Press Release No. 21/137

IMF Staff Completes Mission to the Central African Republic

May 21, 2021

• The Central African authorities and IMF team discussed economic policies and structural reforms that could form the basis of a staff-monitored program. These discussions will continue in the coming days.
• The staff-monitored program will aim at helping the authorities address the economic challenges caused by the security crisis and the Covid-19 pandemic. It also calls for the implementation of structural reforms to improve governance and public financial management and strengthen domestic revenue mobilization
• The deterioration of the security situation at the beginning of the year and the prolonged closure of the trade corridor between Bangui and Cameroon have had a significant impact on growth, inflation, balance of payments, and public finances.

Washington, DC: An International Monetary Fund (IMF) team led by Mr. Édouard Martin conducted a virtual mission from May 4 to 20, 2021, to discuss a staff-monitored program with the authorities.

At the conclusion of the mission, Mr. Martin issued the following statement:

"The Central African authorities and the staff of the International Monetary Fund (IMF) discussed economic policies and structural reforms that could form the basis of a staff-monitored program (SMP). These discussions will continue in the coming days so as to reach an agreement that could be submitted for approval to IMF Management once the prior actions have been implemented. The 7-month SMP will aim at helping the authorities address the economic challenges caused by the security crisis and the pandemic. Its satisfactory implementation would allow for the resumption of discussions under the Extended Credit Facility (ECF) supported program in the first half of 2022.

"The deterioration of the security situation at the beginning of the year and the prolonged closure of the trade corridor between Bangui and Cameroon have had a substantial social and economic impact. The cut-off of the country's main source of supply led to a sharp rise in consumer prices and affected production owing to a lack of inputs. While the reopening of the corridor has allowed trade flows to resume, they remain lower than in the past. Even assuming it continues to recover gradually over the next few months, economic activity is expected to contract slightly this year, compared to the 3½ percent growth expected before the security situation deteriorated. After rising sharply at the beginning of the year, inflation is expected to decline gradually, to just over 3 percent year-on-year by the end of 2021. Owing mainly to lower imports, the current account deficit would decline to about 6½ percent of GDP in 2021 from 8½ percent of GDP in 2020.

"The closure of the corridor also affected significantly public finances. Domestic government revenues in the first quarter were about 20 percent below expectations, while security spending increased sharply. This, combined with budgetary slippages at the end of 2020 and lower budget support, led to a rapid decline in government deposits with BEAC. To ensure that the government can meet its financial obligations in the coming months, the IMF team emphasized the need to revise downwards non-priority expenditures to offset the increase in security expenditures in the context of the supplementary budget law. In view of the apparent resurgence of the pandemic, the IMF team also encouraged the authorities to accelerate the implementation of their vaccination strategy with the support of their technical and financial partners.

"The IMF team also discussed with the authorities a program of structural reforms for 2021 aimed at improving governance and public financial management and strengthening domestic revenue mobilization. In particular, the authorities committed to submit a new anti-corruption law to the National Assembly, systematically publish public contracts, and to make the e-procedures for tax filing and payment by large companies operational.

"The team would like to express its deep appreciation to the authorities for their excellent collaboration and the open atmosphere that prevailed during the discussions."

The IMF team met with President Touadéra, Finance Minister Dondra, Economy Minister Moloua, Mines Minister Mboli-Fatrane, BEAC National Director Chaïbou, other senior government officials, and representatives of technical and financial partners.