## cr18380

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### Recent developments and macroeconomic stance
- Growth and inflation:
  - GDP at constant prices: 4.3 percent in 2017 and 4.3 percent projected for 2018 and 2019.
  - GDP per capita at constant prices: 2.4 percent in 2017 and 2.4 percent projected for 2018 and 2019.
  - GDP at current prices: 8.1 percent in 2017 and 8.4 percent projected for 2018; 7.4 percent projected for 2019.
  - GDP deflator: 3.6 percent in 2017 and 3.9 percent projected for 2018; 3.0 percent projected for 2019.
  - CPI (annual average): 4.1 percent in 2017, 4.0 percent projected for 2018, 3.0 percent projected for 2019.
  - CPI (end-of-period): 4.2 percent in 2017, 3.6 percent projected for 2018, 2.5 percent projected for 2019.
- Money and credit:
  - Broad money: 10.3 percent in 2017 and 8.5 percent projected for 2018; 2.3 percent projected for 2019.
  - Credit to the economy: -0.1 percent in 2017 and 5.9 percent projected for 2018; 5.5 percent projected for 2019.
  - Credit growth to the economy reached 5.2 percent (y-o-y) at end-September 2018 (text).
- External sector and trade:
  - Export volume of goods: 42.5 percent in 2017 and 9.3 percent projected for 2018; 10.0 percent projected for 2019.
  - Import volume of goods: -2.5 percent in 2017 and 6.7 percent projected for 2018; 5.2 percent projected for 2019.
  - Terms of trade: -19.0 percent in 2017 and -11.4 percent projected for 2018; -13.4 percent projected for 2019.
  - External current account balance with grants: -8.3 percent of GDP in 2017 and -8.4 percent projected for 2018; -8.6 percent projected for 2019.
  - External current account balance without grants: -11.7 percent of GDP in 2017 and -13.2 percent projected for 2018; -13.3 percent projected for 2019.
  - Overall balance of payments: 3.1 percent of GDP in 2017 and -1.6 percent projected for 2018; -1.8 percent projected for 2019.
- Fiscal sector:
  - Total revenue (including grants): 13.7 percent of GDP in 2017 and 16.6 percent projected for 2018; 17.5 percent projected for 2019.
  - Domestic revenue: 8.3 percent of GDP in 2017 and 9.2 percent projected for 2018; 9.3 percent projected for 2019.
  - Total expenditure (cash basis): 14.8 percent of GDP in 2017 and 15.8 percent projected for 2018; 16.8 percent projected for 2019.
  - Capital spending: 4.8 percent of GDP in 2017 and 6.3 percent projected for 2018; 6.9 percent projected for 2019.
  - Overall balance excluding grants: -6.5 percent of GDP in 2017 and -6.6 percent projected for 2018; -7.6 percent projected for 2019.
  - Overall balance including grants: -1.1 percent of GDP in 2017 and 0.9 percent projected for 2018; 0.7 percent projected for 2019.
  - Domestic primary balance (excludes grants, interest, externally-financed capital): -2.2 percent of GDP in 2017 and -1.4 percent projected for 2018 and 2019.
- Public debt:
  - Public sector debt: 52.8 percent of GDP in 2017 and 47.0 percent projected for 2018; 48.5 percent projected for 2019.
  - Of which domestic debt: 25.1 percent of GDP in 2017 and 21.2 percent projected for 2018; 22.5 percent projected for 2019.
  - Of which external debt: 27.8 percent of GDP in 2017 and 25.8 percent projected for 2018; 26.0 percent projected for 2019.
- Other key indicators:
  - Gross investment: 13.8 percent of GDP in 2017 and 15.3 percent projected for 2018; 15.9 percent projected for 2019.
  - Gross national savings: 5.5 percent of GDP in 2017 and 6.9 percent projected for 2018; 7.3 percent projected for 2019.
  - PPP per capita (PPP dollars): 676.9 in 2017 and 705.9 projected for 2018 and 2019.
  - Nominal GDP (CFAF billions): 1,041 in 2016; 1,126 in 2017; 1,218 projected for 2018; 1,209 projected for 2019.

### Program performance and institutional context
- ECF arrangement and financing:
  - ECF launched in July 2016 with total access of SDR 133.68 million (120 percent of quota).
  - Schedule of disbursements includes: SDR 12.525 million (July 20, 2016), SDR 12.525 million (December 21, 2016), SDR 11.70 million (July 20, 2017), SDR 28.41 million (December 15, 2017), SDR 22.84 million (July 02, 2018), SDR 22.84 million (December 19, 2018), SDR 22.84 million (March 20, 2019) — total SDR 133.68 million — 120.0 percent of quota.
  - Fifth review completion will release a disbursement equivalent to SDR 22.84 million (staff view supports completion).
- Program monitoring and criteria:
  - All end-June 2018 quantitative and continuous performance criteria were met.
  - Net domestic financing of the government: CFAF 1.5 billion (ceiling CFAF 8.0 billion) at end-June 2018.
  - Domestic primary fiscal balance: CFAF 0.0 billion (floor -CFAF 10.0 billion) at end-June 2018.
  - Total domestic government revenue: CFAF 56.8 billion (floor CFAF 53.4 billion) at end-June 2018.
  - Clearance of domestic payment arrears: CFAF 19.0 billion (floor CFAF 14.2 billion) at end-June 2018.
- Institutional and security context:
  - CAR characterized as a fragile state with unstable security environment and widespread poverty; World Bank estimates poverty rate exceeds 70 percent (text).
  - NRPP covers 2017–2021 and is backed by substantial donor support.
  - IMF engagement includes technical assistance and a Capacity Building Framework (CBF) pilot project.

### Executive Board assessment and Director recommendations
- Executive Directors:
  - Agreed with staff appraisal; recognized efforts to implement program and satisfactory performance under ECF.
  - Stressed rebuilding institutions and maintaining macroeconomic stability to exit fragility.
  - Welcomed authorities’ commitment to program objectives and need to implement NRPP and development agenda.
- Key director recommendations and priorities:
  - Ensure fiscal policy remains consistent with macroeconomic stability while stepping up social spending.
  - Further improve domestic revenue mobilization:
    - Strengthen customs and tax administration.
    - Enhance information exchange between government agencies.
    - Modernize payment systems and use IT systems more comprehensively.
  - Improve public financial management and transparency:
    - Continue regular and timely budget execution reporting.
    - Reduce use of exceptional spending procedures.
    - Further streamline quasi-fiscal taxes and levies.
  - Strengthen governance and anti-corruption:
    - Strengthen the asset declaration regime.
    - Implement the United Nations Convention against Corruption.
    - Improve management of natural resources and adhere to Extractive Industries Transparency Initiative principles.
  - External sector and debt advice:
    - Note external position appears weaker than implied by fundamentals and desirable policies.
    - High risk of debt distress: recommend limiting borrowing and mobilizing grant financing to the fullest extent.
    - Continue efforts to resolve external arrears and maintain transparency and accountability in clearing domestic arrears.
- Regional assurances:
  - Program supported by three policy assurances provided in June 2018, updated by December 2018 Letter; completion of sixth review conditional on implementing these policy assurances.

### Economic outlook, risks, and policy recommendations
- Medium-term outlook:
  - Staff projects gradual recovery; staff expects growth to reach 5 percent from 2019 onward.
  - Inflation projected to fall below 3 percent in the medium term (CPI period average: 4.1 in 2017; 4.0 in 2018; 3.0 in 2019; 3.0 in 2020; 2.5 in 2021–2023).
  - Current account deficit expected to gradually decline over the medium term.
- Risks:
  - Downside: escalation of violence; lack of political cohesion; delays in CEMAC regional adjustment; further increases in global oil prices; delays in external support.
  - Upside: swift implementation of reform agenda; inclusive peace agreement; progress in lifting embargo on diamond exports.
- Staff policy recommendations:
  - Prioritize domestic revenue mobilization to finance public service extension.
  - Strengthen transparency and good governance.
  - Step up poverty reduction and improve business environment.
  - Promote gender equality to boost resilience.
  - Simplify oil price structure to limit fiscal impact of higher global oil prices.

### Fiscal performance, arrears clearance, and the 2019 budget
- 2018 fiscal performance (end-June):
  - Domestic revenues: CFAF 56.7 billion (vs. floor CFAF 53.4 billion).
  - Primary balance: CFAF 0.0 billion (vs. floor CFAF -10.0 billion).
  - Domestic arrears repayments: CFAF 19.0 billion (vs. target CFAF 14.2 billion).
  - Social spending: CFAF 12.5 billion (vs. indicative floor CFAF 9 billion).
  - Exceptional spending procedures: declined from 24 percent in 2017 to 9 percent in first two quarters (ceiling 5 percent).
- 2019 draft budget (selected ratios, percent of GDP; text table excerpts preserved as presented):
  - Total Revenue: "17.5 17.0 18.8"
  - Domestic Revenue: "9.2 9.5 10.7"
  - Tax Revenue: "8.5 8.7 8.6"
  - Non-tax revenue: "0.8 0.8 2.1"
  - Grants: "8.3 7.6 8.1"
  - Expenditure: "15.7 16.4 18.1"
  - Current primary expenditure: "9.3 9.2 10.2"
  - Wages and salaries: "5.0 5.0 4.9"
  - Transfers and subsidies: "2.3 2.2 2.7"
  - Capital expenditure: "6.9 6.9 7.5"
  - Domestically financed: "1.1 1.5 1.7"
  - Externally financed: "5.8 5.4 5.8"
  - Interest: "0.3 0.3 0.3"
  - Overall Balance: "0.7 0.7 0.7"
  - Domestic primary balance: "-1.4 -1.2 -1.2"
- Revenue measures and social spending:
  - Expiring tax exemptions, revenue administration reforms, and revised reference price for wood exports estimated fiscal gain: 0.3 percent of GDP.
  - Integration of parafiscal taxes expected to lift recorded revenues by more than 1 percent of GDP, with marginal net gain of 0.1-0.2 percent of GDP for the budget in short term.
  - Draft budget envisages wage bill containment; spending increases for education (+21.4 percent) and health (+27.9 percent).
- Oil price sensitivity:
  - 2019 budget assumes international oil price at $75/barrel.
  - Simplification of oil price structure generated savings of 0.1 percent of GDP; petroleum retail prices significantly higher than neighboring countries.

### External position, debt, and regional context
- External position:
  - Current account (with grants): -8.3 percent of GDP in 2017; projected -8.4 percent in 2018 and -8.6 percent in 2019; medium-term improvement expected (e.g., -5.5 percent by 2021 in projections).
  - Exports in 2017: 7.6 percent of GDP; wood exports accounted for 62 percent of total exports in 2017.
  - FDI: 0.4 percent of GDP in 2017 (pre-crisis level was 2 percent in 2012).
- Debt and borrowing:
  - CAR at high risk of debt distress but vulnerabilities declining.
  - CAR contracted one new loan of US$13 million (0.6 percent of GDP) in 2018 with grant element of 50.2 percent for a road to the airport.
  - Post-HIPC arrears regularized with India; repayments start in 2023 over a 20-year period (new convention with India mentioned elsewhere: 25 years at 1.5 percent interest with five-year grace period).
  - Authorities committed to mobilize only grants and highly concessional financing within ECF limits.
- Regional (CEMAC) context:
  - Regional growth could improve to 2.3 percent in 2018 (1 percent in 2017) from rebound in oil production.
  - End-September BEAC’s net foreign assets (NFAs) were significantly below projections; BEAC increased policy rate from 2.95 to 3.5 percent on October 31 and strengthened FX regulation enforcement.
  - Updated policy assurances provide new projections for regional NFA; semi-annual consultations starting first half of 2019 between member states, regional institutions, and IMF staff to review strategy implementation.

### Financial sector and payments
- Banking sector and financial stability:
  - Banks remain adequately capitalized; NPLs declined to around 22 percent from 31 percent at end-2015.
  - Sectoral NPL disparities: mining, manufacturing, and real estate have NPL ratios reaching more than 50 percent of total gross loans.
  - C.A.R.’s four banks implemented COBAC recommendations on governance and prudential standards; delays remain on internal controls and AML recommendations, including mobile banking user identification and IT updates.
- Balance of payments and reserves:
  - Overall balance of payments projected: -1.6 percent of GDP in 2018 and -1.8 percent in 2019; improving to -0.2 percent in 2020 and surplus projections thereafter.
  - Staff notes regional institution policies (monetary stance, regional reserves build-up) critical to program success.

### Domestic arrears and repayment plans
- Wage and pension arrears (selected entries from Text Table 3; stocks in CFAF billion and percent of GDP preserved as presented):
  - Wage and Pension Arrears — Stock (in CFAF billion): 64.9 62.5 57.3 56.9 50.8 44.2 33.2 22.1 11.1
  - Wage and Pension Arrears — (in percent of GDP): 5.8 5.1 4.7 4.7 4.2 3.3 2.5 1.7 0.8
  - Wage and Pension Arrears — Repayments: 2.4 5.2 0.4 6.1 6.6 11.1 1.1 1.1 1.1 1.1
  - Arrears to SMEs — Stock (in CFAF billion): 9.2 9.2 3.8 0.8 0.8 0.8 0.0 0.0 0.0 0.0
  - Arrears to SMEs — (in percent of GDP): 0.8 0.8 0.3 0.1 0.1 0.0 0.0 0.0 0.0 0.0
  - Arrears to SMEs — Repayments: 0.05 5.4 3.0 0.0 0.8 0.0 0.0 0.0 0.0
- Only repayments of arrears accumulated before 2014 shown in Text Table 3; some repayments expected in 2019.
- Authorities adopted comprehensive time-bound plan to clear domestic arrears with safeguards including quarterly progress reports by an international auditor.

### Revenue mobilization and administration
- Impact of 2013 crisis: tax revenues fell from almost 10 percent of GDP in 2012 to 4.4 percent of GDP in 2014.
- Recovery: tax revenues expected to recover to about 8.4 percent of GDP in 2018 via improved tax and customs controls and tax policy changes (notably excise tax increases).
- Staff recommendations:
  - Use IT systems more comprehensively.
  - Ensure consistent application of legislation.
  - Step up tax and customs controls and fight fraud (control widely-used imports and publish monthly customs valuation reconciliation results; proposed structural benchmark end-December 2018).
- Authorities’ commitments:
  - Overhaul revenue administration and build a new headquarters for tax administration.
  - Set up new IT platform at Ministry of Finance by end-December 2018.
  - Draw on Rwanda and Senegal experiences for IT tools.

### Good governance, transparency, and anti-corruption
- Progress:
  - Quarterly budget execution reports published.
  - Closed more than two hundred government accounts in private banks.
  - Submitted budget settlement laws for 2016 and 2017 to the court of auditors.
  - Established ceilings for cash funds and reduced use of exceptional spending procedures.
  - Transition to new financial management system envisaged for 2020.
- Structural benchmarks (selected):
  - Close all cash funds at end-December 2018; issue budget execution circular (end-December 2018).
  - Overhaul regulations for medical evacuations (end-March 2019).
  - Decentralize spending processes and establish IT platform for line ministries (proposed end-December 2018).
  - Revise legislation governing public agencies (end-March 2019) and reorganize Ministry of Finance to strengthen oversight (MEFP, ¶22, 23).
  - Draft 2019 budget integrates revenues from public agencies equivalent to 1 percent of GDP; audits of 43 entities expected finalized in December (structural benchmark, end-December 2018).
- Fighting corruption — recommendations:
  - Implement UNCAC review recommendations to criminalize all acts of corruption and facilitate mutual legal assistance.
  - Enact asset declaration legislation covering high-level officials and family members, require declaration of domestic and foreign assets, verification mechanisms, dissuasive sanctions, and publication of declarations.
  - Strengthen capacity and funding for High Authority for Good Governance.
- Natural resource management:
  - CAR joined Kimberley Process in 2003; EITI membership in 2010 suspended in 2013; process to lift suspension launched.
  - Published forestry permits through June 30, 2018 and new mining permits since January 1, 2018 on Ministry website.
  - Staff suggests expedite lifting EITI suspension, encourage civil society involvement, and ensure host community benefits.

### Supporting reconciliation, poverty reduction, and gender equality
- Fragility drivers: lack of social cohesion, concentration of power, disparities between Bangui and periphery, illicit exploitation of resources, impunity, and insecurity.
- 2016 national survey (ICASEES with World Bank support) findings:
  - Economic activity dominated by smallholder agriculture; forestry generates more than 60 percent of export revenues and is mainly in southwestern regions.
  - Electricity limited to Bangui and few neighboring communities; only 30 percent of municipalities reported access to clean water; cell phone coverage in less than half the country; banking services minimal outside Bangui.
  - Asset ownership declined between 2012 and 2016 (bikes from 30 to 15 percent; radios from 42 to 23 percent).
  - In rural areas less than 20 percent have secondary or higher education; almost 50 percent of women have no formal education.
- Gender equality:
  - Legal commitments: national action plan aligned with UNSCR 1325; minimum quota of 35 percent women in parliament during transition until 2026, and 50 percent thereafter.
  - Staff estimate: if CAR had same level of gender equality as Rwanda, average annual GDP growth would be higher by 0.76 percentage points.
  - Staff recommendation: fund and empower National Observatory for Gender Equality and collect gender-disaggregated data.
- NRPP implementation:
  - Externally financed investment projects in 2018 expected to reach 5.8 percent of GDP (vs. previously projected 4.8 percent).
  - Gradual redeployment of administration to provinces and envisaged increase in social expenditure for key ministries.

