Central African Republic: Enhanced Initiative for Heavily Indebted Poor Countries—Completion Point Document and Multilateral Debt Relief Initiative
This paper was prepared by staffs of the International Monetary Fund and the World Bank in connection with the Executive Board’s consideration of the Central African Republic’s completion point under the Enhanced Initiative for Heavily Indebted Poor Countries and debt relief under the Multilateral Debt Relief Initiative. It is based on the information available at the time it was completed on June 16, 2009. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of Central African Republic or the Executive Board of the IMF.
The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
1b. Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2009–29
2a. Public Sector Debt Sustainability Framework, Baseline Scenario, 2006–29
2b. Sensitivity Analysis for Key Indicators of Public Debt, 2009–29
African Development Bank
Annual Progress Report
Public Procurement Policy Regulatory Authority
Anti Retro Viral
Banque des États de l’Afrique Centrale (Bank of Central African States)
Central African Republic
Communauté Économique Monétaire de l’Afrique Centrale (Central African Economic and Monetary Community)
Country Financial Accountability Assessment
Disarmament, Demobilization and Reintegration
General Public Procurement Directorate
Debt Management and Financial Analysis System
Debt Sustainability Analysis
Diagnostic Trade Integration Study
Education For All/Fast Track Initiative
European Investment Bank
Extractive Industries Transparency Initiative
Gross Domestic Product
Heavily Indebted Poor Countries
Human Immunodeficiency Virus/ Acquired Immunodeficiency Syndrome
International Development Association
International Monetary Fund
Joint Staff Advisory Note
German development assistance fund
Letter of Development Policy
Low Income Countries under Stress
Millennium Development Goals
Multilateral Debt Relief Initiative
National Committee for Public Debt
Net Present Value
Organization of the Petroleum Exporting Countries
Public Financial Management
Poverty Reduction and Growth Facility
Poverty Reduction Strategy
Poverty Reduction Strategy Paper
United Nations Conference on Trade and Development
United Nations Development Program
United Nations Population Fund
United Nation Children Fund
Value Added Tax
World Economic Outlook
World Health Organization
In September 2007, the Boards of Executive Directors of IDA and the IMF agreed that the Central African Republic (C.A.R.) had met the requirements for reaching the decision point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. The amount of debt relief committed at the decision point was US$583 million in end-2006 net present value (NPV) terms, calculated to reduce the NPV of eligible external debt to 150 percent of exports at end-2006. This relief implied a common reduction factor of 68.1 percent.
In the view of the IDA and IMF staffs, C.A.R. has made satisfactory progress in meeting the requirements to reach the completion point. All the floating triggers have been fully implemented. The first poverty reduction strategy paper (PRSP) was published in June 2007. Its implementation has been satisfactory, as acknowledged by the Joint Staff Advisory Note (JSAN) on the first Annual Progress Report (APR) of the poverty reduction strategy. The fourth review under the Poverty Reduction and Growth Facility (PRGF) arrangement will be considered by the Executive Board of the IMF together with this completion point document and the JSAN. The IMF staff will recommend completion of the fourth PRGF review based on the broadly satisfactory implementation of the program in 2008 and the appropriate policy framework for 2009. All other triggers, including those in the area of transparency, structural reforms for forestry and mining sectors, public financial management (PFM), civil service reform, public debt management, social sectors and HIV/AIDS have also been fully implemented.
As a result of the debt reconciliation exercise for the completion point, the net present value (NPV) of eligible external debt at end-2006 after traditional debt relief has been revised upward by US$0.7 million to US$856.6 million. The required HIPC assistance in end-2006 NPV terms has been revised downward from US$583 million at the decision point to US$578 million. The HIPC assistance in nominal terms is estimated at US$804 million, of which US$454 million would be delivered by multilateral creditors and US$350 million by bilateral and commercial creditors. The common reduction factor has declined from 68.1 percent to 67.5 percent.
Creditors accounting for 82 percent of total HIPC eligible debt have given satisfactory assurances of their participation in the enhanced HIPC Initiative. Most multilateral creditors and all Paris Club creditors have agreed to participate. The authorities are working toward obtaining participation of all the remaining creditors.
C.A.R. does not qualify for topping-up under the enhanced HIPC Initiative. The NPV of debt-to-exports ratio after enhanced HIPC assistance at end-2008 was 148.0 percent, higher than anticipated at the decision point. This increase is mainly explained by less favorable exchange rates, a lower discount rate used to calculate the NPV of debt, and reduced exports. The NPV of eligible external debt-to-exports ratio at end-2008 after the full delivery of additional bilateral debt relief beyond HIPC Initiative is estimated at 137.8 percent, below the 150 percent threshold for topping-up consideration under the enhanced HIPC Initiative.
Upon reaching the completion point under the enhanced HIPC Initiative, C.A.R. will also qualify for additional debt relief under the Multilateral Debt Relief Initiative (MDRI). Debt relief under the MDRI would cover almost all remaining debt service obligations to IDA, the African Development Bank (AfDB), and the IMF. MDRI relief would reduce nominal debt service by US$297 million over a period of 33 years.
Full delivery of HIPC, additional bilateral assistance beyond HIPC and MDRI debt relief at the completion point would reduce C.A.R.’s external debt burden significantly. The NPV of debt-to-exports ratio at end-2009 would drop to 74.8 percent and gradually fall over time under the baseline scenario, after rising to 91.3 percent by end-2011. However, the future evolution of these indicators would be sensitive to the macroeconomic assumptions, particularly exports and the terms of new external financing.
The staffs recommend that the Executive Directors of IDA and the IMF approve the completion point for C.A.R. under the enhanced HIPC Initiative.