27/08/2010 05:40:11
Analysis: Cameroon oil slump raises risk of unrest
Fall in oil revenues a threat to social spending. Tensions already on the rise ahead of 2011 vote... Plunging oil revenues could stoke unrest ahead of Cameroon's 2011 elections by hindering social spending and raising public frustration over the slow pace of reforms in the impoverished central African state.
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Oil output in a country that depends on petroleum for half of export revenues is on track for a 33 percent drop between 2008 and 2011 as mature fields fall into decline, and lower oil prices have compounded the impact on the treasury.

"The main question is whether the government is able to keep the socio-economic risks that come with dwindling oil revenues at bay," said Rolake Akinola of Eurasia Group.

"With declining revenues, the avenues for social spending, as well as for cronyism and patronage to manage political dissent, dwindle," she said.

Cameroon is among central Africa's oldest energy producers and is widely viewed as among the region's most stable countries. But public disenchantment with long-serving President Paul Biya is on the rise over his plans to stand in 2011 polls.

 Internal conflict in the country would be a setback for regional democracy and unsettle billions of dollars' worth of energy and mining investments that Biya's administration hopes will rejuvenate its laggard economy in the coming years.

Economic growth is seen rising from 2 percent last year to around 2.6 percent this year and just over 3 percent in 2011, lagging the region as a whole and barely keeping pace with the annual rise in the population.

Oil production has dropped to about 66,000 barrels per day from above 80,000 bpd in 2008 and more than 180,000 bpd in the 1980s -- marking the steepest percentage decline among the continent's energy producers -- with revenues to the state treasury on track to slide more than a third over two years.

Simon Tamfu, exploration manager at Cameroon's state oil company SNH, said production would likely decline further to 55,000 bpd in 2011 before the startup of new fields pushes output back up in 2012.

Source of tension
While the government's use of revenues from the oil industry is hard to quantify, analysts said the decline would likely affect the regime's ability to subsidise food and fuel for a population dogged by poverty.

Cameroon boosted its 2010 budget 11.4 percent over 2009 to 2.570 trillion CFA francs ($4.96 billion) but has come under pressure from the IMF to reevaluate spending and cut subsidies, in part because of "overstated oil production".

Cameroonian "authorities viewed staff advice as difficult to implement in the current social and political context", the IMF said in a report issued last month.

 "It is certainly possible that the decline in oil revenues will mean a paring back of public spending, stoking political tensions ahead of the elections," said Lisa Lewin of Business Monitor International.

"Dissatisfaction with the current government is already on the rise," she said, citing rioting that broke out in 2008 when food and fuel prices increased.

Biya, 77, came to power in Cameroon in 1982 and has held sway since. In 2008, he orchestrated a constitutional re-jig removing term limits that set off violent protests but allowed him to stand for the elections expected next year.

Biya's government has announced plans to triple electricity generation by 2020 in an effort to open the door to huge mining developments vital to diversifying the economy, but experts are sceptical the power projects will happen on time.

"Unfortunately, the country is facing a number of challenges, which if not dealt with as quickly as possible could undermine all these bright perspectives," said Babissakana (Eds: correct as one name), head of the Prescriptor economic think tank in Yaounde.

"I am thinking of bad governance, endemic corruption and growing unemployment," he said. Cameroon is in 146th place on Berlin-based anti-graft watchdog Transparency International's ranking of efforts by 180 countries to combat corruption.

reuters

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