IMF Executive Board Completes Fifth Review Under Extended Credit Facility Arrangement for Central African Republic and Approves US$31.6 Million Disbursement
December 21, 2018
- IMF Executive Board also concludes the 2018 Article IV consultation.
- The Central African Republic authorities implement a comprehensive economic reform program to entrench macroeconomic stability, buttress inclusive growth, and reduce poverty.
- Growth is estimated at 4.3 percent in 2017 and is expected to remain broadly unchanged.
On December 19, 2018, the Executive Board of the International Monetary Fund (IMF) completed the fifth review under the Extended Credit Facility (ECF) arrangement for the Central African Republic. Completion of this review enables the disbursement of SDR 22.84 million (about US$31.6 million).
The three-year ECF arrangement was approved by the IMF Executive Board on July 20, 2016 and access has been augmented twice to a total of SDR 133.68 million (about US$185.2 million or 120 percent of the Central African Republic’s quota).
Following the Executive Board’s discussion on the Central African Republic, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“Central African Republic’s performance under the ECF‑supported program has been satisfactory despite a challenging security environment and difficult humanitarian conditions.
“The authorities remain committed to maintain fiscal policy consistent with macroeconomic stability, which is critical for economic growth and poverty reduction. The 2019 budget is anchored to the domestic primary balance objective while allowing a scale-up of social and capital spending. The integration in the budget of previously excluded revenues and expenses of government agencies and funds is an important step to enhance fiscal transparency.
“Strong efforts to mobilize domestic revenues, which remain weak, will be critical to sustainably finance an increase of public services. To that end, the authorities will step up the use of IT tools and modernize the customs and revenue administration. Given the country’s high risk of debt distress, continued reliance on grant financing is essential to support debt sustainability. The implementation of the investment program for the National Recovery and Peacebuilding Plan will boost economic prospects, create jobs, and reduce poverty.
“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 strengthening financial oversight of public institutions and state-owned enterprises, reducing exceptional payment procedures, improving the business climate, and strengthening the asset declaration regime. It will also be important to follow through on commitments to strengthen governance and transparency in the management of natural resources.
“Central African Republic’s program continues to be supported by the implementation of supportive policies and reforms by the 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 the program’s success.”
The Executive Board of the IMF also concluded the 2018 Article IV consultation with the Central African Republic.
Growth is estimated at 4.3 percent in 2017 and is expected to remain broadly unchanged driven by a dynamic forestry sector, construction and externally financed investment projects. Inflation fell on the back of price declines for food and manufacturing products. Growth could increase to 5 percent in the medium term. However, risks are on the downside, mainly due to the volatile security situation. The projections are predicated on progress in peace and reconciliation efforts under the African Union Initiative, the gradual extension of security forces and public services in provinces, and steadfast implementation of reforms.
In July 2018, the Parliament passed a revised budget to reflect the fiscal performance in the first half of the year. Data through end-September confirms that the fiscal deficit remains contained and that the fiscal program is on track. The current account deficit is estimated at 8.3 percent of GDP in 2017. Currently available information suggests it will remain at a similar level in 2018. While the oil import bill is set to increase, higher timber exports and the sale of stockpiled diamonds will offset the effect on the trade balance. The banking sector remained stable and credit growth to the economy has picked up to 5.2 percent (y-o-y) at end-September 2018.
The Central African Republic authorities have implemented a comprehensive economic reform program to entrench macroeconomic stability, buttress inclusive growth, and reduce poverty. The parliament adopted a 2019 budget consistent with macroeconomic stability. The 2019 budget enhances fiscal transparency by integrating previously excluded fiscal revenues and expenditure. The authorities also envisage to increase social spending. To bolster growth prospects, resilience, and poverty reduction, the authorities have committed to strengthen fiscal revenue mobilization, enhance good governance, promote gender equality and improve the business climate.
Executive Board Assessment [1]
Executive Directors agreed with the thrust of the staff appraisal. Given the persistent insecurity and the large humanitarian needs of the population, they recognized the Central African Republic’s efforts to implement its economic program and the satisfactory performance under the ECF arrangement. Directors stressed the importance of rebuilding sound institutions and maintaining macroeconomic stability, which provide an important opportunity toward exiting fragility. Against this difficult backdrop, Directors welcomed the authorities’ continued commitment to the program objectives, and underscored the need to implement the National Recovery and Peacebuilding Plan and the development agenda to boost economic prospects. Directors emphasized that higher and inclusive growth will be critical to create jobs and reduce poverty. They underlined the importance of continued Fund engagement through ongoing technical assistance and close coordination with other development partners, paying due regard to the country’s absorptive capacity.
