IMF Executive Board Approves Three-Year US$115.8 Million Arrangement Under the ECF for the Central African Republic

July 21, 2016

On July 20, the Executive Board of the International Monetary Fund (IMF) approved a three-year SDR 83.55 million (about US$115.8 million, 75 percent of quota) arrangement under the Extended Credit Facility (ECF) for the Central African Republic. The approval enables the immediate disbursement of SDR 12.525 million (about US$17.4 million), while the remaining amount will be phased over the duration of the arrangement, subject to program reviews.

The authorities’ ECF-supported program aims to entrench macroeconomic stability and create the conditions for sustained and inclusive growth, through structural reforms.

Following the Executive Board’s discussion on the Central African Republic, Mr. Mitsuhiro Furusawa, Deputy Managing Director, and Acting Chair, made the following statement:

“The return to democratic institutions in April 2016 offers the Central African Republic a unique opportunity to consolidate peace, foster inclusive economic growth, and rebuild national cohesion to exit the current state of fragility. Going forward, and building upon progress made during the transition, economic reforms and consolidation of peace should ensure lasting improvements in security conditions and economic development of the country.

“The new three-year program supported by the Extended Credit Facility seeks to restore macroeconomic stability through lowering the domestic primary deficit in order to restore debt sustainability, while ramping up poverty-reducing spending and critical capital investment. Donor support ensures the full financing of the first year of the program, and there are good prospects for financing the remainder of the program.

“The program’s structural reform agenda focuses on raising domestic revenue to bring it to the pre-crisis level through a review of tax policy, strengthening tax administration, and streamlining tax exemptions. Raising domestic resource mobilization to the country’s potential over the medium term will be key to allow the government to scale up pro-poor and investment spending. Structural reforms also focus on strengthening public financial management, improving the efficiency of spending, and restoring control and transparency in the execution of the budget. Better control of the wage bill would allow new hiring in the priority health and education sectors. In addition, the authorities’ structural reform agenda also comprises measures to increase banking intermediation, improve the business environment, and build institutional capacity. Technical assistance to strengthen capacity development is a critical element of the program and the authorities have agreed to participate in the pilot IMF Capacity Building Framework.”

Annex

Recent Economic Developments

The 2013 crises and a protracted political transition in 2014–15 provide the context for recent economic developments. The economy contracted by an estimated 36.7 percent in 2013, and economic growth remained anemic in the subsequent years, due to structural rigidities, poor infrastructure and limited energy supply. Inflation reached 11.6 percent in 2014, and receded to 4.5 percent in 2015 thanks to improved supply conditions and a fall in the prices of basic imports. During this period, the fiscal deficit widened on the back of declining domestic revenue, which collapsed to below 5 percent of GDP in 2014. Corrective measures implemented in 2015 allowed revenue to reach 7.1 percent. However, domestic revenue remains insufficient to cover salary payments and critical expenditure. The current account deficit has doubled to 9 percent of GDP, mainly reflecting a collapse in exports of diamonds and forestry products.

Program Summary

The government program, supported by the ECF, aims at restoring macroeconomic stability, economic growth, job creation and poverty reduction. The program focuses on enhancing revenue mobilization and improving expenditure efficiency to lower the primary fiscal deficit and scale-up social and infrastructure spending. Measures to improve the business environment and access to credit should support private sector activity. Technical assistance and training will be critical to support the implementation of key reforms that will underpin an economic recovery.

Additional Background

The Central African Republic, which became a member of the IMF on July 10, 1963, has an IMF quota of SDR 111.4 million. For additional background information on the IMF and the Central African Republic, see: http://www.imf.org/external/country/CAF/index.htm.

Table 1. Central African Republic: Selected Economic and Financial Indicators, 2012–21

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Est.

Prel.

Proj.

