(Ecofin Agency) - • Cameroon plans to raise up to CFA200 billion ($345 million) on international markets
• The country faces CFA1,795 billion in financing needs this year, driven by heavy debt service
• Investors remain wary amid delayed repayments, election risks, and high borrowing costs

Cameroon is preparing to return to international markets to raise fresh funds. On May 19, 2025, President Paul Biya signed a decree authorizing the Ministry of Finance to seek up to CFA200 billion, about $345 million, through external borrowing. The funds will help cover treasury operations for the current fiscal year.

This move comes as the country faces a total financing need of CFA1,795 billion in 2025. Of that, CFA1,375 billion is earmarked for debt service, including CFA729 billion for domestic debt and CFA646.7 billion for external obligations. In addition, the government must settle CFA207.5 billion in arrears and reimburse CFA84 billion in VAT credits.

Debt-related pressure is expected to rise. While external debt payments remain moderate in 2025, they are projected to exceed CFA1,000 billion by 2026 and reach more than CFA1,200 billion in 2027. These projections have raised concerns about Cameroon’s shrinking fiscal space and increased the urgency of securing affordable financing abroad.

Beyond securing funds, the new borrowing effort is also a way for Cameroon to signal its continued presence in international markets. By doing so, the government hopes to strengthen investor confidence, demonstrate financial resilience, and maintain visibility in a region under mounting fiscal stress.

This latest move follows a Eurobond issue in July 2024, where Cameroon raised $550 million over seven years at a steep interest rate of 10.75%. While the deal was considered a success, the high borrowing cost reflected ongoing investor caution. Analysts now say conditions may be even tougher this year.

Over the past two years, some credit rating agencies have downgraded Cameroon, citing "technical defaults", delays of just a few days in repaying commercial creditors. These delays, although resolved within the 30-day grace periods allowed by contract terms, have undermined market trust.

The government blames the delays on administrative lags at the regional central bank, BEAC, which handles foreign currency disbursement requests. Officials say the upcoming CFA200 billion operation could help Cameroon secure a stronger foreign currency buffer and prevent similar setbacks in the future.

But the road ahead is not smooth. According to Denis Nzifack, economist and bond portfolio manager at Harvest Asset, several risk factors will keep borrowing costs high this year. These include global monetary tightening, uncertainty ahead of elections, and limited clarity on Cameroon’s budget strategy. He also notes that although the country’s debt-to-GDP ratio remains under control, debt service costs are still high.

The U.S. Federal Reserve’s benchmark rate, currently at 4.5%, is another headwind. Nzifack warns that Cameroon could face refinancing problems down the road, recalling the tough negotiations during the refinancing of the 2015 Eurobond in 2021. A deeper concern is the market’s fragile perception of Cameroon’s credit risk. Some international asset managers who bought into the 2024 bond remain cautious.

Given these challenges, Nzifack believes that turning to the local market may be a viable alternative, if done right. He suggests that a well-structured domestic bond program could succeed, possibly through multiple issuances. He points to recent examples: the Central African Republic raised CFA50 billion through syndication, and Gabon completed a large-scale bond sale. “Why not Cameroon?” he asks, noting its leadership role in the region.

Nzifack also highlights the cost gap between international and local markets. A domestic bond currently yields around 7.5%, while international Eurobonds demand rates of 10% to 10.5% for similar maturities.

However, local financing comes with its own set of hurdles. Around 60% of banking assets in the CEMAC region, mainly held by Cameroonian banks, are tied up in sovereign debt. A new prudential rule introduced by regional regulator COBAC now requires banks to assign higher risk weights to such holdings, up to 100% for countries like Gabon. This aims to reduce banks’ dependence on government debt. If fully enforced, banks may have to set aside more capital to maintain current exposures, possibly leading them to cut back on state bonds, making it harder for Cameroon to raise funds domestically.

Meanwhile, global conditions remain tough for lower-rated issuers. Yields on African Eurobonds are still higher than before 2022. Countries like Kenya have delayed or revised their bond plans. Others, such as Benin and Côte d’Ivoire, managed to raise $1 billion and $1.75 billion respectively in 2025, proving that investor appetite remains strong for some names, but not all.