### Program targets, financing, and donor support
- Program targets and structural benchmarks:
  - Proposed to keep performance criteria for end-December unchanged.
  - Two new structural benchmarks for end-December 2018:
    - Publish results of monthly customs valuation reconciliation meetings.
    - Ministry of Finance to set up IT platform to operationalize deconcentration of spending process.
- Financing and donor support:
  - Program remains fully financed; firm financing commitments obtained for remainder of program.
  - All expected budget support for 2018 disbursed; one further World Bank disbursement expected in first half of 2019.
  - Main development partners indicating intentions to continue budget support: World Bank, African Development Bank, European Union, and France.
- Total financing sources and components (Table excerpts preserved as presented):
  - Total financing sources: 88.7 102.2 123.4 115.7
  - Capital transfers: 62.5 68.7 75.9 73.2 79.0 85.2
  - Foreign direct investment (net): 10.0 15.0 20.0 20.0 20.0
  - Debt financing: 7.5 7.5 7.5 7.5 7.5 7.5
  - Other net capital inflows: 8.7 11.0 20.0 15.0 10.0 10.0
  - Total financing needs: 72.5 54.5 27.8 26.9 25.9 25.0
  - Budget support (grants): 37.5 37.2 27.8 27.0 26.0 25.0
  - Residual financing need: 35.0 17.3 — IMF: 35.0 17.3

### Treasury cash management and liquidity (Table 6 highlights)
- Deposits beginning of month (CFAF millions, monthly sequence): January 30,593; February 20,267; March 17,887; April 19,144; May 18,263; June 12,710; July 18,881; August 26,309; September 32,443; October 23,821; November 17,241; December 17,913.
- Gross cash outflows (monthly totals): 23,256 13,327 13,303 16,804 14,897 20,386 20,127 15,099 17,382 16,060 20,660 20,012 (annual total 209,358).
- Net cash flow (II-III) monthly: -10,326 -2,380 1,257 -881 -5,553 6,171 7,428 6,134 -8,622 -6,580 672 6,768 -5,792.
- Deposits at end of month (I + (II-III)): 20,267 17,887 19,144 18,263 12,710 18,881 26,309 32,443 23,821 17,241 17,913 24,681 24,801.
- Freely usable deposits (annual): 60,480.

### Indicators of capacity to repay the IMF and disbursements
- Outstanding IMF Credit (SDR Millions) series (selected): 147.30 161.04 155.68 149.83 138.97 121.49 93.41 64.45 37.71 15.99 2.28 0.00.
- Outstanding IMF Credit (CFAF Billions) series (selected): 112.42 121.48 115.62 109.99 102.02 89.19 68.57 47.31 27.68 11.74 1.67 0.00.
- Schedule of disbursements under ECF (SDR millions and percent of quota) — total SDR 133.68 million — 120.0 percent of quota (disbursement dates and amounts preserved as presented).

### Capacity building, technical assistance (CBF) and TA risks
- CBF pilot project (since January 2017) delivered substantial IMF and AFRITAC Central TA.
- TA priorities: tax policy and revenue administration; public financial management; public debt management; statistics (national accounts, GFS, external sector).
- Achievements since January 2018:
  - New agreement with private banks on revenue collection prohibiting automatic compensation.
  - Integration of parafiscal taxes into the budget.
  - TA on public finance statistics and national accounts.
  - Strengthened CS-REF for TA coordination (MEFP, ¶30, 31).
- Risks to TA implementation and mitigation measures:
  - Security risk: Probability High; Impact High — mitigation: send staff to outside locations for training; use donor support for equipment.
  - Delayed development partner support: Probability Medium; Impact High — mitigation: mobilize pledged resources and increase donor capacity development funding.
  - Implementation capacity constraints: Probability High; Impact High — mitigation: hire and train young graduates; equipment modernization with donor support.
  - TA risk register will be a live management tool.

### Data provision and surveillance issues
- Data provision broadly adequate for surveillance despite serious shortcomings.
- Progress noted: national accounts 2013–2017 finalized and about to be published; balance of payments validated for 2013–2015; focus on strengthening central government fiscal collection and reporting.
- Staff stressed need to improve quality, scope, and timeliness of economic data and resourcing.

### Staff appraisal — summary findings and recommendations
- Security and fragility: CAR caught in cycle of violence; legitimate institutions rebuilding; macroeconomic stability restored.
- Growth and jobs: stronger inclusive growth needed to create jobs and reduce poverty; recovery steady but pre-crisis activity level likely only in the 2020s under current projections.
- Domestic revenue mobilization: essential to finance public services; untapped potential due to weak customs and tax administration and fraud.
- Transparency and governance: progress made; further legislative and enforcement steps recommended on asset declaration and UNCAC implementation.
- Business climate: constraints include insecurity, infrastructure, access to credit, judicial weakness; reforms and private sector dialogue needed.
- Program implementation: satisfactory performance to date; 2019 budget considered consistent with macro stability though revenue target could be optimistic; staff welcomes reassessment in first half 2019 and adjustment of non-priority spending if necessary.
- Review recommendations: staff recommends completion of the Fifth Review and completion of the financing assurances review; sixth review conditional on implementation of union-level policy assurances in December 2018 background paper.

### Annex: External sector assessment (summary)
- Main assessment:
  - External position weaker than implied by medium-term fundamentals and desirable policy settings, largely due to structural factors: insecurity, lack of infrastructure, high transport costs, weak business climate.
  - EBA-lite REER overvaluation estimated between 13 and 16 percent by two models.
  - Current account (actual) -8.3 percent in 2017; fitted -6.4 percent; norm -1.9 percent (Table 1, 2017).
  - Drivers of policy gap small; structural factors explain remaining gap.
- Balance of payments and exchange rate developments:
  - Current account deficit narrowed in 2017 to 8.3 percent of GDP.
  - Oil was 27 percent of total imports in 2017.
  - Projection: current account deficit improves over medium term; exports increase with wood and diamond recovery.
- Structural competitiveness constraints:
  - Landlocked status and poor corridors (Bangui–Douala; Pointe Noire–Bangui) raise transport costs.
  - Energy supply covers about a fourth of Bangui consumption.
  - Doing Business showed modest improvement but CAR underperforms CEMAC and SSA averages.
  - World Bank CPIA 2016: overall score 2.4; low government effectiveness.

*Source: Central African Republic — STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION, FIFTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND FINANCING ASSURANCES REVIEW (December 6, 2018).*

### 8.3 percent of GDP in 2017. Currently available information suggests it will remain at a

### cr18380 - 8.3 percent of GDP in 2017. Currently available information suggests it will remain at a

### Recent developments and macroeconomic stance
- Growth and inflation:
  - GDP at constant prices: 4.3 percent in 2017 and 4.3 percent projected for 2018 and 2019.
  - GDP per capita at constant prices: 2.4 percent in 2017 and 2.4 percent projected for 2018 and 2019.
  - GDP at current prices: 8.1 percent in 2017 and 8.4 percent projected for 2018; 7.4 percent projected for 2019.
  - GDP deflator: 3.6 percent in 2017 and 3.9 percent projected for 2018; 3.0 percent projected for 2019.
  - CPI (annual average): 4.1 percent in 2017, 4.0 percent projected for 2018, 3.0 percent projected for 2019.
  - CPI (end-of-period): 4.2 percent in 2017, 3.6 percent projected for 2018, 2.5 percent projected for 2019.
- Money and credit:
  - Broad money: 10.3 percent in 2017 and 8.5 percent projected for 2018; 2.3 percent projected for 2019.
  - Credit to the economy: -0.1 percent in 2017 and 5.9 percent projected for 2018; 5.5 percent projected for 2019.
  - Credit growth to the economy reached 5.2 percent (y-o-y) at end-September 2018 (text).
- External sector and trade:
  - Export volume of goods: 42.5 percent in 2017 and 9.3 percent projected for 2018; 10.0 percent projected for 2019.
  - Import volume of goods: -2.5 percent in 2017 and 6.7 percent projected for 2018; 5.2 percent projected for 2019.
  - Terms of trade: -19.0 percent in 2017 and -11.4 percent projected for 2018; -13.4 percent projected for 2019.
  - External current account balance with grants: -8.3 percent of GDP in 2017 and -8.4 percent projected for 2018; -8.6 percent projected for 2019.
  - External current account balance without grants: -11.7 percent of GDP in 2017 and -13.2 percent projected for 2018; -13.3 percent projected for 2019.
  - Overall balance of payments: 3.1 percent of GDP in 2017 and -1.6 percent projected for 2018; -1.8 percent projected for 2019.
- Fiscal sector:
  - Total revenue (including grants): 13.7 percent of GDP in 2017 and 16.6 percent projected for 2018; 17.5 percent projected for 2019.
  - Domestic revenue: 8.3 percent of GDP in 2017 and 9.2 percent projected for 2018; 9.3 percent projected for 2019.
  - Total expenditure (cash basis): 14.8 percent of GDP in 2017 and 15.8 percent projected for 2018; 16.8 percent projected for 2019.
  - Capital spending: 4.8 percent of GDP in 2017 and 6.3 percent projected for 2018; 6.9 percent projected for 2019.
  - Overall balance excluding grants: -6.5 percent of GDP in 2017 and -6.6 percent projected for 2018; -7.6 percent projected for 2019.
  - Overall balance including grants: -1.1 percent of GDP in 2017 and 0.9 percent projected for 2018; 0.7 percent projected for 2019.
  - Domestic primary balance (excludes grants, interest, externally-financed capital): -2.2 percent of GDP in 2017 and -1.4 percent projected for 2018 and 2019.
- Public debt:
  - Public sector debt: 52.8 percent of GDP in 2017 and 47.0 percent projected for 2018; 48.5 percent projected for 2019.
  - Of which domestic debt: 25.1 percent of GDP in 2017 and 21.2 percent projected for 2018; 22.5 percent projected for 2019.
  - Of which external debt: 27.8 percent of GDP in 2017 and 25.8 percent projected for 2018; 26.0 percent projected for 2019.
- Other key indicators:
  - Gross investment: 13.8 percent of GDP in 2017 and 15.3 percent projected for 2018; 15.9 percent projected for 2019.
  - Gross national savings: 5.5 percent of GDP in 2017 and 6.9 percent projected for 2018; 7.3 percent projected for 2019.
  - PPP per capita (PPP dollars): 676.9 in 2017 and 705.9 projected for 2018 and 2019.
  - Nominal GDP (CFAF billions): 1,041 in 2016; 1,126 in 2017; 1,218 projected for 2018; 1,209 projected for 2019.

### Program performance and institutional context
- ECF arrangement and support:
  - The Extended Credit Facility (ECF) arrangement launched in July 2016 with total access of SDR 133.68 million (120 percent of quota).
  - Program performance described as satisfactory; all end-June 2018 quantitative and continuous performance criteria were met.
  - Completion of the fifth review under the ECF will release a disbursement equivalent to SDR 22.84 million (staff view supports completion).
  - Financing assurances review: staff recommends completion.
- Institutional and security context:
  - The Central African Republic is characterized as a fragile state with an unstable security environment and widespread poverty; the World Bank estimates the poverty rate exceeds 70 percent (text).
  - Return to constitutional order in 2016 provided an opportunity to rebuild state structures; tensions and violence increased since 2017.
  - National Recovery and Peacebuilding Plan (NRPP) covers 2017–2021 and is backed by substantial donor support.
  - IMF engagement includes technical assistance and a capacity building framework integrated with policy advice.

### Executive Board Assessment and Main Policy Messages
- Executive Directors’ assessment:
  - Agreed with the thrust of the staff appraisal and recognized CAR’s efforts to implement its economic program and satisfactory performance under the ECF arrangement.
  - Stressed importance of rebuilding sound institutions and maintaining macroeconomic stability as an opportunity to exit fragility.
  - Welcomed authorities’ commitment to program objectives and underscored need to implement the National Recovery and Peacebuilding Plan and the development agenda.
  - Emphasized higher and inclusive growth as critical to create jobs and reduce poverty.
  - Underscored importance of continued Fund engagement through technical assistance and coordination with development partners, mindful of absorptive capacity.
- Key director recommendations and priorities:
  - Ensure fiscal policy remains consistent with macroeconomic stability while stepping up social spending.
  - Further improve domestic revenue mobilization to sustainably expand public services:
    - Strengthen customs and tax administration.
    - Enhance information exchange between government agencies.
    - Modernize payment systems and use IT systems more comprehensively.
  - Improve public financial management and transparency:
    - Continue regular and timely budget execution reporting.
    - Reduce use of exceptional spending procedures.
    - Further streamline quasi-fiscal taxes and levies.
  - Strengthen governance and anti-corruption measures:
    - Strengthen the asset declaration regime.
    - Implement the United Nations Convention against Corruption.
    - Improve management of natural resources and adhere to Extractive Industries Transparency Initiative principles.
  - External sector and debt advice:
    - Note that the external position appears weaker than implied by medium-term fundamentals and desirable policies.
    - Given insecurity, high transportation cost, and weak judicial system undermine investment attractiveness.
    - High risk of debt distress: recommend limiting borrowing and mobilizing grant financing to the fullest extent.
    - Continue efforts to resolve external arrears and maintain transparency and accountability in clearing domestic arrears.
- Regional policy assurances:
  - Program supported by implementation of three policy assurances provided in June 2018 Letter of Policy Support, updated with respect to NFAs by December 2018 Letter, and discussed in the December 2018 union-wide background paper.
  - Completion of the sixth review will be conditional on implementing these policy assurances.

### Economic outlook, risks, and policy recommendations
- Medium-term outlook and risks:
  - Staff projects a gradual recovery; risks are on the downside due to insecurity.
  - Stronger growth and poverty reduction require:
    - Restoring peace.
    - Extending public services to the provinces.
    - Maintaining momentum of externally-financed investments.
    - Implementing reforms to spur private sector-led and inclusive growth.
    - Improving governance.
- Key policy recommendations (staff summary):
  - Prioritize domestic revenue mobilization to sustainably finance extension of public services.
  - Strengthen transparency and good governance to build legitimacy and trust.
  - Step up efforts to fight poverty and improve the business environment.
  - Promote gender equality to boost resilience.
  - Simplify oil price structure to limit fiscal impact of higher global oil prices (directed in text as welcomed by Directors).

### Financial sector and payments
- Banking sector and financial stability:
  - The banking sector remained stable (text).
  - Credit growth to the economy picked up to 5.2 percent (y-o-y) at end-September 2018 (text).
- Balance of payments and reserves:
  - Overall balance of payments projected: -1.6 percent of GDP in 2018 and -1.8 percent in 2019; improving to -0.2 percent in 2020 and surplus projections thereafter.
  - Staff notes continued regional institution policies (monetary stance, regional reserves build-up) are critical to program success.

*Source: Central African Republic — STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION, FIFTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND FINANCING ASSURANCES REVIEW (December 6, 2018).*

### 4.4 percent and is estimated to reach 4.3 percent in 2018 driven by a dynamic forestry sector,

### 4.4 percent and is estimated to reach 4.3 percent in 2018 driven by a dynamic forestry sector,

### Macroeconomic performance
- Real GDP growth and inflation:
  - Growth was reported as "4.4 percent and is estimated to reach 4.3 percent in 2018 driven by a dynamic forestry sector, construction and externally financed investment projects."
  - "Average inflation fell on the back of price declines for food and manufacturing products."
- Credit and financial indicators:
  - "Credit to the economy increased by 5.2 percent (y -o-y) at end-September, a clear uptick compared with the decline of 0.1 percent in 2017."
- External sector:
  - Timber and diamond export increases were matched by a higher oil import bill due to higher prices and U.S. dollar appreciation.
  - "Net foreign assets have increased over the last two years but are projected to fall this and next year."
  - Diamond exports were temporarily boosted by sale of a stockpile accumulated during the crisis.

### Fragility and living conditions
- Drivers of fragility:
  - "A lack of social cohesion, concentration of political power in a very small elite, disparities between Bangui and the periphery, illicit exploitation of natural resources, impunity and a lasting state of insecurity" have eroded trust and public institutions.
- 2016 national survey findings (ICASEES with World Bank support):
  - Economic structure: "Economic activity is dominated by smallholder agriculture. Livestock, mining, and the forestry sector are of secondary importance. Commerce and public employment are predominant in Bangui."
  - Export structure: "The forestry industry, generating more than 60 percent of export revenues, is mainly located in the southwestern regions."
  - Mining: "The survey suggests that it employs one hundred thousand individuals, a possible underestimation."
  - Access to services and infrastructure:
    - "Electricity supply is limited to Bangui and a few neighboring communities."
    - "Only 30 percent of municipalities reported having access to clean water either through the national water company or water pumps."
    - "Cell phone network coverage is available in less than half of the country and access to banking services is minimal outside of Bangui."
    - "Just 43 percent of municipalities reported having functioning primary schools in their biggest villages."
  - Assets and education:
    - Asset ownership declined between 2012 and 2016 (example: households with a bike decreased from 30 to 15 percent; with a radio from 42 to 23 percent).
    - "In rural areas, less than 20 percent have secondary or higher education. Almost 50 percent of women have no formal education."
  - Impact of 2013 crisis: "Most people work in agriculture without formal employment. Households generally own few productive assets ... Asset ownership declined in 2016 compared to 2012."