Directors welcomed the authorities’ commitment to ensure that fiscal policy remains consistent with macroeconomic stability while stepping up social spending. They underscored the importance of further improving domestic revenue mobilization to sustainably expand the provision of public services. In this regard, Directors encouraged the authorities to further strengthen customs and tax administration, enhance information exchange between government agencies, modernize payment systems, and use IT systems more comprehensively. They commended the authorities for integrating in the 2019 budget previously excluded expenditures and revenues from government agencies and funds, as well as for increasing the budget allocation for key ministries providing social services. Directors welcomed the recent simplification of the oil price structure that would limit the fiscal impact of higher global oil prices.
Directors noted the progress in improving public financial management, including regular and timely budget execution reporting and reduced use of exceptional spending procedures. They encouraged the authorities to further streamline quasi‑fiscal taxes and levies. Directors underscored the importance of good governance and the fight against corruption. They encouraged the authorities to strengthen the asset declaration regime, implement the United Nations Convention against Corruption, and improve the management of natural resources, including by adhering to the principles of the Extractive Industries Transparency Initiative.
Directors noted the staff assessment that the external position appears weaker than implied by medium‑term fundamentals and desirable policies. They pointed out that the insecurity, high transportation cost, and a weak judicial system undermine the country’s attractiveness for investment. Noting the high risk of debt distress, Directors recommended limiting borrowing and seeking instead to mobilize grant financing to its fullest extent. They also called for continued efforts to resolve external arrears. Directors welcomed progress to clear domestic arrears and encouraged steadfast implementation of the strategy while ensuring transparency and accountability of the process.
Directors noted that the Central African Republic’s program continues to be supported by the implementation of policies and reforms by the regional institutions, which are critical to the program’s success. These comprise the implementation of the three policy assurances provided in the June 2018 Letter of Policy Support, as updated with respect to the assurance on NFAs by the December 2018 Letter, and as discussed in the December 2018 union‑wide background paper. Completion of the sixth review will be conditional on the implementation of these policy assurances.
It is expected that the next Article IV consultation with the Central African Republic will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.
Table 1. Central African Republic: Selected Economic and Financial Indicators, 2016–23
|
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
||||||||
|
Est. |
Est. |
4th. Rev. |
Proj. |
Proj. |
|||||||||||
|
(Annual percentage change; unless otherwise indicated) |
|||||||||||||||
|
National income and prices |
|||||||||||||||
|
GDP at constant prices |
4.5 |
4.3 |
4.3 |
4.3 |
5.0 |
5.0 |
5.0 |
5.0 |
5.0 |
||||||
|
GDP per capita at constant prices |
2.6 |
2.4 |
2.4 |
2.4 |
3.1 |
3.0 |
3.0 |
3.1 |
3.1 |
||||||
|
GDP at current prices |
11.2 |
8.1 |
8.4 |
7.4 |
8.2 |
7.6 |
7.6 |
7.6 |
7.6 |
||||||
|
GDP deflator |
6.3 |
3.6 |
3.9 |
3.0 |
3.0 |
2.5 |
2.5 |
2.5 |
2.5 |
||||||
|
CPI (annual average) |
4.6 |
4.1 |
4.0 |
3.0 |
3.0 |
2.5 |
2.5 |
2.5 |
2.5 |
||||||
|
CPI (end-of-period) |
4.7 |
4.2 |
3.6 |
2.5 |
2.3 |
2.7 |
2.4 |
2.6 |
2.4 |
