## EXECUTIVE SUMMARY — 1cafea2025001-print-pdf ## Source details **Canonical URL:** [EXECUTIVE SUMMARY — 1cafea2025001-print-pdf](https://www.imf.org/-/media/files/publications/cr/2025/english/1cafea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1cafea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1cafea2025001-print-pdf.pdf.json) --- ### Context and program status - CAR’s ECF-supported program supported governance and transparency reforms and benefited from improvements in the security environment. - Binding fiscal constraints: fuel supply constraints and subpar tax compliance. - Weak public financial management (PFM) and limited spending controls hindered budget execution. - Grants remain well below pre-2020 levels, undermining debt sustainability. - Staff finalized CAR’s Country Engagement Strategy (CES) (Annex III). ### Program performance (combined third and fourth reviews) - Overall: - Half of the six Performance Criteria (PC) for end-June and end-December 2024 were met. - Two out of seven Structural Benchmarks (SB) for the third and fourth reviews were met; a third was implemented with a delay. - Quantitative highlights (cumulative outcomes vs. targets): - Domestic revenues: CFAF 79.9 billion at end-June and CFAF 155.5 billion at end-December vs. targets CFAF 75 billion and CFAF 155 billion. - Domestic primary deficit: CFAF 44.5 billion at end-June (target CFAF 22 billion) and CFAF 83.5 billion at end-December (target CFAF 50 billion). - Net domestic financing: CFAF 47.7 billion at end-June (target CFAF 30 billion) and CFAF 90.3 billion at end-December (adjusted target CFAF 57.3 billion). - Continuous PC on non-accumulation of new external arrears: Not met. - Indicative Targets for social spending: missed by CFAF 0.9 billion at end-June and CFAF 9.4 billion at end-December. - Spending via extraordinary procedures: CFAF 18.6 billion at end-June and CFAF 34.1 billion at end-December vs. ceilings CFAF 5 billion and CFAF 8 billion. ### Recent macroeconomic developments and outlook - Real GDP growth: estimated 3.0 percent in 2024 (up from 1.9 percent in 2023). - Inflation (CPI, end-of-period): 4.2 in 2024; projected 1.3 in 2025; 3.5 in 2026; 3.1 in 2027. - Fiscal aggregates (central government, percent of GDP): - Domestic revenue: 9.1 (2024 act.), projected 9.8 (2025 proj.), 9.6 (2026 proj.), 9.7 (2027 proj.). - Domestic primary expenses: 14.0 (2024 act.), projected 11.9 (2025 proj.), 11.1 (2026 proj.), 10.7 (2027 proj.). - Domestic primary balance: -4.9 (2024 act.), projected -2.1 (2025 proj.), -1.5 (2026 proj.), -1.0 (2027 proj.). - Public sector debt: 60.7 percent of GDP (2024 act.), projected 57.4 (2025 proj.), 52.9 (2026 proj.), 47.8 (2027 proj.). - Domestic: 28.7 percent (2024 act.); projected 27.2, 24.5, 21.8. - External: 32.0 percent (2024 act.); projected 30.2, 28.4, 26.0. - External sector: - Current account (with grants): -9.0 percent of GDP (2024 act.), projected -7.1 (2025 proj.), -4.1 (2026 proj.), -3.1 (2027 proj.). - Other developments: - A large in-kind grant of fuel from Russia in January 2025 (30,000 metric tons of diesel, covering about half of annual consumption) should improve hydrocarbon supply. - Banking sector: NPL ratio 12.7 percent as of December 2024; 72.8 percent covered by loan-loss reserves; capital adequacy ratio approximately 19 percent at end-2023; private sector loans down 10 percent y-o-y to 13 percent of GDP. - Food insecurity: some 2 million people (31 percent of the population) faced acute food insecurity from September 2024 to March 2025. ### Baseline and key assumptions for outlook - Baseline conditional on: - restoring budget credibility via improved tax compliance, administration, and spending controls; - boosting recovery of tax arrears and fuel-related revenues via proper price structures and a successful hydrocarbon import campaign through the Ubangi River; - refinancing maturing debt; - strengthening governance to retain donor support. - Growth projections: - 3.0 percent in 2025; 3.3 percent in 2026. - Inflation: decline to 1.3 percent by end-2025 from 4.2 percent in 2024; stabilize around 3 percent thereafter. ### Downside risks (selected and enumerated) - Fuel supply disruptions and coordination problems with monopoly importer. - Spending overruns, especially ahead of local and presidential elections (election-driven slippages). - Debt rollover pressures and tightening regional market liquidity. - Security challenges, humanitarian risks, and falling foreign aid (e.g., USAID withdrawal; estimated suspensions range from $11 million to $39 million). - Failure to implement PFM, governance, anti-corruption, AML/CFT reforms. - If realized, risks could severely limit service delivery, wage payments, and avoidance of arrears. ### Debt distress and liquidity vulnerabilities - CAR remains at high risk of overall and external debt distress. - Short-term maturities on the CEMAC debt market: - CFAF 9.1 billion for the remaining of 2025 (8.5 percent of anticipated domestic revenues during 2025H2). - CFAF 68 billion for 2026 (33 percent of anticipated domestic revenues). - 2024 gross arrears incurred: CFAF 6.2 billion (0.36 percent of GDP); net increase in arrears: CFAF 3.3 billion after CFAF 2.9 billion cleared. ### Financing and program requests - Authorities request waivers for nonobservance of PCs for end-June 2024 and end-December 2024 (domestic primary fiscal balance and net domestic financing) and for nonobservance of continuous PC on non-accumulation of new external arrears. - Authorities request rescheduling of SBs (audit of fuel procurement costs, quarterly pump price mechanism, fiscal risk statement on the Sango project). - Authorities commit to leave 90 percent of access in CAR's SDR account to prefinance Fund payments for the next six months; 10 percent deposited in CAR’s escrow account at BEAC to supplement a WB operation financing non-discretionary spending. ### Updated conditionality: prior actions and new SBs (selected) - Prior actions (three): - submit to Parliament a revised Budget Law for 2025 consistent with program macro framework; - submit to Parliament the Court of Audit Law; - strengthen the tax compliance certificate regime. - Five new SBs for the fifth review (examples): - ensure effective use of e-Tax by all large taxpayers for online payment by end-2025Q3; - regularize all expenses paid payment orders from the Treasury and the Budget during the 2023 budget year; - enhance monitoring of customs exemptions; - assess mid-term progress of April 2025 IMF TA action plan on manual tax data cross-checks for FY2023; - replicate manual cross-check for 2024 tax year. - Four SBs for the sixth review (examples): - implement the new DGID structure by appointing staff to the new Directorates; - submit to Parliament draft of new law on the fuel sector aligned with IMF comments; - assess completion of April 2025 IMF TA action plan on manual tax data cross-checks for FY2023; - assess mid-term progress on manual FY2024 tax data cross-checks. *Source: EXECUTIVE SUMMARY, 1cafea2025001-print-pdf — CENTRAL AFRICAN REPUBLIC, INTERNATIONAL MONETARY FUND, May 21, 2025.* --- ### Corrective measures to safeguard program objectives ### Identified corrective measures (institutional and technical) - Digitalization of tax collection (e-Tax rollout and e-payments module operational). - IMF TA-supported tax compliance reforms, including manual cross-checks and an interagency task force. - Streamlining of exemptions and modernization of tax administration (MEFP ¶25). - Improvement of debt and liquidity management (MEFP ¶21-22). - Continued collaboration with IMF staff on fuel market reforms (MEFP ¶28). - Anti-corruption and governance reforms (MEFP ¶33). - Institutional actions proposed: Three prior actions and nine new SBs (¶25-26). ### Fiscal policy package and revised 2025 budget (key figures) - Revised 2025 Budget projections: - domestic revenues: CFAF 186 billion, or 9.8 percent of GDP. - domestic primary deficit: CFAF 40 billion, or 2.1 percent of GDP. - gross financing needs: 6.2 percent of GDP. - financing composition: about 3.4 percent via the CEMAC debt market, 1 percent from the WB, 0.35 percent from the AfDB (carried over), 0.9 percent from the concessional loan from France and 0.55 percent from net IMF disbursements. - Fiscal adjustment: primary deficit decrease of 2.8 percentage points of GDP versus last year, with 2.1 percentage points attributed to reduced spending. - Structural domestic revenue collection projected: CFAF 158 billion (8.3 percent of GDP). - Assumptions: buoyant fuel imports due to successful river campaign; CFAF 8 billion already received from sale of the 4G license; around CFAF 7 billion expected in annual dividend from BEAC. ### Revenue measures to reach CFAF 186 billion (total CFAF 32 billion, including CFAF 4 billion buffer) - Recoveries of tax arrears: CFAF 7 billion (half from fuel sector). - Monetization of the in-kind grant of fuel: CFAF 6 billion. - Collection of second installment from sale of a 4G license: CFAF 5 billion. - Uptick in Telco tax collection following 4G rollout: CFAF 2 billion. - Transfer of fees and charges from line ministries to TSA: CFAF 2 billion. - Sale of artisanal forestry permits: CFAF 1 billion. - VAT on transportation of goods imported from other CEMAC countries: CFAF 1 billion. - Streamlining tax exemptions for firms with outstanding tax arrears: CFAF 1 billion. - Tightening customs procedures (domiciliation, valuation accuracy): CFAF 2 billion. - Tightening tax compliance via IMF TA-supported cross-checks: CFAF 5 billion. ### Spending controls and PFM measures - SIM_Ba operationalized at ACCT; related training and IT equipment provided (SB, third review). - Ministerial directive capping spending and curbing extraordinary procedures; directive helped improve fiscal performance at end-March and extended to end-June. - Revised 2025 spending: CFAF 226 billion (slightly above CFAF 222 billion spent last year, excluding one-offs). - Wage bill capped at CFAF 109.3 billion (up from CFAF 101 billion in 2024, excluding accrued expenditures from December 2023 paid in January 2024). - Excluding one-offs: goods and services expected to decline to about CFAF 46 billion from CFAF 55 billion; transfers to increase to CFAF 61.9 billion from CFAF 59 billion; domestically-financed capital expenditure to about CFAF 9 billion from CFAF 7 billion. ### Public debt management priorities - 2024 gross issuances from regional debt market: nearly CFAF 155 billion (after discount to face value); increased reliance on syndications—averaging 12 percent yields—cost about CFAF 6 billion (0.35 percent of GDP). - Late April/early May 2025 domestic syndication: CFAF 65 billion raised; around CFAF 13.5 billion used to repay debt maturing this year. - Policy recommendation: prioritize grants and concessional financing to gradually reduce regional debt and debt vulnerabilities (MEFP ¶18). --- ### Fuel market, in‑kind grant, and operational implications ### Key facts and planned uses - Fuel-related fiscal revenues jumped 42 percent y-o-y in 2024. - Tax revenues per liter: fell by 5.5 percent in 2024 despite global prices declining by 1.8 percent and pump prices unchanged. - In-kind grant from Russia: 30,000 metric tons of diesel (about half annual consumption). - Authorities plan a revolving scheme: monetize part of proceeds (excluding taxes) to import fuel via Ubangi River; part to finance the budget. - Audit of fuel procurement costs expected to start in 2025Q2 after UNDP funding mobilization; audit rescheduled to fifth review. ### Operational and structural constraints - Monopoly importer issues: does not prioritize Ubangi River route; charges hefty costs and margins; no agreement on margin cap. - Failed river campaign for third consecutive year; reactivation of supply planning committee planned. - SOPRAF to be capitalized with proceeds from monetized grant; transparency commitments included in revised budget. --- ### Revenue administration, PFM, and structural reforms ### e-Tax and tax compliance - e-Tax progress: e-payments module implemented; mandatory e-declaration for large taxpayers; first online tax payments recorded. - Unique taxpayer identification number introduced; improved access to digital databases for cross-checks. - April 2025 TA: action plan to strengthen tax compliance and controls with sequenced monitoring framework. - Proposed SBs with performance thresholds for manual tax data cross-checks (FY2023 and FY2024) and replication obligations (fifth and sixth reviews). ### Customs and exemptions - Transition to ASYCUDA World completed in major customs offices; exemptions module optimized. - Enhanced monitoring of customs exemptions and commitment to publish list of beneficiaries by October 2025. - Tightening customs procedures and domiciliation rules to raise CFAF 2 billion. ### PFM and expenditure control - SIM_Ba operational at ACCT; rollout beyond Bangui planned. - Regularization of OPT/OPB expenses for 2023 budget year (SB, fifth review). - Ministerial circular limiting extraordinary procedures and setting ceilings per category. ### Financial integrity and ANIF - Partial funding allocated to operationalize Financial Intelligence Unit (ANIF). - Asset Declaration Law implementing regulation adopted (SB, third review); operationalization completed with delay. - Tokenization law compliance with CEMAC pending BEAC legal opinion; limited data on $CAR meme-coin inflows. --- ### Arrears, debt dynamics, and capacity to repay the Fund ### Arrears and clearing efforts - Total arrears (end-April 2025): 9,090 (CFAF million) — % of GDP: 0.53. - Net arrears end-2024: 3,316 (CFAF million) — % of GDP: 0.19. - Additional arrears end-April 2025: 1,600 (CFAF million) — % of GDP: 0.09. - Legacy arrears total: 137,970 (CFAF million) — % of GDP: 8.10. - Actions: Treasury committee formed in October to prioritize debt service and meet weekly; exploring legacy arrears solutions with African Legal Support Facility. ### Capacity to repay Fund - Repayments to the Fund projected to rise, peaking in 2026 at around SDR 36 million (about 11 percent of exports of goods and services, and around 17 percent of revenue excluding grants). - Outstanding IMF credit (SDR millions series 2023–2033): 215.6, 227.6, 241.9, 236.8, 201.2, 174.8, 149.5, 124.7, 96.0, 66.6, 38.2. - Capacity to repay remains weak and becomes adequate only after successful program reforms. ### External borrowing program and DSA findings (selected) - Volume of new PPG external debt contracted: US$18.6 million (concessional). - Public sector debt (Percent of GDP series): 50.0 55.7 57.3 60.7 57.4 52.9 47.8 43.8 41.5 38.1. - DSA: public debt assessed sustainable but CAR remains at high risk of overall and external debt distress; liquidity and rollover risks persist; priority on grants and concessional financing. --- ### Monitoring, conditionality, and reporting ### Monitoring framework - Program monitored using quantitative PCs, indicative targets and structural benchmarks defined in TMU. - Quantitative performance criteria set through end-December 2025 (sixth review); indicative targets for end-September 2025; SBs until April 2026. - Sixth review scheduled on or after 30 April 2026. ### Key reporting requirements (selected) - Government cash-flow table: within 10 days of end of each month. - TOFE and monetary survey: within four weeks of end of each month. - Monthly stock of external debt and breakdown of debt service and external arrears: within four weeks of end of each month. - Semi-annual evaluation report on qualitative indicators and structural measures: within four weeks of end of each quarter. --- ### Staff appraisal: main policy priorities and recommendations (selected) - Implement revenue measures and maintain strict budget discipline to meet fiscal targets. - Sustain tax administration and compliance efforts across fuel and non-fuel sectors. - Reinforce spending management amid election pressures and potential cuts in foreign humanitarian aid. - Prioritize grants and highly concessional resources for social spending and infrastructure as debt service costs crowd out critical expenditures. - Expedite audit of fuel procurement costs to advance fuel price reforms and leverage findings to boost revenue. - Continue to enhance business climate, governance, financial integrity, and anti-corruption measures (operationalize asset declaration system; adopt new forestry and mining codes). - Anchor policies to the National Development Plan (NDP) 2024-2028 to catalyze donor support and private investment. *Source: IMF staff report excerpts, 1cafea2025001-print-pdf (Central African Republic).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context - CAR's ECF-supported program has supported governance and transparency reforms, aided by improvements in the security environment. - Fiscal pressures persist as revenue mobilization has not kept pace with rising spending and debt service. - Binding constraints on revenue collection: fuel supply constraints and subpar tax compliance. - Weak public financial management (PFM) and limited spending controls have hindered budget execution. - Grants have materialized broadly as expected but remain well below pre-2020 levels, undermining debt sustainability. - Staff finalized CAR’s Country Engagement Strategy (CES) (Annex III), outlining key fragility drivers and IMF support modalities. ### Outlook and risks - Baseline scenario hinges on: - restoring budget credibility via improved tax compliance, administration, and spending controls; - boosting recovery of tax arrears and fuel-related revenues via proper price structures and a successful hydrocarbon import campaign through the Ubangi River; - refinancing maturing debt; - strengthening governance to retain donor support. - Downside risks include: fuel supply disruptions, spending overruns, debt rollover pressures, security challenges, and falling foreign aid—risks heightened ahead of local and presidential elections. - If realized, these risks could severely limit the government’s ability to deliver services, pay wages, and avoid arrears. - CAR stays at a high risk of overall and external debt distress. ### Program performance (combined third and fourth reviews) - Overall summary: - Half of the six Performance Criteria (PC) for end-June and end-December 2024 were met. - Two out of seven Structural Benchmarks (SB) for the third and fourth reviews were met; a third was implemented with a delay. - Quantitative performance highlights: - Domestic revenues: CFAF 79.9 billion at end-June and CFAF 155.5 billion at end-December vs. targets CFAF 75 billion and CFAF 155 billion, respectively. - Domestic primary deficit: CFAF 44.5 billion at end-June (target CFAF 22 billion) and CFAF 83.5 billion at end-December (target CFAF 50 billion). - Net domestic financing: CFAF 47.7 billion at end-June (target CFAF 30 billion) and CFAF 90.3 billion at end-December (adjusted target CFAF 57.3 billion). - Continuous PC on non-accumulation of new external arrears was missed due to liquidity pressures and poor coordination between cash and debt units. - Indicative Targets (ITs) for social spending missed by CFAF 0.9 billion at end-June and CFAF 9.4 billion at end-December. - Spending via extraordinary procedures: CFAF 18.6 billion at end-June and CFAF 34.1 billion at end-December vs. ceilings CFAF 5 billion and CFAF 8 billion, respectively. - Structural reforms and institutional milestones: - Operationalization of e-Tax. - Strengthening of the Court of Audit (Court of Audit Law submitted to Parliament). - Allocation of funding to operationalize parts of the institutional plan of the Financial Intelligence Unit. - Official taxpayer recognition criteria SB met; SIM_Ba operationalized; Asset Declaration law operationalized with delay. - Fiscal risk analysis of the Sango project not initiated; two fuel-price-related SBs could not be implemented due to disagreement with the monopoly on price structure. - Audit of fuel procurement costs expected to start in 2025Q2 after UNDP funding mobilization. ### Recent macroeconomic developments (selected) - Output and prices: - Real GDP growth: estimated 3.0 percent in 2024, up from 1.9 percent in 2023 and a 0.1 percent contraction in 2023 (Text Table 1 shows series). - CPI (end-of-period): 4.2 in 2024; projected 1.3 in 2025; projected 3.5 in 2026; projected 3.1 in 2027. - Fiscal aggregates (Text Table 1, central government finances): - Domestic revenue: 9.1 percent of GDP (2024 act.), projected 9.8 (2025 proj.), 9.6 (2026 proj.), 9.7 (2027 proj.). - Domestic primary expenses: 14.0 percent of GDP (2024 act.), projected 11.9 (2025 proj.), 11.1 (2026 proj.), 10.7 (2027 proj.). - Domestic primary balance: -4.9 percent of GDP (2024 act.), projected -2.1 (2025 proj.), -1.5 (2026 proj.), -1.0 (2027 proj.). - Public sector debt: 