### Fiscal performance, arrears clearance, and the 2019 budget
- 2018 fiscal program and performance:
  - "Parliament passed a revised budget for 2018 in July."
  - "All end-June 2018 quantitative and continuous performance criteria were met."
  - End-June program figures:
    - "Domestic revenues stood at CFAF 56.7 billion (vs. a floor of CFAF 53.4 billion)."
    - "The primary balance was CFAF 0.0 billion (vs. a floor of CFAF - 10.0 billion)."
    - "Domestic arrears repayments reached CFAF 19.0 billion (vs. a target of CFAF 14.2 billion)."
    - "Social spending reached CFAF 12.5 billion (vs. an indicative floor of CFAF 9 billion)."
    - "The share of spending through exceptional procedures declined from 24 percent in 2017 to 9 percent in the first two quarters, but still exceeded the indicative ceiling of 5 percent."
  - Structural benchmarks:
    - "All end-June and end-September structural benchmarks have been implemented."
    - Two of three structural benchmarks for end-June 2018 were not met on time; audits of the forestry fund and the telecommunication agency were completed in October and the revision of the oil price structure was adopted in November, generating fiscal savings of 0.1 percent of GDP.
- Domestic arrears clearance:
  - "The authorities adopted a comprehensive and time-bound plan to clear domestic arrears ... The plan contains strong safeguards ... including quarterly progress reports produced by an international auditor."
- 2019 draft budget (Text Table 2 excerpts as presented):
  - Total Revenue: "17.5 17.0 18.8"
  - Domestic Revenue: "9.2 9.5 10.7"
  - Tax Revenue: "8.5 8.7 8.6"
  - Non-tax revenue: "0.8 0.8 2.1"
  - Grants: "8.3 7.6 8.1"
  - Program: "3.1 2.7 2.8"
  - Project: "5.2 4.8 5.3"
  - Expenditure: "15.7 16.4 18.1"
  - Current primary expenditure: "9.3 9.2 10.2"
  - Wages and salaries: "5.0 5.0 4.9"
  - Transfers and subsidies: "2.3 2.2 2.7"
  - Capital expenditure: "6.9 6.9 7.5"
  - Domestically financed: "1.1 1.5 1.7"
  - Externally financed: "5.8 5.4 5.8"
  - Interest: "0.3 0.3 0.3"
  - Overall Balance: "0.7 0.7 0.7"
  - Domestic primary balance: "-1.4 -1.2 -1.2"
- Revenue measures and social spending:
  - "Expiring tax exemptions, reforms to strengthen revenue administration, and a revised reference price for wood exports are estimated to result in a fiscal gain of 0.3 percent of GDP."
  - "The integration of parafiscal taxes is expected to lift recorded revenues by more than 1 percent of GDP (MEFP, ¶13), but with a marginal net gain (0.1-0.2 percent of GDP) for the budget in the short term."
  - "The draft budget envisages a contained wage bill ... The most important spending increases are proposed for the ministries of education (+21.4 percent) and health (+27.9 percent)."
- Oil price sensitivity:
  - "The global oil price increase poses a slight risk to the 2018 revenue projection."
  - Authorities simplified the oil price structure generating savings of 0.1 percent of GDP.
  - "Petroleum retail prices are significantly higher than in all neighboring countries, limiting the scope for upward adjustments."

### External position, debt, and regional context
- Debt and borrowing:
  - "C.A.R. is at high risk of debt distress but vulnerabilities are declining."
  - "C.A.R. has contracted one new loan of US$13 million (0.6 percent of GDP) in 2018 with a grant element of 50.2 percent to revamp a road to the airport."
  - "Post-HIPC arrears have been regularized as the authorities signed an agreement with India. Repayments will now start in 2023 over a 20-year period."
  - Domestic debt: "C.A.R. continues to repay commercial banks and started interest payments on the consolidated debt to BEAC."
- Regional developments (CEMAC):
  - "Regional growth could improve to 2.3 percent in 2018 (1 percent in 2017), largely from a rebound in oil production."
  - "End-September BEAC’s net foreign assets (NFAs) were significantly below projections."
  - BEAC policy response: "increasing its policy rate from 2.95 to 3.5 percent on October 31, and enhancing implementation of the existing foreign exchange regulation."

### Medium-term outlook and scenarios
- Staff baseline expectations:
  - "Staff expects growth to reach 5 percent from 2019 onward."
  - "Inflation is projected to fall below 3 percent."
  - "The current account deficit is expected to gradually decline over the medium term, as forestry exports pick up."
  - "Net transfers are expected to remain substantial, comprising official grants and private transfers mainly from non-governmental organizations."
  - "Foreign direct investment is projected to gradually increase from a very low level, notably in the telecommunication and forestry sectors."
- Text Table 1 (as presented):
  - "Real GDP4.34.34.35.05.05.05.05.0"
  - "Inflation (period average)4.14.03.03.02.52.52.52.5"
  - "Current account balance (percent of GDP)-8.3-8.3-8.6-7.6-7.0-5.7-4.9-4.7"
  - "Overall fiscal balance (incl. grants, percent of GDP)-1.10.90.70.7-0.10.10.30.4"
  - "Domestic primary balance (percent of GDP)-2.2-1.4-1.4-1.2-1.2-0.9-0.6-0.3"
  - "Public Debt  (percent of GDP)52.847.048.542.239.236.433.831.5"
- Risks and scenarios:
  - Downside risks:
    - "An escalation of violence could exacerbate the humanitarian crisis, reduce growth, increase inflation, and lower tax revenues."
    - "Lack of political cohesion and weak capacity could undermine implementation of peace and development strategy, delay public investment projects, or lead to policy missteps."
    - "Delays in CEMAC regional adjustment, of external support, or further increases in global oil prices could weigh on the fiscal balance and the balance of payments."
    - A negative shock could lead to increasing fiscal deficits and renewed arrears accumulation in the absence of alternative financing.
  - Upside potential:
    - "Strong upside potential to growth if the reform agenda is swiftly implemented, an inclusive peace agreement is reached, and the embargo on diamond exports progresses from a partial lift to fully lifted."
  - Authorities’ stance:
    - They "underlined upside risks to the outlook" based on progress on peace and externally-financed investment programs.
    - In the event of a negative shock, authorities are "committed to adjusting non-priority or domestically-financed investments pending to avoid jeopardizing hard won macroeconomic stability."

### Policy discussions and recommendations
- Short-term stability priorities:
  - Finalize the 2019 budget consistent with program objectives: "budget targets a domestic primary deficit of 1.2 percent of GDP, with domestic revenues of 10.7 percent of GDP, and domestic primary spending of 11.9 percent of GDP."
  - Address impact of higher global oil prices and protect vulnerable households if retail prices change.
  - Further improve public financial management and transparency.
- Medium-term growth and inclusiveness:
  - Increase domestic revenue mobilization.
  - Strengthen transparency and good governance.
  - Support reconciliation by creating economic opportunities, reducing poverty, improving the business environment, and promoting gender equality.
- Specific fiscal and administrative reforms:
  - Continue reforms of tax administration and recording of parafiscal taxes.
  - Maintain implementation of the revenue convention with banks to reduce discrepancies in reported revenues.
  - Complete audits and integrate parafiscal funds into budgetary framework to reduce reliance on exceptional spending procedures.

*International Monetary Fund staff report excerpts (Central African Republic).*

### 2.3 percent of GDP by end 2018. Strict control and identification requirements delayed some

### 2.3 percent of GDP by end 2018. Strict control and identification requirements delayed some

### Financial stability
- Banks remain adequately capitalized; non-performing loans have declined to around 22 percent from 31 percent at end-2015.
- Sectoral distribution of NPLs shows huge disparities: mining, manufacturing, and real estate sectors have the highest NPL ratios, reaching more than 50 percent of total gross loans.
- C.A.R.’s four banks have implemented key recommendations of the Commission Bancaire de l'Afrique Centrale (COBAC) related to governance and compliance with prudential standards.
- Delays remain on implementing recommendations regarding internal controls and anti-money laundering, including the identification of mobile banking users and the update of IT systems by banks.
- Authorities committed to:
  - Cutting non-priority spending if revenues underperform to contain the primary fiscal deficit.
  - Considering increasing pump prices if oil prices increase further to limit the loss of fiscal revenue.
  - Clearing all 2003 salary arrears and those of November and December 2002 by the end of 2018 (MEFP, ¶ 24).
- IMF staff: regular external auditor reports confirm implementation of the arrears repayment strategy and application of safeguards (MEFP, ¶24).
- Assumption noted: The 2019 budget assumed international oil price at $75/barrel.

### Domestic arrears and repayment plans
- Text Table 3 (selected items quoted):
  - Wage and Pension Arrears — Stock (in CFAF billion): 64.9 62.5 57.3 56.9 50.8 44.2 33.2 22.1 11.1
  - Wage and Pension Arrears — (in percent of GDP): 5.8 5.1 4.7 4.7 4.2 3.3 2.5 1.7 0.8
  - Wage and Pension Arrears — Repayments: 2.4 5.2 0.4 6.1 6.6 11.1 1.1 1.1 1.1 1.1
  - Arrears to Small and Medium-Sized Enterprises — Stock (in CFAF billion): 9.2 9.2 3.8 0.8 0.8 0.8 0.0 0.0 0.0 0.0
  - Arrears to Small and Medium-Sized Enterprises — (in percent of GDP): 0.8 0.8 0.3 0.1 0.1 0.0 0.0 0.0 0.0 0.0
  - Arrears to Small and Medium-Sized Enterprises — Repayments: 0.05 5.4 3.0 0.0 0.8 0.0 0.0 0.0 0.0
- Only repayments of arrears accumulated before 2014 are shown in Text Table 3.
- Some repayments expected to happen in 2019.

### Revenue mobilization
- Impact of 2013 crisis: Tax revenues fell from almost 10 percent of GDP in 2012 to 4.4 percent of GDP in 2014.
- Recovery: Tax revenues are expected to recover to about 8.4 percent of GDP in 2018 on the back of improved tax and customs controls and tax policy changes, notably an increase in excise taxes.
- Staff recommendations to strengthen revenue administration:
  - Use IT systems more comprehensively.
  - Ensure consistent application of legislation.
  - Step up tax and customs controls.
  - Fight fraud by better controlling widely-used imports (e.g., cement or cooking oil) and publishing results of monthly customs valuation reconciliation meetings (proposed structural benchmark, end-December 2018, MEFP, ¶18).
- Longer-run sources to boost revenues: increase formal economic activity in mining, forestry, agro-industrial, and telecommunications sectors; improve collection of provincial revenues while ensuring commensurate transfers and service delivery.
- Authorities’ commitments:
  - Overhaul revenue administration and build a new headquarters for the tax administration to modernize outdated information technology.
  - Set up a new IT platform at the Ministry of Finance by end-December 2018 (MEFP, ¶ 22).
  - Draw on experiences of Rwanda and Senegal for IT tools to mobilize revenue.
  - Acknowledge that reforms take time and external Fund TA remains important.

### Good governance and fighting corruption
- Weak institutions and perceived corruption undermine state legitimacy; staff view improving governance as yielding economic benefits (higher growth and tax revenues).
- Fiscal transparency progress:
  - Authorities publish quarterly budget execution reports.
  - Closed more than two hundred government accounts in private banks.
  - Submitted budget settlement laws for 2016 and 2017 to the court of auditors for validation.
  - Established ceilings for the use of cash funds and took measures to reduce the use of exceptional spending procedures.
  - Transition to a new financial management system envisaged for 2020.
- Structural benchmarks and reforms:
  - Close all cash funds at end-December (structural benchmark, end-December 2018) and issue a budget execution circular (structural benchmark, end-December 2018).
  - Overhaul regulations for medical evacuations of public servants (structural benchmark, end-March 2019).
  - Decentralize spending processes and establish an IT platform for line ministries (proposed structural benchmark, end-December 2018) (MEFP ¶21).
  - Revise legislation governing public agencies (structural benchmark, end-March 2019) and reorganize the Ministry of Finance to strengthen oversight of public agencies and SOEs (MEFP, ¶22, 23).
  - Draft 2019 budget integrates revenues from the most important public agencies and funds equivalent to 1 percent of GDP and envisages elimination of taxes without economic justification; audits of 43 entities receiving parafiscal revenues expected finalized in December (structural benchmark, end December 2018) (MEFP, ¶19, 20).
- Fighting corruption — past measures:
  - Ratified UNCAC in 2006; review of chapter III and IV in 2016.
  - Constitution requires senior officials to declare assets to the Constitutional Court upon taking and leaving office, but no implementing legislation adopted.
  - High Authority for Good Governance established in 2017; prepared a National Strategy for Good Governance with UNDP funding.
- Staff recommended additional measures:
  - Implement UNCAC review recommendations to criminalize all acts of corruption and facilitate mutual legal assistance.
  - Enact legislation establishing an asset declaration regime covering high-level officials and family members, requiring declaration of all assets domestically and abroad, verification mechanisms, dissuasive sanctions for non-compliance, and publication of declarations.
  - Strengthen capacity and ensure adequate and timely funding for the High Authority for Good Governance.
- Natural resource management:
  - C.A.R. joined the Kimberley Process in 2003; embargo imposed after 2013 crisis was subsequently partially lifted.
  - Joined EITI in 2010; membership suspended in 2013 and a process to lift the suspension has been launched.
  - All mining and forestry contracts are published on the Ministry of Finance and Budget website.
  - Recent actions: publishing all forestry permits issued through June 30, 2018 and all new mining permits issued since January 1, 2018 on the Ministry website; submitting this information to the permanent secretariat for economic and financial reforms of CEMAC.
  - Staff suggestions: expedite efforts to lift the EITI suspension, encourage greater civil society involvement, and ensure host communities benefit from resource exploitation (MEFP, ¶26).
- Authorities’ views: commitment to improve governance and fight corruption; all government members have declared assets to the Constitutional Court as mandated; welcome Fund technical assistance on public financial management and plan further re-organization of the Ministry of Finance and increased use of IT tools.

### Supporting reconciliation, poverty reduction, and gender equality
- Business environment constraints:
  - Economy uncompetitive due to landlocked status, poor infrastructure, and businesses paying for security.
  - Risks include fragile security, weaknesses in the judicial system, and fiscal uncertainty from multiplicity of taxes and collection institutions.
- Authorities’ actions to improve private sector development:
  - Investment charter enacted in June 2018.
  - Draft law modifying public-private partnership terms being finalized.
  - Plan to revise the mining code to ensure compliance with regional foreign exchange standards.
  - Strengthen Joint Consultation Framework for Business Improvement (CMCAA) to bolster government–private sector dialogue.
- National Recovery and Peacebuilding Plan:
  - Implementation continues; externally financed investment projects picked up in 2018 and are now expected to reach 5.8 percent of GDP (vs. a previously projected 4.8 percent of GDP).
  - Envisaged increase of social expenditure for key ministries and gradual redeployment of administration in provinces to expand access to basic social services (MEFP, ¶27).
- Gender equality:
  - Legal commitments: national action plan aligned with UN Security Council Resolution 1325; minimum quota of 35 percent of women in parliament during transition until 2026, and 50 percent thereafter.
  - National Action Plan for Peace and Reconciliation (RCPCA) identifies gender equality as a cross-cutting objective.
  - National Observatory for Gender Equality established but remains woefully underfunded.
  - Staff analysis: same level of gender equality as Rwanda could be associated with 0.8 percent higher average annual GDP in C.A.R.
  - Staff recommendation: fund and empower the National Observatory for Gender Equality and collect gender-disaggregated data.
- Authorities’ views: recognize business environment and gender equality as key to peace and poverty reduction; updated investment charter in June 2018; working on PPP draft law; plan to set up a National Gender Parity Observatory (MEFP, ¶28); more external support expected in 2019.

*Central African Republic — IMF staff report content unit*

### 42.      It is proposed to keep performance criteria for end-December unchanged. Indicative

### It is proposed to keep performance criteria for end-December unchanged. Indicative

### Program targets and structural benchmarks
- Proposed to keep performance criteria for end-December unchanged.
- Indicative targets for end-March 2019 have been revised to reflect the updated framework to ensure continuous monitoring of program performance.
- Two new structural benchmarks proposed for end-December 2018:
  - (i) publishing the results of monthly meetings to reconcile valuations used by customs with those provided by the pre-inspection company; and
  - (ii) the Ministry of Finance will set up an IT platform to operationalize the deconcentration of the spending process (MEFP, ¶18,21).

### Financing and donor support
- The program remains fully financed.
- C.A.R. has obtained firm financing commitments for the remainder of the program.
- All expected budget support for 2018 has been disbursed.
- In the first half of 2019, one further disbursement from the World Bank is expected.
- Main development partners indicating intentions to continue budget support: the World Bank, African Development Bank, European Union, and France—especially if C.A.R. requests another Fund arrangement.

### Regional institutions, policy assurances, and NFA response
- The BEAC and COBAC have pursued implementation of policy commitments and provided updated policy assurances in support of CEMAC countries’ programs.
- In response to the lower NFA accumulation, the BEAC:
  - increased its policy rate,
  - strengthened enforcement of foreign exchange regulations,
  - will submit new foreign exchange regulations to the UMAC ministerial committee by end-year, and
  - will make the new monetary policy framework fully operational.
- Updated policy assurances present new projections for regional NFA with the end-2018 projection revised downward but the end-2019 projection broadly unchanged.
- To achieve these projections:
  - BEAC reiterated commitment to implement an adequately tight monetary policy, and
  - member states will implement adjustment policies in the context of IMF-supported programs.
- Starting in the first half of 2019, semi-annual consultations between member states, regional institutions, and IMF staff will review regional strategy implementation and, if necessary, identify additional corrective measures to allow continuation or approval of new IMF financial support.
- These policy assurances are characterized as critical for the success of C.A.R.’s program.

