• export revenue is almost 5X more volatile than
  aid
• The vol of Official flows seems to reinforce
  those of private flows and export revenue
• Trade is important for devt finance, and even
  more important than other resource flows, but has
  not been receiving adequate attention, despite
  the emphasis in the MC
• which in many cases is the single most
  important external source of devt financing
  (MC, p.7)

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Implications

• A holistic approach to development financing
• Aid policy should not be done in isolation of
  issues affecting other inflows emphasis on
  policy coherence
• Reflecting the Monterrey Consensus
• Even if Accra HLF is focusing on aid, it should
  be recognised that aid can be effective by
  improving the effectiveness of the other inflows
• Using aid as a counter-cyclical tool design aid
  to work as an insurance against external shocks
• aid might be volatile and unpredictable, but
  total inflows will be more stable

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Implications

• Policies to make resource inflows more effective
  might be country-specific
• Policies towards aid-dependent and non-aid
  dependent countries might not be the same
• Insisting on stabilising aid flows to a country
  heavily dependent on volatile exports might
  simply be futile
• Avoid SAP mistakes
• Aid alone, even very effective will not help many
  countries to achieve the MDGs
• Need for concerted action to increase all RIFs,
  and more importantly those mobilised domestically
  
• Doha - Trade issues not dealt with at Monterrey
• unrestricted access to markets, especially agl
  pdts
• Agricultural and export subsidies in Developed
  countries

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THANK YOU FOR YOU ATTENTION