60.7 percent of GDP (2024 act.), projected 57.4 (2025 proj.), 52.9 (2026 proj.), 47.8 (2027 proj.). - Domestic: 28.7 percent (2024 act.); projected 27.2, 24.5, 21.8. - External: 32.0 percent (2024 act.); projected 30.2, 28.4, 26.0. - External sector: - Current account (with grants): -9.0 percent of GDP (2024 act.), projected -7.1 (2025 proj.), -4.1 (2026 proj.), -3.1 (2027 proj.). - Other developments: - A large in-kind grant of fuel from Russia in January 2025 should improve hydrocarbon supply. - The fiscal deficit widened: primary deficit reached 4.9 percent of GDP in 2024, up from 3.5 percent in 2023, including 1 percent of GDP in accrued expenditures from December 2023 paid in January 2024. - Overruns in security spending (0.4 percent of GDP) and mission travel (0.2 percent of GDP). - Improved fuel revenue: +0.2 percent of GDP vs. 2023. - Sale of a 4G license: 0.6 percent of GDP in December. - Tightening financing conditions: subscription rates on primary auctions plummeted in 2024 amid declining liquidity in the regional market; government turned to syndicated regional debt issuances with expensive fees. - Banking sector: NPL ratio 12.7 percent as of December 2024; 72.8 percent covered by loan-loss reserves; capital adequacy ratio approximately 19 percent at end-2023; private sector loans down 10 percent y-o-y to 13 percent of GDP. - Current account deterioration: current account deficit widened to 9 percent of GDP in 2024 from 8.8 percent in 2023. - France disbursed a EUR 10 million grant in December (half for budget support; EUR 3 million for elections). - Food assistance under stress: some 2 million people (31 percent of the population) faced acute food insecurity from September 2024 to March 2025; cuts in foreign aid impacted funding for logistical costs. ### Policy recommendations - Prioritize budget discipline to meet 2025 program targets and ensure debt sustainability. - Revenue collection priorities: - implement appropriate pricing structures for all imported fuel, and maximize monetization of the in-kind grant from Russia received in early 2025; - accelerate recovery of tax arrears, particularly from fuel marketers and telecom companies; - reduce unwarranted tax exemptions; - enhance tax return controls via cross-checks among tax agencies and banks; - expedite duty collection from the forestry sector; - fully enforce tax measures adopted in 2023–24; - focus on collection of dues from 4G-network license sales. - Reinforce budget controls through the financial control software SIM_Ba to contain the deficit and curb exceptional spending. - Fiscal discipline will reduce rollover risks and prevent new external arrears; strengthening institutions will ensure transparent, effective budget management. ### Program issues and authorities' requests - Authorities request waivers for nonobservance of the PCs for end-June 2024 and end-December 2024 domestic primary fiscal balance and net domestic financing. - Authorities request a waiver for nonobservance of the continuous PC on non-accumulation of new external arrears. - Authorities seek to reschedule SBs: - audit of fuel procurement costs from the third to the fifth review; - adopt a quarterly pump price adjustment mechanism from the fourth to the sixth review; - fiscal risk statement on the Sango project from the third to the sixth review. - Authorities commit to leave 90 percent of access in CAR's SDR account to prefinance payments to the Fund for the next six months; 10 percent of access will be deposited at CAR’s escrow account at BEAC to supplement a WB operation financing certain non-discretionary spending in critical service delivery areas. ### Updated conditionality (prior actions and new structural benchmarks) - Three prior actions for the combined third and fourth reviews: - submit to Parliament a revised Budget Law for 2025 consistent with the program’s macroeconomic framework with credible revenue and spending projections; - submit to Parliament the Court of Audit Law that regulates its statute and functions and ensures its financial and operational independence; - strengthen the tax compliance certificate regime, in line with IMF recommendations. - Five new SBs for the fifth review: - ensure effective use of e-Tax by all large taxpayers for online payment of taxes and duties by end-2025Q3; - regularize all expenses paid payment orders from the Treasury and the Budget during the 2023 budget year; - enhance monitoring of customs exemptions; - assess mid-term progress of the April 2025 IMF TA action plan on manual tax data cross-checks for FY2023; - replicate the manual cross-check of taxpayer data for the 2024 fiscal year. - Four SBs for the sixth review: - implement the new DGID structure by appointing staff to the new Directorates; - submit to Parliament the draft of the new law on fuel sector aligned with IMF comments; - assess completion of the April 2025 IMF TA action plan on manual tax data cross-checks for FY2023; - assess mid-term progress in implementing the action plan for manual FY2024 tax data cross-checks. *Source: EXECUTIVE SUMMARY, 1cafea2025001-print-pdf - CENTRAL AFRICAN REPUBLIC, INTERNATIONAL MONETARY FUND, May 21, 2025.* ### 6. Against this backdrop, a package of corrective measures has been identified with a ### 6. Against this backdrop, a package of corrective measures has been identified with a ### Corrective measures to safeguard program objectives - Identified measures include: - digitalization of tax collection - IMF TA-supported tax compliance reforms - streamlining of exemptions and modernization of tax administration (MEFP ¶25) - improvement of debt and liquidity management (MEFP ¶21-22) - continued collaboration with the IMF staff on fuel market reforms (MEFP ¶28) - anti-corruption and governance reforms (MEFP ¶33) - Institutional actions proposed: Three prior actions and nine new SBs (¶25-26). ### Outlook and key macro projections - Growth projections: - 3.0 percent in 2025 - 3.3 percent in 2026 - Assumptions: improved fuel supply consistent with the trend since 2022 and further helped by the sizeable in-kind grant of from Russia early this year. - Additional growth supports: rollout of the 4G cellular technology, lifting of diamond export sanctions, launch of AfDB-supported Corridor-13 infrastructure works. - Inflation projections: - decline to 1.3 percent by the end of 2025 from 4.2 percent in 2024 - subsequently expected to stabilize at around 3 percent - Medium-term outlook: positive, supported by enhanced security, fuel supply, continued access to various financing sources, and further reform progress. ### Downside risks (enumerated) - Rollover risks for domestic debt: erosion in investor sentiment in the CEMAC regional debt market, rising interest rates, or sudden deterioration in banks’ balance sheets may hinder refinancing of large maturities in 2025 and beyond. - External financing challenges: grant financing may be undermined by reprioritization of foreign aid and rising global geopolitical risks. - Fuel supply: poor coordination between the government and the monopoly importer could prolong import challenges despite the in-kind grant. - Election-driven slippages: local and presidential elections in 2025H2 could lead to significant expenditure overruns, including financed through arrears accumulation. - Authorities tightened spending using extraordinary procedures by introducing new directives early this year. - Humanitarian and security risks: deterioration in security could disrupt economic activity and donor financing. - Most USAID-related projects meet the “lifesaving” exemptions and were therefore maintained. - Funding for the UN peacekeeping mission and UN agencies is subject to significant uncertainty given funding withdrawal from several bilateral partners. - Failure to implement reforms (PFM, governance, anti-corruption, AML/CFT) could further undermine official and private financing. - Limited global trade exposure: recent surge in global uncertainty and trade tensions should have limited impact given CAR’s limited trade with advanced economies; gold exports could benefit from the price rally though volumes remain small. ### Debt distress and liquidity vulnerabilities - CAR remains at high risk of overall and external debt distress. - Public debt: projected to remain sustainable though liquidity and refinancing risks persist. - Maturities on the CEMAC debt market: - CFAF 9.1 billion for the remaining of 2025 (8.5 percent of anticipated domestic revenues during 2025H2) - CFAF 68 billion for 2026 (33 percent of anticipated domestic revenues) ### Policy discussion priorities - Strengthen credibility of the 2025 budget and ensure alignment with financing constraints. - Mitigate refinancing risks and rising borrowing costs. - Continue agreed fuel sector reforms. - Accelerate medium-term reforms in revenue administration, public financial management, governance, and financial integrity. ### A. Fiscal Policy: Improving Budget Credibility — key figures and measures - Revised 2025 Budget projections: - domestic revenues: CFAF 186 billion, or 9.8 percent of GDP - domestic primary deficit: CFAF 40 billion, or 2.1 percent of GDP - gross financing needs: 6.2 percent of GDP - financing composition: about 3.4 percent via the CEMAC debt market, 1 percent from the WB, 0.35 percent from the AfDB (carried over from last year), 0.9 percent from the concessional loan from France and 0.55 percent from net IMF disbursements - Fiscal adjustment: primary deficit decrease of 2.8 percentage points of GDP versus last year, with 2.1 percentage points attributed to reduced spending. - Note: 1 percent of GDP of current expenditures in 2024 were non-recurrent; excluding these, nominal spending expected to remain broadly stable between 2024 and 2025. - Structural domestic revenue collection projected: CFAF 158 billion (8.3 percent of GDP) - Assumptions: buoyant fuel imports due to successful river campaign, CFAF 8 billion already received from the sale of the 4G license, around CFAF 7 billion expected in annual dividend from BEAC. - Revenue measures to reach CFAF 186 billion (total CFAF 32 billion, including CFAF 4 billion buffer): - Recoveries of tax arrears: CFAF 7 billion (half from the fuel sector) - Proceeds from monetization of the in-kind grant of fuel: CFAF 6 billion - Collection of second installment from sale of a 4G license: CFAF 5 billion - Uptick in Telco tax collection following 4G rollout: CFAF 2 billion - Uptick in transfer of fees and charges from line ministries to TSA: CFAF 2 billion - Sale of artisanal forestry permits: CFAF 1 billion - Compliance with VAT on transportation of goods imported from other CEMAC countries: CFAF 1 billion; VAT also expected to rise due to increased fuel sales and improved tax compliance - Streamlining tax exemptions for companies with outstanding tax arrears: CFAF 1 billion - Tightening compliance with customs procedures (domiciliation, valuation accuracy): CFAF 2 billion - Tightening tax compliance with IMF TA-supported interagency task force and manual cross-checks: CFAF 5 billion (backed by a new SB (¶18)) - Beyond 2025, revenue growth hinges on: - optimization of the e-Tax system and new DGID organizational chart following the February 2025 FAD TA (¶19) - improved tax compliance (¶20) - optimization of revenues from the fuel sector based on the Action Plan (MEFP ¶35 and Annex III) - optimization of mining and forestry taxation - Spending control measures: - Minister of Finance introduced directive capping spending and curbing extraordinary procedures; directive helped improve fiscal performance at end-March and expected extension to end-June. - Revised 2025 budget sets spending at CFAF 226 billion, slightly above CFAF 222 billion spent last year (excluding one-offs). - Wage bill capped at CFAF 109.3 billion, up from CFAF 101 billion in 2024 (excluding accrued expenditures from December 2023 paid in January 2024). - Excluding one-offs: goods and services expected to be reduced to about CFAF 46 billion from CFAF 55 billion; transfers expected to increase to CFAF 61.9 billion from CFAF 59 billion; domestically-financed capital expenditure to about CFAF 9 billion from CFAF 7 billion in 2024. ### B. Public Debt Management: Unwinding Debt Vulnerabilities - 2024 gross issuances from regional debt market: nearly CFAF 155 billion (after discount to face value) - CFAF 10 billion used to make up for delays in disbursements from AfDB, WB, and IMF for the third ECF review - Increased reliance on syndications—averaging 12 percent yields—cost about CFAF 6 billion (0.35 percent of GDP), worsening the primary deficit in 2024 - Late April and early May 2025 domestic syndication: CFAF 65 billion raised; around CFAF 13.5 billion used to repay debt maturing this year - Continued challenge: issuing long-term instruments to rollover maturing debt given large amortizations beyond 2025 - Policy recommendation: prioritize grants and concessional financing to gradually reduce regional debt and reduce debt vulnerabilities (MEFP ¶18) ### External debt arrears and legacy arrears (selected figures) - Net new arrears and outstanding (Text Table 2 summary): - Total arrears (end-April 2025): 9,090 (CFAF million) — % of GDP: 0.53 - Net arrears end-2024: 3,316 (CFAF million) — % of GDP: 0.19 - Additional arrears end-April 2025: 1,600 (CFAF million) — % of GDP: 0.09 - Bilateral components (selected): - China: 1,242 (CFAF million) net arrears end-2024; 5,416 outstanding (CFAF million) - India: 1,676 net arrears end-2024; 870 outstanding (CFAF million) - Saudi Arabia: 185 net arrears end-2024; 222 outstanding (CFAF million) - Legacy arrears total: 137,970 (CFAF million) — % of GDP: 8.10 - Examples: Argentina 20,696; Libya 8,114; Taiwan, Province of China 95,005 (CFAF million) ### Addressing external arrears - 2024 gross arrears incurred: CFAF 6.2 billion (0.36 percent of GDP), primarily to India, China, Saudi Arabia, and BADEA due to liquidity pressures and coordination issues. - CFAF 2.9 billion in old and new external arrears was cleared using domestic financing, net increase in arrears: CFAF 3.3 billion (Text Table 2). - 2025Q1 new arrears: CFAF 1 billion to Saudi Arabia, India, Serbia, BADEA, FAD, and FIDA in part due to technical challenges (payment transfers returned because of human errors). - Actions: Authorities exploring solutions for legacy external debt with assistance from the African Legal Support Facility; Treasury committee formed in October prioritized debt service and will meet weekly to improve oversight and limit new arrears (MEFP ¶20 and ¶21). ### C. Fuel Market: staying the course on fuel price reforms - Fuel-related fiscal revenues: jumped 42 percent year-on-year in 2024, driven by improved supply and consumption from a very low base. - Tax revenues per liter: fell by 5.5 percent in 2024 despite global prices declining by 1.8 percent and pump prices unchanged. - Import inefficiencies: monopoly importer does not prioritize Ubangi River route and charges hefty costs and margins; no agreement reached to cap margins despite Action Plan recommendations. - Audit of fuel procurement expected to clarify cost structures and profit margins to establish an appropriate margin cap; importer has not finalized registration of a local entity (MEFP ¶27). - Authorities intend to enforce tax compliance based on importer’s first year of operations as part of revised budget revenue measures. ### Fuel grant from Russia and operational implications - In-kind grant: 30,000 metric tons of diesel covering about half of annual consumption. - Authorities plan a revolving scheme: monetize part of proceeds (excluding taxes) to import fuel via Ubangi River; part of proceeds to finance the budget (¶11). - Authorities reduced fuel prices at the pump (Text Table 3). - Transparency commitments: disclosure in the revised budget and financial disclosure from SOPRAF—the SOE in charge of the revolving scheme. - Objective: address structural fuel supply deficit and reduce reliance on the monopoly importer. ### D. Structural Reforms: revenue administration and compliance - Digital and institutional tax reforms: - November 2024 TA report outlined full rollout steps for e-Tax modules at DGID. - Progress: implementation of the e-payments module and mandatory e-declaration for large taxpayers. - Introduction of a unique taxpayer identification number and enhanced access to digital databases improved control and cross-checking among tax agencies. - IMF TA-supported new DGID structure to be operationalized through staff appointments (SB, sixth review). - All large taxpayers required to use the e-Tax platform for online payments by end-September 2025 (SB, fifth review). - Compliance tools and monitoring: - April 2025 TA: action plan to strengthen tax compliance and controls, supported by a sequenced monitoring framework. - Commitment to strengthen tax certificate (quitus fiscal) regime and submit interim report on manual tax data cross-check action plan for FY2023 to the Public Finance Monitoring Committee (SB, fifth review). - Final report demonstrating at least 80 percent implementation in critical areas (SB, sixth review). - Similar approach applied to FY2024 taxpayer data with submission of an interim report by April 2026 (SB, sixth review). - Improved oversight of customs exemptions through enhanced monitoring (SB, fifth review) and follow-up measures (MEFP ¶25). _International Monetary Fund — Central African Republic (excerpt)._ ### 21. Several challenges remain to fully unlock the potential of revenue administration ### 21. Several challenges remain to fully unlock the potential of revenue administration ### Revenue administration, IT, and human resources - Critical investments in IT infrastructure and human resources are needed but are currently constrained by limited funding, making continued donor support essential. - Political economy constraints persist, underscoring the importance of strengthening capacity and securing sustained high-level political support to ensure successful reform implementation. ### Public Financial Management (PFM) and anti-corruption - Authorities are strengthening PFM systems through high-level PFM and treasury committees to enhance fiscal transparency and spending controls. - Operationalization of SIM_Ba is already effective with related training for accounting staff at the Agence Comptable Centrale du Trésor (ACCT) and necessary IT equipment (SB, third review). - A medium-term plan aims to improve SIM_Ba functionalities and extend its rollout beyond Bangui, but challenges remain, including limited IT access and software issues. - Steps are being taken to regularize expenses paid by Treasury and Budget payment orders (OPT and OPB) for the 2023 budget year (SB, fifth review). - Additional measures needed: boost revenue forecasting, budget preparation, execution, internal controls, and capacity building to prevent slippages. ### Financial integrity and tokenization law - Progress on mitigating risks from crypto-related ventures has been mixed, reflecting the lack of success of such ventures. - Authorities allocated partial funding to operationalize the institutional plan for the Financial Intelligence Unit (ANIF) to improve the financial integrity framework. - The Sango fiscal risk assessment remains delayed (SB, requested to be rescheduled to the sixth review). - BEAC’s legal opinion on the compliance of the CAR’s Tokenization Law with CEMAC community provisions, including Articles 8 and 18, is still pending. - A "meme-coin" ($CAR) introduced on February 9 revived attention, but there is limited available data on any related inflows to the government; authorities have been reluctant to proceed with actions that could reveal limited success. ### Program modalities, waivers, and conditionality changes - Authorities request waivers for non-observance of PCs related to the end-June 2024 and end-December 2024 domestic primary deficit and net domestic financing. - Authorities request a waiver for nonobservance of the continuous PC on non-accumulation of external arrears. - Due to delays in securing funding for the audit on fuel procurement costs, authorities request to reschedule the completion of the related SB from the third to the fifth review. - Requests to reschedule: - SB on the adoption of a quarterly pump price adjustment mechanism from the fourth to the sixth review. - SB on the preparation of a fiscal risk statement on the Sango project from the third to the sixth review (authorities prefer completion after the end-year election). - Corrective measures already taken: - Directive capping spending and restricting extraordinary procedures through end-March, leading to a cut of such spending by 72 percent year-over-year in 2025Q1; directive extended until end-June. - New prior actions for the combined third and fourth reviews: - Submit to Parliament a revised Budget Law for 2025 consistent with the program’s macroeconomic framework, incorporating credible revenue and spending projections. - Submit to Parliament the Court of Audit Law that regulates its statute and functions and ensures its financial and operational independence. - Strengthen the tax clearance certificate (quitus fiscal) regime in line with IMF recommendations (MEFP ¶ 25). ### New structural benchmarks (SBs) to modernize revenue collection and controls - Nine new SBs added: - (i) ensure the effective use of e-Tax by all large taxpayers (SB, fifth review); - (ii) regularize all expenses paid by payment orders from the Treasury and the Budget during the 2023 budget year (SB, fifth review); - (iii) enhance the monitoring of exemptions by digitizing clearance procedures and submitting quarterly reports (SB, fifth review); - (i v) replicate the manual cross-check of taxpayer data for the 2024 fiscal year using the methodology developed with IMF technical assistance (SB, fifth review); - (v) submit to the Public Finance Monitoring Committee chaired by the President a progress report on the implementation of the IMF TA action plan related to the manual tax data cross-checks for FY2023 (SB, fifth review); - (vi) implement the new DGID structure by appointing staff to the new Directorates (SB, sixth review); - (vii ) submit to Parliament the draft of the new law on the fuel sector aligned with IMF staff comments (SB, sixth review); - (viii) submit to the Public Finance Monitoring Committee chaired by the President the final report on the implementation of the April 2025 IMF TA action plan on manual tax data cross-checks for FY2023, showing at least a 80 percent performance rate in critical areas (SB, sixth review); - (ix) submit to the Public Finance Monitoring Committee chaired by the President a progress report on the implementation of the action plan related to the manual tax data cross-checks for FY2024 (SB, sixth review). ### External arrears, debt management, and corrective actions - CAR accumulated external arrears in 2024 due to liquidity challenges: - 2024 gross arrears: CFAF 6.2 billion (0.36 percent of GDP), primarily to India, China, Saudi Arabia, Kuwait, and BADEA. - 2025Q1 new arrears: CFAF 1 billion, to Saudi Arabia, India, Serbia, BADEA, FAD, and FIDA—partly due to technical challenges with payment transfers returned because of errors. - All official bilateral creditors to which there are outstanding legacy external arrears have consented to Fund financing notwithstanding the arrears. - Staff assesses a credible plan is in place to clear the new arrears with BADEA, FAD, and FIDA (MEFP ¶20). - Corrective actions adopted to prevent new external arrears: - Establishment of a public debt monitoring committee overseeing debt servicing. - Addition of external debt service as priority spending. - Clearance of all arrears incurred to multilateral creditors in 2024—and 2025. ### Capacity to repay the Fund and debt-service profile - Capacity to repay the Fund remains weak and becomes adequate only after successful implementation of program reforms. - Repayments to the Fund are projected to rise over the medium term, peaking in 2026 at around SDR 36 million (about 11 percent of exports of goods and services, and around 17 percent of revenue excluding grants). - Downside risks to capacity to repay include: slower-than-expected pace of reforms, natural disasters, deterioration of security situation, and persistence of difficulties with domestic revenue mobilization. - Mitigants: authorities’ strong collaboration with the Fund, strong commitment to program objectives, regional policy assurances provided by BEAC, and other factors in the original program request documents (Country Report No. 2023/155). ### Safeguards, escrow arrangements, and financing assurances - Authorities request that ten percent of access continues to be deposited in the escrow account at the BEAC to supplement the WB’s operation financing certain non-discretionary fiscal expenditures. - Authorities commit to continue leaving 90 percent of access in CAR's SDR account; part will be used to pre-fund 100 percent of obligations to the Fund for the upcoming 6 months. - 2022 safeguards assessment: BEAC maintained strong governance and external audit arrangements; internal audit and risk management practices needed strengthening. - Safeguards monitoring mission at end-2023 recommended strengthening onboarding for new senior management and Board members and establishing an enhanced delegation framework for executive decision-making; BEAC is addressing recommendations but additional efforts needed. - Program financing remains fully financed with firm commitments from the WB, the AfDB, and France until June 2026: - WB anticipated disbursement in 2025: US$30 million (about CFAF 18 billion), in addition to CFAF 2.1 billion carried over from 2024 and disbursed in January 2025. - AfDB disbursed in February carried-over budget support from 2024: CFAF 6.6 billion. - France committed EUR 25 million through a new concessional loan. ### Regional assurances and policy linkage - BEAC provided updated policy assurances for CEMAC countries’ Fund-supported programs, discussed at the Extraordinary Summit of the Heads of State on December 16, 2024. - Review of regional policies and assurances was presented to the IMF Executive Board on February 24, 2025, with adequate policies being a prerequisite for completing the review. - Completion of the fifth review is based on BEAC’s commitment to implement measures to meet the newly established March 2025 NFA target. ### Capacity development and statistics - Authorities requested improved time allocation of the Resident Advisor on PFM; Japan-funded project extension until April 2026 would improve access to part-time Resident Advisor services. - AFRITAC Centre resources will complement support to address key PFM weaknesses. - Strengthening statistical capacity remains a top priority: data quality, particularly external sector statistics, is weak with significant delays in reporting external debt due to poor interagency coordination. - Authorities have started collaborating with the IMF to develop their National Summary Data Page to boost data sharing (MEFP ¶39). ### Staff appraisal: program performance, risks, and policy recommendations - Program has anchored structural reforms; two years into the program economic growth has bounced back though per capita output remains below levels observed before the 2013 civil war. - Fuel supply and revenue improved by an average of 40 percent per year; greater transparency was brought to the fuel price structure; operationalization of revenue administration and PFM systems is well advanced; steps taken to improve the Financial Intelligence Unit and the Court of Audit. - Program performance for the combined third and fourth reviews was mixed: - Half of the six PCs for end-June and end-December 2024 were met. - Domestic primary deficit and net domestic financing targets were missed by wide margins. - Continuous PC on non-accumulation of external arrears was missed. - Indicative targets for social spending and expenditures via extraordinary procedures were also missed. - Two out of seven SBs for the third and fourth reviews were met, with a third implemented with a delay. - Key policy priorities and recommendations: - Effectively implement revenue measures and maintain strict budget discipline to meet fiscal targets; end-March 2025 indicative targets for domestic revenues and domestic primary balance were met, but net domestic financing IT was missed. - Sustained efforts in tax administration and compliance across fuel and non-fuel sectors to meet end-June and end-December PCs. - Maintain strong spending management amid election pressures and potential cuts in foreign humanitarian aid. - Prioritize grants and highly concessional resources for social spending and infrastructure as debt service costs crowd out critical expenditures; consult closely with the Fund on new financing opportunities. - Implement the action plan on tax compliance identified by the April 2025 IMF TA mission to address discrepancies and risks of fraudulent tax declarations. - Expedite audit of fuel procurement costs to advance fuel price reforms, leverage findings to boost revenue, and increase competition across the fuel value chain. - Continue efforts to enhance the business climate, governance, financial integrity, and combat corruption, including operationalizing the new asset declaration system and adopting the new forestry code and mining code. - Anchor policies to enhance growth potential and equality on the National Development Plan (NDP) 2024-2028; faithful execution of the NDP is crucial to catalyze donor support and attract foreign private investment flows. *Source: IMF country document excerpt.* ### 46. Considering the strength of the authorities’ corrective actions, the corrective actions at ### CENTRAL AFRICAN REPUBLIC ### Program status and conditionality - Staff supports the requests of waivers for nonobservance of PCs, the completion of the financing assurances review, and completion of the third and fourth reviews under the ECF-supported program. - The authorities understand the importance of closely engaging with creditors to ensure obligations are current. - Staff proposes that completion of the fifth review be conditional on the implementation of critical policy assurances at the union level, as established in the February 2025 union-wide background paper. ### Recent economic developments (highlights from Figure 1 and text) - Growth rebounded in 2024, driven by a marked improvement in energy supply. - Inflation spiked in the final quarter of 2024, largely due to surging food prices. - Public debt has increased reflecting mounting debt issuances in the CEMAC market. - The current account widened slightly in 2024 due to an uptick in service imports. Key numeric indicators (as presented) - GDP growth series shown for 2016–2024 with sector contributions (Primary, Secondary, Tertiary, Indirect taxes). - CPI (annual average and y-o-y change) series plotted Jan-23 to Jan-25; CPI (Annual Average) and CPI, y-o-y change trajectories are displayed. - Debt and Fiscal Deficit: Domestic primary balance, Overall balance, Public debt (right axis) plotted 2016–2024. - External Sector: Current Account (incl. grants), Current Account (excl. grants), Trade Balance plotted 2016–2024. ### Medium-term economic prospects (Figure 2 overview) - Growth: "Growth should accelerate as fuel supply improves while donor support and private investment strengthen." - Inflation: "Inflation would hover around 3 percent supported by lower energy prices, transportation costs, and food supply." - Fiscal: "Domestic revenue mobilization should increase in line with fiscal structural reforms..." and "increasing fiscal space to reallocate expenditure to favor the provision of public goods and services." - Outcomes: "As a result of these fiscal efforts, deficits would narrow... with a concomitant reduction in the current account deficit." Representative series and projections (2020–2030) - Real GDP (Percent Change) series for Central African Republic, CEMAC (excl. CAR), Sub-Saharan Africa. - CPI Average (Percent Change) series with Central African Republic and comparators. - Government Revenue (Percent of GDP): Grants, Non-tax revenue, Tax revenue series. - Government Expenditure (Percent of GDP): Capital expenditure, Interest, Current primary expenditure series. - Fiscal Position (Percent of GDP): Overall Balance (incl. and excl. grants), Domestic Primary Balance series. - External Position (Percent of GDP): Current Account (incl. grants), Current Account (excl. grants), Trade Balance series. ### Fiscal projections and debt dynamics (Table 1 and Tables 2a/2b) Selected fiscal and debt figures (preserved exactly as presented) - GDP at constant prices (annual growth sequence): 0.8-0.1 1.4 1.9 3.0 3.3 3.6 3.8 3.7 3.9 - CPI (annual average): 5.6 3.0 4.7 1.5 4.6 3.3 2.9 2.9 3.1 3.3 - CPI (end-of-period): 7.6 2.3 5.0 4.2 1.3 3.5 3.1 3.3 2.9 3.0 - Public sector debt (Percent of GDP): 50.0 55.7 57.3 60.7 57.4 52.9 47.8 43.8 41.5 38.1 - Of which: domestic debt (Percent of GDP): 17.8 24.3 26.1 28.7 27.2 24.5 21.8 16.9 15.6 14.3 - Of which: external debt (Percent of GDP): 32.1 31.4 31.2 32.0 30.2 28.3 26.0 26.9 25.9 23.8 - Current account (incl. grants) (Percent of GDP): -12.6 -8.8 -8.6 -9.0 -7.1 -4.1 -3.1 -2.0 -2.8 -2.5 - Total revenue (including grants) (Percent of GDP): 12.1 14.0 14.8 14.5 15.7 16.7 16.4 17.1 14.4 14.1 - Domestic revenue (Percent of GDP): 7.6 8.0 9.2 9.1 9.8 9.6 9.7 10.6 10.2 10.3 - Total expenditure (Percent of GDP): 17.4 17.5 17.8 19.6 18.1 16.7 16.1 16.5 16.4 15.4 - Overall balance excluding grants (Percent of GDP): -9.8 -9.4 -8.6 -10.5 -8.4 -7.1 -6.5 -5.9 -6.1 -5.1 - Overall balance including grants (Percent of GDP): -5.2 -3.4 -3.1 -5.1 -2.5 0.0 0.3 0.6 -2.0 -1.3 Central government financial operations (CFAF Billion, selected lines from Table 2a) - Revenue (CFAF Billion): 189.8 231.5 253.0 248.1 298.8 345.8 376.2 424.4 385.7 411.8 - Domestic revenue (CFAF Billion): 119.0 132.5 158.0 155.5 186.0 198.1 221.2 261.9 274.1 301.2 - Grants (CFAF Billion): 70.8 99.0 95.0 92.7 112.7 147.7 155.0 162.5 111.6 110.7 - Total expenditure (CFAF Billion): 271.7 288.2 305.7 335.4 345.8 345.3 369.8 408.9 439.1 449.9 - Capital expenditure (CFAF Billion): 92.3 89.6 99.2 96.7 107.0 113.1 128.4 154.8 170.6 178.0 - Overall balance excluding grants (CFAF Billion): -152.7 -155.8 -147.7 -179.9 -159.7 -147.1 -148.5 -147.0 -165.0 -148.8 - Overall balance including grants (CFAF Billion): -81.8 -56.7 -52.7 -87.3 -47.0 0.5 6.4 15.6 -53.4 -38.1 - Primary balance (CFAF Billion): -75.6 -47.2 -35.3 -72.5 -25.2 20.7 23.4 29.9 -39.3 -22.3 Memoranda (Table 2a) - Fuel Revenue (CFAF Billion): 9.3 12.5 17.0 17.8 17.1 27.0 36.7 40.0 48.3 52.0 - Total government debt (CFAF Billion): 781.4 918.3 981.7 1,041.1 1,094.6 1,093.0 1,096.2 1,086.0 1,112.9 1,112.8 - Nominal GDP (CFAF billions): 1,564 1,649 1,714 1,715 1,906 2,068 2,291 2,480 2,684 2,922 - GDP per capita (US dollars series): 490 537 539 531 567 599 642 672 704 743 ### Monetary developments (Table 3 highlights) Selected monetary aggregates (CFAF Billion, preserved exactly) - Net foreign assets (CFAF Billion): 13.9 71.5 16.8 105.8 72.9 96.1 133.7 233.8 272.8 353.3 - Net domestic assets (CFAF Billion): 528.4 563.3 593.2 638.7 665.7 653.5 607.5 547.7 504.0 447.5 - Money and quasi-money (CFAF Billion): 488.9 524.4 548.2 595.2 665.6 718.8 791.2 845.1 923.2 1,009.1 - Credit to the economy (annual % change shown): 28.2 0.4 5.1 -10.7 4.8 4.8 4.8 5.4 5.5 3.9 - Monetary base (CFAF billions, memorandum): 293.2 310.4 327.7 368.3 426.2 484.1 541.9 586.6 634.8 691.0 - Velocity (GDP/broad money) End of period: 3.2 3.1 3.1 2.9 2.9 2.9 2.9 2.9 2.9 2.9 ### External sector, balance of payments, and financing (Tables 4a/4b and Table 5 summary lines) Current account and components (CFAF Billion, selected lines) - Current account (CFAF Billion): -197.4 -145.8 -147.6 -154.3 -135.9 -84.5 -71.1 -48.7 -75.5 -74.2 - Balance on goods (CFAF Billion): -259.4 -231.5 -232.9 -236.0 -225.8 -223.8 -220.1 -217.1 -206.8 -211.1 - Exports, f.o.b. (CFAF Billion): 104.2 119.0 136.7 135.3 157.4 177.1 207.7 247.6 295.5 315.9 - Of which: Diamonds (CFAF Billion): 9.6 13.8 17.9 17.9 23.6 28.6 35.6 44.6 56.2 58.4 - Of which: Wood products (CFAF Billion): 47.8 54.6 63.9 64.8 74.2 81.1 99.4 117.0 138.3 149.1 - Imports, f.o.b. (CFAF Billion): -363.6 -350.6 -369.7 -371.3 -383.3 -400.9 -427.8 -464.6 -502.2 -527.0 - Of which: Petroleum products (CFAF Billion): -107.3 -76.6 -88.3 -84.2 -75.9 -74.5 -80.3 -91.5 -97.8 -104.6 - Services (net) (CFAF Billion): -49.0 -48.9 -66.8 -67.1 -76.3 -69.5 -76.0 -74.8 -72.6 -78.5 - Transfers (net) (CFAF Billion): 113.0 141.4 160.0 156.6 172.1 214.8 231.0 249.1 209.7 221.3 - Private transfers (CFAF Billion): 82.4 91.2 102.6 102.7 108.1 113.7 119.6 125.7 132.2 139.0 - Official transfers (CFAF Billion): 30.7 50.2 57.4 53.9 64.0 101.1 111.4 123.3 77.5 82.3 - Of which: Program (CFAF Billion): 0.0 18.1 23.4 21.1 26.6 60.0 65.0 73.0 23.0 23.0 Financial flows and balances - Capital account (CFAF Billion): 70.8 80.9 71.6 71.6 86.1 86.9 90.0 89.5 88.6 87.7 - Financial account (CFAF Billion): 6.1 18.8 19.1 19.1 35.4 29.0 66.0 78.9 140.5 148.2 - Overall balance (CFAF Billion): -120.4 -46.1 -56.9 -63.6 -14.4 31.4 84.9 119.7 153.6 161.7 - Identified financing (CFAF Billion): 120.4 46.2 56.9 63.6 14.4 -32.2 -84.9 -119.7 -153.6 -161.7 - Net IMF credit (CFAF Billion): -1.7 10.5 9.8 -5.8 27.1 -4.1 -28.8 -21.3 -18.9 -12.0 - IMF purchase (CFAF Billion): 0.0 -24.7 -30.9 -15.0 -53.7 -25.9 0.0 0.0 0.0 0.0 - IMF repurchase (CFAF Billion): 1.7 14.1 21.1 20.8 26.6 30.0 28.8 21.3 18.9 12.0 - Other reserves (increase = -) (CFAF Billion): 120.6 36.8 48.3 70.5 -12.2 -26.9 -55.6 -98.4 -134.7 -149.7 Memoranda and indicators - Current account (percent of GDP): -12.6 -8.8 -8.6 -9.0 -7.1 -4.1 -3.1 -2.0 -2.8 -2.5 - Capital account (percent of GDP): 4.5 4.9 4.2 4.2 4.5 4.2 3.9 3.6 3.3 3.0 - Terms of trade (percent change): -9.2 10.2 6.8 -2.7 9.1 7.9 16.8 2.1 3.4 2.9 ### Policy implications and financing considerations - Completion of the fifth review is proposed to be conditional on implementation of critical union-level policy assurances (February 2025 union-wide background paper). - Authorities are advised to closely engage with creditors to ensure obligations are current. - External financing prospects noted (Table 5 annotations): good prospects for WB financing exist for the remainder of the program period provided satisfactory performance under IMF and WB operations, progress on reforms, and addressing concerns about the use of budgetary resources for security arrangements that led to stopping budget support. - Budget support loans to be confirmed starting 2026H2; budget support loans to be identified from 2026 onward (as noted in table footnotes). *Source: Excerpt from IMF staff report materials for the Central African Republic (tables and figures reproduced as provided).