### BEAC safeguards, accounting, and legal alignment
- BEAC continues to implement remaining recommendations of the 2017 safeguards assessment.
- BEAC’s full transition to IFRS is progressing broadly as planned.
- Steps are being taken to accelerate adoption of revisions to secondary legal instruments to align with the BEAC Charter, in consultation with IMF staff.

### Fund repayment capacity and arrears
- C.A.R. has adequate capacity to repay the Fund.
- Significant Fund repayments are due in the coming years (Table 8) and the authorities are making regular deposits at the BEAC to ensure timely repayment.
- Most official creditors to which there are outstanding arrears have consented to Fund financing.
- C.A.R. has accumulated arrears that pre-date the completion point of the HIPC initiative with some Non-Paris Club members (Argentina, Equatorial Guinea, Iraq, Libya, Taiwan, Province of China).
  - Among these creditors, Libya requested more time to convey its decision regarding consent to Fund financing.
- C.A.R. remains in arrears to a private creditor and is continuing good-faith efforts to reach a collaborative agreement.
- The Fund may provide financing to C.A.R. notwithstanding its external arrears to private creditors, given prompt financial support is considered essential and C.A.R. is pursuing appropriate policies.

### Interest in a successor arrangement
- Authorities signaled interest in a successor arrangement.
- ECF arrangement viewed as having provided support to address protracted balance of payment need, anchor macroeconomic policies, and set the reform agenda.
- Staff encouraged continued diligent program implementation; discussions about a new arrangement could be initiated in the context of the Sixth and final review under the current ECF arrangement.

### Technical assistance and capacity building
- From January 2017, under the IMF’s Capacity Building Framework (CBF) pilot project (Annex I), C.A.R. benefited from substantial IMF and AFRITAC Central TA.
- Expected medium-term outcomes: increase revenue, enhance spending efficiency, restore budget discipline and transparency, strengthen debt management, and create a core macro-fiscal capacity.
- Priorities for capacity building are closely aligned with key reform objectives under the program; authorities concur with most recommendations.
- Specific achievements since January 2018 include:
  - a new agreement with private banks regarding revenue collection that prohibits automatic compensation and requires timely transfer of funds,
  - integration of parafiscal taxes into the budget.
- TA also delivered on public finance statistics and national accounts.
- The number of TA missions, combined with weak absorptive capacity, highlighted the need to improve monitoring and coordination; authorities strengthened the Economic and Financial Reform Monitoring Unit (CS-REF) to better coordinate TA and training (MEFP, ¶30, 31).

### Data provision and surveillance issues
- Despite serious shortcomings, data provision remains broadly adequate for surveillance with limited impact on reliability and quality of policy recommendations.
- Production suffers from poor source data, compilation issues, omissions, delays, inconsistencies, and a lack of cooperation across government agencies.
- Progress noted:
  - national accounts for 2013 to 2017 have been finalized and are about to be published;
  - improvement and dissemination of external sector statistics is ongoing and balance of payment data has recently been validated for 2013 to 2015;
  - on fiscal data, focus so far on strengthening collection and reporting of central government operations; expanding coverage beyond central government is only beginning.
- Staff stressed that improving quality, scope, and timeliness of economic data is crucial and must be properly resourced; authorities agreed and noted weak capacity and need for continued external support.

### Staff appraisal — key findings and recommendations
- Security and fragility:
  - C.A.R. is caught in a cycle of violence and conflict; social cohesion and trust have eroded, GDP has declined, and poverty has soared in a process long predating the 2013 crisis.
  - Rapid turnaround cannot be expected; however, legitimate institutions are rebuilding and considerable international support is creating an enabling environment for reforms; macroeconomic stability has been restored.
- Growth and jobs:
  - Stronger and more inclusive economic growth is necessary to create jobs and reduce poverty.
  - Economic recovery continues at a steady pace, but reaching pre-crisis level of economic activity will take well into the 2020s under current projections.
  - Achieving higher growth depends on consolidation of peace and security, extension of state institutions in provinces, and swift implementation of development agenda.
  - Staff recommends targeted reforms in priority areas while being mindful of capacity constraints.
- Domestic revenue mobilization:
  - Essential to sustainably finance public service provision.
  - Significant untapped revenue potential due to weak customs and tax administration and fraud.
  - Immediate steps: more comprehensive use of IT systems, reinforcing controls, and sanctioning non-compliance.
  - Strong political leadership required to break entrenched malpractices.
- Transparency and governance:
  - Government could signal intent to break with the past by launching a transparency campaign.
  - Progress made: increased fiscal transparency, published mining and forestry permits, relaunched EITI membership process.
  - Recommendations: strengthen asset declaration regime by adopting implementing legislation to specify scope of assets, extend declaration requirements to family members, facilitate public access to declarations, and specify sanctions for non-compliance; prioritize rectifying shortcomings in implementation of the United Nations Conventions Against Corruption.
- Business climate:
  - Constraints include insecurity, lack of basic infrastructure, limited access to credit, high transportation cost, unfair competition, and lack of qualified personnel.
  - Weak and unpredictable judicial system is a key concern; government should reinforce dialogue with private sector and strengthen the judicial system.
- Gender equality:
  - Translating commitments into practice could boost resilience and growth.
  - Achieving outcomes similar to other countries in the region could boost growth considerably and reduce conflict frequency and intensity.
  - First steps: collect more disaggregated data by gender through the National Observatory and step up communication and awareness efforts.
- Program implementation and risks:
  - Program implementation has been satisfactory despite challenging environment; all performance criteria for end-June were met.
  - Structural reforms have progressed with some delay.
  - Staff considers the 2019 budget consistent with macroeconomic stability and welcomes integration of parafiscal taxes and envisaged increase of social spending.
  - Revenue target could prove optimistic given uncertain yield of administrative measures; staff welcomes intent to reassess revenue projections during first half of 2019 and, if necessary, safeguard macroeconomic stability by adjusting non-priority spending.
  - Authorities’ action to limit fiscal impact of higher oil prices is welcome: simplification of oil price structure by eliminating or reducing fees for intermediaries will generate fiscal savings. If oil prices continue to increase, authorities should consider adjusting retail prices while carefully assessing social impact and communicating rationale.
  - Program risks remain elevated: tensions between conflict parties could escalate undermining growth, revenues, and implementation; delays in CEMAC-wide regional adjustment strategy implementation could also have negative impact.
- Review recommendations:
  - Based on performance and progress towards end-December regional policy assurances and corrective actions in response to NFA underperformance, staff recommends completion of the Fifth Review.
  - The economic program in the attached Letter of Intent and Memorandum of Economic and Financial Policies remains appropriate.
  - Staff proposes completion of the sixth review be conditional on implementation of critical policy assurances at the union level, as established in the December 2018 union-wide background paper.
  - Staff also recommends completion of the financing assurances review.

*Source: IMF staff report (excerpts provided).*

### 61.      It is proposed that the next Article IV consultation take place in accordance with

### cr18380 - 61.      It is proposed that the next Article IV consultation take place in accordance with

### Proposed Article IV consultation framework
- Next Article IV consultation to take place in accordance with the Decision on Article IV Consultation Cycles, Decision No. 14747–10/96.

### Macroeconomic performance and prospects (2012–21; summary observations)
- Swift implementation of economic reforms and improved security could lift medium term economic growth above current projections.
- Inflation is projected to decline.
- Domestic primary balance is expected to improve.
- External position reflects large investment needs.
- Revenue reforms are starting to bear fruit; tax revenues expected to increase gradually.
- Higher capital spending expected due to implementation of the NRPP.

### Growth and prices (selected indicators and projections)
- GDP at constant prices (annual percentage change): 4.5 (2016), 4.3 (2017), 4.3 (2018), 4.3 (2019), 5.0 (2020), 5.0 (2021), 5.0 (2022), 5.0 (2023).
- GDP per capita at constant prices: 2.6 (2016), 2.4 (2017), 2.4 (2018), 2.4 (2019), 3.1 (2020), 3.0 (2021), 3.0 (2022), 3.1 (2023).
- CPI (annual average): 4.6 (2016), 4.1 (2017), 4.0 (2018), 3.0 (2019), 3.0 (2020), 2.5 (2021), 2.5 (2022), 2.5 (2023).
- CPI (end-of-period): 4.7 (2016), 4.2 (2017), 3.6 (2018), 2.5 (2019), 2.3 (2020), 2.7 (2021), 2.4 (2022), 2.6 (2023).

### Fiscal outlook and central government finances (2016–23)
- Total revenue (including grants, percent of GDP): 14.1 (2016), 13.7 (2017), 16.6 (2018), 17.5 (2019), 18.8 (2020), 18.3 (2021), 17.9 (2022), 18.0 (2023), 18.1 (2023 repeated in tables).
- Domestic revenue (percent of GDP): 8.2 (2016), 8.3 (2017), 9.2 (2018), 9.3 (2019), 10.7 (2020), 10.9 (2021), 11.2 (2022), 11.5 (2023), 11.8 (final).
- Tax revenue (percent of GDP): 7.5 (2016), 7.5 (2017), 8.4 (2018), 8.5 (2019), 8.6 (2020), 8.9 (2021), 9.2 (2022), 9.5 (2023), 9.8 (final).
- Grants (percent of GDP): 6.0 (2016), 5.4 (2017), 7.4 (2018), 8.3 (2019), 8.1 (2020), 7.4 (2021), 6.6 (2022), 6.4 (2023), 6.3 (final).
- Capital expenditure (percent of GDP): 3.1 (2016), 4.8 (2017), 6.3 (2018), 6.9 (2019), 7.5 (2020), 7.8 (2021), 7.2 (2022), 7.2 (2023), 7.1 (final).
- Overall balance excluding grants (percent of GDP): -4.4 (2016), -6.5 (2017), -6.6 (2018), -7.6 (2019), -7.4 (2020), -7.4 (2021), -6.5 (2022), -6.2 (2023), -5.9 (final).
- Including grants (percent of GDP): 1.6 (2016), -1.1 (2017), 0.9 (2018), 0.7 (2019), 0.7 (2020), -0.1 (2021), 0.1 (2022), 0.3 (2023), 0.4 (final).
- Domestic primary balance (percent of GDP, excludes grants, interest, and externally-financed capital expenditure): -1.1 (2016), -2.2 (2017), -1.4 (2018), -1.4 (2019), -1.2 (2020), -1.2 (2021), -0.9 (2022), -0.6 (2023), -0.3 (final).
- Total government debt (percent of GDP): 56.0 (2016), 52.8 (2017), 47.0 (2018), 48.5 (2019), 42.2 (2020), 39.2 (2021), 36.4 (2022), 33.8 (2023), 31.5 (final).
- Government domestic currency debt (percent of GDP): 26.3 (2016), 25.1 (2017), 21.2 (2018), 22.5 (2019), 18.0 (2020), 16.6 (2021), 15.3 (2022), 14.0 (2023), 12.9 (final).

### Central government financial operations (CFAF billions, 2016–23 highlights)
- Revenue (CFAF billions): 147.1 (2016), 154.0 (2017), 202.7 (2018), 212.1 (2019), 245.8 (2020), 257.5 (2021), 270.5 (2022), 293.1 (2023), 317.4 (final).
- Domestic revenue (CFAF billions): 84.9 (2016), 93.5 (2017), 112.0 (2018), 112.1 (2019), 139.9 (2020), 153.8 (2021), 170.3 (2022), 188.1 (2023), 207.2 (final).
- Tax revenue (CFAF billions): 78.0 (2016), 84.6 (2017), 102.3 (2018), 102.2 (2019), 113.0 (2020), 124.8 (2021), 139.1 (2022), 154.6 (2023), 171.1 (final).
- Grants (CFAF billions): 62.2 (2016), 60.6 (2017), 90.6 (2018), 100.0 (2019), 105.9 (2020), 103.7 (2021), 100.2 (2022), 105.0 (2023), 110.2 (final).
- Expenditure (cash basis, CFAF billions): 130.9 (2016), 166.8 (2017), 192.0 (2018), 203.7 (2019), 236.7 (2020), 258.6 (2021), 268.7 (2022), 288.7 (2023), 310.3 (final).
- Capital expenditure (CFAF billions): 31.8 (2016), 53.8 (2017), 76.2 (2018), 83.3 (2019), 98.7 (2020), 109.4 (2021), 108.6 (2022), 116.7 (2023), 125.3 (final).
- Overall balance excluding grants (CFAF billions): -46.0 (2016), -73.3 (2017), -79.9 (2018), -91.6 (2019), -96.8 (2020), -104.8 (2021), -98.4 (2022), -100.6 (2023), -103.1 (final).
- Including grants (CFAF billions): 16.2 (2016), -12.8 (2017), 10.7 (2018), 8.5 (2019), 9.1 (2020), -1.1 (2021), 1.8 (2022), 4.4 (2023), 7.1 (final).

### Monetary and credit developments (2016–23)
- Broad money (annual percentage change): 5.8 (2016), 10.3 (2017), 8.5 (2018), 2.3 (2019), 11.6 (2020), 7.6 (2021), 7.6 (2022), 7.6 (2023), 7.6 (final).
- Credit to the economy (annual percentage change): 17.5 (2016), -0.1 (2017), 5.9 (2018), 5.5 (2019), 3.3 (2020), 7.7 (2021), 7.3 (2022), 8.7 (2023), 11.0 (final).
- Monetary base (CFAF billions, end of period): 162.0 (2016), 202.5 (2017), 219.6 (2018), 217.6 (2019), 235.3 (2020), 253.3 (2021), 272.5 (2022), 293.3 (2023), 315.6 (final).
- Money and quasi-money (CFAF billions): 272.6 (2016), 300.7 (2017), 314.8 (2018), 316.5 (2019), 326.5 (2020), 307.7 (2021), 314.4 (2022), 321.1 (2023), 343.4 (final).

### External sector and balance of payments (2016–23)
- Current account balance (with grants, CFAF billions): -57.5 (2016), -93.9 (2017), -102.1 (2018), -104.3 (2019), -98.9 (2020), -97.9 (2021), -85.7 (2022), -80.2 (2023), -82.2 (final).
- Current account (percent of GDP): -5.5 (2016), -8.3 (2017), -8.4 (2018), -8.6 (2019), -7.6 (2020), -7.0 (2021), -5.7 (2022), -4.9 (2023), -4.7 (final).
- Exports, f.o.b. (CFAF billions): 68.1 (2016), 85.6 (2017), 86.3 (2018), 89.9 (2019), 99.7 (2020), 107.3 (2021), 116.7 (2022), 127.0 (2023), 134.7 (final).
- Imports, f.o.b. (CFAF billions): -240.3 (2016), -255.3 (2017), -285.8 (2018), -296.4 (2019), -315.7 (2020), -327.8 (2021), -338.0 (2022), -354.4 (2023), -374.9 (final).
- Transfers (net, CFAF billions): 122.9 (2016), 105.8 (2017), 120.9 (2018), 124.6 (2019), 124.4 (2020), 124.7 (2021), 132.3 (2022), 138.1 (2023), 142.8 (final).
- Financial account (CFAF billions): 59.0 (2016), 32.6 (2017), 31.8 (2018), 20.5 (2019), 27.8 (2020), 41.8 (2021), 36.9 (2022), 31.8 (2023), 34.2 (final).
- Overall balance (CFAF billions): 9.2 (2016), 35.4 (2017), -19.3 (2018), -21.3 (2019), -2.4 (2020), 19.8 (2021), 24.4 (2022), 30.6 (2023), 37.2 (final).
- Net IMF credit (CFAF billions): 9.0 (2016), 21.6 (2017), 28.8 (2018), 27.1 (2019), 10.4 (2020), -4.4 (2021), -4.8 (2022), -8.9 (2023), -14.3 (final).

### External financing needs (billions CFAF, 2018–23 excerpt)
- 1. Total financing requirement (selected years): 161.3 (2018), 156.7 (2019), 151.2 (2020), 142.7 (2021), 142.5 (2022), 147.7 (2023).
- Components (selected):
  - Current account deficit (excl. budget support): 141.8 (2018), 136.1 (2019), 125.7 (2020), 112.7 (2021), 106.2 (2022), 107.2 (2023).
  - Debt amortization: 5.7 (2018), 5.7 (2019), 5.7 (2020), 5.7 (2021), 5.7 (2022), 3.3 (2023).
  - Repayment to the Fund: 7.9 (2018), 6.9 (2019), 4.4 (2020), 4.8 (2021), 8.9 (2022), 14.3 (2023).
  - Change in other reserves: 4.9 (2018), 8.0 (2019), 15.4 (2020), 19.6 (2021), 21.7 (2022), 22.9 (2023).
  - Arrears Repayment: 1.0 (2018) and subsequent entries not shown in excerpt.

