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IMF Country Report No. 21/28
CENTRAL AFRICAN REPUBLIC
FIRST AND SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA—PRESS RELEASE; STAFF REPORT; STAFF STATEMENT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE CENTRAL AFRICAN REPUBLIC
February 2021
In the context of the First and Second Reviews Under the Extended Credit Facility Arrangement and Request for Waivers of Nonobservance of Performance Criteria, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on January 12, 2021, following discussions that ended on October 9 2020 with the officials of the Central African Republic on economic developments and policies underpinning the IMF disbursement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on December 21, 2020.
A Debt Sustainability Analysis prepared by the staff of the IMF and the International Development Association (IDA).
A Supplementary Information on Libya
A Statement by the Staff Representative for the Central African Republic.
A Statement by the Executive Director for the Central African Republic.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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CENTRAL AFRICAN REPUBLIC
FIRST AND SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA
December 21, 2020
Executive Summary
Context. The Covid-19 pandemic had a substantial impact on C.A.R.’s economy but appears now somewhat contained. The number of positive cases and related deaths has been very limited over the last few months, even though most containment measures have been progressively loosened. Despite some progress since the February 2019 peace agreement, the security situation remains precarious. Despite some delays in voter registration, the first round of the presidential and general elections is still scheduled on December 27.
Program performance. The pandemic and early shortfalls in policy implementation have substantially affected program performance, with most quantitative performance criteria and structural benchmarks missed. Program implementation has, however, improved over recent months with fiscal developments broadly in line with the April 2020 RCF projections and substantial progress in implementing structural reforms.
Macroeconomic prospects. Reflecting the longer-than-expected economic impact of the pandemic, the short-term outlook has worsened further. Assuming a steady implementation of the peace agreement and of the reforms envisaged under the program, growth would gradually recover over the medium term. Inflation would remain contained, while the external current account deficit would decline. Risks to this outlook are sizeable and skewed to the downside, while risks to the program remain elevated.
Key policy recommendations. In the short term, the authorities should focus on ensuring that donor financing is efficiently spent to fight the pandemic. As the situation improves, the focus should return to sustainably financing—through revenue mobilization, spending prioritization, and PFM reforms— C.A.R.’s considerable security, social, and infrastructure spending needs, while promoting inclusive growth through governance and business environment reforms.
Staff supports completion of the first and second reviews under the ECF arrangement and the authorities’ request for waivers for the non-observance of performance criteria. Completion of this review will release a disbursement equivalent to SDR 23.87 million.
Approved By
Vitaliy Kraramenko (AFR) and Seán Nolan (SPR)
An IMF team consisting of Messrs. Martin (head), Diaby, Million, Nshimiyimana, Ms. Esham (all AFR), and Messrs. Basdevant (FAD), Davies and Zoungarani (resident representative and local economist) held discussions with the Central African authorities by video conferences from September 28–October 9 2020. Mr. Kibassim (OED) also attended the discussions. The team had talks with President Touadera, Prime Minister Ngrebada, Minister of Finance and Budget Dondra, Minister of Economy, Planning and International Cooperation Moloua, Minister of Mines, Energy and Hydraulics Mboli-Fatrane, Minister of Posts and Telecommunications Gourna-Zacko, National Director of BEAC Chaïbou, senior government officials and parliamentarians, as well as development partners and representatives of the private sector. Mr. Ouattara’s help with the production of the staff report is gratefully acknowledged.
Contents
CONTEXT
RECENT DEVELOPMENTS
PROGRAM PERFORMANCE
OUTLOOK AND RISKS
POLICY ISSUES AND DISCUSSIONS
A. Fiscal Policy
B. Structural Fiscal Issues
C. Other Structural Reforms
CAPACITY BUILDING
PROGRAM ISSUES
STAFF APPRAISAL
BOX
1. Monitoring of COVID19-Related Expenditures
TABLES
1. Selected Economic and Financial Indicators, 2018–25
2a. Central Government Financial Operations, 2018–25 (Billions of CFAF).
2b. Central Government Operations, 2018–25 (Percent of GDP)
3. Monetary Survey, 2018–25
4a. Balance of Payments, 2018–25 (Billions of CFAF)
4b. Balance of Payments, 2018–25 (Percent of GDP)
5. External Financing Requirements, 2020–25
6. Sustainable Development Goals, 2000–19
7. BOP and Budget Support, 2020–21
8. Indicators of Capacity to Repay the IMF, 2020–30
9. Financial Soundness Indicators, 2012–20
10. Schedule of Disbursements, 2019–22
11. Risk Assessment Matrix
FIGURES
1. Recent Developments
2. Medium-Term Economic Prospects, 2015–25
ANNEXES
I. The Authorities’ Response To The Pandemic
II. Domestic Revenue Mobilization
III. Alternative Scenario
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies (MEFP)
Attachment II. Technical Memorandum of Understanding
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CENTRAL AFRICAN REPUBLIC
FIRST AND SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVERS OF NON-OBSERVANCE OF PERFORMANCE CRITERIA —DEBT SUSTAINABILITY ANALYSIS
December 21, 2020
Approved By
Vitaliy Kramarenko (AFR); Seán Nolan (SPR) and Marcello Estevão (IDA)
Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA)1
| Central African Republic Joint Bank-Fund Debt Sustainability Analysis | |
| Risk of external debt distress | High |
| Overall risk of debtdistress | High |
| Granularity in the risk rating | Sustainable |
| Application of judgement | No |
| Central African Republic Joint Bank-Fund Debt Sustainability Analysis | |
| Risk of external debt distress | High |
| Overall risk of debtdistress | High |
| Granularity in the risk rating | Sustainable |
| Application of judgement | No |
The Central African Republic (C.A.R.) remains at high risk of external debt distress and overall high risk of debt distress, unchanged from the most recent DSA.2 Solvency indicators have deteriorated relative to the previous DSAs, and liquidity indicators breach their thresholds under the baseline scenario. Sensitivity of debt indicators to standard stress tests, increased uncertainty of the economic outlook owing to the pandemic, a volatile security environment, and sizeable contingent liabilities are all considerations supporting the high-risk assessment. Debt is projected to remain sustainable over the medium term provided that the policies and structural reforms to which the authorities committed to under the ECF arrangement continue to be implemented. Given the difficult debt situation, staff recommend that the government continues to rely heavily on grant financing, with concessional debt financing to be considered in exceptional cases.3
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CENTRAL AFRICAN REPUBLIC
FIRST AND SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVERS OF NON-OBSERVANCE OF PERFORMANCE CRITERIA —SUPPLEMENTARY INFORMATION
January 8, 2021
Prepared By
The African Department