(Annual percentage change; unless otherwise indicated)

National income and prices

GDP at constant prices

4.1

-36.7

1.0

4.8

5.2

5.5

5.8

5.8

5.8

5.8

GDP at current prices

6.9

-32.3

12.2

11.3

11.3

11.1

10.9

10.9

10.8

9.3

GDP deflator

2.7

7.0

11.1

6.2

5.8

5.3

4.8

4.7

4.7

3.3

CPI (annual average)

5.9

6.6

11.6

4.5

4.0

3.5

3.0

3.0

3.0

3.0

CPI (end-of-period)

5.9

5.9

9.7

4.8

4.0

3.5

3.0

3.0

3.0

3.0

Money and credit

Broad money

1.6

5.6

14.6

5.3

11.8

12.8

10.9

10.9

10.8

9.3

Credit to the economy

30.2

-16.3

4.0

-3.0

10.3

10.8

10.7

10.6

10.6

9.2

External sector

Export volume of goods

11.3

-50.8

-28.1

4.9

32.4

21.6

7.3

21.9

8.9

21.6

Import volume of goods

22.1

-29.6

77.5

18.8

12.6

2.4

5.8

12.7

1.2

7.1

Terms of trade

2.8

19.4

8.2

26.6

5.8

-7.9

0.6

-2.7

0.7

0.0

(Percent of GDP; unless otherwise indicated)

Gross national savings

10.4

5.7

4.6

4.9

6.7

7.3

8.6

9.8

12.2

14.3

Of which: current official transfers

1.0

1.3

8.7

3.3

0.5

0.0

0.0

0.0

0.0

0.0

Gross domestic savings

3.6

-1.9

-14.3

-8.0

-2.5

-1.0

0.7

2.2

5.0

7.4

Government

1.4

-7.3

-5.3

-2.8

-2.4

-0.9

-0.3

0.6

1.4

2.4

Private sector

2.2

5.4

-9.0

-5.2

-0.1

-0.1

1.0

1.6

3.6

5.1

Consumption

96.4

101.9

114.3

108.0

102.5

101.0

99.3

97.8

95.0

92.6

Government

7.4

10.2

8.2

7.7

7.5

7.1

7.1

6.9

7.4

7.4

Private sector

89.0

91.6

106.1

100.4

95.0

94.0

92.2

90.9

87.6

85.1

Gross investment

15.0

8.7

10.2

13.9

16.9

17.2

17.9

19.0

19.9

21.0

Government

6.2

1.7

2.1

4.7

6.2

6.0

6.2

6.7

7.0

7.4

Private sector

8.8

7.0

8.1

9.3

10.6

11.2

11.7

12.3

12.9

13.6

External current account balance

-4.6

-3.0

-5.6

-9.0

-10.1

-9.9

-9.3

-9.2

-7.7

-6.7

Overall balance of payments

3.0

2.8

-2.6

-2.2

-4.4

-2.2

-2.0

-2.1

-1.0

-0.6

Central government finance

Total revenue (including grants)

16.4

8.4

15.7

14.3

13.0

13.2

13.7

14.3

15.5

16.5

of which: domestic revenue

11.5

5.6

4.9

7.1

8.1

8.9

9.5

10.1

11.6

12.6

Total expenditure 2

16.4

14.9

12.7

14.9

17.1

16.0

16.0

16.4

17.5

17.7

of which: capital spending

6.2

1.7

2.1

4.7

6.2

6.0

6.2

6.7

7.0

7.4

Overall balance 1

Excluding grants

-4.9

-9.3

-7.8

-7.8

-9.0

-7.2

-6.6

-6.3

-5.8

-5.1

Including grants

0.0

-6.5

3.0

-0.6

-4.1

-2.8

-2.3

-2.1

-1.9

-1.2

Domestic primary balance 2

0.5

-7.0

-5.1

-3.0

-3.3

-1.8

-1.4

-0.9

-0.5

0.0

Public sector debt

23.5

38.5

51.1

48.5

47.2

41.2

35.8

31.2

27.7

24.7

Of which: domestic debt 3

13.8

24.0

36.3

34.0

30.3

26.2

22.5

18.9

16.0

13.4

Gross official foreign reserves

(US$ millions, end-of-period)

175.6

205.8

258.7

199.4

207.6

248.5

288.8

319.2

364.1

406.3

(months of imports, f.o.b.)

5.6

3.7

5.1

4.2

4.0

4.5

4.7

5.0

5.2

5.5

Nominal GDP (CFAF billions)

1108

750

842

937

1042

1158

1285

1424

1578

1726

Sources: C.A.R. authorities; and IMF staff estimates and projections.

1 Expenditure is on a cash basis in 2014 and 2015 in the context of the Rapid Credit Facility.

2 Excludes grants, interest payments, and externally-financed capital expenditure.

3 Comprises government debt to BEAC, commercial banks and government arrears.

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