*Sources: C.A.R. authorities and IMF staff estimates and projections.*

### 2. Total financing sources88.7102.2123.4115.7

### 2. Total financing sources88.7102.2123.4115.7

### Total financing sources and components
- Total financing sources: 88.7 102.2 123.4 115.7
- Capital transfers: 62.5 68.7 75.9 73.2 79.0 85.2
- Foreign direct investment (net): 10.0 15.0 20.0 20.0 20.0
- Portfolio investment (net): 0.0 0.0 0.0 0.0 0.0 0.0
- Debt financing: 7.5 7.5 7.5 7.5 7.5 7.5
  - Public Sector: 7.5 7.5 7.5 7.5
  - Non-public sector: 0.0 0.0 0.0 0.0 0.0
  - Short-term debt: 0.0 0.0 0.0 0.0 0.0 1.0
- Other net capital inflows: 8.7 11.0 20.0 15.0 10.0 10.0
- Exceptional Financing: (no numeric entries)
- Errors and Omissions: 0.0 0.0 0.0 0.0 0.0

### Total financing needs (Table entries)
- Total financing needs: 72.5 54.5 27.8 26.9 25.9 25.0
- Budget support (grants): 37.5 37.2 27.8 27.0 26.0 25.0
  - World Bank: 13.7 11.2
  - African Development Bank: 5.4 5.6
  - European Union: 11.8 13.8
  - France: 6.6 6.6
  - Other: 0.0 0.0
- Budget support (loans): 0.0 0.0 0.0 0.0 0.0 0.0
  - African Development Bank: 0.0 0.0 0.0 0.0 0.0

### Residual financing need
- Residual financing need: 35.0 17.3
- IMF: 35.0 17.3

*Sources: C.A.R. authorities and IMF staff estimates and projections.*

### Treasury Cash Management Plan, 2018 (Table 6, monthly highlights, CFAF millions)
- Deposits beginning of month (I): January 30,593; February 20,267; March 17,887; April 19,144; May 18,263; June 12,710; July 18,881; August 26,309; September 32,443; October 23,821; November 17,241; December 17,913
- Gross cash inflows (II) (monthly sequence as presented): 129 3010 947 145 601 59 239 344 265 572 755 521 233 876 094 802 133 226 780 203 566
- Domestic Revenue (selected aggregated lines):
  - Revenue Customs (aggregate line): 483 445 724 073 449 044 653 971 476 039 624 433 435 043 504 350 52,610
  - Revenue Tax (aggregate line): 3210 507 13944 480 340 524 171 366 742 183 537 430 042 004 300 49,473
  - Other revenue (aggregate line): 385 414 241 128 140 124 166 193 147 230 230 230 2,628
  - Salary Tax (aggregate line): 609 640 643 622 627 601 612 613 643 600 600 600 7,410
- Financing (selected): 3,892 2505 5,659 5,880 601 7,690 18,350 12,247 00 11,952 17,300 91,445
  - Treasury securities: 3,892 00 5,352 03,896 0000 5,3520 18,492
  - Other budget support: 00 5,422 00 13,734 18,000 11,897 00 6,600 17,300 72,953
    - World Bank: 00000 13,734 000000 13,734
    - African Development Bank: 00 5,422 00000000005,422
    - IMF Disbursements: 00000018,0000000 17,300 35,300
    - European Union: 000000011,897000011,897
    - France: 00000000006,60006,600
- Depot des correspondants: 0 25 0 23 75 28 60 60 350 350
- Gross cash outflows (III) total: 23,256 13,327 13,303 16,804 14,897 20,386 20,127 15,099 17,382 16,060 20,660 20,012 (annual total 209,358)
  - Primary expenditure (monthly subset): 7,900 8,022 10,304 10,435 8,651 11,492 13,687 11,546 13,683 12,170 12,370 14,520 (annual total 134,780)
    - Wages (monthly): 4,168 4,279 4,312 4,240 4,237 4,639 4,280 4,649 4,467 4,600 4,600 4,600
    - Salary charges (monthly): 609 640 643 622 627 601 612 613 643 600 600 600
    - Transfers (monthly): 931 987 3,114 1,437 1,204 1,955 4,197 1,873 3,954 1,900 1,900 4,000 (of which: pensions lines)
    - Goods and services (monthly): 1,867 1,630 1,202 2,936 1,801 2,892 2,768 3,051 2,258 2,400 2,600 2,600 (annual total 28,005)
    - Capital (monthly): 955 315 951 848 071 1,071 829 1,631 2,500 2,500 2,550 (annual total 13,293)
  - Interest and Amortization (monthly totals): 6,481 259 1,120 3,836 6,041 7,216 5,912 1,165 808 1,190 5,790 2,992 (annual total 42,810)
    - Domestic: 5,923 196 999 376 5,875 6,820 5,608 1,049 692 290 5,790 1,892 (annual total 35,510)
      - IMF repayments (component): 1,734 0 70 985 02 2,128 5,318 707 000 1,200 11,881
      - Treasury securities (component): 4,000 0000 5,500 4,000 0000 05,5000 19,000
      - Commercial Banks (component): 189 189 290 290 290 290 290 290 290 290 290 3,278
    - External: 558 631 213 3,460 166 396 304 116 116 900 01,100 7,300
      - External interest: 285 427 81 1,186 144 196 424 545 003 002 2,363
      - External amortizations: 273 214 32 2,274 222 002 627 171 900 080 04,937
  - Arrears payments (monthly): 8,875 4,796 1,642 2,005 145 1,498 178 2,038 2,891 2,700 2,500 2,500 (annual total 31,768)
  - Retrait des correspondants: 0 25 0 23 75 28 60 180 350 350
- Net cash flow (II-III) (monthly): -10,326 -2,380 1,257 -881 -5,553 6,171 7,428 6,134 -8,622 -6,580 672 6,768 -5,792
- Deposits at end of month (I + (II-III)): 20,267 17,887 19,144 18,263 12,710 18,881 26,309 32,443 23,821 17,241 17,913 24,681 24,801
- Freely usable deposits (annual figure): 60,480

*Source: Data provided by the authorities and staff calculations.*

### Remaining Commitments for 2018 and Commitments for 2019 (Table 7)
- Remaining Commitments for 2018 (CFA francs, bn):
  - IMF SDR 22.84 million: 35.0
  - SDR 22.84 million (Balance of payments support): 17.3
  - World Bank US$0 13.7 US$ 20 million: 11.2 (Budget support)
  - African Development Bank $0 5.4 US$ 10 million: 5.6 (Budget support)
  - European Union € 0 11.8 € 21 million: 13.8 (Budget support)
  - France € 10 million: 6.6 € 10 million: 6.6 (Budget support)
  - Total: 72.5 54.5 (excluding IMF 37.5 37.2)
- Commitments for 2019 (listed instruments): SDR 22.84 million; US$ 25 million; US$10 million; € 18 million

### Indicators of Capacity to Repay the IMF, 2018–29 (Table 8, selected series)
- IMF obligations based on existing credit (SDR millions) — Principal by year:
  - 2018: 1.7 2019: 39.10 2020: 5.3 2021: 55.85 2022: 10.86 2023: 17.49 2024: 21.22 2025: 19.83 2026: 17.60 2027: 12.59 2028: 4.57 2029: 0.00
  (Note: original table contains concatenated digits; preserved as presented)
- Charges and interest (SDR millions) by year: 0.13 0.54 0.55 0.54 0.54 0.54 0.55 0.54 0.54 0.54 0.55 0.54
- IMF obligations based on existing and prospective credit (SDR millions) — Principal series: 1.7 39.10 5.3 55.85 10.86 17.49 28.07 28.96 26.74 21.73 13.70 2.28
- Outstanding IMF Credit (SDR Millions) series: 147.30 161.04 155.68 149.83 138.97 121.49 93.41 64.45 37.71 15.99 2.28 0.00
- Outstanding IMF Credit (CFAF Billions) series: 112.42 121.48 115.62 109.99 102.02 89.19 68.57 47.31 27.68 11.74 1.67 0.00
- Percent of government revenue series: 100.28 86.81 75.17 64.59 54.24 43.04 30.44 19.33 10.41 4.06 0.53 0.00
- Percent of exports of goods and services series: 54.56 54.83 49.14 43.81 38.05 31.53 23.24 15.37 8.51 3.40 0.45 0.00
- Percent of debt services series: 631.98 718.86 798.90 747.64 539.76 402.77 317.15 232.99 151.12 85.07 23.58 0.00
- Percent of GDP series: 9.30 9.29 8.21 7.26 6.26 5.08 3.68 2.39 1.32 0.53 0.07 0.00
- Percent of quota series: 132.23 144.56 139.75 134.50 124.75 109.06 83.85 57.85 33.85 14.35 2.05 0.00
- Net use of IMF credit (Disbursements): 45.7 22.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Net use of IMF credit (Repayments and repurchases): 1.86 9.64 5.90 6.39 11.40 18.03 28.62 29.50 27.28 22.27 14.25 2.82
- Memorandum items (selected):
  - Nominal GDP (billions of CFA francs): 1,209.4 1,308.1 1,407.8 1,514.7 1,630.2 1,754.5 1,863.2 1,978.9 2,101.4 2,317.6 2,517.5
  - Exports of goods and services (billions of CFA francs): 206.0 221.5 235.3 251.0 268.1 282.8 295.1 307.8 325.3 345.5 368.3
  - Government revenue (billions of CFA francs): 112.1 139.9 153.8 170.3 188.1 207.2 225.3 244.8 265.9 289.0 314.1
  - Debt service (billions of CFA francs): 17.8 16.9 14.5 14.7 18.9 22.1 21.6 20.3 18.3 13.8 7.1
  - IMF Quota (SDR millions): 111.4 (constant across years)

*Source: IMF staff projections.*

### Financial Soundness Indicators, December 2011–June 2018 (Table 9, percent)
- Capital Adequacy:
  - Total bank regulatory capital to risk-weighted assets: 25.6 22.7 39.1 42.2 38.7 32.0 34.3 32.0
  - Total capital (net worth) to assets: 22.3 22.2 23.7 21.9 21.1 19.2 21.0 20.6
- Asset Quality:
  - Non-performing loans to total loans: 12.0 9.6 28.5 27.7 30.9 25.6 22.9 22.0
  - Non-performing loans net of provision to capital: 3.3 1.6 50.0 44.4 34.9 18.7 4.3 5.2
- Earnings and Profitability:
  - Net income to average assets (ROA): 5.0 4.5 -1.3 0.9 -0.9 0.8 ...... 
  - Net income to average capital (ROE): 24.4 20.7 -5.4 3.8 -4.0 4.2 ...... 
  - Non interest expense to gross income: 59.9 64.0 79.5 73.6 72.8 67.3 ......
- Liquidity:
  - Liquid assets to total assets: 24.3 16.6 19.2 27.5 40.0 31.9 30.7 27.1
  - Liquid assets to short-term liabilities: 160.7 114.5 149.1 203.1 276.1 219.6 227.4 186.6

*Sources: C.A.R. authorities and the Banque des Etats de l'Afrique Centrale.*

### Schedule of Disbursements, 2016–19 (Table 10, SDR millions and percent of quota)
- First disbursement upon program approval:
  - Date: July 20, 2016 — SDR 12.525 million — 11.2 percent of quota
- Second disbursement:
  - Date: December 21, 2016 — SDR 12.525 million — 11.2 percent
- Third disbursement:
  - Date: July 20, 2017 — SDR 11.70 million — 10.5 percent
- Fourth disbursement:
  - Date: December 15, 2017 — SDR 28.41 million — 25.5 percent
- Fifth disbursement:
  - Date: July 02, 2018 — SDR 22.84 million — 20.5 percent
- Sixth disbursement:
  - Date: December 19, 2018 — SDR 22.84 million — 20.5 percent
- Seventh disbursement:
  - Date: March 20, 2019 — SDR 22.84 million — 20.5 percent
- Total: SDR 133.68 million — 120.0 percent of quota
  - Footnotes: reflects augmentations at 2nd and 3rd review; approved amounts at program request were lower in some cases.

### Risk Assessment Matrix (Table 11, selected entries)
- Deterioration of security situation
  - Relative Likelihood: High
  - Impact If Realized: High
  - Policy Response if Materialized: Make room for more security-related spending; accelerate implementation of the RCPCA to advance peace, security and reconciliation.
- Limited institutional and human resources capacity
  - Relative Likelihood: High
  - Impact If Realized: High
  - Policy Response if Materialized: Strengthen TA effectiveness by strengthening the role of the coordinating unit and ensure a well-prioritized reform agenda for targeted TA.
- Delayed delivery of external financial assistance
  - Relative Likelihood: Medium
  - Impact If Realized: Medium
  - Policy Response if Materialized: Strengthen external support through comprehensive reform implementation and communicating the needs of C.A.R.’s development strategy (RCPCA).
- Weaker-than-expected global growth
  - Relative Likelihood: Medium
  - Impact If Realized: Medium
  - Policy Response if Materialized: Intensify structural reform and improve business environment to support diversification.
- Sizeable deviations from baseline energy prices
  - Relative Likelihood: Medium
  - Impact If Realized: High
  - Policy Response if Materialized: Simplify the price structure of petroleum products to limit revenue losses and the need to adjust retail prices.

(Note: RAM definitions and probability bands provided in the table footnote.)

### Implementation of Key Recommendations from the 2016 Article IV Consultation (Table 12)
- Gradually reduce the domestic primary deficit by mobilizing revenues
  - Status: Implemented but revenues have increased slower than envisaged under the program
- Strengthen public financial management
  - Status: Work in progress. Regular budget reporting has improved but use of exceptional spending procedures remains high.
- Increase social spending
  - Status: Implemented. Social spending has been increased from a very low level.
- Improve the business environment by overhauling the investment charter and reforming the mining code and forestry sector regulations
  - Status: Work in progress. New investment charter has been adopted.
- Reform revenue administration and strengthen capacity
  - Status: Work in progress. Implementation of tax and customs department reform plans has been uneven. Efforts to strengthen capacity are underway.

### Capacity Building Framework Strategy — Annex I (October 2018) — TA priorities and objectives (selected)
- Overarching policy priorities:
  - (i) enhancing domestic revenue collection and revenue performance;
  - (ii) returning to normal budget procedures and improving the efficiency of the public spending process, including the capital spending framework;
  - (iii) building debt management capacity and improving debt management strategy;
  - (iv) improving data compilation in the national accounts, consumer prices, government finance statistics, and the external sector.
- Assessment of past TA effectiveness:
  - Timely TA delivery during transition (January 2014–March 2016) was instrumental in rebuilding basic institutions; Fund TA delivery was hampered by suspension of TA missions due to security conditions; AFRITAC Central organized offsite TA/training seminars.
- TA priorities going forward (Fund):
  - (i) tax policy and revenue administration;
  - (ii) public financial management;
  - (iii) public debt management;
  - (iv) statistics issues on national accounts, government finance statistics, and the external sector.
- Tax Policy and Administration (2016–18) — Objective and outcomes:
  - Objective: Achieve more effective and efficient mobilization of domestic resources by improving VAT and excise design and administration; rationalizing exemptions; reforming tax and customs administration; reform diamond, telecom, and forestry taxation; rationalize parafiscal charges.
  - Outcomes: (i) improved compliance enforcement of VAT filing; (ii) strengthened customs operations; (iii) significantly reduced tax exemptions; (iv) improved domestic revenue from 7.1 percent of GDP in 2015 to 9.5 percent in 2018.
  - Milestones: improve revenue from downstream oil, forestry and mining (2018); implement tax laws and streamline exemptions (2017-2018); streamline processes for large taxpayers/importers and secure revenue collection (2017-2018).
- Public Finance Management (2016–18) — Objective and outcomes:
  - Objective: (i) Comprehensive, credible, and policy-based budget preparation; (ii) improved budget execution and control; (iii) improved coverage and quality of fiscal reporting.
  - Outcomes: more credible medium-term macro-fiscal framework; strengthened budget execution and controls; improved monitoring of expenditure arrears; payroll controls; alignment of chart of accounts with international standards.
  - Milestones: streamline budget execution including exceptional procedures; strengthen SOE oversight; align management of earmarked revenues and parafiscal taxes (2018).
- Public debt management (2016–18) (concluded) — Objective and outcomes:
  - Objective: Building debt management capacity and improving debt management strategy.
  - Outcomes: modernize institutional, legal and regulatory framework; improve debt management strategy and reporting; strengthen analytical and operational capabilities.
  - Milestones: review institutional and regulatory framework and improve debt management strategy (2017).
- Statistical issues (2016–18) — Objective and outcomes:
  - Objective: Produce more accurate statistics on prices, national accounts, government finance statistics, and the external sector.
  - Outcomes and Milestones: compile 2005–15 national accounts in line with 1993 SNA; improve CPI collection and update; improve balance of payments compilation and start IIP; produce statement of government operations following GFSM 2001/2014 and implement CEMAC TOFE directive based GFSM 2001.
  - Inputs: AFRITAC Central short-term experts; a three-year project funded by the Japanese government targeting balance of payments for francophone countries; long-term AFRITAC Center experts for government finance statistics.
- Risks and Mitigation Measures: (Section D referenced; details follow in source)

*Italicized source attribution:* _Source: IMF staff projections; Data provided by the authorities and staff calculations._

### 5. The implementation of the technical assistance program is subject to various risks.

### 5. The implementation of the technical assistance program is subject to various risks.

### Risks to TA implementation and mitigation measures
- Persistently delicate and fluid security situation
  - Probability: High
  - Impact: High
  - Risk description: Security remains volatile despite recent progress. A deterioration of security conditions could hinder timely delivery of TA in the field and reduce its effectiveness.
  - Mitigation Measures: To mitigate the security risk, the authorities may consider sending staff to outside locations to build capacity.

