In the face of net depreciation of gross capital stock, especially in rural areas, most investment accrued to the informal and private sector in urban areas. Total gross investment is estimated at about US$1.2 billion, representing about 14% of GDP. Compared to the early 1980s, where gross investment was estimated to be in the range of 27% of GDP, this level of investment is quite low; and with public savings at 2% of GDP, most of it is financed by private capital, which accounts for about 80% of total investment. Public investment, which accounts for the remaining 20%, is directed primarily to urban areas, which receives over 99% of the total. The high share of consumption and extremely low level of capital formation is a serious constraint to long-term growth and poverty reduction. It may have contributed to increased debt burden, especially because a rapid depreciation of gross capital formation negatively impacts on the level of output which otherwise would be used to service the loans.

On the financial side of the SAM, the key items are summarized under the capital accounts of economic agents (accounts 37-47) and changes in assets and liabilities (accounts 48-59). The changes in assets and liabilities are measured in terms of flows. In the columns, they represent gross asset accumulation of the sector, typically physical and financial assets. However, given that the development of the financial market is still in its embryonic stage in Cameroon, the model assumes that the acquisition of securities and public bonds is restricted to financial institutions such as commercial banks.<sup>36</sup> In the rows of the financial SAM, the capital accounts provide details on the sources and distribution of resources owed by economic agents. These resources are essentially made up of the sum of savings and borrowings. The latter includes borrowings from financial institutions, foreign borrowings by public and private institutions, changes in ownership of capital shares, foreign reserves and holdings of currency.

Recall that savings by foreign residents, shown at the intersection of column 47 (capital accounts of economic agents) and row 15 (current accounts of economic agents), is the balancing item between external receipts and payments. The value of savings, which also corresponds to the current account of the balance of payments, is negative and equivalent to about 3.4% of GDP in absolute value terms. This negative value of savings by foreign residents corresponds to a current account surplus in the balance of payments. This surplus reflects a significant improvement of the trade balance following the devaluation of the CFA Franc in 1994. Indeed, from a low base in the years preceding the devaluation, exports increased by over 40 percent between 1994 and 1995, from US$1761.3 million to US$2075.6 million, representing 20 and over 24% of GDP, respectively. This improvement of the current account balance is significant, especially given the scope of the deficit in the early 1990s, when it reached over 7.7% of GDP (Cameroon [2000]).

The current account surplus is more than offset by the deficit of the capital account, however. At about US$356 million, net capital inflows (public and private) represent about 4% of GDP. A net inflow of resources and capital this large reflects the degree of reliance and dependence of Cameroon on external financing, and continued large financing gaps, especially in a context of a dramatically low level of domestic saving, a constraint to the financing of investment. The current account surplus of 3.4% of GDP, and capital account balance of about 4% of GDP, explain the relatively strong reserve position. At about 40% of bank financial assets, the level of foreign reserves represents over 0.35 months of imports, a

> 36 The Cameroon Stock Exchange was officially inaugurated in April 2003. The embryonic stage of the financial market is not specific to Cameroon, however; it is indeed one of the key characteristics of low income countries.

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