The National Hydrocarbons Company (SNH) has just informed the government that it can only guarantee 30% of the revenues initially provided for in the 2020 Finance Law. A cyclical downturn which it links to the fall in the crude oil prices, following the Coronavirus pandemic.

Clearly, on the basis of this information transmitted to the government by the secular arm of the State in the oil and gas exploitation, we are moving towards a drop in oil revenues of around 70% in Cameroon, within the framework of the amending Finance Law expected during this month of June 2020.

Indeed, even if oil revenues include the tax on oil companies, which is collected directly by the tax administration, this tax has very little influence on the overall envelope of said revenues, given the much larger share of the SNH royalty. This includes income from exports of crude oil and locally produced gas.

Concretely, of the 443 billion FCFA of oil revenue budgeted in the 2020 Finance Law, voted by the Parliament in November 2019, Cameroon could ultimately only record around 130 billion FCFA of revenue from this item, subject to the latest arbitrations in progress in government bodies. In view of the economic situation, this drop in oil revenues was expected by the Cameroonian public authorities.

Budget cuts

“  We already know that we have negative consequences on our budgets. In Cameroon, we have made some assessments which still deserve to be refined. If I take the case of oil, we made our 2020 Finance Law on an assumption of a barrel at 54.4 dollars. There we are under 30 dollars. You understand that the consequence is immediate,  “said Louis Paul Motaze, the Minister of Finance (Minfi). It was March 28, 2020 in the Congolese capital, during the 3rd extraordinary session of the Steering Committee of the Economic and Financial Reform Program of Cemac.

But, did Minister Motaze expect this level of oil revenues to plummet? It must be said that these SNH forecasts seem too pessimistic. Because oil prices have resumed an upward curve and are gradually approaching 40 dollars per barrel.

In any case, the budget collective (Amending Finance Law) 2020, for which a presidential ordinance should be made public before the start of work in the National Assembly on June 10, 2020, will not only reveal a drop in oil revenues. It will also devote an equally drastic reduction in tax and customs revenue, due to the slowdown in economic activity in the country since the confirmation of the first case of Covid-19, on March 6, 2020.

Logically, this drop in public revenue will inevitably lead to clear cuts in the initial budgets of the various administrations, with an impact on public investment in the country in the current year 2020.

 

Source: Agence Ecofin

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