- Delayed support from the development partners
  - Probability: Medium
  - Impact: High
  - Risk description: Lack of resources could cause delays or prevent proper implementation of TA recommendations and outcomes. TA recommendations that require the purchase of equipment and/or the hiring of staff may be delayed if the necessary equipment and staff could not be procured and hired for budgetary reasons.
  - Mitigation Measures:
    - The authorities are mobilizing resources pledged during the November 2016 donor conference in Brussels.
    - Development partners, including the European Union and the World Bank, are increasing resources allocated to capacity development projects to cover infrastructure and equipment needs.

- Implementation capacity constraints
  - Probability: High
  - Impact: High
  - Risk description: Weak institutional and human resources capacity could cause delays or hamper implementation. Government units involved in economic and financial affairs are understaffed, poorly equipped, and work under difficult conditions, including a lack of sufficient energy to power computers and office equipment.
  - Mitigation Measures:
    - As part of their CBF pilot, the new authorities are committed to improve capacity and make the best use of the TA that will be provided by the development partners and the Fund.
    - To offset the lack of specialized local staff, they plan to hire young college graduates and train them in the specialty identified as crucial to improve capacity.
    - Equipment modernization is underway with donor support.

- Management of the TA risk register
  - Note: The table summarizing these risks and measures will be a live TA management tool to be updated periodically as the TA program evolves.

### Authorities’ commitments on capacity building and TA use
- The C.A.R. authorities are committed to continue to rebuild capacity to ensure successful implementation of the ECF-supported program.
- TA delivered in 2016–17 by development partners focused on:
  - enhancing customs and tax revenue collection;
  - improving treasury management;
  - strengthening the Government financial management information system (GESCO) pending the development of a new system (SIM BA) in 2020;
  - pursuing civil service reform.
- For 2017–18, the authorities reached an understanding with the Fund on a comprehensive capacity-building strategy in the context of the Capacity Building Framework (CBF) pilot project.
- CBF priorities remain:
  - domestic revenue collection,
  - PFM,
  - public debt management,
  - macroeconomic statistics,
  - civil service reform,
  - macro-fiscal capacity.
- Expected outcomes include:
  - strengthening the institutional framework coordinating TA and training to increase revenue;
  - enhancing spending efficiency;
  - restoring budget discipline;
  - strengthening debt management;
  - creating core macro-fiscal capacity.
- Contingency if security risk heightens: the authorities agree to send staff to outside locations for training.
- The authorities plan to take full advantage of additional Fund TA under the CBF pilot on:
  - tax policy,
  - revenue administration,
  - PFM,
  - national accounts data compilation,
  - external trade data.
- Commitment to improved coordination: The authorities are committed to improving capacity and making the best use of the TA and training provided by development partners and the Fund through improved coordination of activities.

### Promoting good governance and fighting corruption — context and Fund engagement
- Context:
  - The state remains weak as a result of years of violent conflict and poor governance; state authority is yet to be established in large parts of the country, especially areas under rebel control.
  - Revenue administration has been characterized by a proliferation of taxes and tax agencies, undermining transparency and accountability, and creating considerable fiscal uncertainty for businesses.
  - C.A.R. is well endowed with natural resources (diamonds, forestry resources, gold) but tax revenues are among the lowest in Sub-Saharan Africa.
- Fund engagement and focus under the ECF and CBF:
  - TA program embedded in the IMF’s Capacity Building Framework pilot project focuses on revenue mobilization, PFM, debt management, and macroeconomic statistics.
  - ECF arrangement approved in 2016; Fifth Review discussions conducted in October-November 2018.
  - Program focus areas: widening coverage of treasury operations; strengthening the treasury single account; ending proliferation of taxes and tax agencies; strengthening revenue administration; securing revenue collection.
  - Transparency and accountability measures include publication of regular budget execution reports and reducing the use of exceptional spending procedures.
  - Conditionality includes a performance criterion on domestic revenues, an indicative target to limit spending through exceptional procedures, and structural benchmarks.

### Fighting corruption — measures adopted and recommendations
- Measures adopted:
  - Implementing the United Nations Convention Against Corruption (UNCAC).
    - C.A.R. ratified UNCAC in 2006.
    - In 2016, it underwent an implementation review of Chapter III (criminalization and enforcement) and Chapter IV (international cooperation). The review highlighted deficiencies and inconsistencies in criminalization of acts of corruption, and impediments to extradition and mutual legal assistance.
  - Declaration of Assets:
    - The constitution requires the President, Prime Minister and members of Government to declare their asset at the Constitutional Court before or shortly after taking up duty and upon leaving their function.
    - For members of Government, this is a structural benchmark under the ECF program.
    - There is no legislation establishing the framework for implementation of the regime and sanctions for defaulters.
    - Staff was informed that all members of government and most high-level officials have submitted their declaration.
  - High Authority for Good Governance:
    - Established in 2017 and mandated with promoting good governance; it has developed a national strategy that is yet to receive wider government support.
    - The President of the Authority stressed that a lack of financial resources is a key constraint.
- Recommendations:
  - Implement the recommendations of the UNCAC review, namely to criminalize acts of corruption and eliminate all restrictions on extradition and on bilateral legal assistance.
  - Enact legislation establishing a framework for the asset declaration regime in line with best practices:
    - ensure declaration obligations cover high-level officials and their family members;
    - require the declaration of all assets held domestically and abroad, directly and beneficially;
    - put in place a verification mechanism;
    - establish dissuasive sanctions for non-compliance;
    - require the publication of the declaration.
  - Strengthen the capacity of the High Authority for Good Governance and seek adequate funding.

### Natural resource management — initiatives and recommendations
- Initiatives undertaken:
  - 2003: C.A.R. joined the Kimberley diamond certification scheme; the scheme initially imposed an embargo on the export of diamonds from C.A.R., which was subsequently partially lifted.
  - 2010: C.A.R. joined the Extractive Industry Transparency Initiative (EITI); C.A.R. membership was suspended in 2013 and the country has launched a process for lifting the suspension.
  - All mining and forestry contracts are now published on the website of the Ministry of Finance and Budget (this is a structural benchmark under the ECF).
- Recommendations:
  - Expedite ongoing efforts to lift the suspension from the Extractive Industry Transparency Initiative.
  - Encourage greater involvement of civil society in the management of natural resources.
  - Ensure that host communities benefit from the exploitation of natural resources.

### Governance indicators and observations
- Governance indicator note: Scale is from -2.5 to 2.5, with higher scores representing more favorable governance.
- Observation provided: "The quality of C.A.R.’s institutions has declined after some improvement before the 2013 crisis... and government services need reconstruction."
- Note: estimates are subject to uncertainty.

### Promoting gender equality — background and findings
- Background findings:
  - Gender gaps contribute to instability and fragility; more inclusive countries tend to be less likely to return to civil war.
  - One study found that post-conflict legislatures with at least 35 percent women did not relapse into conflict.
  - Caprioli (2005) found that countries with 40 percent female labor force participation are 30 times less likely to devolve into intrastate conflict than those with 10 percent of women in the labor force.
  - Lower gender gaps in education and higher female labor force participation have been associated with higher diversification of output and export products.
  - Women with agency tend to invest more in their children, yielding greater school expenditures and higher school enrollment.
- Current state of gender equality in C.A.R.:
  - C.A.R. ranks last on UNDP’s 2016 Human Development Index (188 of 188) and 149th of 159 on the Gender Inequality Index (note: Third Party Indicators may be subject to bias and should be treated with caution).
  - Sexual violence remains widespread; organized violence toward women is the highest in Sub-Saharan Africa, with about 30 female battle deaths per 100,000 (Georgetown Institute for Women, Peace and Security).
  - ILO statistics show women made up 45 percent of the labor force in C.A.R. in 2016.
  - Women make up 83 percent of the agricultural workforce; agriculture employed 74 percent of C.A.R.’s people in 2016 (AfDB statistics).
  - The Ibrahim Index of African Governance (IIAG) scores C.A.R.’s gender equality at 37.4 of 100 as of 2016.
    - IIAG scores women’s political participation at 27.4 of 100.
    - C.A.R. scores 100 on women’s participation in the judiciary (women representing at least one third of the members of the highest branch of the judicial system), but women magistrates comprised 18 of 200 total, or 9 percent of the judiciary.
- FINDEX 2017 financial access indicators (selected)
  - Account, female (% age 15+): Central African Republic position shown among peers (chart provided in source).
  - Account, male (% age 15+): Central African Republic position shown among peers (chart provided in source).
- Table 1. Selected Gender Indicators (percent, unless otherwise indicated) — selected entries:
  - Population (number of people): 3,754,986 (current)
  - Female share in total population: 50.8 (current)
  - Life expectancy at birth:
    - Male: 42.7 (current)
    - Female: 45.2 (current)
  - Maternal mortality rate (modeled estimate, per 100,000 live births): 1,200 (2000), 1,060 (2005), 909 (2010), 98 (2015), 82 (2017)  [note: preserve numbers exactly as presented]
  - Fertility rate: 5.5 (2000), 5.4 (2005), 5.2 (2010), 4.9 (2015) [current column shows values across years]
  - Adolescent fertility rate (births per 1,000 women ages 15-19): 127.3 (2000), 113.0 (2005), 101.6 (2010), 90.7 (2015)
  - Labor force participation rate (modeled ILO estimate):
    - Male: 79.0 (2000), 78.8 (2005), 79.0 (2010), 80.3 (2015), 80.0 (2017)
    - Female: 64.2 (2000), 64.1 (2005), 64.1 (2010), 63.4 (2015), 63.3 (2017)
  - Unemployment rate (modeled ILO estimate):
    - Male: 5.7 (2000), 5.8 (2005), 5.8 (2010), 5.9 (2015), 6.1 (2017)
    - Female: 6.6 (2000), 6.7 (2005), 6.7 (2010), 6.6 (2015), 6.9 (2017)
  - Female seats in parliament (share of total seats): 7.3 (2000), 10.5 (2005), 9.6 (2010), 8.6 (2015)
- C.A.R. commitments: The source states "C.A.R. has Made Commitments to Gender Equality."

*Source: cr18380 - 5. The implementation of the technical assistance program is subject to various risks.*

### 9. C.A.R. has recognized already the

### 9. C.A.R. has recognized already the

### Commitments and National Action Plan (UNSCR 1325)
- The United Nations Security Council Resolution 1325 calls for signatory countries to create a National Action Plan. C.A.R. authored one for 2014–16, which calls for 5 priority axes:
  - Improvement of knowledge of national actors and the population of UNSCR1325 and other international women’s rights protection instruments, to support social mobilization favoring civil population protection and women in times of conflict as well as the in the peace process;
  - Reinforcement of the prevention of violent conflict and the protection of the civil population;
  - Increased participation and representation of women at all levels of decision making process, management, and resolution of conflict;
  - Strengthening the protection of civil populations against violence and the rehabilitation of victims of conflict-related sexual violence;
  - Strengthening of the coordination and monitoring evaluation of these actions.
- Each axis has accompanying actions that lay forth concrete steps the government may take to achieve each respective axis.

### National law, institutions, and data needs
- National law (Title 3, Chapter 1) sets a minimum quota of 35 percent women in parliament during the transition time until 2026, and 50 percent, thereafter.
- The law also sets up the National Gender Parity Observatory (Observatoire National de la parité).
- The National Action Plan for Peace and Reconciliation identifies gender equality as a cross-cutting objective in all three of its priority pillars and asks for greater sex- and age-disaggregated data to monitor and evaluate the progress of this objective.
- Implementation of the national gender parity observatory is noted as a welcome first step.
- Policy recommendation (implicit): continue adherence to preexisting commitments by reporting gender—and age—disaggregated data to better track national gender equality commitments and assess gender-specific impacts of policies.

### Benefits from improved gender relations: empirical findings and estimates
- Based on experiences of other fragile countries, C.A.R. stands to greatly benefit from improved gender equality; opportunities exist to leverage improved gender relations for leaving behind the conflict cycle and improving economic growth.
- Rwanda and Uganda are cited as examples of countries that opened to women’s participation and hugely benefitted.
  - One estimate shows that gender equality explains 0.5 percent of Rwanda’s 2.2 percent higher growth compared to other countries in Sub-Saharan Africa.
- IMF staff estimates:
  - Our estimates show that if C.A.R. had the same level of gender inequality as Rwanda, average annual GDP growth would be higher by 0.76 percentage points.
  - Over time, this translates to significantly higher real GDP per-capita levels (Figure 3).
- Methodological note:
  - The regressions are performed on a sample of 103 countries over the period of 1994-2014, using a system-GMM method to address endogeneity issues.

### Key empirical relationships (visual/regression findings)
- There is a clear negative correlation between economic growth and gender inequality: the higher the gender inequality, the lower the growth.
- The same applies for gender inequality in education: the higher the inequality of genders who attend school, the lower the growth.

---

### Annex IV. External Sector Assessment

### Main assessment summary
- The external sector assessment finds that the external position is weaker than implied by medium-term fundamentals and desirable policy settings. This is largely due to structural factors such as insecurity, lack of infrastructure, high transport costs, and a weak business climate.
- Macroeconomic policies are broadly appropriate.
- Compared to the last external sector assessment in 2016, the current account deficit narrowed due to export growth and higher transfers.
- C.A.R.’s external position would benefit from actions to foster security, improve the business environment, diversify the economy, and strengthen resilience.

### Balance of payments and exchange rate developments (selected statistics)
- The current account deficit narrowed in 2017 to 8.3 percent of GDP.
- In 2017, C.A.R.’s exports stood at 7.6 percent of GDP: a 1.8 percent of GDP increase from 2014.
- Wood exports accounted for 62 percent of total exports in 2017.
- Oil was the most important import with a share of 27 percent of total imports.
- Foreign direct investment remained weak, reaching only 0.4 percent of GDP in 2017—far below pre-crisis levels (2 percent of GDP in 2012).
- C.A.R.’s nominal effective exchange (NEER) rate remained broadly stable while the real effective exchange rate (REER) appreciated; following a prolonged period of stability, the REER appreciated during the 2013 crisis and in subsequent years due to higher inflation.
- Projection: The current account deficit is projected to gradually improve over the medium term; by 2021, the current account deficit is expected to reach 5.5 percent of GDP.
- Exports are expected to increase gradually, supported by a recovery in the wood sector and an increase in diamond exports. Imports are projected to grow in line with aggregate demand as the economy recovers.

### Exchange rate assessment (EBA-lite results and interpretation)
- The external assessment is informed by the EBA-lite methodology. Staff used the current account (CA) and the REER models.
- Quantitative methods suggest that the external position is weaker than implied by fundamentals and desirable policies.
- The overvaluation of the real effective exchange rate is estimated between 13 and 16 percent according to the two models.
- Table 1 (selected figures, 2017):
  - Current account (actual): -8.3%
  - Current account (fitted): -6.4%
  - Current account (norm): -1.9%
  - Ln(REER) Actual: 4.84
  - Ln(REER) Fitted: 4.66
  - Ln(REER) Norm: 4.68
  - Residual: 0.18
  - Real exchange rate gap: 13.0% and 16.6% (from the two models)
- Assumption for the elasticity of trade balance to real exchange rate is -0.15.
- The main drivers of the policy gap are fiscal policy (0.32%) and private credit growth (0.46%).
- Interpretation: The contribution of the policy gap is small and mostly driven by policy deviations in the rest of the world. Structural factors such as insecurity, high transportation costs, lack of infrastructure, and a weak business climate likely explain the remaining gap. Macroeconomic policies in C.A.R. are broadly in line with desirable medium-term values.

### Structural competitiveness and constraints
- An improved security and business environment, investments in infrastructure, and better governance could enhance competitiveness.
- The 2018 World Bank Doing Business indicators showed a modest improvement in C.A.R.’s business environment, yet C.A.R. underperformed compared to the CEMAC and SSA regional average.
- Weak areas of the business environment include starting a business, paying taxes, and electricity distribution.
- Insecurity, high transportation costs, and a lack of energy supply undermine C.A.R.’s competitiveness:
  - Lasting high-level insecurity amid repeated eruptions of violence impedes private investment.
  - C.A.R. is landlocked and most of its formal trade transits through two unreliable corridors (Bangui–Douala; Pointe Noire–Bangui via Brazzaville and the Ubangi river).
  - Numerous tariff and non-tariff barriers and proliferation of checkpoints along trade routes impose additional costs.
  - Formal energy production covers only about a fourth of the energy consumption in the Bangui area.
- C.A.R. performs poorly on governance and institutional quality; World Bank CPIA indicators in 2016 indicated low government effectiveness and an overall CPIA score of 2.4, below the average for SSA.

*Source: International Monetary Fund, Central African Republic country report text excerpt.*

### 1. The security situation has improved but remains fragile. After the violence in May,

### 1. The security situation has improved but remains fragile. After the violence in May,

### Security and humanitarian situation
- Government measures helped restore security in Bangui and Bambari after the violence in May.
- Continued installation of prefects and sub-prefects and redeployment of the army, security forces, and the administration in some provinces.
- Government pursued talks with the 14 armed groups under the aegis of the African Union.
- The humanitarian situation continues to raise considerable concern.

