IMF Executive Board Approves US$115.1 Million Three-Year Extended Credit Facility (ECF) Arrangement for the Central African Republic
December 20, 2019
- Board’s decision enables an immediate disbursement of SDR 11.936 million, about US$16.4 million
- Structural reforms will aim at improving the government’s capacity to design and implement policies and reforms, and enhancing governance, including through strengthening anticorruption institutions.
- Fiscal policy will focus on enhanced revenue mobilization, spending prioritization, and strengthened public financial management
On December 20, 2019, the Executive Board of the International Monetary Fund (IMF) approved a three-year arrangement under the IMF’s Extended Credit Facility (ECF) for the Central African Republic (CAR) equivalent to SDR83.55 million (about US$115.1 million, or 75 percent of the Central African Republic’s quota in the Fund). The IMF-supported program aims to maintain macroeconomic stability, strengthen administrative capacity, governance and the business climate, and address the country’s protracted balance of payment needs.
The IMF Executive Board’s decision enables an immediate disbursement of SDR 11.936 million, about US$16.4 million. Disbursement of the remaining amount will be phased in over the duration of the program, subject to semi-annual reviews of the IMF-supported program by its Executive Board.
Following the Executive Board’s discussion on Central African Republic, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“Despite significant progress under the ECF arrangement that expired last July, the Central African Republic (C.A.R.) remains very fragile, with a volatile security environment, limited administrative capacity, poor governance, and lack of social cohesion.
“The new three-year program supported by the IMF Extended Credit Facility (ECF) will support the implementation of the February 2019 peace agreement and of C.A.R.’s medium-term development strategy. It aims at maintaining macroeconomic stability, strengthening administrative capacity, governance and the business climate, promoting robust and sustainable growth, and reducing poverty.
“Fiscal policy will focus on enhanced revenue mobilization, spending prioritization, and strengthened public financial management. This will ensure that C.A.R.’s considerable security, social, and infrastructure spending needs are sustainably met. Revenue mobilization measures will include the daily reconciliation of revenue data, the digitalization of tax returns and payments, and enhanced coordination between revenue administrations. The further strengthening of public financial management will involve the elimination of the remaining public agencies with no economic justification, the finalization of the audit of domestic arrears, and the strengthening of SOEs’ oversight and management.
“Structural reforms will aim at improving the government’s capacity to design and implement policies and reforms, enhancing governance, including through strengthening anticorruption institutions, and removing bottlenecks and regulatory impediments to private investment.
“Continued financial and technical support from development partners will be critical to the program’s success. Given its high risk of debt distress and limited revenue base, C.A.R. will have to continue relying heavily on grant financing to finance its most pressing spending needs. The authorities will work closely with their technical partners to ensure that capacity development focuses on priorities closely aligned with the program objectives and is efficiently delivered.
“The C.A.R.’s program is supported by the implementation of policies and reforms by the CEMAC regional institutions in the areas of foreign exchange regulations and monetary policy framework, and to support an increase in regional net foreign assets, which are critical to program’s success.”
Annex
Recent Economic Developments
The Central African Republic authorities’ program of economic policies and reforms implemented under the three-year ECF arrangement that expired in July helped to restore economic growth, reduce fiscal and external imbalances, and strengthen public administration. Recent economic developments have been broadly satisfactory, with growth expected to recover to 4 ½ percent this year, mainly driven by the mining, forestry and construction sectors. As the inflationary pressures that resulted from the blockade of the main trade route between Bangui and Cameroon in March have abated, inflation is expected to be limited to 3¼ percent on average this year and less than 3 percent next year. The current account deficit is expected to narrow to 5.6 percent of GDP in 2019, thanks primarily to an increase in official transfers.
The banking sector remains well capitalized, liquid, and profitable although credit to the private sector declined by 3 percent year-to-year in September 2019. Some progress has also been made in the implementation of structural reforms.
Progress under the peace agreement signed in February 2019 remains fragile. Overall, CAR remains in a very fragile situation, with a volatile security environment, limited administrative capacity, poor governance, and lack of social cohesion.
Program Summary
The program will support the implementation of the peace agreement and of CAR’s medium-term development strategy. Fiscal policy will focus on revenue mobilization, spending prioritization, and strengthening public financial management, with a view to allow, over the medium term, the sustainable financing of CAR’s considerable security, social, and infrastructure spending needs. Structural reforms will aim at improving the government’s capacity to design and implementing policies and reforms, at enhancing governance, and at removing bottlenecks and regulatory impediments to private investment.