* ### 1. Total financing requirements84.8148.0154.2136.0214.8215.4234.8254.5262.2269.1 ### 1. Total financing requirements ### Total financing requirements (annual series) - 84.8, 148.0, 154.2, 136.0, 214.8, 215.4, 234.8, 254.5, 262.2, 269.1 ### Components of financing requirements - Current account deficit (excl. budget support): 197.4, 163.9, 171.0, 175.4, 162.5, 144.5, 136.1, 121.7, 98.5, 97.2 - Debt amortization: 6.4, 6.7, 10.4, 10.4, 13.4, 14.1, 14.2, 13.1, 10.2, 10.2 - Repayment to the Fund: 1.7, 4.1, 21.1, 20.8, 26.6, 30.0, 28.8, 21.3, 18.9, 12.0 - Change in other reserves: -120.6, -36.8, -48.3, -70.5, 12.2, 26.9, 55.6, 98.4, 134.7, 149.7 ### 2. Total available financing ### Total available financing (annual series) - 83.3, 106.4, 101.1, 101.1, 118.5, 116.0, 141.2, 152.5, 160.2, 167.1 ### Sources (annual series) - Capital transfers: 70.8, 80.9, 71.6, 71.6, 86.1, 86.9, 90.0, 89.5, 88.6, 87.7 - Foreign direct investment (net): 15.0, 23.5, 24.5, 24.5, 25.5, 29.5, 37.3, 44.0, 50.2, 56.1 - Portfolio investment (net): 0.0, 0.0, 0.0, 0.0, 0.0, 1.0, 1.0, 1.0, 1.0, 1.0 - Debt financing (total): 7.5, 7.0, 10.0, 10.0, 11.8, 8.6, 18.0, 23.0, 25.4, 27.3 - Public Sector: 7.5, 7.0, 10.0, 10.0, 11.8, 8.6, 18.0, 23.0, 25.4, 27.3 - SDR allocation: 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 - Other net capital inflows: -10.0, -5.0, -5.0, -5.0, -5.0, -10.0, -5.0, -5.0, -5.0, -5.0 ### 3. Financing gap - 1.5, 41.6, 53.1, 35.0, 96.3, 99.4, 93.6, 102.0, 102.0, 102.0 ### 4. Expected sources of financing and budget support ### Expected sources of financing (annual series) - 0.0, 18.1, 23.4, 21.1, 43.0, 75.0, 95.0, 103.0, 103.0, 103.0 ### Of which: Budget support (grants)1 - 0.0, 18.1, 23.4, 21.1, 26.6, 60.0, 65.0, 73.0, 23.0, 23.0 ### Of which: Budget support (loans)2 - 0.0, 0.0, 0.0, 0.0, 16.4, 15.0, 30.0, 30.0, 80.0, 80.0 ### 5. Residual financing gap and potential financing sources ### Residual financing gap (annual series) - 1.5, 23.5, 29.7, 13.9, 53.3, 24.4, -1.4, -1.0, -1.0, -1.0 ### Potential program and concessional sources (annual series) - ECF arrangement: 0.0, 24.7, 30.9, 15.0, 53.7, 25.9, 0.0, 0.0, 0.0, 0.0 - RCF: 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 - CCRT3: 2.2, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 - G20 DSSI4: -0.7, 0.0, -1.1, 0.0, -0.4, -0.4, -0.4, 0.0, 0.0, 0.0 - Unidentified financing: 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 ### Financial sector indicators and program monitoring ### Core Financial Soundness Indicators for Deposit Takers (2018–2023) - Total bank regulatory capital to risk-weighted assets1: 28.5, 30.3, 23.9, 21.0, 23.5, 18.9 - Total capital (net worth) to assets: 15.1, 15.9, 13.8, 13.9, 14.0, 11.1 - Non-performing loans to total loans: 17.6, 16.1, 17.5, 13.9, 14.5, 16.2 - Non-performing loans net of provisions to capital: 6.2, 14.6, 12.9, 10.7, 12.8, 25.4 - Net income to average assets (ROA)1: 1.7, 1.7, 0.4, 1.1, 1.5, 0.6 - Net income to average capital (ROE)2: 6.9, 7.6, 1.5, 6.2, 8.3, 3.8 - Non interest expense to gross income: 90.5, 78.9, 71.5, 82.0, 75.1, 76.1 - Liquid assets to total assets: 29.9, 26.3, 32.2, 26.9, 28.3, 25.7 - Liquid assets to short-term liabilities: 198.6, 165.8, 199.3, 162.2, 151.8, 146.1 ### Access under the ECF Arrangement (disbursements and percent of quota) - April 28, 2023: SDR 11.30 million; 10.14 percent of quota - October 30, 2023: SDR 19.17 million; 17.21 percent of quota - April 30, 2024: SDR 18.60 million; 16.70 percent of quota - October 30, 2024: SDR 19.15 million; 17.19 percent of quota - April 30, 2025: SDR 24.07 million; 21.61 percent of quota - October 30, 2025: SDR 23.19 million; 20.81 percent of quota - April 30, 2026: SDR 32.00 million; 28.73 percent of quota - Total: SDR 147.48 million; 132.39 percent of quota - Note: CAR's quota is SDR 111.4 million ### Proposed Quantitative Performance Criteria and Indicative Targets (CFAF Billion; cumulative) - Net domestic financing of the government (ceiling, cumulative flows for the year): various targets and actuals; many "Not Met" entries across reporting dates including End-June 2024, End-September 2024, End-December 2024, End-March 2025, End-June 2025, End-September 2025, End-December 2025 (targets: e.g., 18.0; 12.0; 25.3; 30.0; 47.7; 40.0; 38.4; 69.2; 55.0; 57.3; 90.3; 15.0; 6.3; 12.6; 17.0; 18.0; 20.0) - Domestic government revenue (floor, cumulative for the year)1: targets and outcomes include 34.0, 40.7, 75.0, 79.9, 115.0, 112.1, 155.0, 155.5, 39.0, 45.1, 80.0, 125.0, 180.0 - Domestic primary fiscal balance (floor, cumulative for the year)2: targets and outcomes include -13.0, -26.7, -22.0, -44.5, -33.0, -67.9, -50.0, -83.5, -10.0, -9.8, -17.0, -30.0, -40.0 - Continuous performance criteria (new external nonconcessional debt contracted or guaranteed; disbursement of external nonconcessional debt): 0.0 across monitoring dates—marked "Met" - Non accumulation of new external payments arrears by the government (ceiling, cumulative): multiple "Not Met" entries with figures like 0.0, -1.2, 0.0, 3.0, 0.0, 4.4, 0.0, 6.2, 0.0, 1.6, 0.0, 0.0 - Indicative targets: Social spending (floor) and Spending using extraordinary procedures (ceiling) show several "Not Met" results with specific target and outcome numbers (e.g., Social spending targets: 4.0, 8.0, 17.0, 22.0, etc.; Spending using extraordinary procedures targets: 2.0, 5.0, 7.0, 8.0, etc.) - Memorandum items: Budget support and Privatization receipts reported in multiple entries (e.g., Budget support: 0.0, 6.0, 6.0, 12.3, 13.9, 23.4, 21.1, 0.0, 8.7, 15.0, 15.0, 26.6; Privatization receipts: 0.0, 0.7, 0.0, 0.7, 0.0, 0.7, 0.0, 0.0) ### Standard Continuous Performance Criteria under the ECF Arrangement - Not to impose or intensify restrictions on the making of payments and transfers for current international transactions - Not to introduce or modify multiple currency practices - Not to conclude bilateral payment agreements which are inconsistent with Article VIII - Not to impose or intensify import restrictions for balance of payment reasons ### Structural benchmarks, prior actions, and proposed benchmarks ### Selected structural benchmarks (status and timelines) - Revenue administration: Issue a ministerial decree outlining minimal criteria for official taxpayer recognition by the tax office. SB third review (October 2024) — Met - Fuel market efficiency (continuous and review-based measures): multiple benchmarks starting July 25, 2024 and SB fourth review (April 2025) — several entries Unmet or proposed rescheduling - Audit of fuel procurement costs: SB third review (October 2024) — Unmet, proposed rescheduled - Fiscal risk statement on the Sango project: SB third review (October 2024) — Unmet, proposed rescheduled - Asset declaration law operationalization for HABG: SB third review (October 2024) — Unmet, but implemented with a delay - Public Financial Management: Systematic use of the SIM_Ba application by Treasury staff — SB third review (October 2024) — Met ### Prior actions and newly proposed structural benchmarks (selected) - Submit to Parliament a revised Budget Law for 2025 consistent with the program’s macroeconomic framework — Five days before the board date for the combined third/fourth reviews — Prior Action - Submit to Parliament the Court of Audit Law — Five days before the board date for the combined third/fourth reviews — Prior Action - Strengthen the tax clearance certificate (quitus fiscal) regime — Five days before the board date for the combined third/fourth reviews — Prior Action - Ensure use of eTax by all large taxpayers by end of third quarter of 2025 — SB fifth review (October 2025) — Proposed - Implement new DGID structure by appointing staff to new Directorates — SB sixth review (April 2026) — Proposed - Series of tax administration reporting and performance targets tied to SB fifth and sixth reviews (October 2025, April 2026) — Proposed - Submit draft new law on fuel sector aligned with IMF comments — SB sixth review (April 2026) — Proposed - From June 25, 2025, monthly publication of new fuel price structures — Continuous structural benchmark starting June 25, 2025 — Modified continuous structural benchmark - Regularize all expenses paid by payment orders during 2023 budget year — SB fifth review (October 2025) — Proposed - Enhance monitoring of customs exemptions via Ministerial Order and quarterly reporting — SB fifth review (October 2025) — Proposed ### External borrowing program and public debt indicators ### External borrowing program (PPG external debt contracted or guaranteed) - Volume of new debt, US million: 18.6 - Present value of new debt, US million: 10.4 - Concessional debt (of which): 18.6, 10.4 - Multilateral debt: 7.5, 4.8 - Bilateral debt: 11.2, 5.6 - Non-concessional debt: 0.0, 0.0 - Semi-concessional debt: 0.0, 0.0 - Commercial terms: 0.0, 0.0 - Uses of debt financing: Infrastructure and Budget financing - Infrastructure: 18.6 - Budget financing: 10.4 - Indicative projections: Year 2: 37.1, 28.9; Year 3: 76.0, 69.2 ### Indicators of capacity to repay the IMF (2023–2033) ### IMF obligations based on existing credit (SDR millions) - Principal (2023–2033): 17.5, 25.8, 32.9, 37.1, 35.7, 26.4, 23.4, 14.8, 8.5, 6.1, 5.0 - Charges and interest (2023–2033): 5.5, 6.4, 6.5, 6.5, 6.5, 6.5, 6.5, 6.5, 6.5, 6.5, 6.5 ### IMF obligations based on existing and prospective credit (SDR millions) - Principal (2023–2033): 17.5, 25.8, 32.9, 37.1, 35.7, 26.4, 25.3, 24.8, 28.7, 29.5, 28.4 - Charges and interest (2023–2033): 5.5, 6.4, 6.5, 6.5, 6.5, 6.5, 6.5, 6.5, 6.5, 6.5, 6.5 ### Outstanding IMF Credit - SDR millions (2023–2033): 215.6, 227.6, 241.9, 236.8, 201.2, 174.8, 149.5, 124.7, 96.0, 66.6, 38.2 - CFAF Billions (2023–2033): 173.0, 186.9, 195.3, 191.2, 162.4, 141.1, 120.7, 100.7, 77.5, 53.7, 30.8 ### Ratios and memorandum items (selected) - Percent of government revenue: 130.6, 120.2, 105.0, 96.5, 73.4, 53.9, 44.0, 33.4, 23.5, 14.4, 7.7 - Percent of exports of goods and services: 73.7, 74.3, 67.7, 60.0, 45.5, 34.8, 26.4, 20.6, 14.5, 9.5, 5.5 - Percent of debt service: 294.7, 229.2, 204.0, 191.0, 125.2, 147.4, 141.4, 391.3, 152.2, 99.2, 53.3 - Percent of GDP: 10.5, 10.9, 10.2, 9.2, 7.1, 5.7, 4.5, 3.4, 2.5, 1.6, 0.9 - Percent of quota: 193.5, 204.3, 217.1, 212.6, 180.6, 156.9, 134.2, 112.0, 86.2, 59.7, 34.3 ### Net use of IMF credit (SDR millions) - Disbursements: 30.5, 37.8, 47.3, 32.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 - Repayments and repurchases: 23.0, 32.1, 39.4, 43.5, 42.1, 32.8, 31.7, 31.3, 35.1, 36.0, 34.8 ### Memorandum items (selected nominal series) - Nominal GDP (billions of CFA francs): 1,649.5, 1,715.2, 1,905.7, 2,067.9, 2,291.4, 2,480.2, 2,683.9, 2,921.7, 3,127.9, 3,347.8, 3,573.2 - Exports of goods and services (billions of CFA francs): 234.7, 251.5, 288.4, 318.5, 357.2, 405.8, 461.5, 489.0, 534.4, 563.2, 565.1 - Government revenue (billions of CFA francs): 132.5, 155.5, 186.0, 198.1, 221.2, 261.9, 274.1, 301.2, 330.5, 372.6, 398.2 - Debt service (billions of CFA francs): 58.7, 81.6, 95.7, 100.1, 129.7, 95.8, 85.4, 25.7, 51.0, 54.1, 57.9 - IMF Quota (SDR millions): 111.4 (constant across years) ### Composition of newly accumulated public sector debt arrears in 2024 (CFAF million) - Total Gross Arrears 2024: Jan-Jun 2024 reported 1,903; Reported at end-Jun 2024: 1,094; Total Jan-June 2024: 2,997; July-Dec 2024: 3,216; Total Gross Arrears 2024: 6,214; Total Net Arrears 2024: 3,316 - Bilateral (total): 1,542 reported Jan-Jun 2024; 693 reported at end-Jun 2024; Jan-June total 2,235; July-Dec 2024: 2,673; Total Gross Arrears 2024: 4,908; Total Net Arrears 2024: 3,316 - China: 887 (Jan-Jun 2024 reported); Total Jan-June 2024: 887; July-Dec 2024: 355; Total Gross Arrears 2024: 1,242; Total Net Arrears 2024: 1,242 - India: 462 (Jan-Jun 2024 reported); Reported at end-Jun 2024: 128; Total Jan-June 2024: 590; July-Dec 2024: 1,369; Total Gross Arrears 2024: 1,959; Total Net Arrears 2024: 1,676 - Kuwait: 5 (Jan-Jun 2024 reported); Reported at end-Jun 2024: 30; Total Jan-June 2024: 35; July-Dec 2024: 208; Total Gross Arrears 2024: 243; Total Net Arrears 2024: 213 - Saudi Arabia: 188 (Jan-Jun 2024 reported); Reported at end-Jun 2024: 246; Total Jan-June 2024: 434; July-Dec 2024: 454; Total Gross Arrears 2024: 888; Total Net Arrears 2024: 185 - Serbia: 0 (Jan-Jun 2024 reported); Reported at end-Jun 2024: 288; Total Jan-June 2024: 288; July-Dec 2024: 288; Total Gross Arrears 2024: 577; Total Net Arrears 2024: 0 - Multilateral (total): 361 (Jan-Jun 2024 reported); Reported at end-Jun 2024: 401; Total Jan-June 2024: 763; July-Dec 2024: 543; Total Gross Arrears 2024: 1,305 - BADEA: 325 (Jan-Jun 2024 reported); Reported at end-Jun 2024: 70; Total Jan-June 2024: 395; July-Dec 2024: 372; Total Gross Arrears 2024: 767 - IFAD (FIDA): 30 (Jan-Jun 2024 reported); Reported at end-Jun 2024: 298; Total Jan-June 2024: 327; July-Dec 2024: 131; Total Gross Arrears 2024: 458 - IMF (FAD): 7 (Jan-Jun 2024 reported); Reported at end-Jun 2024: 33; Total Jan-June 2024: 40; July-Dec 2024: 40; Total Gross Arrears 2024: 80 - Total Jan–June 2024: 2,997; Total Gross Arrears 2024: 6,214; Total Net Arrears 2024: 3,316 - % of GDP: 0.11, 0.06, 0.18, 0.19, 0.36, 0.19 *Source: IMF staff compilation of the Central African Republic documents and tables in the provided content.* ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### Conjunctural Risks - Trade policy and investment shocks - Relative Likelihood: High - Time Horizon: Short Term - Expected Impact If Realized: Medium - Key points: "Trade is moderate at 30 percent of GDP, with exports at just 9 percent and focused on markets without tariffs. FDI will remain low due to structural economic and governance challenges." - Policies to Mitigate the Risks: - Execute the fiscal consolidation recommended to retain market access. - Implement the reforms on the fuel market as to avoid disruptions in the provision of energy. - Ramp-up the efforts to strengthen governance and transparency to attract private investment and gradually foster diversification. - Intensify cooperation with humanitarian agencies, including the WFP. - Sovereign debt distress - Relative Likelihood: High - Time Horizon: Short Term - Expected Impact If Realized: High - Key points: "Any credit event in the CEMAC will further restrain regional liquidity and increase refinancing risks for CAR." - Policies to Mitigate the Risks: - Execute the fiscal recommended fiscal consolidation. - Refinance 2026 maturities as much as possible. - Accelerate governance reforms as to avoid a renewed fall in donor financing. - Tighter financial conditions and systemic instability - Relative Likelihood: Medium - Time Horizon: Short to Medium Term - Expected Impact If Realized: High - Key points: Spillovers to CEMAC imply higher funding costs and shorter maturities for CAR paper, increasing refinancing risks for the sovereign. - Policies to Mitigate the Risks: - Fiscal prudency amid engagement with bondholders to curb borrowing costs and secure longer-term debt maturities. - Regular engagement with COBAC to actively monitor the health of CAR’s and CEMAC’s banking systems, and their ability to continue to finance the sovereign. - Regional conflicts - Relative Likelihood: Medium - Time Horizon: Short to Medium Term - Expected Impact If Realized: High - Key points: "A renewed inflow of refugees would hinder the security environment and add to the fiscal pressures." Domestic conflict could disrupt supply chains and raise prices for essential imports such as fuel and wheat. - Policies to Mitigate the Risks: - Fiscal prudency amid active engagement with bondholders to curb borrowing costs and secure longer-term debt maturities. - Commodity price volatility - Relative Likelihood: Medium - Time Horizon: Short to Medium Term - Expected Impact If Realized: High - Key points: "Higher energy prices would stoke inflation and would also add to fiscal pressures, given the fixed pump prices." - Policies to Mitigate the Risks: - Application of the pump price adjustment mechanism to avoid expectations of a subsidy and to safeguard critical revenues. - Introduce measures to mitigate the shock, e.g., by expanding the social safety net. - Intensify cooperation with humanitarian agencies (eg WFP). - Global growth acceleration (beneficial scenario) - Relative Likelihood: Low - Time Horizon: Short to Medium Term - Expected Impact If Realized: Low - Key points: "CAR growth path would remain relatively unchanged, as it largely depends on strengthening the energy sector and governance." ### Structural Risks - Deepening geoeconomic fragmentation - Relative Likelihood: High - Time Horizon: Short to Medium Term - Expected Impact If Realized: High - Policies to Mitigate the Risks: - Active engagement with development partners on development financing, including budget support. - Cyberthreats - Relative Likelihood: High - Time Horizon: Medium - Expected Impact If Realized: (implicit high systemic risk) - Policies to Mitigate the Risks: - "Mitigate the risks related to all CAR’s crypto assets projects, in collaboration with the CEMAC monetary and regulatory authorities." - Climate change - Relative Likelihood: Medium - Time Horizon: High - Expected Impact If Realized: (described as compounding effects) - Key points: "A climate shock can have compounding effects on CAR’s social and political stability, reform momentum, and the overall security context." - Policies to Mitigate the Risks: - Deepen the engagement with development partners to strengthen CAR’s infrastructure against climate shocks and promote economic diversification. - Continued fiscal prudency to allow authorities to rapidly react when climate events occur. - Social discontent - Relative Likelihood: Medium - Time Horizon: High - Expected Impact If Realized: (described as weakening growth and policy certainty) - Key points: "Increased cost of living from increased inflation and supply chain disruption could provide a recipe for increased tension and social unrest." - Policies to Mitigate the Risks: - Continued cooperation with international organizations to support social programs. - Monitor social sentiments and provide solutions to ease tensions. ### Regional and Domestic Risks - Increased insecurity and political instability - Relative Likelihood: High - Time Horizon: Short to Medium Term - Expected Impact If Realized: High - Key points: "Domestic and external political factors could lead to an escalation in insecurity, particularly in the runup to the local and presidential elections this year." - Policies to Mitigate the Risks: - Maintain dialogue with relevant stakeholders. - Prepare a budget contingency plan. - Resumption in fiscal slippages (e.g., due to social discontent, political instability, and/or capacity constraints) - Relative Likelihood: Medium - Time Horizon: Short to Medium Term - Expected Impact If Realized: High - Key points: "Delays in revenue and PFM reforms (particularly related to the fuel market), and spending overruns in light of the elections, could hinder fiscal consolidation and jeopardize debt sustainability." - Policies to Mitigate the Risks: - Ramp-up PFM as recommended to protect budget execution. - Enforce the proposed caps in spending throughout the year, particularly that executed through extraordinary procedures. - Put in place social programs to address potential adverse impacts on the most vulnerable groups. - Donor support vulnerabilities - Relative Likelihood: High - Time Horizon: Short to Medium Term - Expected Impact If Realized: High - Key points: "Scarcer donor support would increase debt sustainability and BOP risks." - Policies to Mitigate the Risks: - Speed governance and PFM reforms are critical to keep donor engagement. ### RAM methodology note - "The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. The relative likelihood is the Staff’s subjective assessment of the risks surrounding the baseline ('low' is meant to indicate a probability below 10 percent, 'medium' a probability between 10 and 30 percent, and 'high' a probability between 30 and 50 percent). The RAM reflects Staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. The conjunctural shocks and scenarios highlight risks that may materialize over a shorter horizon (between 12 to 18 months) given the current baseline. Structural risks are those that are likely to remain salient over a longer horizon." *Source: Annex I. Risk Assessment Matrix, Central African Republic — INTERNATIONAL MONETARY FUND.