||||||
|
Money and credit |
|||||||||||||||
|
Broad money |
5.8 |
10.3 |
8.5 |
2.3 |
11.6 |
7.6 |
7.6 |
7.6 |
7.6 |
||||||
|
Credit to the economy |
17.5 |
-0.1 |
5.9 |
5.5 |
3.3 |
7.7 |
7.3 |
8.7 |
11.0 |
||||||
|
External sector |
|||||||||||||||
|
Export volume of goods |
52.3 |
42.5 |
9.3 |
10.0 |
10.4 |
8.1 |
8.6 |
8.6 |
5.5 |
||||||
|
Import volume of goods |
13.4 |
-2.5 |
6.7 |
5.2 |
6.2 |
5.4 |
5.7 |
5.3 |
5.7 |
||||||
|
Terms of trade |
-0.4 |
-19.0 |
-11.4 |
-13.4 |
0.2 |
1.2 |
2.7 |
0.6 |
0.4 |
||||||
|
(Percent of GDP; unless otherwise indicated) |
|||||||||||||||
|
Gross national savings |
8.2 |
5.5 |
6.9 |
7.3 |
9.0 |
9.9 |
10.6 |
11.3 |
12.0 |
||||||
|
Of which: current official transfers |
3.7 |
1.9 |
3.3 |
3.1 |
2.8 |
2.0 |
1.8 |
1.6 |
1.4 |
||||||
|
Gross domestic savings |
-3.3 |
-3.7 |
-3.0 |
-2.9 |
-0.3 |
1.2 |
2.0 |
3.0 |
4.0 |
||||||
|
Government |
-1.0 |
-1.5 |
-0.1 |
-0.5 |
0.3 |
0.5 |
0.8 |
1.1 |
1.4 |
||||||
|
Private sector |
-2.3 |
-2.2 |
-2.9 |
-2.4 |
-0.6 |
0.7 |
1.2 |
1.8 |
2.5 |
||||||
|
Consumption |
103.3 |
103.7 |
103.0 |
102.9 |
100.3 |
98.8 |
98.0 |
97.0 |
96.0 |
||||||
|
Government |
7.3 |
7.5 |
7.0 |
7.3 |
7.5 |
7.7 |
7.7 |
7.7 |
7.7 |
||||||
|
Private sector |
96.0 |
96.2 |
96.0 |
95.5 |
92.8 |
91.1 |
90.3 |
89.3 |
88.3 |
||||||
|
Gross investment |
13.7 |
13.8 |
15.3 |
15.9 |
16.6 |
16.8 |
16.2 |
16.2 |
16.6 |
||||||
|
Government |
3.1 |
4.8 |
6.3 |
6.9 |
7.5 |
7.8 |
7.2 |
7.2 |
7.1 |
||||||
|
Private sector |
10.6 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
9.5 |
||||||
|
External current account balance |
|||||||||||||||
|
with grants |
-5.5 |
-8.3 |
-8.4 |
-8.6 |
-7.6 |
-7.0 |
-5.7 |
-4.9 |
-4.7 |
||||||
|
without grants |
-10.7 |
-11.7 |
-13.2 |
-13.3 |
-11.7 |
-10.6 |
-9.2 |
-8.4 |
-8.0 |
||||||
|
Overall balance of payments |
0.9 |
3.1 |
-1.6 |
-1.8 |
-0.2 |
1.4 |
1.6 |
1.9 |
2.1 |
||||||
|
Central government finance |
|||||||||||||||
|
Total revenue (including grants) |
14.1 |
13.7 |
16.6 |
17.5 |
18.8 |
18.3 |
17.9 |
18.0 |
18.1 |
||||||
|
of which: domestic revenue |
8.2 |
8.3 |
9.2 |
9.3 |
10.7 |
10.9 |
11.2 |
11.5 |
11.8 |
||||||
|
Total expenditure 1 |
12.6 |
14.8 |
15.8 |
16.8 |
18.1 |
18.4 |
17.7 |
17.7 |
17.7 |
||||||
|
of which: capital spending |
3.1 |
4.8 |
6.3 |
6.9 |
7.5 |
7.8 |
7.2 |
7.2 |
7.1 |
||||||
|
Overall balance |
|||||||||||||||
|
Excluding grants |
-4.4 |
-6.5 |
-6.6 |
-7.6 |
-7.4 |
-7.4 |
-6.5 |
-6.2 |
-5.9 |
||||||
|
Including grants |
1.6 |
-1.1 |
0.9 |
0.7 |
0.7 |
-0.1 |
0.1 |
0.3 |
0.4 |
||||||
|
Domestic primary balance 2 |
-1.1 |
-2.2 |
-1.4 |
-1.4 |
-1.2 |
-1.2 |
-0.9 |
-0.6 |
-0.3 |
||||||
|
Public sector debt |
56.0 |
52.8 |
47.0 |
48.5 |
42.2 |
39.2 |
36.4 |
33.8 |
31.5 |
||||||
|
Of which: domestic debt 3 |
26.3 |
25.1 |
21.2 |
22.5 |
18.0 |
16.6 |
15.3 |
14.0 |
12.9 |
||||||
|
Of which: external debt |
29.6 |
27.8 |
25.8 |
26.0 |
24.2 |
22.6 |
21.1 |
19.7 |
18.6 |
||||||
|
PPP per capita (PPP dollars) |
651.8 |
676.9 |
705.9 |
705.9 |
735.8 |
765.0 |
795.0 |
824.8 |
855.9 |
||||||
|
Nominal GDP (CFAF billions) |
1,041 |
1,126 |
1,218 |
1,209 |
1,308 |
1,408 |
1,515 |
1,630 |
1,754 |
||||||
|
Sources: C.A.R. authorities and IMF staff estimates and projections. |
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|
1 Expenditure is on a cash basis. |
|
||||||||||||||
|
2 Excludes grants, interest payments, and externally-financed capital expenditure. |
|
|
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|
3 Comprises government debt to BEAC, commercial banks and government arrears. |
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[1] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://0-www-imf-org.library.svsu.edu/external/np/sec/misc/qualifiers.htm .
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