net improvement from the pre-devaluation period where assets barely accounted for 0.1 month of imports (World Bank [1998]).

The “rest of the world” capital account has negative savings; all the other economic agents, including the rural traded and non traded sectors, have positive savings. However, savings rates are variable across economic agents, as reflected in the marginal propensity to save. This marginal propensity to save varies from 1 percent in the rural non traded production sector to over 60% for commercial banks (see Figure 2). It is relatively high for capitalist households and nonfinancial corporations, which allocated about 30 and 41% to savings, respectively.<sup>37</sup> Commercial banks have the highest marginal propensity to save, reflecting the restrictive policy of limited credit expansion in the post-devaluation growth period to contain inflationary pressures.<sup>38</sup> The savings by rural households engaged in the production of traded, non traded, informal and public sector production are lower than the national average depicted by the straight horizontal line. The large variance of savings across sectors is reflected in the relatively high range of the marginal propensity to save.

At the macroeconomic level, the low saving rates, particularly public sector savings, which fall below the already low national average and accounts for less than 2% of GDP, has implications for investments and economic growth, and may partly explain the poor performance of the Cameroonian economy in most of the 1980s and beyond. Indeed, there is strong theoretical and empirical evidence corroborating a positive and strong association between public savings and growth (Krieckhaus [2002]).<sup>39</sup> Assessing the association between public savings and growth in a sample of 32 developing countries, Krieckhaus found that the sub-sample of countries with high public saving rates averaging over 8% of GDP enjoyed economic growth rates roughly double that of the other sub-sample of countries with public savings averaging less than 1% of GDP. The study found the direction and strength of the association to be robust over time.

Empirical evidence on the implications of public savings on growth and the direction of causality have been established in a number of countries. Looking at the medium term trend, a unidirectional causality between savings and growth could be established in Brazil, for instance, where the increased costs of servicing external debt due to rising interest rates in international capital markets led to a dramatic collapse of public savings, which in turn resulted in lower investment and growth rates, and was believed to be responsible for the Brazilian fiscal crisis and economic debacle of the 1980s (Carneiro and Werneck [1993] and Krieckhaus [2002]).<sup>40</sup> Without ruling out the possibility of dual causality and covariation between public savings and growth, the costs of increased debt servicing and falling public savings for economic growth may be even more important in Cameroon, especially as a

> 37 Non financial corporations refers to public and private enterprises involved in the production of goods and services other than commercial banks and insurance companies.

> 38 The limited credit expansion, which was the cornerstone of monetary policy during the post-devaluation period, continued to be in effect during most of the 1990s, and is believed to be largely responsible for the excess liquidity which now characterizes bank portfolios in Cameroon.

> 39 The potential benefits of large public savings are significant: economic theory suggests that increasing public savings should lead to rising overall national savings, investments, and ultimately economic growth rates.

> 40 In a study investigating the determinants of the Brazilian economic crisis in the 1980s, Carneiro and Werneck [1993] concluded that the collapse of public savings preceded the dramatic fall in investment, which was singled out as the most important immediate causes of the slowdown in economic growth.

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