* ### 5. According to the FY25 IMF’s classification of fragile and conflict-affected states, CAR is ### 5. According to the FY25 IMF’s classification of fragile and conflict-affected states, CAR is ### Fragility assessment and recent conflict dynamics - CAR is classified among the most fragile states, primarily due to a history of numerous coups and the civil war that erupted in 2013, which caused widespread destruction of infrastructure and displaced a quarter of the population. - Conflict events have reduced since 2021, but the country remains at risk of instability and humanitarian crises. - Conflict impacts include increased internally displaced persons (IDP), refugees, food insecurity, malnutrition, and social instability. - The current ECF program advances poverty reduction and growth objectives through structural reforms to strengthen revenue administration, governance, PFM, and the efficiency of the fuel market. ### Root causes of fragility (enumerated factors) - Resource curse: dependence on the natural resource sector has led to corruption and elite contestation, fueling violence and instability. - Weak governance: power concentrated among a small elite, hindering inclusive governance and public service delivery. - Political instability: numerous political coups since independence; elite struggles to capture resources. - Geographical challenges: landlocked status and poor infrastructure (lack of paved roads, unreliable transport, prohibitive fuel price and reliability) raise costs and hinder trade and services. - Low population density: around 8-9 people per square kilometer, complicating nationwide service provision. ### Constraints to reforms - Centralized power structures that resist inclusive reforms. - Weak institutions, corruption, and ineffective regulatory frameworks that hinder private sector investment. - Socioeconomic conditions: high poverty and food insecurity prioritize immediate survival over long-term reforms. - Security challenges: ongoing violence and armed groups divert attention and resources. - Limited international support and conflicting external interests that complicate reform implementation. ### Macroeconomic policies for recovery (four pillars) - Macroeconomic stability: - Advocate a robust medium-term fiscal strategy to increase fiscal space while ensuring debt sustainability. - Current tax-to -GDP ratio is below 10 percent, below the African average of 20 percent. - Prioritize strengthening domestic revenue mobilization and optimizing natural resource revenue (mining and forestry) as part of a revenue-led fiscal consolidation strategy. - Emphasize effective public debt management and securing concessional financing. - Public services and infrastructure: - Substantial investment needed in roads, electricity, and healthcare. - Only 11 percent of the population has access to electricity. - Governance and transparency: - Strengthen governance frameworks and combat corruption; learn from successful anti-corruption measures elsewhere. - Developing new growth drivers: - Address weak economy and lack of job opportunities; over 92 percent of Central Africans prioritize job access. - NDP 2024-28 emphasizes active policies to stimulate productive sectors and governance reforms. - Key growth sectors: agriculture and livestock, forestry, and mining. ### Capacity development (CD) priorities and delivery - Authorities’ CD priorities concentrate on addressing fragility, building institutions, and coordinating with partners; CD strategy aligned with the 2024 Country Engagement Strategy and the NDP 2024-28. - CD targets include public financial management, revenue administration, governance, digitization, debt vulnerabilities, food insecurity, gender disparities, and climate change. - CD delivery and financing: - FY25 CD workplan allocation: public financial management (41 percent), revenue administration (36 percent), debt management (10 percent), National Accounts (6 percent), Government Finance (6 percent). - Total CD budget estimated at USD 1.7 million, of which 83.5 percent is externally financed. - From 2019 to 2022, authorities updated the capacity-building strategy within the CBF pilot project context. - In 2024, CD spending on public finances was nearly 75 percent of total CD spending; statistics 20 percent; monetary and financial systems 5 percent. - CD spending in CAR is primarily financed though non-regional sources (78 percent). ### Priority CD actions (specific sectors and reforms) - Fuel market reform: - 2022H2 disruptions in fuel supply raised local prices and transportation costs, reducing government revenue. - ECF program aims to restore a well-functioning fuel market via a new pricing structure; government adopted an action plan with IMF technical assistance, but progress remains slow. - Domestic revenue mobilization: - IMF technical assistance via the Revenue Mobilization Trust Fund has supported DRM reforms; substantial collection challenges persist. - A Tax Expenditures Assessment is recommended to identify tax-policy and compliance gaps. - Recent DRM reforms include E-Tax, Menues Recettes, and Sydonia World. - Public financial management (PFM): - Key CD priorities: (i) establishing the treasury single account (TSA) and expanding it beyond central government entities; (ii) enhancing commitment controls integrated into budget execution; (iii) implementing IFMIS, focusing on the SIM_BA application; (iv) clearing the public accounting backlog to produce accounts for 2021–2024; (v) shifting to medium-term budgeting and accrual accounting; (vi) using digital technology for revenue collection and monitoring; (vii) linking tax and customs administrations. - Public procurement and spending efficiency: - EU PEFA report identified significant procurement gaps; priority reforms should target procurement, fiscal risk management, public wage policies, and SOE oversight. - Fiscal transparency and financial integrity: - 2021 Governance Diagnostics identified gaps in transparency and integrity; reforms proposed include strengthening legal frameworks against corruption, digitizing legal processes, reinforcing oversight institutions, and implementing ANIF. - A stocktaking update of the 2021 report is suggested; technical assistance on Fiscal Responsibility Legislation and a Fiscal Transparency Assessment would be beneficial though not currently contemplated. - Statistics and data: - Significant gaps in statistical production and transparency hinder Fund surveillance and program monitoring. - An LTX at AFRITAC Central was assigned end-2023 to assist external sector statistics compilation. - CD should focus on debt flow/stock discrepancies, government records, sovereign-banking nexus, auditing, classification/registration of public arrears, government guarantees, and contingent liabilities. - Support the government’s National Strategy for the Development of Statistics across four pillars: legal framework/governance; local data production capacity; scope/quality/geographical coverage; dissemination/analysis/archiving/management. - Public debt management: - Limited capacity has placed CAR at high risk of debt distress; exposure to interest rate risks due to limited grants/concessional loans and increasing reliance on costly domestic financing. - Ongoing issues with domestic and external arrears. - ECF program and TA supported establishment of a debt management office and development of a Medium-term Debt Management Strategy with AFRITAC Center support. - CD priorities: enhance technical expertise, take stock of arrears, and devise a credible arrears-clearance plan. ### Collaboration with development partners - Key multilateral and regional partners: African Development Bank (AfDB), European Union (EU), World Bank (WB) provide grants and concessional financing aligned with NDP 2024-28, focusing on infrastructure, poverty reduction, human development, and access to basic public services; they also address conflict, gender equality, climate change, and digital technology. - Specialized organizations and roles: - WFP and FAO: humanitarian assistance, food security, and sustainable agriculture. - UNDP and WHO: human development and health services. - UNICEF: humanitarian aid for children. - MINUSCA: protect civilians and support transitional processes. - Systematic debriefing of Fund missions with CAR-based partners is recommended to enhance collaboration and knowledge exchange. ### IMF engagement, program performance, and risks - IMF engagement history and instruments: - CAR has engaged in 18 arrangements focused on the Poverty Reduction and Growth Trust, primarily through Extended Credit Facility (ECF) arrangements. - CAR has benefited from HIPC initiatives, MDRI debt relief, and participated in the DSSI. Recent ECF programs have been on track despite challenges. - Reforms since 2023: - Reforms initiated in 2023 improved macroeconomic stability, bolstered fiscal institutions, supported social spending, led to economic growth, and improved revenue collection; risks remain and a deep reform agenda with adequate TA is crucial. - Main risks to Fund engagement: - Ongoing security issues, weak state legitimacy, corruption, and high staff turnover threaten program performance and long-term reforms. - Involvement of foreign forces could strain diplomatic relationships. - Mitigation strategies: - Balance technical assistance with local capacity limitations and enhance program monitoring through closer collaboration with local entities. ### Annex IV: Capacity Development Strategy (high-level points) - CD alignment: Priorities focused on fragility, digitization, reducing debt vulnerabilities, food insecurity, gender disparities, and climate change; aligned with NDP 2024-28 and the 2024 Country Engagement Strategy. - Reform examples and implementation status: - New convention with banks for transferring public revenues to the TSA; integrating extra-budgetary revenues into the budget; strengthening revenue administration. - National Statistical Institute (ICASEES) has a website but lacks capacity to produce and publish data online; TA planned to launch the National Summary Data Page under IMF data standards initiatives. - Historical sequencing: - CBF strategy revised June 2019 after a 2017-18 review. - Figures and allocations reiterated: - FY25 CD workplan focus: PFM 41 percent; DRM 36 percent; debt 10 percent; National Accounts 6 percent; Government Finance 6 percent. - Total CD budget USD 1.7 million; 83.5 percent externally financed. - CD spending in 2024 on public finances nearly 75 percent; statistics 20 percent; monetary and financial systems 5 percent. - Additional contextual note from Letter of Intent (May 19, 2025): - Government notes near-total territorial control by the national army, planning local elections in 2025 (first in 36 years). - Geopolitical tensions eased with France’s recent EUR 10-million budget grant. - NDP funding needs over the next 5 years estimated at CFAF 7,040 billion (approx. USD 12.8 billion). *Source: 1cafea2025001-print-pdf (excerpts provided).* ### 3. As the result, fiscal performance under the program has suffered in 2024 but we have ### 1cafea2025001-print-pdf - 3. As the result, fiscal performance under the program has suffered in 2024 but we have ### Fiscal performance and corrective measures - Primary deficit targets: - Exceeded by CFAF 22.5 billion in June 2024. - Exceeded by CFAF 33.5 billion at end-December 2024. - Net domestic financing ceilings: - Ceiling on net domestic financing at end-June and end-December 2024 was exceeded to compensate for delays in donor disbursements. - Corrective measures adopted to meet 2025 QPC: - Adoption of a revised 2025 budget in line with Fund recommendations. - New emergency revenue measures, including suspension of all exceptional tax exemptions. - Setup of an IMF TA-supported task force on tax compliance controls. - Tightening of spending, especially through extraordinary procedures. - End-March 2025 performance: - Domestic revenues reached CFAF 45.1 billion at end-March 2025. - Domestic revenues projected to reach CFAF 186 billion by end-2025 (a gain of 1.8 percent as a share of GDP over the last two years). - Nominal domestic primary deficit in the revised budget reduced to CFAF 40 billion or 2.1 percent of GDP (half of prior level). - Domestic primary deficit IT for end-March met; net domestic financing IT missed due to use of funds raised in regional markets last year to repay external creditors. - eTax rollout and tax administration: - eTax recorded its first online tax payments. - Steps to expedite operationalization of eTax’s cross-check module. - Manual cross-institution taxpayer database cross-checks being leveraged with IMF TA support. ### Structural reforms, benchmarks, and implementation status - Structural benchmark (SB) performance for combined third and fourth reviews: - Two out of seven SBs met: - Issuance of a ministerial decree outlining minimal criteria for official taxpayer recognition by the tax office. - Improving effective use of SIM_Ba by providing IT equipment and training to all staff in charge of accounting at the Treasury. - Decree to operationalize new asset declaration requirements under the ECF-sponsored anticorruption framework implemented with a delay. - Other implemented reforms: - Operationalization of the Financial Intelligence Unit (ANIF) in the 2025 budget. - Issuance of a ministerial circular restricting expenditure eligible for extraordinary procedures. - Optimization and effective use of the exemptions module of ASYCUDA World. - Unmet SBs and causes: - Fuel reform-related SBs and preparation of a fiscal risk statement covering Sango-related initiatives not met due to delays in procuring technical assistance from donors. - Commitment: - Implement on time nine new SBs related to revenue administration, fuel market efficiency and public financial management. ### External financing, arrears, and program requests - IMF obligations and status: - Obligations amounted to SDR 17.3 million (around CFAF 13.5 billion, or 0.8 percent of GDP) between end-December 2024 and early May 2025. - External support and grants: - 2025 revised budget reflects grant financing from the WB. - EUR10 million grant from France recorded in external support last December. - Risks from commercial borrowing: - Ongoing reliance on commercial borrowing in the regional market has resulted in rapid build-up of refinancing risks and is not sustainable in the long run. - Requests to the IMF: - Completion of the third and fourth reviews under the Extended Credit Facility to make available an amount equivalent to SDR 43.22 million and completion of the financing assurances review. - Waiver for nonobservance of the PCs related to end-June 2024 and end-December 2024 domestic primary deficit, net domestic financing, and non-accumulation of external arrears. - Reschedule completion of SBs due to audit funding delays: - Reschedule fuel procurement costs audit–related SB from the third to the fifth review. - Reschedule SB on adoption of a quarterly pump price adjustment mechanism from the fourth to the sixth review. - Revise scope of continuous SB on fuel price structure publication pending audit completion. - Reschedule SB on preparation of a fiscal risk statement on the Sango project from the third to the sixth review. - Use of IMF financing and safeguards: - Commit to leave 90 percent of access in CAR's SDR account to prefinance payments to the Fund for the next six months. - Request that the remaining 10 percent of access be deposited at CAR’s escrow account at BEAC to continue supplementing a WB operation financing certain spending in critical service delivery areas. ### Economic developments, outlook, and risks - 2024 macro developments: - Real GDP growth: 1.9 percent in 2024 (following a 0.1 percent contraction in 2023). - Domestic revenues: rose from 132.5 billion to 155.5 billion FCFA between 2023 and 2024, above the target of CFAF 155 billion. - Contributing items: fuel import revenues CFAF 17.8 billion; sale of 4G operating license CFAF 10 billion; external donation of wheat CFAF 4.1 billion; BEAC dividends CFAF 3.8 billion. - Primary fiscal deficit at end-December 2024: CFAF 83.5 billion (target CFAF 50 billion, cash basis). - Contributors to deviation: accrued expenditures from December 2023 paid in January 2024 (CFAF 7.5 billion); exceptional investment costs (CFAF 4.2 billion); fees on regional syndicated debt (about CFAF 6 billion); procurement of military motorbikes and food allowance (total CFAF 4 billion); mission travels (CFAF 6.7 billion); conference organization (CFAF 2.2 billion). - Net domestic financing reached CFAF 90.3 billion, surpassing adjusted target of CFAF 57.3 billion. - Current account deficit (including grants) at end-2024: 9 percent of GDP. - 2025 outlook and projections: - Growth projected to accelerate to 3.0 percent in 2025. - Average inflation expected to rise to 4.6 percent in 2025, then converge to around 3 percent in the medium term. - Baseline scenario fiscal projections if medium-term fiscal targets met: - Domestic primary deficit could decline from 4.9 percent of GDP in 2024 to less than 2 percent in 2026. - Current account deficit (including grants) expected to decline from 9 percent to 4 percent of GDP over the same period. - Factors supporting 2025 growth: - Diesel donation from the Russian Federation equivalent to six months of domestic consumption. - Deployment of 4G and mobile money services. - Lifting of sanctions on diamond exports. - Infrastructure work related to Corridor 13 financed by the African Development Bank. - Downside risks highlighted: - Difficulties refinancing domestic debt. - Delays in accessing additional concessional external financing due to governance and transparency reform delays. - Resurgence of fuel shortages. - Budget overruns ahead of local, legislative and presidential elections. - Non-preservation of security gains. - Intensification of humanitarian risks following withdrawal of USAID. - Upside possibilities: - Fast-tracking structural reforms. - Consolidating peace throughout the territory. - Significant revenue mobilization gains and public spending control. ### 2025 fiscal policy and planned revenue measures - Revised 2025 Budget Law (prior action) aligns with ECF objectives: - Domestic revenues: CFAF 186 billion. - Domestic primary deficit: CFAF 40 billion (2.1 percent of GDP), down from CFAF 83.5 billion (4.9 percent of GDP) in 2024. - Adjustment drivers: 2.1 percentage points contraction in primary spending and a 0.7 percentage point increase in domestic revenues. - Nominal primary spending overall unchanged after accounting for one-off spending in 2024. - Key spending controls: significant reductions in mission travels; improved modeling of unforeseen expenses; cutting expenditures through exceptional procedures per Ministerial circular. - Planned revenue-raising measures: - Ensure success of campaign to import fuel through the Ubangi river (¶27). - Increase recovery of tax arrears, especially to the tax agency (DGID). - Perform a manual cross-check of tax returns between different tax agencies (¶25). - Sale of artisanal forestry permits. - Pause tax and customs exemptions for companies with outstanding tax arrears. - Ensure higher data consumption from the new 4G network is reflected in higher collection from the telco tax (TIC-TECH). - Apply VAT on transportation of goods imported from other CEMAC countries. - Ensure effective recovery of anticipated exceptional revenues, including sale of additional 4G licenses (0.7 percent of GDP, of which 0.4 percent has already been collected). *Document: Memorandum of Economic and Financial Policies (MEFP) and associated Letter of Intent, Central African Republic.* ### 16. The short-term impact of the USAID withdrawal appears more limited than ### 1cafea2025001-print-pdf - 16. The short-term impact of the USAID withdrawal appears more limited than ### Short-term impact of the USAID withdrawal - Estimates of definitive suspensions range from $11 million to $39 million (0.4 to 1.3 percent of GDP), much less than the 4 percent initially projected. - At least $17 million (0.5 percent of GDP) has been waived for humanitarian reasons. - A significant portion of the funds has already been disbursed, reducing immediate fiscal impact. - Cuts have significantly affected donor operations, particularly in food security and logistics. - Some donors have temporarily maintained operations; full impact will only be known in the coming years given uncertainty around future US commitments. - Macroeconomic impact could be much greater if main financial partners (MINUSCA, the World Bank, the Global Fund) were affected. - Possible government response: absorb projects cancelled or restructured. ### Budget financing and debt issuance strategy - Bulk of the deficit to be financed through the regional market and, to a lesser extent, by development partners (including World Bank and African Development Bank operations and disbursements originally due for late last year). - Given restrictive fiscal policy under the ECF program, the regional public securities market is expected to provide the needed gross domestic financing for the Budget this year. - Policy objective: continue to promote extended maturities to smoothen the public debt payment profile. ### Medium-term fiscal policy and targets - Medium-term strategy: increase domestic revenue collection by around 1.4 percent of GDP annually between the end of 2024 and the end of 2028. - Support measures: continued implementation of the eTax tool (including cross-checking module) and comprehensive reform of tax (DGID) and customs (DGDDI) administrations. - Combined with better prioritization of public spending, targets include: - Domestic primary fiscal deficit below 1 percent of GDP by end-2028. - Public debt stock nearly 45 percent of GDP by the end of 2028 (compared to around 60 percent of GDP at the end of 2024). - Continue dialogue with donors to unlock all budgetary support; noted approval of a EUR 25 million concessional loan by France. ### Public debt management: risks and actions - 2024 domestic syndication: slightly less than CFAF 155 billion raised; about CFAF 10 billion used to make up delays of disbursements from AfDB, WB, and IMF. - Greater reliance on domestic syndication cost CFAF 6 billion in 2024 (0.35 percent of GDP), adding to the primary deficit. - Market access likely to tighten due to regional deterioration in liquidity conditions; continued reliance on syndications raises refinancing costs and rollover risks without fiscal consolidation and higher donor support. - External arrears in 2024: - Recorded arrears of CFAF 6.2 billion during 2024, of which CFAF 2.9 billion already paid as of date; efforts ongoing to settle the rest. - Institutional and operational measures: - Ministerial order to make debt repayment compulsory. - Treasury committee on public expenditure prioritization (established October 2024) formally prioritized debt service and plans weekly meetings. - Leverage IMF November 2024 TA recommendations to improve coordination between Debt Directorate and Central Accounting Agency of the Treasury (ACCT). - Continue discussions with ADB on financing SYGADE debt management and analysis software; develop credible plan to clear arrears with multilateral creditors. - Efforts to resolve long-standing external arrears under the AfDB African Legal Support Facility. ### Strengthening public debt coordination and systems - December 2023: established a framework for public debt coordination and management in line with IMF recommendations. - Public finance management committee chaired by H.E. the President operational since last year. - Operationalized SIM_Ba at the ACCT (structural benchmark for the third review) to reduce cash flow constraints that led to external arrears. - Ongoing advocacy with IMF for assignment of a resident public finance management advisor based