### Economic growth and inflation
- Economic growth is estimated at 4.3 percent in 2018.
- Growth drivers: significant increase in externally financed investments; sustained recovery of construction and forestry activities.
- Insecurity in some rural areas affects agricultural activities and the mining sector.
- Inflation rate has declined slightly since May 2018 due to falling prices of food products and manufactured goods.

### Financial sector and external accounts
- Credit to the economy increased by 8.5 percent at end-June 2018 compared to the same period of 2017.
- Broad money expanded by 7.3 percent, driven by domestic credit.
- Proportion of nonperforming loans declined with respect to 2017; banks remain reasonably liquid and profitable and are broadly compliant with prudential standards.
- Current account deficit is expected to remain constant in 2018 compared to 2017.
- Exports increased during the first half of 2018, driven primarily by wood and diamonds; increased petroleum prices raised the value of imports.

### Fiscal performance and program implementation (first half of 2018)
- Government adopted a revised budget in July 2018 to incorporate new tax measures and adjust expenditures.
- Primary fiscal on cash basis was balanced at end-June 2018.
- Tax revenue reached CFAF 56.7 billion compared to a forecast of CFAF 53.4 billion.
- Primary expenditure totaled CFAF 56.7 billion.
- Priority social spending reached CFAF 12.5 billion.
- Payment of salary arrears and domestic commercial arrears amounted CFAF 19 billion during the first half of 2018.

Program quantitative performance criteria met at end-June 2018:
- Net domestic financing of the government: CFAF 1.5 billion (ceiling CFAF 8.0 billion).
- Domestic primary fiscal balance: CFAF 0.0 billion (floor -CFAF 10.0 billion).
- Total domestic government revenue: CFAF 56.8 billion (floor CFAF 53.4 billion).
- Clearance of domestic payment arrears: CFAF 19.0 billion (floor CFAF 14.2 billion).

Continuous and other criteria:
- No new non-concessional external debt contracted or guaranteed; no external debt arrears accumulated.
- One concessional external loan contracted: CFAF 7.2 billion with grant element of 50.2 percent (indicative ceiling CFAF 9 billion).
- Indicative criterion on exceptional spending procedures not met: 9 percent compared to a ceiling of 5 percent.

Structural benchmarks and reforms implemented (with some delays):
- Projections of external debt service and stock now produced in SYGADE.
- External audits of the forestry development fund and telecommunications regulatory agency conducted.
- Petroleum price structure streamlined to limit budgetary impact of oil price increases.
- All structural benchmarks at end-September 2018 are met.
- All forestry permits issued prior to June 30, 2018 and mining permits issued since January 1, 2018 were published on the Ministry of Finance and Budget website.

### Economic outlook and risks
- Forecasts maintained: 4.3 percent economic growth in 2018 and 5 percent in the medium term.
- Medium-term drivers: robust recovery of forestry and telecommunications, construction activities, externally financed investments, improved execution of domestically financed investments.
- Energy and infrastructure projects with World Bank and partners: two big solar projects, extension of Boali 2, reinforcement of transportation lines, reconstruction of Boali 3, and hydroelectric development starting in 2019 — expected to boost activity and improve business environment.
- Inflation contained at 2.5 percent in the medium term.
- Primary fiscal deficit projected at 1.4 percent of GDP in 2018 and 1.2 percent of GDP in 2019.
- Current account deficit expected to improve in the medium term with increased forestry and mining exports.

Key risks:
- Deterioration of the security situation could compromise government efforts.
- Higher oil prices could harm economic activity and reduce tax revenue.
- Delay in disbursement of external financing would pose risk to public finances and economic activity.
- Government will pursue negotiations with armed groups under the African initiative and draft laws on military programming and domestic security forces to reinforce redeployment.

### 2019 budget priorities and fiscal strategy
- Budget emphasis: economic and social development; constrained by resource limitations.
- Four key pillars for 2019: (i) strengthening peace and security, (ii) consolidating public finances, (iii) good governance, and (iv) social affairs and humanitarian actions.
- Commitments and figures:
  - Limit domestic primary deficit to 1.2 percent of GDP.
  - Domestic revenue to reach 10.7 percent of GDP (increase of 1.4 percent with respect to the 2018 revised budget, owing to transfer of parafiscal taxes into the TSA).
  - Primary spending to represent 11.9 percent of GDP, of which 10.2 for current expenditure and 1.7 for capital expenditure.
- Measures to achieve revenue objectives: revise petroleum price structure; revise reference price of wood after consultations; integrate some parafiscal taxes into the TSA; pursue revenue administration improvements including fighting fraud and controlling VAT bases and income tax.
- Expenditure measures: contain the wage bill; increase priority social spending — Education (+21.4 percent) and Health (+27.9 percent) are main beneficiaries.
- Transfers will increase by 0.6 percent of GDP due to inclusion of expenses related to parafiscal agencies whose resources were transferred into the TSA.
- Commitment to limit exceptional spending to less than 5 percent of total expenditure (excluding salaries and debt service).
- Risks to the budget forecast: (i) lower economic growth limiting tax mobilization; (ii) lower-than-expected revenue from parafiscal taxes integrated into the TSA and/or increased budget transfers to public agencies; (iii) higher-than-expected international oil prices.
- Government will review budget assumptions during the first semester of 2019 and, if necessary, reduce non-priority spending to preserve macroeconomic stability and contain domestic primary deficit at 1.2 percent of GDP.
- Depending on oil price evolution, government will readjust pump prices if necessary to limit impact on tax revenues.

### Increase revenue mobilization
- Tax measures in 2018 produced encouraging outcomes:
  - Expansion of 10 percent excise tax on locally-produced beverages and additional specific tax on alcoholic beverages generated tax revenue of CFAF 980.0 million at end-July 2018.
  - Administrative measures (intensified tax audits, recovery of tax arrears, creation of tax arrears collections management and monitoring unit) raised additional revenue estimated at CFAF 4.4 billion at end-September 2018.
- ASYCUDA operational at Beloko customs bureau since June 2018.
- Delays in commitments to increase revenue: (i) revision of reference price of wood; (ii) strengthening collaboration between DGID and DGDDI and between DGDDI and BIVAC through monthly meetings and disclosure of outcomes of data reconciliations; (iii) use of BIVAC certified value as minimum base for import taxes and duties; (iv) update of configuration of VAT rates in ASYCUDA.
- Commitments and new structural benchmark:
  - Incorrect VAT rates in ASYCUDA corrected in October 2018.
  - Monthly reconciliation meetings between BIVAC and customs administration with publication of outcomes [new structural benchmark at end-December 2018]; IMF representative office invited to participate.
  - Ensure all tax declaration data entered in SISTEMIF upon subscription to strengthen monitoring.
  - Commit to conducting annual audits of at least 60 percent of businesses that report VAT credits or declare a net VAT payable of zero.

### Rationalize parafiscal taxes
- IGF launched audit of 22 of the 43 entities and agencies receiving parafiscal taxes.
- Draft note from Council of Ministers initiated to eliminate all 9 non-operational agencies.
- Of seven most critical agencies, two (ARCEP ex ART, FDF) already audited; external audits of remaining five (FNE, ANR, ANAC, CASDTA, SODIAC) to be launched in [November 2018] with AFD support.
- Government accounting officers assigned to 20 public entities and agencies under audit.
- Draft 2019 budget law provides for elimination of environmental tax related to production/manufacturing/imports of cigarettes, alcohol and non-alcohol beverages in glass and/or plastic and telecommunications, and electromagnetic pollution.
- Draft 2019 budget law provides for integration of identified parafiscal taxes amounting to CFAF 10.9 billion into the TSA in return for transfers to entities.
- Commitments:
  - Finalize audits of parafiscal entities and agencies identified by end-December 2018.
  - Pursue elimination of unjustified parafiscal taxes and transfer justified ones to the TSA (structural benchmark at end-December 2018).
  - Commitment not to create new parafiscal taxes.

### Rationalize and strengthen public expenditure management
- Management accounts of 2016 and 2017 finalized and transmitted to Court of auditors to allow establishment of discharge bills upon approval.
- To limit exceptional spending to 5 percent of total spending:
  - Regulate modalities for medical evacuations (structural benchmark, end-March 2019).
  - Close all cash funds and imprest accounts prior to end of each fiscal year (structural benchmark, end-December 2018).
  - Finalize budget execution circular for 2019 by end-December 2018 (structural benchmark, end-December 2018); circular will cap spending amount for imprest accounts.
- Decentralize payment authorization process to reduce delays and improve budget execution:
  - Ministerial circular on delegation of spending commitment and validation functions at ten priority ministries adopted in September 2018; effective January 1, 2019.
  - IT platform to operationalize deconcentration of spending commitment process at sectoral level (structural benchmark at end-December 2018).
- Strengthen governance and financial oversight of public agencies, SOEs and government holdings:
  - With IMF technical support, revise laws and regulations governing para-public sector [structural benchmark, end-March 2019].
- New legal framework implemented: organic law relating to finance laws and law on transparency in public finances management promulgated.
- Ministry of Finances and Budget reorganization underway with IMF technical support; draft new structure to strengthen financial oversight expected to be submitted to Council of Ministers during first quarter of 2019.
- Commitment to limit use of direct contracts by revising public procurement code to strengthen procurement capacities of priority sector ministries.

### Clear arrears and improve debt management
- Pursue strategy to clear salary and commercial arrears.
- Significant steps to clear all 2003 salary arrears and those of November and December 2002 by end of 2018.
- No domestic payment arrears accumulated since beginning of 2018.
- Delays in implementing domestic arrears clearance strategy adopted December 2017; some payments planned in 2018 postponed to 2019.
- Identified spending validated but not committed or paid from budget years prior to 2014; arrears in deposit account opened until 2016 identified. Audits of those arrears to be conducted in fourth quarter of 2018 with partner support.
- External debt management:
  - No new external debt arrears accumulated; all external debt service payments due since beginning of 2018 honored.
  - New convention with India in August 2018: extends term to 25 years at interest rate of 1.5 percent with five-year grace period.
  - Cleared all arrears to International Fund for Agricultural Development (FIDA) and agreed on amount and repayment terms.
  - Government to pursue negotiations with creditors with conventions signed prior to the Heavily Indebted Poor Countries Initiative.
  - Determined to mobilize only grants and highly concessional financing within ECF program borrowing limits.

### Promote transparency and strengthen good governance
- Government committed to fight corruption and improve governance.
- Draft law to tighten requirements to declare assets and clarify conditions and consequences for failure.
- Acknowledge gaps in implementation of United Nations Convention against Corruption, particularly criminalization of corrupt acts; committed to rectify gaps.
- Commitment to sanction offenses with respect to accountability and/or integrity as provided by the Law.
- Resuming process for Extractive Industries Transparency Initiative membership started.
- Published all forestry permits issued through June 30, 2018 on the MFB website.
- Instituted quarterly disclosure of all new mining permits issued since January 1, 2018 on the MFB website.
- Submitted information to permanent secretariat for economic and financial reforms of CEMAC (PREF-CEMAC) in line with regional commitments.

*International Monetary Fund — Central African Republic, Selected 2018 program and 2019 budget details*

### 27. The business environment faces constraints that hinder private investment by local

### 27. The business environment faces constraints that hinder private investment by local

### Business environment: constraints and reforms
- Constraints hindering private investment:
  - inadequate electricity supply
  - high transportation costs due to encirclement and deterioration of road infrastructures
  - limited access to credit
  - gaps in the legal system
- Government actions and planned reforms:
  - Promulgation of the law on the investment charter in June 2018.
  - Draft law setting the conditions of public-private partnerships sent to the parliament for adoption.
  - Modernization and update of the legal framework for key economic sectors, notably the revision of the mining code to ensure its compliance with the regional standards on foreign exchange.
  - Intention to strengthen the Joint Consultation Framework for Business Improvement (CMCAA) to promote and strengthen dialogue between the government and the private sector.
  - Other structural and institutional reforms to be implemented.

### Reduce poverty and promote gender equality (RCPCA implementation)
- Policy orientation:
  - Pursue implementation of the National Recovery and Peacebuilding Plan (RCPCA).
  - Significant increase in priority social spending to contribute to reduce poverty.
  - Support for women’s promotion and equality, in line with RCPCA objectives and national laws governing gender equality.
  - Recognition that women’s participation in political and economic affairs is essential to sustainable peace and economic progress.
- Data and monitoring commitments:
  - Medium-term plan to collect data by gender to monitor commitments and inform the public.
  - Creation of the national gender observatory to support gender-disaggregated monitoring.

### Financial sector development and inclusion
- Objectives and measures:
  - Promote development of the financial sector and financial inclusion of the entire population, including the most vulnerable.
  - Promote the use of mobile banking services to compensate for absence of banking service branches in provinces.
  - Implement recommendations of the 2017 COBAC mission.
- Progress and commitments:
  - Bank governance and prudential standards were strengthened.
  - Progress made in internal control mechanisms and measures to fight money laundering and terrorism financing.
  - Government intends to closely monitor implementation of remaining measures.

### Capacity building
- Rationale:
  - Strengthening administrative and technical capacities is key to ensure successful implementation of the economic program.
- Support and framework:
  - Sustained technical assistance from partners to improve revenue mobilization, ensure better cash management, and reinforce the spending chain.
  - Established a capacity building framework with the IMF; implementation of this program is ongoing.
- Main capacity-building priorities:
  - domestic revenue mobilization
  - management of public finances
  - management of public debt
  - macroeconomic statistics
  - macro-budgetary capacity
- Coordination:
  - Similar strategies to be defined with other development partners in their respective fields.
  - Strengthen coordination of partners’ support to maximize benefit from technical assistance.
  - Strengthened the entity in charge of monitoring economic and financial reforms and coordinating technical assistance and training (CS-REF).

### Program monitoring and structural benchmarks
- Program monitoring:
  - The program will be monitored semi-annually by the IMF Executive Board.
  - Performance criteria at end-December 2018 are maintained; indicative criteria for March 2019 are proposed, reflecting the 2019 macroeconomic outlook and budget.
  - End-December 2018 performance criteria will be assessed as part of the sixth review in the first half of 2019.
- New structural benchmarks proposed for end-December 2018:
  - Publish the outcomes of the reconciliation between customs and BIVAC data (structural benchmark at end-December 2018).
  - Set up an IT platform at the General Directorate of Budget to operationalize the deconcentration of the spending commitment process (structural benchmark at end-December 2018).
- Commitment on exchange restrictions:
  - Throughout the duration of the program, committed to not impose or expand restrictions on payments and transfers on current international transactions, not to resort to multiple currency practices, not to conclude bilateral agreements that do not comply with Article VIII of the IMF’s Articles of Agreement, and not to impose or expand restrictions to influence the balance of payments.
  - Authorities commit to adopt, in consultation with IMF staff, any new financial or structural measures necessary to ensure the success of the program.

### Key operational definitions and program parameters (TMU highlights)
- Exchange rates used for the ECF preparation:
  - CFAF/US$: 585
  - CFAF/Euro: 656
  - CFAF/SDR: 815
- Government and debt definitions (selected):
  - “Government” excludes local governments, the central bank, or public entities with separate legal personality not included in the TOFE.
  - “Debt” follows Decision No. 6230-(79/140) and includes loans, suppliers’ credits, and leases (present value at inception).
  - External debt is debt borrowed or serviced in a currency other than the CFAF.
  - Concessional debt: grant element at least 50 percent; discount rate for present value calculations is 5 percent.
- Fiscal definitions:
  - Total government revenue recorded on a cash basis; proceeds from taxation on contracts, asset sales, privatization, and grants are not considered government revenue for the program.
  - Total government expenditure recorded on a commitment basis unless otherwise stated; includes DAO (dépenses avant ordonnancement).
  - Domestic payment arrears: “balances payables” whose maturity goes beyond the 90-day regulatory deadline; expenditure payment arrears are payment orders not paid 90 days after authorization by the Treasury.
  - External payment arrears: an obligation not paid within 30 days after falling due is considered an external payments arrear.
- Quantitative targets and ceilings/floors (selected descriptions):
  - Ceiling on domestic financing of the State budget: defined as bank credit to government plus non-bank financing including proceeds from sale of government assets, Treasury bills, other securitized obligations denominated in CFA Francs on the CEMAC regional financial market, and any BEAC credit to the government.
  - Floor for total domestic government revenue: only cash revenues (tax and non-tax) counted for the TOFE.
  - Floor for government social spending: public non-wage spending on national education, health, social action, water and sanitation, microfinance (SME – SMI), agriculture, livestock, and rural development; execution monitored on a payment-order basis.
  - Ceiling on domestic primary deficit: domestic primary fiscal balance (cash basis) = government domestic revenue less government expenditure, excluding all interest payments and externally financed capital expenditure.
  - Ceiling on contracting or guaranteeing new external non-concessional debt: government undertakes not to contract or guarantee non-concessional debt; IMF financing excluded.
  - Non-accumulation of new external payment arrears: government undertakes not to accumulate external payment arrears, except for arrears under renegotiation or rescheduling; an obligation unpaid within 30 days after falling due is an external payments arrear.
  - Limitation of spending through extraordinary procedures: total of all expenditure following extraordinary disbursement procedures will not exceed 5 percent of total expenditure on non-salary spending or debt service (principal and interests) on average per quarter; observed quarterly since March 2018.