The medium-term outlook remains broadly favorable, provided security holds. Given the peace agreement’s slow implementation, the macroeconomic framework assumes no conflict resurgence but factors in only limited peace dividends at this juncture. Growth is expected to amount to 5 percent over the medium term, driven by the recovery in the mining sector, the implementation of structural reforms, and the gradual loosening of the energy and transportation bottlenecks. Inflation is expected to remain under the CEMAC ceiling of 3 percent over the medium term. The current account deficit would stabilize at about 5½ percent of GDP, as the improvement in the balance of goods and services would broadly offset the decline in official transfers. The domestic primary balance would stabilize at around 2½ percent, allowing a gradual reduction of the debt/GDP ratio. Facing lower-than-expected revenues, the authorities are committed to containing the domestic primary balance.
The new arrangement will help catalyzing external concessional financing from other development partners, which is critical to support CAR’s path out of fragility. The IMF will also continue its extensive capacity development on priorities that are aligned with the program objectives.
However, risks to the outlook remain high. Political pressures and uncertainty could weaken policy and reform implementation in the run-up to the 2020–21 presidential and general elections. A renewal of violence could also exacerbate the humanitarian crisis and political instability.
Background
The Central African Republic, which became a member of the IMF on July 10, 1963, has an IMF quota of SDR111.4 million.
For additional information on the IMF and the Central African Republic, see:
https://www.imf.org/en/Countries/CAF
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Table 1. Central African Republic: Selected Economic and Financial Indicators, 2017–2024 |
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|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
|||
|
Est. |
6th Rev. |
Est. |
6th Rev. |
Est. |
Proj. |
|||||
|
(Annual percentage change; unless otherwise indicated) |
||||||||||
|
National income and prices |
||||||||||
|
GDP at constant prices |
4.5 |
3.8 |
3.8 |
4.5 |
4.5 |
5.0 |
5.0 |
5.0 |
5.0 |
5.0 |
|
GDP per capita at constant prices |
3.2 |
1.9 |
2.3 |
2.5 |
2.8 |
3.2 |
3.1 |
3.0 |
3.0 |
2.9 |
|
GDP at current prices |
11.3 |
5.3 |
5.2 |
7.2 |
7.4 |
7.6 |
7.6 |
7.7 |
7.7 |
7.6 |
|
GDP deflator |
6.4 |
1.4 |
1.3 |
2.7 |
2.8 |
2.5 |
2.5 |
2.6 |
2.5 |
2.5 |
|
CPI (annual average) |
4.5 |
1.6 |
1.6 |
3.5 |
3.2 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
|
CPI (end-of-period) |
7.2 |
4.6 |
4.6 |
3.0 |
-0.3 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
|
Money and credit |
||||||||||
|
Broad money |
10.3 |
14.0 |
14.0 |
14.1 |
3.2 |
14.9 |
5.8 |
8.9 |
9.4 |
9.6 |
|
Credit to the economy |
1.4 |
11.5 |
11.5 |
9.7 |
3.0 |
5.0 |
7.0 |
8.0 |
8.0 |
8.0 |
|
External sector |
||||||||||
|
Export volume of goods |
42.5 |
10.3 |
10.3 |
2.8 |
-6.5 |
14.9 |
6.0 |
7.0 |
8.3 |
9.2 |
|
Import volume of goods |
-1.9 |
0.1 |
-0.2 |
4.2 |
10.4 |
7.8 |
4.0 |
5.0 |
4.2 |