in Bangui. ### Domestic arrears and public enterprise debt management - Plan to identify all domestic arrears and develop a plan to facilitate domestic debt clearance, including potential securitization of audited arrears. - Strategy to end accumulation of new arrears to include at minimum: - (i) a detailed timeline; (ii) criteria for clearing arrears to avoid favoritism and corruption; (iii) enhancement of the cash flow plan aligned with consolidated accounts and the commitment plan. - State-owned enterprises: audit of arrears for ENERCA, SODECA and SOCATEL; plan for clearing these arrears (including pre-2019). Debt with ENERCA settled in December 2023. - Commitment to ensure any new debt with State-owned enterprises is duly registered and to apply Law No. 20/004 requiring written authorization of the Minister of Finance and Budget prior to signing any loan agreement. ### Borrowing policy given high debt distress risk - Continue to promote grants and refrain from any non-concessional borrowing. - Concessional loans will comply with limits agreed with the IMF. - Support plan for an investment conference with funds and donors to raise concessional funding within limits of the ECF-supported arrangement. - New concessional loans to have extended grace periods and/or maturities to avoid increasing high ratios of debt service to exports and projected medium-term revenues. - Commit to consult IMF staff for any new financing windows. ### Structural reforms: overview - Focus on improving revenue mobilization, business climate, social and environmental protection, and fiscal transparency. ### Domestic revenue mobilization: key measures and results - Administrative fees and levies: - Issuance in 2023 of orders establishing revenue agencies in 22 MDAs and systematic transfer to the TSA. - Collections reached CFAF 2 billion in 2024 despite processing difficulties for retrocessions. - Measures to consolidate reform: strengthen inter-ministerial cooperation, better public communication, accelerate digitization (USSD for mobile payments), include performance criterion on collection in ministerial evaluations. - EU-supported mobile payment pilot operations launched with Ministries of Justice and Security. - Tax and customs recovery including arrears: - Measures include electronic declarations for large enterprises, recovery of arrears from importers and public contract beneficiaries, reclassification of companies after joint Tax-Customs-Trade mission and April 2025 FAD TA mission. - Tax arrears recovery plan launched: amicable recovery phase early September 2024; forced recovery in first quarter of 2025. - Stock of outstanding arrears estimated at CFAF 8 billion in forestry, telecommunications and logistics sectors. - Customs modernization: - Transition from ASYCUDA++ to ASYCUDA World in 2023; significant coverage in major customs offices (PK 26 Terminal 1 & 2, Airport Revenue, Postal Control Revenue, Commitments and Hydrocarbons Service, Beloko, Gamboula, Berberati, Moungoumba, Central African Transit Window in Douala). - Training program for customs officers and economic operators on ASYCUDA World in first half of 2024. - Redeployment and future computerization of customs in pacified areas: Bria, Bambari, Bossangoa, Bangassou. - Forthcoming commissioning of a scanner at the dry port; implementation of transit interconnectivity per CEMAC standards; optimization using tools such as Webb Fontaine. - Optimized ASYCUDA World's Exemptions module: detailed categorization, integrated list of exempted goods, automated monitoring and validation, automated extraction and regular disclosure of exemptions data. - Inventory of exemptions and monthly tax expenditures report to be carried out; enhanced monitoring via Ministerial Order and quarterly reporting (structural benchmark for the fifth review). - UNCTAD technical assistance to operationalize ASYCUDA World Litigations module. - Streamlining tax exemptions: - Measures in place to contain customs exemptions and mobilize additional revenues in 2024 and beyond. - From 2025, streamline granting and monitoring of exemptions; publish list of exemptions beneficiaries and corresponding legal basis no later than October 2025. - eTax deployment at DGID: - Operationalization of cross-check module completed in April 2024 (structural benchmark for the second review). - Large enterprises and some NGOs using remote reporting; gradual extension to medium-sized enterprises. - Commitment: effective use of eTax platform by all large taxpayers for online payment by end of the third quarter of 2025 (structural benchmark for the fifth review). - Remote reporting coverage for large enterprises: 94.3 percent. - Remote payments tests successful with four banks in first quarter of 2025. - Steering committee established to oversee eTax roll-out and resolve technical issues (internet connectivity, generator, computers, taxpayer assistance, skills transfer). - Article 344 Tax Code enforcement: - Decree published defining minimum criteria for a taxpayer to be considered active and recognized by the tax administration (structural benchmark for the third review). - DGID to share monthly list of known active importers with DGDDI to optimize penalty application. - Strengthening tax compliance and control: - Committee established in July 2024 to reconcile data from banks, customs, Ministry of Trade; mandate to monitor, control, and sanction noncompliant import operations. - Using SYDONIA World monitoring, nearly 95 percent of customs import operations were noncompliant in 2024. - Preliminary audit of 27 large taxpayers for first half of 2024 resulted in CFAF 1.3 billion in penalties, with further recoveries expected. - Requested follow-up IMF TA mission in April 2025 to support manual cross-checks between tax agency data and line ministries and third parties. - Program update commitments (sequenced approach framed by the April 2025 IMF TA action plan and TMU): - Prior actions and benchmarks include amending General Tax Code and Book of Tax Procedures to strengthen the tax clearance certificate regime (prior action); updating bank tax declaration obligations; mandating valid tax clearance certificate for all transfers of funds outside the CEMAC region. - SB, fifth review: submit to Public Finance Monitoring Committee a progress report on implementation of April 2025 IMF TA action plan for FY2023 showing: at least 50 percent of planned controls conducted; 75 percent of controlled taxpayers notified; 25 percent of assessed taxes recovered; all identified taxpayers reclassified into correct segments. - SB, fifth review: replicate manual cross-check for 2024 fiscal year and submit summary tables of identified anomalies to IMF. - SB, sixth review: final report on FY2023 cross-checks to show: at least 90 percent of identified taxpayers controlled; 95 percent of controlled taxpayers notified; 80 percent of assessed taxes recovered; all identified taxpayers reclassified. - Structural benchmark for sixth review: progress report on implementation of April 2025 IMF TA action plan for FY2024 showing: at least 70 percent of planned controls conducted; 75 percent of controlled taxpayers notified; 60 percent of assessed taxes recovered; all identified taxpayers reclassified. - Forestry revenues: - Semi-industrial permits for medium-sized operators and committee for taxation of artisanal forestry activities established. - Expected revenue for 2025: CFAF 1 billion. - SIM_BA operationalization and expenditure controls: - SIM_BA effective at ACCT after provision of IT equipment and staff training (structural benchmark for the third review). - Plans to operationalize SIM_BA in other sectoral ministries (security, justice). - Ministerial circular to specify and limit scope of expenses eligible for exceptional spending procedures, set ceilings per category, impose accelerated regularization and use of SIM_BA for processing. - Exceptional procedures expenses and regularization: - Exceptional expenses contributed to 2024 budget deficit; decree in January 2025 to limit non-priority expenditure (notably official missions). - Significant progress regularizing OPB/OPT expenses; about CFAF 6 billion outstanding payments for 2024 financial year remain; some payment orders for 2021–2023 yet to be regularized. - With IMF TA, proceed to address 2021 balance; commit to regularize all expenses paid by payment orders from Treasury and Budget (OPT and OPB) during 2023 budget year (structural benchmark for the fifth review). - Financial integrity and transparency: - Adopted detailed institutional plan to strengthen operational work of National Financial Investigation Agency (ANIF) as part of second review. - Continue gradual implementation via 2025 budget allocation and donor support. *Source: 1cafea2025001-print-pdf - 16. The short-term impact of the USAID withdrawal appears more limited than* ### 26. Significant progress has been made in the implementation of the fuel market action ### 26. Significant progress has been made in the implementation of the fuel market action plan ### Implementation milestones for the fuel market action plan - Achievements: - (i) liberalized the international jet market, - (ii) formally adopted a forward-looking approach for determining the price structure, coupled with a review of the price structure lines to assess the import margins and costs dynamics in relation to the international price of crude, - (iii) established a price structure for importers not storing at SOCASP, as well as a single structure per transport route (road/river) for all marketers, no later than the 25th day of month M-1 for month M, and - (iv) reviewed the procedures for the settlement of some tax-related elements. ### Persisting challenges and planned actions - Costs transparency - The intricacies of the current import cost structure have complicated negotiations with the monopoly importer, affected implementation of price structure reforms established at the end of the second review, delayed completion of the continuous structural benchmark (scope proposed to be revised and implemented starting June 25, 2025, cf. TMU), and hindered implementation of an automatic pump price mechanism (structural benchmark for the fourth review, proposed to be carried forward to the sixth review). - An audit of costs and margins has been agreed as a structural benchmark for the third review. Donor support was sought to finance the audit due to budget limitations, causing delays. - Funding was obtained from the UNDP to support the audit. Terms of reference of the audit have been reviewed with IMF staff support and its completion is proposed to be rescheduled for the fifth review (structural benchmark). - Compliance by the sole private importer - The sole private importer has initiated establishment of a subsidiary in accordance with Central African law and is taking steps to regularize its tax obligations for 2024, primarily through the CEMAC tax cooperation framework. - Authorities are working to ensure the monopoly importer transmits required regulatory information and adheres to its commitment to source 80 percent of its supplies via the river. - Improving fuel supply and logistics - Despite increased fuel imports in 2024, the sector operates below potential, having experienced a failed river campaign for the third consecutive year. - Planned measures: - Reactivate the supply planning committee to enhance coordination in preparation and logistics of river fuel imports. - Establish a revolving import scheme using a grant of 30 thousand metric tons of fuel from Russia to bolster CAR’s energy security. - Use proceeds from the domestic sale of the in-kind grant to capitalize SOPRAF (Société Panafricaine du Pétrole et des produits Raffinés) to import fuel primarily via the Ubangi River. - At least two key stakeholders are now engaged in importing fuel through the Ubangi River. - Commitment to maintain transparency and keep the IMF informed about ongoing developments in the fuel sector. - Diversification of import partners and cost negotiations - Working to diversify import partner countries and open new import routes in addition to existing ones with Cameroon and the Democratic Republic of Congo. - High-level negotiations started with partner countries, including Cameroon, to review fuel import costs in CAR. ### Legal and regulatory reforms - Revision of downstream oil sector law - Authorities committed to work with the IMF to revise the law governing downstream oil sector activities. - Preliminary work begun under the Ministry of Energy; draft submitted to IMF teams for comments. - A validation workshop for the revised draft law was held from May 9 to 10, 2025, in Liton (PK 22, Damara road). - The revised draft law resulting from the workshop will be submitted to IMF staff for comments and then to Parliament (structural benchmark for the sixth review). - Once adopted, the new law will enable a review of the decree concerning the pricing structure of petroleum products in the Central African Republic. ### Infrastructure, capacity, and financing needs - Structural needs to optimize fuel supply and reduce import costs: - Improve road and river infrastructure to structurally reduce import costs. - Strengthen storage and depot capacities to sustainably avoid shortages. - Increase the network of service stations in provinces to ensure regular, formal, and secured supply. - Fiscal constraint and financing - Given limited fiscal resources, development partners’ support will be critical to sustainably address challenges in the hydrocarbons sector. ### Strengthening public finance management and governance - Budget transparency and donor financing - Continue using the escrow account opened with BEAC to ensure transparency in management and appropriate use of development partner financing; the account will receive IMF disbursements—after deduction of repayments and retirement of regional debt—to supplement financing of the WB operation supporting some fiscal expenditures in essential public service sectors. - Update the Strategic Plan for Public Financial Management Reforms (PS-RGFP) by June 2025, with EU support, to incorporate findings of the 2019-2021 PEFA report. - Budget implementation reports are regularly posted online on time. - Award notices for public contracts above the CFAF 10 million threshold are published regularly and unique identification numbers (UINs) of beneficiaries are disclosed in line with commitments at the end of the second review of the ECF program. - Treasury Single Account (TSA) - Efforts ongoing to finalize the agreement between BEAC and the Treasury on TSA management; the agreement will be signed after the conventions harmonization process by the Central bank, as part of fiscal revenues centralization and traceability. - Anti-corruption and governance measures - Council of Ministers adopted the regulation implementing the anti-corruption law provisions relating to declaration of assets (structural benchmark for the third review). - Instruments developed with African Development Bank assistance were adopted to implement anti-corruption clusters, the gifts and benefits legal regime, and the framework for illicit assets recovery. ### Natural resource, mining, forestry, and business climate reforms - Tokenization of natural resources - Analysis of fiscal risks related to the Sango project was less dynamic than expected and did not meet the corresponding structural benchmark for the third review; completion of the analysis requested to be rescheduled for the sixth review. - Mining and forestry reforms - Promulgation on August 21, 2024, of the new Mining Code (with WB assistance) intended to clean up the sector, attract investors, and increase public revenues; government intends to involve partners in drafting implementing regulations. - Significant progress on the new Forestry Code (with WB and FAO support); strategic provisional elements include: (i) industrial processing, (ii) carbon credits, (iii) optimizing valuation and distribution of surface areas, broadening the tax base and revising framework for granting semi-industrial permits. Work plan envisages transmission to the National Assembly by the fourth quarter of 2025. - Support for enterprise competitiveness - With WB support, a project to improve competitiveness targets 5,000 young entrepreneurs to operationalize the national guarantee fund (FNGI) for VSEs and SMEs to facilitate access to bank financing. - Additional instruments under design: revised Trade Code, Law on Public-Private Partnerships, and new Labour Code. ### Social spending and environmental priorities - Social spending - Social spending reached CFAF 12.6 billion by end-December 2024, 21 percent above the 2023 performance, but below the indicative target of CFAF 22 billion set under the ECF-supported agreement. - The indicative target for the year remains unchanged at CFAF 22 billion and achieving it is deemed crucial to strengthen commitment to the most vulnerable populations. - Environmental and climate commitments - Government intends to intensify reforms addressing global warming, seasonal disruptions, pollution, deforestation and forest degradation, disasters (floods, bushfires, etc.), loss of biodiversity, land degradation, and drought. - Priorities include mobilization around the 2030 Agenda for Sustainable Development Goals (SDGs), the Nationally Determined Contribution (NDC), the National Adaptation Plan, and alignment with Pillar 5 of the National Development Plan 2024-2028 (NDP). - With World Bank and partner support, published the National Report on Climate and Development (RNCD, CCDR acronym) and the Biennial Transparency Report for climate development activities. - Initiated a study on Natural Capital Accounting and Climate Finance (CCN) in the Congo Basin forests to assess forest resource value and impact on domestic revenues. - Seeking technical assistance to develop a National Carbon Market and strengthen capacity to mobilize funds through international financial mechanisms. - Intend to request IMF FAD technical assistance to conduct a Climate Change Public Investment Management Assessment (C-PIMA). - CCDR and C-PIMA would support consideration of the Resilience and Sustainability Facility (RSF). ### Governance, statistics, and data transparency - Governance and statistical production measures - Production of sub-annual economic activity indicators: with IMF technical assistance developing a monthly economic growth indicator (IMCE). First publication posted on the ICASEES website in September 2024; IMCE will support quarterly GDP production. - Revision of national accounts: with IMF technical assistance and World Bank support, committed to producing national accounts for 2020 and 2021 and to initiate a retropolation of national accounts in line with SN 2008. - Improving public finance statistics: September 2024 IMF TA mission enhanced quality of public finance statistics, minimized statistical discrepancies, reviewed primary data, ensured consistency of transactions with financing data (notably Treasury deposits), integrated debt flows and automated the debt database within Ministry of Finance services. - Commitment to data dissemination: work begun on the National Summary Data Page (NSDP). IMF Statistics Department and ICASEES are finalizing formatting of data and metadata prior to an IMF TA mission in 2025. - Censuses: under the HISWACA project financed by the WB, intend to conduct a general population and housing census and an agricultural census in 2025. ### Capacity building - Technical assistance and training priorities (with IMF, WB, EU, AfDB, and partners): - (i) improving domestic revenues; - (ii) strengthening public expenditure management, improving fiscal governance and anti-corruption mechanisms; - (iii) developing macroeconomic programing; - (iv) debt management; - (v) developing inflation forecasting tools; - (vi) improving the quality of national accounts as well as fiscal, monetary, and external sector statistics; - (vii) managing fuel supplies and legal risks; - (viii) updating the public procurement system; and - (ix) capacity building for the development of the carbon credit market and actors implementing the policy of population resilience to climate change. - Resident Advisors and technical presence - Continue to seek support of Resident Advisors, particularly in Public Financial Management and Customs, entirely dedicated to the Central African Republic and based in Bangui, subject to funding. - One-year extension of the Public Financial Management Advisor’s mandate, relocation to Bangui, and more balanced division of time between CAR and Republic of Congo represent progress. - A full-time Resident Advisor exclusively dedicated to CAR is considered more useful for strengthening local capacities and completing ongoing structural reforms. - Support of a Resident Advisor in Customs Administration, officially requested three years ago, remains urgent. - Assistance from AFRITAC Centre will continue to be welcomed as a complement to Resident Advisors. *Source: 1cafea2025001-print-pdf - 26. Significant progress has been made in the implementation of the fuel market action* ### 42. The Program will be monitored using quantitative performance criteria, indicative ### 1cafea2025001-print-pdf - 42. The Program will be monitored using quantitative performance criteria, indicative ### Monitoring framework and timing - The Program will be monitored using quantitative performance criteria, indicative targets and structural benchmarks as defined in the Technical Memorandum of Understanding (TMU). - Quantitative performance criteria have been set for end-December 2025 (sixth review). - Indicative targets have been set for end-September 2025. - Structural benchmarks have been set until April 2026 (Tables 2a and 2b). - The sixth review of the ECF-supported program will take place on or after 30 April 2026. - The authorities will continue to provide IMF staff with the statistical data and information identified in the attached TMU, and any other information that the Fund deems necessary or that IMF staff may request for monitoring purposes. ### Quantitative performance criteria and indicative targets (overview) - Table 1a presents proposed quantitative performance criteria and indicative targets for 2024-25 (CFAF Billion; cumulative from beginning of the year, unless otherwise specified). Sources: Central African authorities; IMF staff estimates. - Key monitoring categories (as defined in the TMU and Table 1a) include: - Net domestic financing of the government (ceiling, cumulative flows for the year). - Domestic government revenue (floor, cumulative for the year). 