tradable and non-tradable goods with adverse effects on living standards for both rural and urban areas. Also, reduced economic activity combined with a slackening of tax collection crippled the ability of the state to provide services, thus worsening the impoverishment.

In 1994, the Central African Economic and Monetary Community<sup>5</sup> of which Cameroon is a member devalued the CFA franc by about 50 percent in nominal terms (30 percent real), and implemented additional trade and fiscal reforms. This presented Cameroon with an opportunity to reverse the socioeconomic downturn. The country did experience some positive growth after the devaluation, but it was only in mid 1996, after some failed stabilization and adjustment efforts, that the government showed strong commitment to meaningful policy reforms. The successful implementation of these reforms let to macroeconomic stability and an average growth rate of real GDP in the neighborhood of 5 percent between 1997 and 2000. On the basis of the 1996 and 2001 household surveys, it is estimated that the incidence of poverty fell by 13 percentage points from about 53 percent to about 40 percent. However, income inequality remained high with the Gini index of inequality decreasing only by 3 percentage points, from 44 to 41 percent. Furthermore, other social indicators have not shown such an improvement.

A shift in borrowing strategy around 1986 combined with the severity of the socioeconomic crisis left the country saddled with an unsustainable debt burden. The stock of external debt increased from less than 33 percent to more than 75 percent of GDP between 1985 and 1993 (Government of Cameroon 2003). In October 2000, Cameroon became eligible for debt relief under the Enhanced HIPC<sup>6</sup> Initiative. In this

> 5 Mostly known under its French acronym CEMAC for _Communauté Economique et Monétaire d’Afrique Centrale._

> 6 HIPC stands for Heavily Indebted Poor Countries.  This initiative was launched in 1996 by the International Development Association (IDA, the World Bank’s fund designed to provide concessional credits and grants to the poorest countries) and the IMF.  The initiative was enhanced in 1999 to tighten its link with poverty reduction and to widen its scope and make it more efficient (in terms of speed of relief delivery).  Eligibility is based on three criteria: (1) qualify only for concessional assistance from IDA, (2) debt situation remains unsustainable after full application of traditional relief mechanisms, and (3) a track record of reforms combined with the development of a Poverty Reduction Strategy (presented in a document known as Poverty Reduction Strategy Paper or PRSP).  The whole process entails reaching a _Decision Point_ and a _Completion Point_ .  Two conditions must be met by a country to reach the Decision Point: (1) satisfactory preparation of an interim PRSP, and (2) satisfactory performance under the IMF’s Poverty Reduction and Growth Facility (PRGF).  At this point, the country gets conditional (on continued good performance) interim relief.  At the Completion Point debt relief becomes irrevocable.  Reaching this point requires the following: (1) maintain macroeconomic stability under a PGRF; (2) satisfactory

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