### Selected structural benchmarks (dates and status)
- Quarterly publication of budget execution reports within 30 days from the end of the quarter: Quarterly, from end September — Met.
- Adoption of an action plan to eliminate unjustified para-fiscal taxes and transfer of other revenues to the Single Treasury Account: End December 2017 — Met.
- Full utilization of ASYCUDA at customs in Beloko: End December 2017 — Not Met (Completed in July 2018).
- Publication of all existing tax exemptions: End December 2017 — Not Met (Completed in February 2018).
- Publication of all laws or decrees creating the 54 structures identified to collect para-fiscal taxes: End March 2018 — Not Met (Completed in May 2018).
- Completion of an external audit of the forestry fund and the telecommunications regulations agency: End June 2018 — Not Met (Completed in October 2018).
- Publish projections for monthly external debt service payments and the external debt stock from June 2018 to May 2019 generated by Sygade: End June 2018 — Met.
- Revision of the price structure of petroleum products at the pump: End June 2018 — Not Met (Completed in November 2018).
- Publish all forestry permits issued before June 30, 2018 on a government website: End September 2018 — Met.
- From September 30, 2018, publish quarterly all new mining permits issued since January 1, 2018 on a government website: Quarterly, from end September 2018 — Met.
- Removal of all identified parafiscal taxes without economic justification: End December 2018 — (listed as Improve transparency and revenue collection).
- Close systematically all cash fund agencies on December 31, 2018: End December 2018 — (listed as Strengthen the efficiency of public spending).
- Establish budget execution circular from LF 2019: End December 2018 — (listed as Rationalize public spending execution procedures).
- Revise legislation governing public agencies to strengthen financial oversight: End March 2019 — (listed as Strengthen the efficiency of public spending).
- Establish inter-ministerial decree laying down the conditions and terms of medical evacuations: End March 2019 — (listed as Strengthen the efficiency of public spending).
- Proposed new measures for end-December 2018:
  - Publication of the results of monthly meetings between customs and the pre-inspection company to reconcile valuations.
  - Set up an IT platform at the Ministry of Finance to operationalize the deconcentration of the spending process.

*Source: Central African Republic — MEFP, TMU and associated tables as provided in the content unit.*

### 15. To take into account the factors or changes that are essentially outside the government’s

### 15. To take into account the factors or changes that are essentially outside the government’s performance

### Adjustments to quantitative targets (2017 and beyond)
- If total revenue from privatization or renewal of telecommunication licenses or forestry or oil licenses is greater than the amount programmed:
  - The floor for the primary budget balance can be adjusted downward by 50 percent of these additional receipts.
  - The ceiling on net domestic financing of the government will be adjusted downward by the remained of the additional receipts.
- If total budget support is below the programmed amount:
  - The ceiling on net domestic financing of the government will be adjusted upward by 50 percent of disbursements programmed but not made.
  - The floor for the primary budget balance will be adjusted downward by 50 percent of disbursements programmed but not made.
- If total budget support is above the programmed amount:
  - The ceiling on net domestic financing of the government will be adjusted downward by 50 percent of disbursements above the programmed amounts.
  - The floor for the primary budget balance will be adjusted upward by 50 percent of disbursements above the programmed amounts.

### Structural benchmarks (deadlines and key actions)
- Production of the revenue and expenditure account for 2016:
  - The revenue and expenditure account for 2016 will have to be prepared and published by end of September 2017.
- Publication of all existing tax exemptions:
  - All existing tax exemptions, both statutory and discretionary, should be identified and made public by the end of December 2017.
- Retrospective control of customs values (Jan 1, 2016 to May 31, 2017):
  - By end of September 2017, all values of imported goods set for the period January 1, 2016 to May 31, 2017 will have to be checked for compliance with the minimum values determined by the pre-inspection company and, if need be, impose the specified customs clearance tariffs and related penalties.
- Quarterly budget execution report:
  - A quarterly budget execution report will be produced as from the end of September 2017, and thereafter every quarter within 30 days of the end of the quarter. The first report will cover the second quarter of 2017.
- Action plan to eliminate unjustified parafiscal fees and transfer proceeds to Treasury Single Account:
  - An action plan will be adopted before the end of December 2017, based on an inventory of all parafiscal charges; the plan will be accompanied by an instruction to transfer proceeds of parafiscal taxes collected to the treasury single account.
- Full utilization of ASYCUDA at Beloko customs post:
  - The main customs office in Beloko will be equipped and all ASYCUDA modules will be fully deployed by end-December 2017.
- External audits:
  - The forestry fund and the telecommunications regulatory agency should be audited by end-June 2018.
- Publication of monthly public debt service projections:
  - Monthly estimates of public debt service, and the debt stock for the period running from June 2018 to end-May 2019, generated directly from the SYGADE system will be published by the end of June 2018.
- Revision of petroleum price structure:
  - Petroleum price structure will be revised by the end of June 2018.
- Elimination of parafiscal taxes with no economic justification:
  - Based on the inventory results, those with no economic justification must be eliminated before the end of December 2018.
- Publication of forestry permits:
  - All forestry permits issued by June 30, 2018 will be published on a government website by September 30, 2018.
- Quarterly publication of mining permits:
  - All new mining permits issued since January 1, 2018 will be published on a government website, starting from September 30, 2018.
- Closure of all cash funds and imprest accounts:
  - All cash funds and imprest accounts will be closed at December 31, 2018.
- Implementation of a budget execution circular starting from the Budget Law 2019:
  - Introduce a budget execution circular starting from the LF 2019 by end December 2018.
- Revision of legislation on public agencies:
  - The February 13, 2008 law -08-011- governing the institutional framework of public agencies will be revised by end March 2019.
- Inter-ministerial decree for medical evacuations:
  - An inter-ministerial decree establishing conditions and modalities for medical evacuations will be elaborated by end March 2019.
- New measures:
  - Set up an IT platform at the General Directorate of Budget by end-December 2018 to operationalize deconcentration of the spending commitment process.
  - Publish outcomes of customs and BIVAC data reconciliation on the Ministry of Finance and Budget website at end-December 2018 after a meeting between the two entities within two weeks of month-end.

### Reporting to the IMF (periodicity and deadlines)
- Quantitative data on the government’s indicative targets will be reported to IMF staff according to the periodicity described in Table III.1 and all data revisions will be promptly communicated.
- Selected reporting deadlines (as described in Table 1):
  - Bi-annual report evaluating quantitative indicators and structural measures: Within four weeks of the end of each quarter.
  - Monetary position, monthly central bank and commercial bank accounts: Within four weeks of the end of each month.
  - Monthly cash flow operations table: Within ten days of the end of each month.
  - Government financial operations table: Within four weeks of the end of each month.
  - Total monthly amount of domestic payment arrears on goods and services and on wages, including unpaid pensions and bonuses: Within four weeks of the end of each month.
  - External debt stock at end of period: Within four weeks of the end of each month.
  - Breakdown of expenditures listed in TOFE (goods and services, wages, interest, etc.): Within four weeks of the end of each month.
  - Summary table of actual expenditures in priority areas (health, education, security): Within four weeks of the end of each quarter.
  - Breakdown of current expenditure and capital disbursements, financed with own and external resources: Within four weeks of the end of each quarter.
  - Breakdown of revenues by institution and economic classification: Within four weeks of the end of each quarter.
  - Revenues and expenditures recognized against one another without a cash settlement: Within four weeks of the end of each quarter.
  - Breakdown of debt service and external arrears, particularly by interest and principal, and by main creditor: Within four weeks of the end of each month.
  - Amount of new non-concessional and concessional external debt contracted by the government: Within four weeks of the end of each month.
  - Actual disbursements for projects and programs receiving foreign financial assistance and relief of external debt granted by external creditors (including date, amount, creditor): Within four weeks of the end of each month.

### Selected institutional and statistical facts (exact figures preserved)
- IMF Quota and holdings:
  - Quota: 111.40 (SDR million) 100.00 percent of Quota.
  - IMF’s Holdings of Currency (Holdings Rate): 110.89 99.55 percent.
  - Reserve Tranche Position: 0.52 0.46 percent.
- SDR Department:
  - Net cumulative allocation: 53.37 (SDR million) 100.00 percent.
  - Holdings: 0.56 1.05 percent.
- Outstanding Purchases and Loans:
  - RCF Loans: 22.28 (SDR million) 20.00 percent of Quota.
  - ECF Arrangements: 103.91 (SDR million) 93.28 percent of Quota.
- Latest ECF arrangement (Jul. 20, 2016 to Jul. 19, 2019):
  - Approved: 133.68 (SDR millions).
  - Drawn: 65.16 (SDR millions).
- Projected payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs):
  - 2018 Principal: 1.73; Charges/Interest: 0.13; Total: 1.86.
  - 2019 Principal: 9.10; Charges/Interest: 0.54; Total: 9.65.
  - 2020 Principal: 5.35; Charges/Interest: 0.55; Total: 5.90.
  - 2021 Principal: 5.85; Charges/Interest: 0.54; Total: 6.39.
  - 2022 Principal: 10.86; Charges/Interest: 0.54; Total: 11.40.
- HIPC and MDRI figures:
  - Assistance committed by all creditors (US$ million): 26 578.00 (with IMF Assistance (US$ million) 26.77 and SDR equivalent 17.19).
  - Completion point date: June 2009.
  - Disbursement of IMF Assistance (SDR million): Assistance disbursed to the member 17.19; Interim assistance 6.59; Completion point balance 10.60; Additional disbursement of interest income 0.90; Total disbursements 18.09.
  - MDRI-eligible debt (SDR Million): 4.02; Financed by MDRI Trust 1.90; Remaining HIPC resources 2.13.
- Exchange rate peg:
  - The CFA Franc is pegged to the euro at the rate of EUR 1 = CFAF 655.957 (since January 1, 1999).
- Safeguards and statistical capacity:
  - A full safeguards assessment for the BEAC was completed in August 2017.
  - Data shortcomings exist across national accounts, price statistics, government finance statistics, and external sector statistics; participation in e-GDDS but no operational National Summary Data Page; many metadata not updated since 2004.

*Source: CENTRAL AFRICAN REPUBLIC — Staff Report for the 2018 Article IV Consultation, Fifth Review under the Extended Credit Facility Arrangement and Financing Assurances Review (cr18380).*

### Box 1. Lending into Arrears to Official Bilateral Creditors

### Box 1. Lending into Arrears to Official Bilateral Creditors

### Lending into Arrears decision and rationale
- Staff assesses that the conditions are met for the Fund to provide financing to C.A.R. in line with the policy on arrears to official bilateral creditors, notwithstanding its outstanding arrears to Libya.
- Key rationales:
  - Prompt financial support from the Fund is considered essential to cover the protracted balance of payment need, catalyze external support, and support the successful implementation of C.A.R.’s program.
  - C.A.R. is pursuing appropriate policies under the ECF-supported program covering 2016–19, which aims to restore macroeconomic stability and external viability through fiscal and structural reforms (mobilizing domestic revenue, enhancing spending efficiency, restoring and building basic infrastructure and utilities, improving the business environment).
  - The debtor (C.A.R.) is making good faith efforts to reach agreement with Libya, including bilateral contact through letters following the 2009 HIPC agreement, sharing relevant information in a timely manner, and scheduling further discussions for early 2019.
  - The terms offered by C.A.R. to Libya are in line with the financing and debt objectives of the Fund-supported program and imply a contribution not disproportionate relative to those sought from other official bilateral creditors; the authorities are seeking from Libya comparable HIPC terms of 94 percent debt cancellation.
  - Libya does not appear to have a strong track record of providing contributions in the context of Fund-supported programs (having undertaken only 5 HIPC restructurings out of its total 18 Completion Point debtors).
- Update: Staff subsequently learnt that the Libyan authorities have indicated that they consent to the provision of Fund financing to the Central African Republic (C.A.R.), notwithstanding official arrears owed by the C.A.R. to Libya. Under the Fund’s Lending into Official Arrears (“LIOA”) policy, this creditor consent is sufficient for the Fund to proceed to provide financing to the C.A.R. notwithstanding its official arrears to Libya.

### Recent economic developments and program performance
- Economic activity and growth:
  - GDP projected at 4.3 percent in 2018, supported by construction, forestry, telecommunications, large externally-financed projects, and better execution of domestically-financed investments.
  - GDP growth projected at 5 percent from 2019 onward, based on gradual increase of FDI in telecommunications and forestry and positive spillovers from the peacebuilding process.
- Inflation and fiscal balances:
  - Inflation projected at 2.5 percent yoy from 2018 to the medium-term.
  - Primary fiscal deficit projected at 1.4 percent of GDP in 2018 following good execution of the revised 2018 budget.
- Program implementation and targets:
  - Program implementation is satisfactory; all quantitative performance criteria at end-June 2018 were met except the one on exceptional spending.
  - Domestic revenue mobilization has exceeded expectations; social spending outperformed program target.
  - The 5 percent ceiling on exceptional spending procedures (DAO) was missed (indicative target); exceptional spending declined from 24 percent (2017) to 9 percent (2018).
  - Authorities have refrained from contracting new non-concessional external debt and from accumulating external debt arrears; use of SYGADE for debt projections, audits of the forestry development fund and telecommunications regulatory agency, and rationalization of petroleum price structure were implemented.
- Debt and financing:
  - C.A.R. contracted one new highly concessional loan for improvement of a road to the capital city’s airport.
  - Authorities continued to repay domestic banks, initiated interest payments to the regional Central Bank BEAC, and are regularizing arrears vis-à-vis external creditors.

### Key quantitative indicators and program-related figures
- GDP growth: 4.3 percent in 2018; 5 percent from 2019 onward.
- Inflation: 2.5 percent yoy from 2018 to the medium-term.
- Primary fiscal deficit: 1.4 percent of GDP in 2018.
- Domestic revenue: expected to increase to 11 percent of GDP by 2020 from 8.3 percent in 2017.
- Exceptional spending: decline from 24 percent (2017) to 9 percent (2018); 5 percent ceiling missed (indicative target).
- Financial sector: credit to the economy increased by 5.2 percent at end-September 2018.
- Nonperforming loans (NPLs): reduced from 31 percent at end-2015 to 22 percent in June 2018.
- Libya’s HIPC participation record: 5 HIPC restructurings out of its total 18 Completion Point debtors.
- C.A.R. seeking HIPC terms of 94 percent debt cancellation from Libya.

### Policy and reform agenda going forward
- National Recovery and Peacebuilding Plan (NRPP):
  - Continued redeployment of public administration, reform of defense forces, execution of development projects, and engagement with local stakeholders, AU, and MINUSCA to foster dialogue.
  - Priority to increase social spending, reinvigorate women’s protection and participation, and support agriculture (women represent 83 percent of the total workforce in agriculture).
- Fiscal policy and public financial management:
  - Pursue prudent fiscal policy centered on budgetary discipline and sustained domestic revenue mobilization (DRM).
  - Revenue measures: step up tax audits and arrears collection; introduce a new tax on alcoholic beverages; create a unit for tax arrears collection management and monitoring; adopt an IT platform to enhance collection and tax payments; improve VAT base control; leverage expected lift of the embargo on diamond exports and parafiscal tax reform.
  - Expenditure measures: prioritize social and infrastructure spending (education and health); maintain strict control of the wage bill and parafiscal agencies; reinforce governance, regulations and financial oversight of SOEs and para-public sector.
  - Legal and institutional reforms: promulgation of the organic law relating to finance laws and the law on transparency in public finance management; future revision of the public procurement code; planned reorganization of the Ministry of Finances and Budget; accelerate establishment of discharge bills; close additional government accounts in private banks; strengthen budget execution through circulars; decentralize the budgetary commitment-payment process.
- Debt management:
  - Guided by preserving debt sustainability and continuing clearance of salary and commercial arrears starting from 2002.
  - Authorities have signed a new convention with India and cleared all arrears to IFAD; negotiations with remaining creditors will continue.
  - Commitment to use only highly concessional loans to finance infrastructure as needed.
- Financial sector reforms:
  - Strengthen governance and prudential standards to meet COBAC requirements.
  - Expand financial services and financial inclusion via financial technologies, notably mobile banking.
  - Continue efforts to strengthen the AML/CFT framework.
- Structural reforms and governance:
  - Promote good governance and fight corruption; strengthen and regulate asset declaration by government members.
  - Enhance natural resources management, resume membership in EITI, and ensure disclosure of new mining and forestry permits.
  - Prepare a National Strategy for Governance with UNDP support and address UNCAC implementation deficiencies.
  - Improve business environment through investment charter and PPP frameworks, revise the mining code in line with international standards, address infrastructure bottlenecks and electricity access (projects in solar energy and road upgrading with World Bank support).
- Capacity building:
  - Continue intensive technical assistance and capacity building under the Fund’s framework.
  - Notable capacity gains: new skills in public finance statistics and national accounts; agreement with private banks preventing automatic compensation; transfer of parafiscal taxes to the budget; improvements to the Economic and Financial Reform Monitoring Unit (CS-REF).
  - Authorities stress need to enhance coordination among partners in technical assistance delivery.

### Conclusion and request to the Fund
- Authorities express gratitude for the Fund’s engagement and place high value on the ECF arrangement as central to the national recovery strategy and CEMAC’s crisis exit strategy.
- Based on good progress, strong commitment to program objectives, and adequate financing assurances for the remainder of the program, the authorities request the completion of the Fifth Review under the ECF.

*CENTRAL AFRICAN REPUBLIC STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION, FIFTH REVIEW UNDER THE EXTENDED CREDIT FACILITY, AND FINANCING ASSURANCES REVIEW—FURTHER SUPPLEMENTARY INFORMATION*

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_Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18380.pdf_