1 - Domestic primary fiscal balance (floor, cumulative for the year). 2 - Continuous performance criteria on new external nonconcessional debt contracted or guaranteed by the Government (ceiling, cumulative), disbursement of external nonconcessional debt (ceiling, cumulative), and non-accumulation of new external payments arrears by the government (ceiling, cumulative). 3,4 - Indicative targets for social spending (floor, cumulative for the year) and spending using extraordinary procedures (ceiling, cumulative for the year). - Ceilings on new external concessional debt contracted or guaranteed by the government (ceiling, cumulative). - The TMU notes adjustments to ceilings on net domestic government financing for a series of periods to reflect disbursements from the African Development Bank (AfDB) and the World Bank (WB), including: - End-March 2024: adjusted-down to reflect the disbursement from the African Development Bank in early January. 6 - End-September 2024: adjusted-down to reflect the disbursement from the African Development Bank in early January, along with the disbursement of a portion of the funds from the WB. 7 - End-December 2024: adjusted-up to reflect the delay of the total disbursements from the AfDB and the WB. 8 - End-March 2025: adjusted-down to reflect the disbursements from the AfDB and the WB carried-over from 2024. 9 Notes from Table 1a (definitions and memos) - Social spending is defined as domestically financed public non-wage spending on primary and secondary education, health, social action, water and sanitation, microfinance, agriculture, and rural development. 5 - Memorandum items include budget support and privatization receipts reported in the table. ### Continuous performance criteria (standard restrictions) - Table 1b lists standard continuous performance criteria under the ECF-supported arrangement: - No setting of new restrictions or strengthening of the current restrictions on payments or transfers relating to current international transactions. - No introduction of new multiple exchange practices or strengthening of the current practices. - No signing of bilateral payment agreements that are not consistent with the Articles of Agreement of the IMF (Article III). - No setting of new restrictions or strengthening of the current restrictions on imports for the purpose of balance of payment equilibrium. ### Structural benchmarks: status, objectives, and timelines (Tables 2a and 2b) - Table 2a (structural benchmarks through earlier reviews) highlights: - Revenue Administration: Issue a ministerial decree outlining minimal criteria for official taxpayer recognition by the tax office. Timeline: SB third review (October 2024). Status: Met. - Fuel market efficiency (continuous and review-based benchmarks): - From July 25, 2024, issue on ministry websites new fuel price structures on the 25th of each month to be applied to transactions of the following month; continuous structural benchmark starting July 25, 2024. Status: Unmet. - Adopt a quarterly pump price adjustment mechanism through a ministerial decree (Ministers of Finance and Energy) with a corridor to allow pump price fluctuation in response to international oil price changes. Timeline: SB fourth review (April 2025). Status: Unmet, proposed to be rescheduled for the sixth review. - Conduct an audit of fuel procurement costs to establish optimal levels and adapt price structure. Timeline: SB third review (October 2024). Status: Unmet, proposed to be rescheduled for the fifth review. - Fiscal risk management: Prepare a fiscal risk statement on the Sango project, to be presented to the Cabinet, using a framework developed with IMF TA and recommending legal measures to mitigate identified risks. Timeline: SB third review (October 2024). Status: Unmet, proposed to be rescheduled for the sixth review. - Governance and transparency: Adopt and implement regulation under the asset declaration law to operationalize the Haute Autorité de la Bonne Gouvernance (HABG) for receiving and publishing asset declarations of senior public officials; implementing regulation should include (i) a specific timeline for operationalization at the latest by the end of 2025, (ii) a monetary threshold of at least 50 million CFAF for simplified declarations contemplated in Art. 22 of the asset declaration law, and (iii) asset declaration forms. Timeline: SB third review (October 2024). Status: Unmet, but implemented with a delay. - Public Financial Management: Make effective the systematic use of the SIM_Ba application by all staff in charge of the accounting function at the Treasury by providing IT equipment and training. Timeline: SB third review (October 2024). Status: Met. - Table 2b (prior actions and newly proposed structural benchmarks) highlights proposed timelines and performance targets, including: - Submit to Parliament a revised Budget Law for 2025 consistent with the program’s macroeconomic framework (Five days before the board date for the combined third/fourth reviews). Status: Prior Action (Met). - Submit to Parliament the Court of Audit Law that regulates its statute and functions (Five days before the board date for the combined third/fourth reviews). Status: Prior Action (Met). - Strengthen the tax clearance certificate (quitus fiscal) regime, in line with IMF recommendations (Five days before the board date for the combined third/fourth reviews). Status: Prior Action (Met). - Ensure the effective use of the eTax platform by all large taxpayers for online payment of taxes and duties by the end of the third quarter of 2025. Timeline: SB fifth review (October 2025). Status: Proposed. - Implement the new DGID structure by appointing staff to the new Directorates. Timeline: SB sixth review (April 2026). Status: Proposed. - A series of IMF TA-related manual tax data cross-check reports and replication exercises with exact performance thresholds are proposed for the SB fifth review (October 2025) and SB sixth review (April 2026), with specific numeric coverage and recovery targets (for instance, confirmation thresholds such as at least 50 percent of planned controls were conducted; 75 percent of controlled taxpayers were notified; 25 percent of assessed taxes were recovered for one milestone; and 90 percent/95 percent/80 percent targets for a later milestone). Status: Proposed. - Submit to Parliament the draft of the new law on the fuel sector aligned with IMF comments. Timeline: SB sixth review (April 2026). Status: Proposed. - Modified continuous structural benchmark: From June 25, 2025, issue on ministry websites new fuel price structures by the 25th of each month for transactions of the following month. Timeline: Continuous structural benchmark starting June 25, 2025. Status: Modified continuous structural benchmark. - Public Financial Management: Regularize all expenses paid by payment orders from the Treasury and the Budget (OPT and OPB) during the 2023 budget year. Timeline: SB fifth review (October 2025). Status: Proposed. - Customs administration: Enhance monitoring of customs exemptions by adopting a Ministerial Order formalizing digitization and monitoring procedures and submitting quarterly clearance reports to the Minister of Finance and the Committee in charge of exemptions. Timeline: SB fifth review (October 2025). Status: Proposed. ### Technical Memorandum of Understanding (TMU): key definitions and valuation rules - The TMU defines the quantitative performance criteria, indicative targets, and structural benchmarks used to evaluate program performance and establishes the framework and deadlines for data reporting to IMF staff. - Government definition (para. 2): Unless otherwise specified, "government" is defined as the central government of the CAR and does not include local governments, the central bank, or any public entity with separate legal personality that are not included in the government financial operations table (TOFE). - Definition of debt (para. 3) references para. 8 of the "Guidelines on Public Debt Conditionality in Fund Arrangements" adopted by Decision No. 16919-(20/103) of the Executive Board on October 28, 2020. Debt is defined as a current liability created under a contractual arrangement requiring the obligor to make one or more payments in the future. Principal forms include: - Loans (including deposits, bonds, debentures, commercial loans and buyers’ credits, repurchase agreements and official swap arrangements). - Suppliers’ credits (contracts permitting deferred payments). - Leases (debt defined as the present value at lease inception of all lease payments expected during the agreement, excluding operation, repair, or maintenance payments). - Arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are considered debt. Failure to make payment on an obligation that is not considered debt under the definition (e.g., payment on delivery) will not give rise to debt. - External debt and domestic debt are defined on the basis of the residency of the subscriber, with exceptions: - Treasury bills and bonds and other securitized debt issued by the government on the CEMAC regional financial market and not held by the local banking system are considered part of domestic debt. - Any BEAC credit to the government, including the use of the SDR allocation, is considered part of domestic debt. - Guaranteed debt (para. 4): Guaranteeing of a debt by the government is an explicit legal obligation to service a debt in the event of nonpayment by the borrower (in cash or in kind). - Concessional debt (para. 5): Defined as debt with a grant element of at least 35 percent. The grant element is the difference between nominal value and present value expressed as a percentage of the nominal value. Present value is calculated on the date the debt is contracted by discounting debt service payments; the discount rate used is 5 percent. - Total government revenue (para. 6): Defined as tax and nontax revenue, or other revenue recorded on a cash basis. Proceeds from the sale of financial assets, revenue from privatizations or from granting or renewal of licenses, investment proceeds on government assets and grants are not considered government revenue for program purposes. *Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1cafea2025001-print-pdf.pdf* ### 7. Total government expenditure is understood to be the sum of expenditure on wages and ### 1cafea2025001-print-pdf - 7. Total government expenditure is understood to be the sum of expenditure on wages and ### Definitions of government expenditure and compensation - Total government expenditure is the sum of expenditure on wages and salaries of government employees, goods and services, transfers (including subsidies, grants, social benefits, and other expenses), interest payments and investment expenditure, recorded on a settlement basis, unless otherwise stated. - Total government expenditure also includes expenditures executed before payment authorization and not yet regularized. - Wages and salaries correspond to the compensation of government employees as described in paragraphs 6.8–6.18 of GFSM 2014, covering all employees (permanent and temporary), including members of the armed and security forces. - Compensation is defined as the sum of wages and salaries, allowances, bonuses, pension fund contributions, and any other form of monetary or non-monetary payment. ### Arrears: definitions and classification - Arrears: any debt (as defined in paragraph 3) that has not been paid in accordance with the conditions specified in the contract establishing said debt. - Domestic payment arrears = (i) payment arrears on expenditures; and (ii) payment arrears on domestic debt. - Payment arrears on expenditures: all payment orders created by the entity responsible for authorizing expenditure payments but not yet paid 90 days after authorization to pay given by the Treasury. - These expenditure payment arrears are part of “balances payable” (or “amounts due”), which include domestic floating debt plus expenditure arrears. “Balances payable” are expenditures incurred, approved by the financial controller, validated (authorized), and assumed by the public Treasury, but not yet paid. They include invoices payable to public and private companies, but do not include domestic debt financing (principal and interest). - For the program target, domestic payment arrears are “balances payable” whose maturity goes beyond the 90-day regulatory deadline; floating debt represents “balances payable” whose maturity does not go beyond the 90-day deadline. - Payment arrears on domestic debt: the difference between the amount required to be paid under the contract and the amount actually paid after the payment deadline specified in the contract. - External payment arrears: arrears on external debt obligations, defined as the difference between the amount required to be paid under the contract and the amount actually paid after the payment deadline specified in the contract. ### Quantitative performance criteria and targets - General: quantitative targets listed are those specified in Table 8 of the MEFP. Unless otherwise indicated, all quantitative performance criteria and indicative targets are assessed on a cumulative basis from the beginning of the calendar year in which they are set. - Ceiling on Net Domestic Financing of the Government - Net domestic financing = (i) net bank credit to the government; and (ii) non-bank financing of the government, including proceeds from the sale of financial assets, proceeds from privatizations or the granting of licenses, Treasury bills and bonds and other securitized debt issued by the government in the CEMAC regional financial market, denominated in CFA francs and not held by the local banking system, and any Bank of Central African States (BEAC) credit to the government, including any drawings on the CFA franc counterpart of the allocation of Special Drawing Rights (SDRs). - Net bank credit to the government = balance between the debts and claims of the government vis-à-vis the central bank (excluding IMF credit) and the national commercial banks. Government claims include the CFA franc cash balance, postal checking accounts, guaranteed tax promissory notes, and all deposits with the BEAC and commercial banks of government-owned entities, except EPICs and government corporations, which are excluded. Government debt to the banking system includes all debt to the central bank and local commercial banks, including Treasury bills and securities and other securitized debt. - Floor for Domestic Government Revenue - Only revenue on a cash basis (tax and nontax revenue) will be taken into account in the TOFE. - Floor for the Domestic Primary Fiscal Balance - Domestic primary fiscal balance (cash basis) = government domestic revenue minus government expenditure, less all interest payments and externally financed capital expenditure. - Payments on arrears are not included in the calculation of the domestic primary balance. - Continuous Performance Criteria - Ceilings on New External Debt Contracted or Guaranteed by the Government - The government undertakes not to contract or guarantee nonconcessional debt (excluding newly contracted financing from the IMF and the General SDR allocation). This continuous quantitative benchmark is assessed on a cumulative basis from April 1, 2023. - The government undertakes not to disburse nonconcessional debt (excluding newly contracted financing from the IMF and the General SDR allocation). - Non-accumulation of New External Payment Arrears by the Government - The government undertakes not to accumulate external payment arrears on an external debt contracted or guaranteed by the government, except arrears relating to debt that is the subject of renegotiation or rescheduling. This benchmark is applied on a continuous basis. - Indicative Targets - Floor for Social Spending - Poverty-reducing social spending comprises non-wage spending on national education (primary, secondary and higher education), health, social action (promotion of women and families, humanitarian actions), water and sanitation, microfinance (small and medium-sized enterprises and industries), agriculture, livestock and rural development. Only domestically financed spending is taken into account. Its execution is monitored on a payment-order basis during the program. - Ceiling on Spending using Extraordinary Procedures - This ceiling is set at 7 percent of total spending excluding wage spending, debt service (principal and interest) and externally financed spending. - Ceiling on New External Concessional Debt Contracted or Guaranteed by the Government - This ceiling is set at a cumulative CFAF 20 billion as of end-December 2023, end- 2024, and end-2025. ### Adjusters of quantitative performance criteria - Adjustments for receipts above programmed amounts from privatizations, sales of financial assets or renewals of telecommunications or forestry or oil licenses: - i. The ceiling on net domestic financing of the government will be adjusted upward by an amount equivalent to 50 percent of these additional receipts; - ii. The floor for the primary domestic fiscal balance will be adjusted downward by an amount equivalent to 50 percent of these additional receipts. - If total budgetary support exceeds the amount programmed, the ceiling on net domestic financing will be adjusted downward by an amount equivalent to 100 percent of the difference between the programmed and actual disbursements. - If total budgetary support is less than the amount programmed, the ceiling on net domestic financing will be adjusted upward by an amount equivalent to 100 percent of the difference between the programmed and actual disbursements. ### Structural benchmarks, prior actions, and timelines - Prior actions (to be implemented at least five days before the IMF board date for the combined third/fourth reviews) - Submit to Parliament a revised Budget Law for 2025 consistent with the program’s macroeconomic framework, incorporating credible revenue and spending projections. - Submit to Parliament the Court of Audit Law that regulates its stature and functions and ensures its financial and operational independence. - Strengthen the tax clearance certificate (quitus fiscal) regime, in line with IMF recommendations. - Continuous structural benchmark (fuel price structures) - From July 25, 2024, issue on the websites of the ministries of Energy or Finance new fuel price structures on the 25th of each month to be applied to the transactions of the following month. New fuel price structures will be consistent with the fuel action plan, based on predefined international reference prices, augmented by taxes and quasi-taxes, margins, transportation costs, and an import premium. This action should be transparently reflected as amendments to Presidential Decree No. 18.295. - Authorities requested revision: “From June 25, 2025, issue on the websites of the ministry of energy or ministry of finance new fuel price