The Executive Board of the International Monetary Fund (IMF) has approved a credit of SDR 6.962 million (about US$10.2 million) in Emergency Post-Conflict Assistance for the Central African Republic to continue the efforts begun under the first Emergency Post-Conflict Assistance-supported program (see press release 04/158 of July 23, 2004) to stabilize the macroeconomic situation, support the ongoing reform process, and catalyze external assistance.
Following the Executive Board’s discussion of the request by the Central African Republic, on January 27, 2006, Mr. Agustín Carstens, Deputy Managing Director and Acting Chair, said:
“The stable political and security situation in the Central African Republic (CAR.) since the conclusion of the presidential and legislative elections last year is encouraging for the economic prospects of the country. The authorities are now in a position to focus firmly on economic and financial policy issues, which should enhance policy implementation in the period ahead. In this setting, the authorities have undertaken recently a set of strong corrective actions, particularly in the fiscal and governance areas.
“The government’s program for 2006, supported by Emergency Post-Conflict Assistance (EPCA) from the Fund, focuses on the priorities of stabilizing public finances and strengthening governance. It is an important step in putting the country on the path of sustainable economic growth and normalizing relations with external creditors. It is to be hoped that the program will catalyze much-needed financial support and technical assistance from the donor community.
“Steady improvements in revenue performance will be central to stabilizing public finances. The measures already taken to increase revenue, notably the increase in petroleum taxes, and the value added tax rate, are commendable. Further actions to strengthen tax administration and combat customs fraud are necessary to broaden the currently thin tax base, and ensure that the state has the resources to meet its core expenditure needs. On the expenditure side of the budget, the measures to control the wage bill are encouraging, but it will be important to continue with efforts to contain wages, and strengthen public expenditure and treasury management. The objective is to ensure that scarce public resources are channeled toward the country’s priority sectors.
“The authorities’ focus on improving transparency and further strengthening the judiciary is well placed. Progress in these areas is needed to enhance accountability in the public sector, and support private sector development. Continued progress on structural reforms, including liberalizing trade, helping the development of the financial sector, and reforming public enterprises, will also be essential to support the economic recovery over the medium term.
“The authorities have undertaken efforts to address the dire situation in the social sectors. Further actions by the authorities and substantial support from the international community will be needed to make significant gains in this area,” Mr. Carstens said.