IMF Executive Board Completes Fifth Review Under the PRGF Arrangement for the Central African Republic and Approves US$18.5 Million DisbursementPress Release No. 09/445
December 7, 2009
The Executive Board of the International Monetary Fund (IMF) has completed the fifth review of the Central African Republic’s economic performance under a program supported by the arrangement under the Poverty Reduction and Growth Facility (PRGF) for an amount equivalent to SDR 69.62 million (about US$112.21 million). Completion of the review enables the disbursement of an amount equivalent to SDR 11.455 million (about US$18.46 million).
The Central African Republic (C.A.R.) has recorded modest economic growth in the post- conflict period, and income per capita is starting to recover after years of decline. In 2008 and early 2009, a series of domestic and external shocks—beginning with unstable power supply, followed by higher prices for imported commodities, and later the global recession—slowed growth, accelerated inflation, and led to higher current account deficits. However, recent performance suggests a modest recovery, owing in part to the implementation of the government’s reform program. Real GDP growth is projected to increase from 2 percent in 2009 to 3½ percent in 2010 with average CPI inflation slowing toward 2½ percent in 2010.
Implementation of the C.A.R. authorities’ economic program was deemed satisfactory and in completing the review, the Executive Board approved a request for a waiver of the nonobservance of the end-June 2009 quantitative performance criterion on the ceiling on change in net claims on the government by the commercial banking system. The Executive Board also approved the modification of all quantitative performance criteria for end-December 2009.
After the Executive Board’s discussion of the C.A.R.’s economic performance on Friday, December 4, 2009, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, issued the following statement:
“The Central African Republic (C.A.R.) authorities are to be commended for the satisfactory implementation of the program supported by the arrangement under the Poverty Reduction and Growth Facility (PRGF).
“The C.A.R. authorities have made significant progress in improving economic management. The credibility in public finances has been improved through domestic revenue mobilization and prudent budget execution. The petroleum product price adjustment mechanism has been implemented consistently, and taxes on petroleum products have become a significant and stable source for government revenues. The authorities now have credible plans to reduce domestic arrears and commercial bank debt. As a result of these reform measures, the economy is on a sounder basis for sustaining higher growth.
“The C.A.R. authorities need to continue their reform efforts to accelerate growth and to mobilize resources required for poverty reduction, while maintaining debt sustainability. The main areas of focus are efficient mobilization of government revenues, prudent expenditure and debt management, improvement in business and investment climate, promotion of private sector activities through facilitating access to credit, and strengthening external sector performance through diversification of the export base. The assistance that has been delivered under the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative should provide significant help to the authorities’ efforts to achieve the Millennium Development Goals. In addition, the authorities intend to partly draw on their SDR allocation, which will allow them to replace more expensive commercial bank financing without increasing spending.
“The C.A.R. authorities recognize the importance of improving the security situation and maintaining political stability in the period ahead of next year’s elections. Funding is being provided by donors for the peace building process and elections. Enhanced donor financial and technical support is also needed to help the authorities strengthen economic management capacity and address critical infrastructure bottlenecks. The ongoing measures to strengthen financial performance of public utility enterprises are expected to help catalyze donor funding in these areas.”
The Executive Board approved a three-year, SDR 36.2 million PRGF arrangement for the C.A.R. in December 2006 (see Press Release No. 06/299). The Executive Board approved augmentations of SDR 8.355 million in June 2008 (see Press Release No. 08/142) and SDR 25.065 million in June 2009, when it also approved a six-month extension of the arrangement (see Press Release No. 09/242). The augmented arrangement totaling SDR 69.62 million (about US$112.21 million) represents 125 percent of the country’s quota in the Fund.