Press Release No. 17/501

IMF Executive Board Completes Third Review Under the ECF Arrangement for the Central African Republic, Approves US$40.2 Million Disbursement, and an Augmentation of US$55.1 Million

December 15, 2017

• The completion of the review enables the disbursement of US$40.2 million.

• Supporting social cohesion and economic growth requires the gradual restoration of state authority and the swift implementation of the National Plan for Recovery and Peace.

• Sustaining and accelerating efforts to mobilize domestic revenues and enhancing budget transparency will create fiscal space for social and development spending.

On December 15, 2017, the Executive Board of the International Monetary Fund (IMF) completed the third review under the Extended Credit Facility (ECF) [1] arrangement for the Central African Republic. The completion of the review enables a disbursement of SDR 28.41 million (about US$40.2 million).

The Executive Board also approved a request for augmentation of the ECF arrangement in the amount of SDR 38.99 million (about US$55.1 million). The augmentation will cover significant balance of payments needs in the context of the national strategy for recovery and peace and support social cohesion and economic growth.

The ECF arrangement for the Central African Republic was approved by the Executive Board on July 20, 2016 (see Press Release No. 16/352 ) for SDR 83.55 million (about US$118.1 million, 75 percent of Central African Republic’s quota at the IMF) and, following the augmentations, total financing amounts to SDR 133.68 million (about US$189.0 million, 120 percent of the country’s IMF quota).

Program performance through end-June has been satisfactory. All quantitative criteria and indicative targets were met, with the exception of the domestic revenue target for which the authorities are taking corrective actions and a waiver of non-observance was granted. All structural reforms have been implemented, albeit with some delays.

At the conclusion of the Board’s discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, stated:

“Performance under the ECF-supported program has been satisfactory despite a challenging security environment and difficult humanitarian conditions. The authorities implemented their reform agenda in parallel with efforts to gradually restore security in additional urban centers to create spaces of stability, reconstruction, and growth.

“Fiscal policy is broadly on track. The 2018 budget remains anchored to the domestic primary balance objective while allowing a scale-up of social and capital spending. Renewed efforts to mobilize domestic revenues, which remain weak, will be critical to support the scale-up. Given the country’s high risk of debt distress, continued reliance on grant financing while limiting borrowing—even on highly concessional terms— is essential. Available assistance must be channeled effectively into priority projects to boost economic growth, create jobs, and reduce poverty. Sound implementation of the investment program for the National Plan for Recovery and Peace will boost economic prospects.

“Structural reforms have progressed, contributing to the strengthening of the treasury single account, streamlining of quasi-fiscal taxes, improved budget transparency and traceability of domestic revenues. Quarterly publication of budget execution reports allows for better tracking and monitoring of government expenditures. More consideration should be given to reducing exceptional payment procedures which can undermine recent progress.

“The government adopted a comprehensive domestic arrears clearance strategy. The repayment of arrears will support growth, bolster the credibility of the state, and strengthen the banking sector. The plan includes measures to ensure the integrity of the arrears clearance process.

“The Central African Republic’s program is supported by the implementation of supportive policies and reforms by the regional institutions, including tighter monetary policy, elimination of statutory advances, sound bank regulation and supervision, and firm controls over the extension of credit to banks.”