IMF Executive Board Completes the First Review under the Extended Credit Facility Arrangement for the Central African Republic and Approves US$25 Million Disbursement
October 30, 2023
- The IMF Executive Board today completed the first review under the Extended Credit Facility Arrangement for the Central African Republic. The completion of the first review allows for an immediate disbursement of SDR 19.17 million (about US$25 million) to the Central African Republic to address its protracted balance of payments needs, sustaining priority spending on basic public services.
- The economy is projected to grow by 1.0 percent in 2023, compared to 1.5 percent in 2022, and should recover moderately to 1.5 percent in 2024 while inflation is expected to remain high.
- Program implementation has been mixed for the first review, against challenging macroeconomic backdrop in the first half of the year. The authorities are taking measures to ensure that end-December 2023 targets are met, including by shoring up revenue collection. The authorities remain committed to strong policies.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the first review of the Extended Credit Facility arrangement (ECF) of SDR 141.68 million (about US$191.4 million) for the Central African Republic (CAR). The ECF was approved by the IMF Executive Board in April 2023 (see Press Release No. 23/129 ). The completion of this review allows for the immediate disbursement of SDR 19.17 million (about US$25 million) bringing total disbursements under the ECF to SDR 30.47 million (around US$40 million).
In completing the review, the Executive Board also approved the authorities’ request for a waiver for nonobservance of certain performance criteria. Furthermore, the Executive Board completed the financing assurances review under the ECF. The Executive Board also approved the rephasing of access under the ECF to better align IMF disbursements with the timing of CAR’s balance of payments needs.
The ECF is part of coordinated efforts by international financial institutions to support the people of CAR. It will continue to help the country meet protracted balance of payments needs and sustain spending on basic public services, including in the health and education sectors. The ECF has also helped anchor important governance-related initiatives such as the recent approval of the anti-corruption law. The authorities have committed to further strengthen governance, transparency, and financial integrity frameworks.
Economic activity in 2023 has improved though not as much as initially anticipated at the time of ECF approval. Growth bounced back from the fuel crisis of 2022, with fuel imports improving in response to the authorities’ reforms of the sector. Inflationary pressures remain elevated, driven by energy and food prices. Inflation projection for 2023 was raised from 6.3 percent to 6.5 percent. The fiscal performance has been mixed, with expenses exceeding projections despite encouraging revenues collection. The primary deficit is projected to decline to 3.8 percent of GDP from 4.5 percent in 2022. Access to regional financing has markedly improved after the ECF was approved in April.
Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and acting Chair, issued the following statement:
“The ECF arrangement has helped address a rapidly deteriorating economic and humanitarian situation in Central African Republic (CAR) by immediately boosting access to financing from the regional market and unlocking concessional financing from other International Financial Institutions. The financing, coupled with domestic reforms, offer a path out of deep-rooted fragility. Both technical and financial support from development partners remain vital to the program’s success, coupled with humanitarian assistance to support CAR’s population.
“Program performance has been mixed against a difficult macroeconomic backdrop. Strong corrective actions have been taken to address this performance. Progress has been achieved in advancing structural reforms, including early adoption of the Anti-Corruption Law, which is a signal of the authorities’ commitment to reforms.
“In 2024, decisive steps are required to bolster domestic revenues by streamlining tax exemptions, strengthening VAT collection, and fostering customs revenues. The operationalization of the new tax IT system and the deployment of new customs offices at the country’s borders stand to generate important efficiency gains. At the same time, continued reforms in the fuel market remain a stepping-stone to achieve the ambitious revenue target.
“The authorities should step up social spending while also prioritizing investment in additional fuel storage capacity and infrastructure to overcome revenue volatility. Strengthening public debt management would alleviate rollover risks, including by lengthening the tenor of new issuances and building cash buffers. Improving debt statistics is also important.
“Continued efforts to strengthen governance, transparency, and anti-corruption frameworks remain crucial, together with measures to improve the business climate.
“CAR’s economic program will continue to be supported by the implementation of policies and reforms agreed among the CEMAC regional institutions, which notably aim at supporting an increase in regional net foreign assets and which are ultimately critical to the program’s success.”
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Central African Republic: Selected Economic and Financial Indicators, 2020-2027 |
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