guide to model building, welfare inference, and assessing the distribution of growth under certain restrictive conditions.

Within the framework of the Highly Indebted Poor Countries (HIPC) Initiative, Cameroon reached the decision point in October 2000, and is engaged in the design and implementation of an IMMPA model to inform the PRSP process, which underpins its future growth strategies.<sup>6</sup> This paper provides an integrated financial SAM of the Cameroonian economy and serves as input into the model-building process. The latest SAM of the Cameroonian economy focused on real sector activities and transactions, and was produced in 1998 using 1989 data. Since then, it has not been updated, despite the significant changes in the structure of the economy, which has witnessed growing informal sector activities and declining industrial production after a long and protracted economic crisis spanning the 1980s and 1990s. The integrated financial SAM proposed here is based on more recent data capturing the post-devaluation period in 1996, and provides an up-to-date coherent picture of the complexity of the economy. It focuses on both the real and the financial components of the economy, with special emphasis on the growing importance of informal sector activities. Drawing on the IMMPA analytical framework, it also provides an assessment of income and distributional effects of growth under fixed-prices multipliers assumption, and further insights on the functional and institutional distribution of income and flows of funds across the different institutional agents and sectors in the years following the devaluation of the CFA Franc.<sup>7</sup> The results show a Cameroonian economy characterized by a relatively large concentration of resources and flows in urban areas, formal and informal sectors. Together, urban formal and informal economy account for over 80 percent of total gross value added; of which formal production account for 42 percent of total aggregate value added at the national level, and about 54 percent of total urban production. This leaves a sizable share, about 46 percent, to urban informal sector’s production. Moreover, investment continues to be dramatically low, significantly below the pre-crisis levels, as a result of extremely high levels of final consumption, and costs of external debt servicing. The significant fall in investment is believed to be partly responsible for the persistence of high unemployment rates and poverty recorded in most of the 1990s and beyond, a period also characterized by a dramatic fall in income. Additionally, under fixed-prices multipliers specification, a simulation of policy experiments highlights the potential benefits of increased public investments. Indeed, under the assumption of a reduction of external debt servicing consistent with the HIPC initiative, with the relief reallocated to public investment, a significantly higher economic growth rate is estimated, with the benefits of growth reflected in the rapid increase in household income and financial assets, and especially for the “capitalist households”.

The remainder of the paper is organized as follows. Section II provides an overview of some of the key characteristic features of the Cameroonian economy, in light of the structure of the prototype IMMPA model. The Cameroonian economy shows a relatively large share of informal sector activities, an unsustainable level of external debt and a relatively high poverty

> 6 At accession to the HIPC Decision Point in the first phase of observed track record, the staff of the IMF and the World Bank jointly recommends targets for the completion point (the second phase) for the net present value of the ratio of debt to export and the debt-service ratio based on the debt sustainability analysis. Provided that the performance criteria are satisfactory during the second phase, the country will then receive support under the initiative. For further details, see Iqbal and Kanbur [1997].

> 7 CFA stands for “Communauté Financière Africaine. ”

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