Speech

Standing with the Central African Republic

January 25, 2017

Good morning!

Thank you, Mr. Meckassoua, for your kind introduction.

I am honored to be in the Central African Republic, speaking before this assembly of the people’s representatives.

I have come to express the support of the International Monetary Fund as your country emerges from a period of great trial. You have experienced internal conflict that has taken away loved ones, destroyed communities, and crippled your economy.

And yet, here you stand today, proud and committed to rebuilding your nation. With my own eyes, I can see the progress that you have made since the difficult days of 2013.

There is stability in the streets, basic services have been restored, and a political transition is proceeding. I congratulate your efforts and commend your spirit of cooperation.

This spirit will be needed as the Central African Republic faces a legacy of fragility and a future where a great challenge remains to restore your economy and meet your people’s needs.

I have come to Bangui to offer a commitment to your country as you steer a path to development, and offer our full support with financial assistance, policy expertise, technical assistance, and capacity building.

For you, the members of the National Assembly, I offer a message of encouragement: you have a crucial role to play at this critical moment in your country’s history. Here I find inspiration in the words of President Touadéra, with whom I had the honor of meeting yesterday.

He said last year:

« Je veux rassembler tout le monde pour construire notre pays dans le dialogue. C’est le désarmement des cœurs et ce n’est pas facile «

In this spirit of reconciliation, I would like to discuss your country’s economic challenges today by focusing on three themes:

• First, the unique challenges that face fragile states emerging from conflict;

• Second, the more specific national challenges that you confront as you rebuild;

• And finally, the IMF’s commitment to the people of the Central African Republic.

Let us begin with the broad challenge of fragility. Nation states should be able withstand great stress. They normally do. But when civil conflict disrupts and destroys critical institutions, it can be immensely difficult to reassemble the pieces of a society.

For many years, the IMF has worked with countries emerging from conflict. I am pleased that the international community has demonstrated an understanding of these issues in the United Nations Sustainable Development Goals (SDGs), agreed in 2015.

The governments and organizations which formulated the SDGs recognized the particular challenge of fragile states—and have committed to addressing their unique problems as part of the compact. One clear understanding is that responding to fragility is not just a matter of more money. There must be a concrete focus on building peace, restoring social cohesion, and assembling a working government. Close coordination among donors is also key.

This type of comprehensive approach is needed to lay the foundation for economic stability and growth. The IMF has a great deal to offer to Central African Republic and other countries as part of a coordinated effort. And so we have committed to provide resources and expertise, to work with countries to develop the capacity to address their own problems.

Let us look at how rebuilding social cohesion and restoring the economy relate to the challenges facing the Central African Republic. You know that you need to foster national reconciliation and restore peace. You also know that you need to restart the economy and rebuild your institutions and infrastructure. These challenges are closely intertwined.

Again, I am deeply impressed with the progress you have made so far. Some of this is evident in the day-to-day work of the government. For example, treasury management has improved, and the civil service has been streamlined.

After President Touadéra took office last year, he launched the National Recovery and Peacebuilding Plan, which rests on a framework of security, governance, and growth. Its proposals to tackle national disarmament, demobilization, reintegration and repatriation are crucial for peace. And the focus on building healthcare facilities, schools and basic infrastructure will help a people whose support network has been obliterated.

The plan also highlights another crucial objective: to rebuild the social contract that will strengthen the legitimacy of the state. The relationship between citizens and the state needs to be built on trust. To establish that trust, the state should be in a position to provide basic social services and security across whole country, while upholding good governance and promoting transparency.

This is all very important—but it is only one part of the task ahead.

After shrinking almost 40 percent in 2013, the Central African Republic’s economy has a long way to go. Infrastructure has been shattered. Agriculture, forestry, and mining have not returned to past levels of output. Institutional capacity remains weak. And the security situation in some parts of the country is still tenuous.

To complicate matters, rebuilding is taking place at a time of slow growth affecting both the global economy and that of Sub-Saharan Africa. Commodity prices have fallen, and access to external finance is more constrained.

These issues are particularly relevant to the CEMAC region, where the difficult challenges of low oil prices and fragile regional security are having a severe impact. At the CEMAC summit in December, I was impressed with the Presidents’ commitment to cooperation aimed at preserving stability, safeguarding social development, and restoring economic stability.

In particular, it is clear that governments will need to take decisive steps to address the economic pressures resulting from permanently lower oil prices. At our meeting in Cameroon last month, I assured the Presidents of the CEMAC that the IMF stands ready to provide significant financial support to help the region address this challenge. This may include further increasing our financial support to CAR, as necessary.

These national and regional issues are obstacles to recovery, but I also believe that there is reason for some optimism in the Central African Republic. With successful implementation of the Recovery and Peacebuilding Plan, the IMF expects the economy to grow around 5 percent of GDP each year over the medium term.

This would be helped tremendously by your international partners following through on their recent commitment of $2 billion of support.

At the same time, there is more that the government itself can do to expand financing: by strengthening the mobilization of domestic resources. This is a crucial issue facing many developing countries, but particularly the fragile states.

In the case of the Central African Republic, tax revenue collection is one of the lowest in Sub-Saharan Africa. It is not sufficient to meet the government’s current spending or essential social programs.

Given the scope of the 2013 conflict, this is not surprising. But there are other issues—including a broad range of tax exemptions and widespread smuggling from neighboring countries—that can be addressed to help improve the situation.

The VAT will be an important focus of this work. And beyond raising more revenue, improved tax collection and administration will support the private sector by offering a level playing field for competition.

We are pleased to see the efforts underway to address the revenue issue, and are prepared to assist with the full range of our expertise in this area.

This leads to my final theme: how the IMF can do more to assist your country on the road to stability and growth.

As I mentioned, support with strengthening tax collection is one part of our partnership. Indeed, it is a crucial part of our work to help build economic management capacity in the Central African Republic, including in the area of natural resources.

Our support to your country also encompasses financial assistance. After 2013, during the period of the interim government, we supported the transition with emergency loans totaling about $28 million. This was combined with close cooperation in the design of an overall plan to restore economic stability.

Then last July, the IMF Executive Board approved a three-year arrangement totaling $120 million under our Extended Credit Facility. This program has several goals: strengthening revenue collection; improving spending efficiency; scaling-up social spending and infrastructure investment; implementing reforms; and mobilizing and coordinating support from development partners. That’s a long list—all of which is essential to restoring stability and growth.

We are linking the objectives of this program to technical assistance and capacity building. Indeed, since we resumed our engagement with the Central African Republic: we have focused on restoring effective public financial management and revenue mobilization. Going forward, our technical assistance and capacity development will be tied to clear milestones to monitor outcomes.

Conclusion

I would like to conclude by restating that the IMF will give you our full support as you pursue political stability, improved governance, and economic resurgence.

In preparing for this visit, I was moved to learn of the words of Pope Francis during his 2015 visit to the Central African Republic. He said:

“Peace is not a document that is signed and then put up some place. Peace is made each day. Peace is a craft, a handiwork.”

As it is with peace, so it is with development. I promise that the IMF will be with you as you refine this craft. Thank you.