Front Matter

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© 2009 International Monetary Fund

August 2009

IMF Country Report No. 09/259

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.

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Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Completion Point Document and Multilateral Debt Relief Initiative (MDRI)

Prepared by the Staffs of the International Development Association and the International Monetary Fund

Approved by Obiageli K. Ezekwesili and Otaviano Canuto (IDA) Michael Atingi-Ego and Dhaneshwar Ghura (IMF)

June 16, 2009


Executive Summary

I. Introduction

II. Assessment of Requirements for Reaching the Completion Point

  • A. PRSP and Poverty Monitoring

  • B. Macroeconomic Performance

  • C. Transparency

  • D. Structural Reforms in the Forestry and Mining Sectors

  • E. Public Financial Management (PFM)

  • F. Civil Service Reform

  • G. Social Sector Reforms

  • H. Debt Management

III. Updated Debt Relief and Debt Sustainability Analysis

  • A. Data Reconciliation

  • B. Revision of HIPC Assistance and Status of Creditor Participation

  • C. Considerations for Exceptional Topping-Up Assistance

  • D. Creditor Participation in the Multilateral Debt Relief Initiative

  • E. Debt Sustainability Outlook, 2009–28

  • F. Sensitivity Analysis and Long-Term Debt Sustainability

IV. Conclusions

V. Issues For Discussion


1. Selected Macroeconomic Indicators, 2004–08

2. Breakdown of the Increase of NPV of Debt-to-Export Ratio as of end-2008

3. Nominal Stock and Net Present Value of Debt as of December 31, 2006 by Creditor Groups

4. HIPC Initiative Assistance Under a Proportional Burden-Sharing Approach

5. Discount and Exchange Rate Assumptions as of end-December 2006 and end-December 2008

6. Net Present Value of External Debt, 2008–28

7. External Debt Service, 2008–28

8. Nominal and Net Present Value of External Debt Outstanding at end-December 2008

9. External Debt Indicators, 2008–28

10. Sensitivity Analysis, 2008–28

11. Status of Creditor Participation Under the Enhanced HIPC Initiative

12. Delivery of IDA Assistance Under the Enhanced HIPC Initiative and the MDRI, 2007–41

13. Delivery of IMF Assistance Under the Enhanced HIPC Initiative and the MDRI, 2007–17

14. Selected Economic and Financial Indicators, 2004–28

15. Status of Country Cases Considered Under the HIPC Initiative, March 31, 2009

16. Paris Club Creditors’ Delivery of Debt Relief Under Bilateral Initiatives Beyond the HIPC Initiative


1. Composition of Stock of External Debt as of December 31, 2006 by Creditor Group

2. Potential Costs of the HIPC Initiative as of December 31, 2006 by Creditor Group

3. External Debt Burden Indicators, 2008–28

4. Sensitivity Analysis, 2008–28


1. Status of Floating Completion Point Triggers

2. Baseline Macroeconomic Assumptions


I. Debt Management

II. Debt Sustainability Analysis Using the Low-Income Country Framework

Appendix Tables

1a. External Debt Sustainability Analysis, Baseline Scenario, 2006–29

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


European Commission


Education For All/Fast Track Initiative


European Investment Bank


Extractive Industries Transparency Initiative


European Union


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


Non-governmental Organization


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


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

Executive Summary

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.

Central African Republic: Enhanced Initiative for Heavily Indebted Poor Countries: Completion Point Document and Multilateral Debt Relief Initiative
Author: International Monetary Fund