4.1 |
|
Terms of trade |
-18.4 |
-11.7 |
-12.0 |
5.7 |
12.7 |
3.5 |
2.2 |
0.5 |
-1.6 |
-1.5 |
|
(Percent of GDP; unless otherwise indicated) |
||||||||||
|
Gross national savings |
5.7 |
7.1 |
8.5 |
12.8 |
10.5 |
10.6 |
11.0 |
10.9 |
11.1 |
11.8 |
|
Of which: current official transfers |
1.8 |
3.0 |
3.0 |
5.9 |
6.0 |
3.7 |
3.4 |
2.7 |
1.9 |
1.8 |
|
Gross domestic savings |
-2.9 |
-2.7 |
-1.4 |
0.2 |
-1.9 |
0.3 |
0.9 |
1.5 |
2.6 |
3.5 |
|
Government |
-1.4 |
-1.2 |
-1.2 |
-0.7 |
-1.6 |
-1.3 |
-0.9 |
-0.6 |
-0.5 |
-0.4 |
|
Private sector |
-1.5 |
-1.5 |
-0.2 |
1.2 |
-0.3 |
1.6 |
1.7 |
2.2 |
3.1 |
3.9 |
|
Consumption |
102.9 |
102.7 |
101.4 |
99.5 |
101.9 |
99.7 |
99.1 |
98.5 |
97.4 |
96.5 |
|
Government |
7.0 |
7.7 |
7.7 |
7.6 |
7.3 |
7.5 |
7.5 |
7.5 |
7.5 |
7.5 |
|
Private sector |
95.9 |
95.0 |
93.7 |
91.9 |
94.6 |
92.3 |
91.7 |
90.9 |
89.9 |
89.0 |
|
Gross investment |
13.5 |
15.1 |
16.4 |
16.6 |
16.2 |
16.9 |
16.3 |
16.3 |
16.8 |
17.3 |
|
Government |
4.5 |
6.0 |
7.4 |
7.5 |
7.1 |
7.9 |
7.2 |
7.2 |
7.3 |
7.3 |
|
Private sector |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
9.5 |
10.0 |
|
External current account balance |
||||||||||
|
with grants |
-7.8 |
-7.9 |
-8.0 |
-3.7 |
-5.6 |
-6.3 |
-5.3 |
-5.4 |
-5.7 |
-5.5 |
|
without grants |
-11.0 |
-12.3 |
-12.3 |
-10.9 |
-12.9 |
-11.6 |
-10.4 |
-9.8 |
-9.4 |
-9.1 |
|
Overall balance of payments |
2.9 |
-1.7 |
-1.7 |
2.9 |
1.0 |
1.3 |
1.5 |
1.4 |
2.4 |
2.6 |
|
Central government finance |
||||||||||
|
Total revenue (including grants) |
12.8 |
16.6 |
16.6 |
20.9 |
19.4 |
18.6 |
18.4 |
17.8 |
17.2 |
17.1 |
|
of which: domestic revenue |
7.8 |
8.9 |
8.9 |
9.9 |
8.7 |
9.7 |
10.0 |
10.3 |
10.6 |
10.8 |
|
Total expenditure 1 |
13.9 |
16.3 |
17.6 |
18.3 |
17.6 |
19.0 |
18.3 |
18.3 |
18.4 |
18.5 |
|
of which: capital spending |
4.5 |
6.0 |
7.4 |
7.5 |
7.1 |
7.9 |
7.2 |
7.2 |
7.3 |
7.3 |
|
Overall balance |
||||||||||
|
Excluding grants |
-6.1 |
-7.4 |
-8.7 |
-8.4 |
-8.9 |
-9.3 |
-8.2 |
-8.0 |
-7.8 |
-7.8 |
|
Including grants |
-1.1 |
0.4 |
-1.0 |
2.6 |
1.8 |
-0.4 |
0.2 |
-0.5 |
-1.2 |
-1.4 |
|
Domestic primary balance 2 |
-2.0 |
-1.7 |
-1.7 |
-2.5 |
-3.0 |
-2.7 |
-2.5 |
-2.5 |
-2.5 |
-2.5 |
|
Public sector debt |
50.3 |
48.8 |
50.0 |
43.4 |
47.1 |
42.6 |
39.8 |
37.1 |
35.1 |
33.0 |
|
Of which: domestic debt 3 |
16.2 |
13.9 |
13.9 |
10.2 |
10.2 |
7.8 |
6.9 |
5.9 |
5.1 |
4.3 |
|
Of which: external debt |
34.1 |
34.9 |
36.1 |
33.2 |
36.9 |
34.8 |
32.9 |
31.2 |
30.0 |
28.6 |
|
Memorandum items: |
||||||||||
|
GDP per capita (US dollars) |
451 |
449 |
489 |
457 |
500 |
534 |
567 |
603 |
639 |
688 |
|
Nominal GDP (CFAF billions) |
1,203 |
1,266 |
1,266 |
1,356 |
1,360 |
1,464 |
1,575 |
1,696 |
1,826 |
1,966 |
|
Sources: C.A.R. authorities and IMF staff estimates and projections. |
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|
1 Expenditure is on a cash basis. |
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|
2 Excludes grants, interest payments, and externally-financed capital expenditures. |
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|
3 Comprises government debt to BEAC, commercial banks, and government arrears. |
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