Cameroon's 2026 Budget and the Risks of Expansionary Policy in a Debt-Heavy Economy

Cameroon's 2026 budget, unveiled in November 2025, has sparked intense debate among economists and investors. With a projected deficit of 631 billion CFA francs ($1.11 billion) and a total budget of 8,816.4 billion CFA francs, the government aims to boost infrastructure, youth employment, and economic diversification. However, this expansionary approach raises critical questions about fiscal sustainability in a country where public debt has already reached 43.9% of GDP as of Q3 2025 according to data. This analysis examines the risks of Cameroon's fiscal stimulus through the lens of broader trends in high-debt emerging markets, drawing parallels with Sub-Saharan Africa's recent experiences.

### A Budget Built on Borrowing
Cameroon's 2026 budget represents a 14% increase from 2025, driven by higher personnel costs and new initiatives like a special fund for women's economic empowerment and youth employment according to reports. To finance this, the government plans to borrow 3,104.2 billion CFA francs, with 1,000 billion allocated to external loans and 826.7 billion to project loan disbursements as detailed in the budget document. While the Ministry of Finance insists the debt-to-GDP ratio will remain below CEMAC's 70% threshold, the African Development Bank and IMF have flagged a "high risk of debt distress." This mirrors a regional trend: Sub-Saharan Africa's public debt surged to $1.8 trillion in 2022, with Cameroon's debt-to-GDP ratio rising from 42.3% in 2023 to 43.4% in 2024 according to World Bank data.

The reliance on external borrowing is particularly concerning. As noted by the World Bank, every percentage point above a 64% debt-to-GDP threshold in emerging markets correlates with a 0.02 percentage point loss in annual real growth according to research. Cameroon's debt trajectory, while currently below this threshold, risks eroding fiscal flexibility. For context, South Africa's post-pandemic fiscal stimulus pushed its debt-to-GDP ratio to 80.5% in 2020, severely constraining its ability to respond to future crises as reported by Brookings.

### Fiscal Stimulus and the Double-Edged Sword
Cameroon's 2026 budget emphasizes fiscal stimulus to spur growth, but the effectiveness of such measures in high-debt environments is contentious. The IMF and World Bank have consistently warned that fiscal vulnerability-exacerbated by large public debt and weak institutional capacity-heightens the risk of financial crises in emerging markets according to their analysis. In Cameroon's case, the 2025 fiscal deficit of 309.9 billion CFA francs (-0.80% of GDP) was already a cause for concern, with analysts projecting a doubling in 2026.

The government's strategy hinges on external financing, but this exposes Cameroon to volatile global capital markets. For instance, Egypt's reliance on external borrowing to fund its post-pandemic stimulus led to a debt servicing crisis, forcing painful austerity measures according to UNCTAD analysis. Similarly, Cameroon's plan to issue public securities on the money market could backfire if global interest rates rise or investor confidence wanes.

### Comparative Lessons from Sub-Saharan Africa
The risks of expansionary policy in high-debt economies are not unique to Cameroon. A 2025 study by the PSE Journal highlights that central bank financing of government deficits-common in Sub-Saharan Africa-often leads to inflationary pressures and fiscal dominance as the study shows. In Cameroon, while central bank lending remains within legal thresholds, the growing proportion of private creditors in the region has raised borrowing costs and reduced the likelihood of orderly debt restructuring according to UNCTAD data.

Moreover, the practice of fiscal stimulus in Sub-Saharan Africa has often exacerbated pre-existing challenges. For example, the 2008 global financial crisis and the Ukraine war forced many countries to increase borrowing, straining public finances according to UNCTAD analysis. Cameroon's 2026 budget, which allocates significant funds to infrastructure and social programs, risks repeating this pattern unless paired with structural reforms to improve tax collection and reduce waste.

### The Path Forward: Balancing Ambition and Prudence
Cameroon's government has emphasized fiscal discipline, citing a "cautious and controlled borrowing policy" as reported in news coverage. However, the projected 631 billion CFA franc deficit in 2026 suggests a departure from this stance. To mitigate risks, the government must prioritize reforms such as digitalizing public services, broadening the tax base, and improving debt management practices.

Investors should also consider the broader macroeconomic context. While emerging markets have benefited from easing financial conditions and Fed rate cuts in 2025 according to market analysis, Cameroon's high debt profile could make it vulnerable to external shocks. For instance, U.S. tariffs or geopolitical tensions could disrupt trade flows, as seen in India and Brazil according to SSGA commentary.

### Conclusion
Cameroon's 2026 budget reflects an ambitious vision for economic transformation, but its reliance on expansionary fiscal policy in a debt-heavy economy raises significant risks. The lessons from South Africa, Egypt, and other Sub-Saharan African countries underscore the need for caution. For Cameroon to succeed, it must balance short-term stimulus with long-term fiscal consolidation, ensuring that borrowing fuels growth rather than deepens vulnerability. Investors, meanwhile, should monitor debt servicing costs, inflation trends, and the government's ability to execute its reform agenda.