structures by the 25th of each month to be applied to the transactions of the following month. The new fuel price structures will be based on international reference prices, augmented by taxes and quasi-taxes provided by the current regulations, margins, transportation costs, and an import premium.” - Structural Benchmarks by review - Third review (October 2024) — selected SBs: - Prepare a fiscal risk statement on the Sango project, disclose existing fiscal commitments, assess fiscal impacts, present to Cabinet; assessment to follow IMF TA framework and recommend legal measures. Authorities requested postponement to the sixth review. - Cabinet to adopt implementing regulation to operationalize the asset declaration law (n. 21.011) and anti-corruption law (n. 23.009), including (i) timeline for operationalization by end of 2025; (ii) monetary threshold of at least 50 million FCFA for simplified declarations; and (iii) asset declaration forms. - Issue a ministerial decree outlining minimal criteria for official taxpayer recognition by the tax office. - Conduct an audit of fuel procurement costs and adapt price structure based on findings. Authorities requested postponement to the fifth review. - Ensure systematic use of the SIM_Ba application by all staff in charge of accounting at the Treasury by providing necessary IT equipment and training. - Fourth review (April 2025) - Adopt a quarterly pump price adjustment mechanism through a ministerial decree signed by the Ministers of Finance and Energy permitting pump price fluctuation in response to international oil price changes. Authorities requested postponement to the sixth review. - Fifth review (October 2025) — selected SBs: - Ensure the effective use of the eTax platform by all large taxpayers for online payment of taxes and duties by the end of the third quarter of 2025. - Regularize all expenses paid by payment orders from the Treasury and the Budget (OPT and OPB) during the 2023 budget year. - Enhance monitoring of customs exemptions by (i) adopting a Ministerial order formalizing digitization and monitoring procedures for clearance lists for exempted goods per importer, and (ii) submitting a quarterly report to the Minister of Finance and the Committee in charge of exemptions detailing clearance status for each importer. - Submit to the Public Finance Monitoring Committee a progress report on implementation of the April 2025 IMF TA action plan on manual tax data cross-checks for FY2023 with performance targets: at least 50 percent of planned controls conducted, 75 percent of controlled taxpayers notified, 25 percent of assessed taxes recovered, and all identified taxpayers reclassified into correct tax segments. - Replicate the manual cross-check of taxpayer data for the 2024 fiscal year using the IMF TA-developed methodology and submit summary tables of identified anomalies to the IMF. - Sixth review (April 2026) — selected SBs: - Implement the new DGID structure by appointing staff to the new Directorates. - Submit to Parliament the draft of the new law on fuel sector aligned with IMF comments. - Submit to the Public Finance Monitoring Committee the final report on implementation of the April 2025 IMF TA action plan on manual tax data cross-checks for FY2023 with performance targets: at least 90 percent of identified taxpayers controlled, 95 percent of controlled taxpayers notified, 80 percent of assessed taxes recovered, and all identified taxpayers reclassified into correct tax segments. - Submit to the Public Finance Monitoring Committee a progress report on implementation of the April 2025 IMF TA action plan on manual tax data cross-checks for FY2024 with performance targets: at least 70 percent of planned controls conducted, 75 percent of controlled taxpayers notified, 60 percent of assessed taxes recovered, and all identified taxpayers reclassified into correct tax segments. ### Reporting requirements and data submission deadlines - Quantitative data on government indicative targets will be reported to IMF staff according to the frequency set out in Table III; all data revisions will be promptly reported. Authorities will consult Fund staff on any necessary information or data not addressed in the TMU. - Selected reporting deadlines (data to be provided in Excel format) - Semi-annual evaluation report on qualitative indicators and structural measures: Within four weeks of the end of each quarter. - Monetary survey, monthly central bank and commercial bank accounts: Within four weeks of the end of each month. - Table of the government’s monthly cash flow operations, reconciled with the BEAC: Within 10 days of the end of each month. - Government financial operations table (TOFE): Within four weeks of the end of each month. - Total monthly amount of domestic payments arrears on goods and services and on wages, including unpaid pensions and bonuses: Within four weeks of the end of each month. - End-of-period stock of external debt: Within four weeks of the end of each month. - Breakdown of expenditures included in the TOFE (goods, services, wages, interest, etc.): Within four weeks of the end of each month. - Summary table of actual expenditure in priority sectors (health, education, security): Within four weeks of the end of each quarter. - Breakdown of current and capital expenditure, whether domestically or externally funded: 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. - Revenue and expenditures netted out without a cash settlement (by expenditure and revenue type): Within four weeks of the end of each quarter. - Breakdown of debt service and external arrears, by principal and interest and by main creditors: 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 external debt relief granted by external creditors (including the date, amount, and creditor): Within four weeks of the end of each month. ### Debt sustainability assessment summary and risks - Risk of external debt distress: High - Overall risk of debt distress: High - Granularity in the risk rating: Sustainable - Application of judgement: No - Key observations from the DSA: - Public debt is projected to be sustainable, though substantial liquidity risks exist due to possible shortfalls in donor support and substantial rollover risks on regional debt. - Approval of the ECF-supported program in April 2023 helped catalyze disbursements from the African Development Bank (AfDB); the World Bank provided disbursements for targeted recurrent spending costs; France recently disbursed grant support after a long hiatus and is following up with a concessional loan in 2025. - Full resumption of financing from all traditional donors remains slow amidst geopolitical tensions and governance shortfalls. - Compared to the previous DSA, growth estimates were increased for 2024 to reflect pickup in fuel consumption and stabilization in electricity provision; the financing mix in 2025 is improved with more concessional financing. - Domestic revenues were adjusted down by an average of 0.7 percent of GDP between 2025 and 2029 to be more consistent with an updated assessment of revenue mobilization capacity. - No new breaches of thresholds since the last DSA. - Sensitivity of debt indicators to standard stress tests, significant macroeconomic and financing uncertainty, and sizeable contingent liabilities support the high-risk assessment. - The high-risk assessment is predicated on the authorities’ continued prioritization of and ability to secure grant financing for essential current spending and developmental projects, and on efforts to lengthen the profile of domestic debt. - Significant downside risks include uncertainty regarding macro-fiscal projections, full resumption of donor support, the size of humanitarian assistance, and recovery of the fuel market. *Source: Central African Republic — Third and Fourth Review under the Arrangement under the Extended Credit Facility, Requests for Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review—Debt Sustainability Analysis (excerpts).* ### 1. The coverage of public sector debt includes external and domestic contractual ### 1. The coverage of public sector debt includes external and domestic contractual obligations of the central government, unchanged from the previous DSA ### Coverage of public sector debt - Coverage includes external and domestic contractual obligations of the central government; state and local governments do not borrow. - Social security funds are not guaranteed by the public sector; the government has not guaranteed other debt. - Notable gaps in coverage: - Non-guaranteed SOE debt (limited information on SOE financial positions). - Supplier/domestic arrears. - Post-HIPC arrears of the central government account for less than 1 percent of GDP. - The limited debt coverage is symptomatic of capacity weakness to effectively collect debt data, limiting the scope for a full-scale debt analysis. ### SOE audits, reporting, and related actions - Under the World Bank Sustainable Development Financing Policy (SDFP), the government completed and published in 2021 audits of the three largest SOEs: ENERCA, SODECA, SOCATEL. - The government prepared and approved a cross-debt settlement plan for these SOEs based on the audits. - As per SDFP FY23 PPA#1 (adopted in 2022): - Authorities plan to prepare and publish an annual report on the financial performance and fiscal risks associated with these three SOEs. - The first annual report, released in April 2023, covered January–December 2021 and aimed to disclose consolidated financial and operational information. - Second and third reports were completed in 2023 and 2024; the third focused on seven additional smaller SOEs covering January 2021–December 2023. - SOE debt shares (based on 2023 numbers): - ENERCA: 55.3 percent of total SOE debt. - SOCATEL: 18.7 percent. - SODECA: 15.6 percent. - Seven additional smaller SOEs collectively: 7.2 percent of total SOE debt. - Company performance notes: - ENERCA: situation seemed reasonably under control despite low revenues relative to capital but with surprisingly high profits. - SOCATEL: continues to lose money at an accelerated pace. - The government cleared arrears with ENERCA in December 2023; arrears are likely to remain with SODECA and SOCATEL due to treasury pressures. ### Contingent liabilities stress test design (DSA) - Combined contingent liabilities stress test assumes a tailored shock of 15 percent of GDP to capture public sector exposure to arrears, SOEs, and a financial market shock. - Composition of the 15 percent of GDP shock: - Contingent liabilities shock from SOE debt: 5 percent of GDP (set above the 2 percent default to reflect heightened risks). - Shock from domestic arrears: 5 percent of GDP (to incorporate past and persisting shortcomings in public expenditure management). - Financial market risk shock: 5 percent of GDP (default value, given small size and depth of financial sector in CAR). - Rationale: reflects uncertainty about non-guaranteed SOE debt and arrears, potential additional domestic arrears, and financial market risks. ### Public debt levels, composition, and recent trends - Total public and publicly guaranteed (PPG) debt: - Anticipated to have increased to around 60 percent of GDP in 2024, from 58.2 percent in 2023. - Public sector debt had declined to 44 .4 percent of GDP in 2020, then resumed upward trend due to security crisis, COVID-19, and pause in donor-financing. - External debt: - Remained stable at about 32 percent of GDP in 2024. - Multilateral creditors (mainly IMF and World Bank) held close to 50 percent of external debt in 2024. - CAR has officially recognized pre-HIPC arrears amounting to 8 percent of GDP (pre-dating HIPC Completion Point) with non-Paris Club creditors (Argentina, Equatorial Guinea, Iraq, Libya, Taiwan, Province of China). - Total bilateral debt: about 14 percent of GDP (main creditors: India, China, Saudi Arabia, Kuwait, Angola). - Debt to private creditors is negligible; this debt is included in the baseline. - Domestic debt: - Domestic indebtedness surged from 9.4 percent of GDP in 2020 to an estimated 28.7 percent by end-2024. - Domestic debt primarily comprises issuances in the regional CEMAC market, reaching 16 percent of GDP in 2024 (about 55 percent of domestic debt). - Other domestic components: - Withdrawn SDR allocations: 5 percent of GDP. - Arrears: 0.9 percent of GDP. - Bank loans: 0.7 percent of GDP. - Exceptional advances from BEAC consolidated into a single loan of CFAF 80.5 billion (4.7 percent of GDP), which started amortizing in March 2025. - New issuances and market conditions: - Regional syndicated issuances totaling CFAF 127 billion in April, September, and December 2024. - Between end-April and early May 2025, authorities raised gross CFAF 65 billion, of which around CFAF 13.5 billion repaid most of CFAF 29.6 billion maturing between May and end-2025. - Medium-term bond coupons have hovered between 6 and 7.5 percent. - Yields on 3-year issuances around 12 percent. - Shorter maturities and declining subscription rates indicate some banks may be nearing internal limits on government securities exposure. - Subscription rates rose from under 20 percent in Q1 2023 to about 70 percent after ECF-supported program approval in April 2023, peaking at 100 percent by mid-2023; tightening in early 2024 forced reliance on costly syndicated issuances. ### Arrears composition and developments - New bilateral arrears in 2024: - Total gross new bilateral arrears: 4,908 (CFAF million). - Total net new bilateral arrears: 3,316 (CFAF million). - By creditor (gross / net, CFAF million): - China: 1,242 / 1,242 - India: 1,959 / 1,676 - Kuwait: 243 / 213 - Saudi Arabia: 888 / 185 - Serbia: 577 / - - Multilateral arrears (gross): 1,305 (CFAF million) — recent multilaterals (excluding legacy) have been cleared. - Total gross new arrears: 6,214 (CFAF million); Total net new arrears: 3,316 (CFAF million). - % of GDP: Total gross 0.36; Total net 0.19. - Legacy arrears (pre-HIPC, amounts in local currency units shown in table): - Total legacy arrears: 137,970 (local currency units as reported); % of GDP 8.10. - Legacy creditors include Argentina, Equatorial Guinea, Iraq, Libya, Taiwan, Province of China, UAPT, OFID. - Specific notes: - Arrears to Angola amount to about CFAF 1.8 billion (amount provided by CAR authorities; uncertainty exists due to dormant loan and ongoing negotiations including possibility of standstill). - New arrears incurred since second review, arrears to Angola, and OFID are deemed de minimis for DSA purposes (less than 1 percent of GDP). - New bilateral arrears in 2024 (about CFAF 4.9 billion gross; net CFAF 3.3 billion) mainly reflect liquidity and coordination challenges between the Debt Directorate and the Treasury; treated as de minimis and did not trigger an in-distress assessment. ### Projections, risks, and medium-term outlook - Public debt projected to decline gradually to about 40 percent of GDP by 2030, led by a fall in domestic debt (domestic debt currently about 45 percent of CAR’s total public indebtedness). - Near-term risks slightly increased compared to previous DSA due to: - Upcoming maturities in the regional debt market. - Increased liquidity pressures driven by fiscal risks. - Issuing long-term instruments to rollover maturing debt has become challenging; heavy amortizations persist beyond 2025. - Recommended financing priorities to ease debt dynamics: - Continue to prioritize grants and concessional financing to gradually replace regional debt. - Objective: ease debt service and reduce debt-to-GDP ratio below 45 percent by 2028. *Source: IMF staff estimates and country authorities (Central African Republic DSA content).* ### 10. CAR has faced difficulties covering its financing needs since 2021. The financing outlook ### 10. CAR has faced difficulties covering its financing needs since 2021. The financing outlook ### Financing outlook and policy imperatives - CAR has faced difficulties covering its financing needs since 2021; the financing outlook hinges on the government’s ability to adhere to the ECF-supported program targets while fostering good governance, transparency, and financial integrity to protect market access and catalyze donor support. - If authorities do not meet program and governance goals, acute financing needs are expected to emerge, likely prompting a very steep spending adjustment across the board that would inflict significant hardship on the population. - Protecting access to the CEMAC debt market is critical to address upcoming maturities; this requires an appropriately tight fiscal stance and continuous investor outreach. ### Recent revisions to projections (comparison with previous DSA) - Near- and medium-term macroeconomic projections were revised to account for a higher primary deficit in 2024 and milder revenue generation over the medium term. - Growth - Real GDP growth in 2024 is estimated to have been 1.9 percent, up from the 1.4 percent included in the prior published DSA. - Growth is projected to reach 3 percent in 2025 as energy supply nears pre-2022 shortage levels. - Additional positive factors cited: 4G rollout, progress on the Corridor 13 road project, a Russian diesel donation, and a mining rebound after late-2024 lifting of diamond export sanctions. - Medium-term growth: 3.3 percent in 2026, 3.6 percent in 2027, and 3.8 percent in 2028. - Long-term growth (2029-42) projected at 3.4 percent. - Assumptions behind growth path include improved fuel and electricity supply, increased extractive and forestry exports, transparency and governance improvements under the ECF-supported program, security improvements especially since 2022 in greater Bangui and secondary urban centers, redeployment of public services, domestic arrears clearance, and increased public and private investments. - Inflation - Inflation is expected to drop from 4.2 percent in 2024 to 1.6 percent in 2025 (year-on-year). - Inflation would continue to hover around CEMAC’s 3 percent convergence criterion, conditional on improved fuel supply and an active trade corridor with Cameroon. - Projections carry upside risks due to CAR’s vulnerability to external shocks affecting food and other imported goods prices. ### Public finances: outturns and medium-term outlook - 2024 domestic primary deficit revised up to 4.8 percent of GDP from 2.8 percent of GDP in the prior DSA. - Causes: substantial spending overruns executed through extraordinary procedures (military motorbikes, food allowances, mission travel). - Financing in 2024 largely satisfied through the CEMAC regional debt market, a credit line with local banks, and IMF financing. - Disbursements from the World Bank and the AfDB totaling CFAF 15 billion or 0.9 percent of GDP helped close the financing gap. - Half of an EUR 10 million grant from France (CFAF 3.3 billion or 0.2 percent of GDP) disbursed in December was immediately available for budget support; the remainder allocated to specific spending including local elections (EUR 3 million). - Medium term (2025-28) assumptions - Budget support grants expected to gradually increase to almost 3.0 percent of GDP assuming agreement with traditional donors to unblock financing. - Domestic revenue mobilization anticipated to increase by an average of 0.3 percent of GDP per year, driven by: stronger revenues from fuel imports, reduction in unwarranted tax exemptions at customs, rollout of e-Tax, opening of new customs offices enabled by security improvements, VAT electronic invoicing system, tax-compliance improvements, and continued efforts to recover past-due taxes. - Downside risks: insufficient provision of hydrocarbons at reasonable cost and shortfalls in donor grants, particularly if macroeconomic, governance, or security reforms reverse. - Expenditures expected to remain overall stable as a percentage of GDP. ### Financing assumptions and near-term financing mix - 2025 financing - Most financing needs in 2025 assumed to be covered through the regional debt market, likely at higher costs. - Factors supporting continued market access: a quarter of original maturities for the year were repaid through a successful syndication last September; prospects of fiscal consolidation under the ECF-supported program; regular communication with primary dealers; operationalization of the public debt coordination and management committee (PNDP). - CAR expected to receive approximately US$45 million (CFAF 26.6 billion) in grants in the year: US$30 million from the World Bank (in addition to US$3.5 million in delayed disbursements from last year) and US$10 million from the AfDB (also reflecting a delayed disbursement from 2024). France committed EUR 25 million in a concessional loan. - 2026–2028 - Anticipated full resumption of external concessional borrowing, reducing reliance on the regional market. ### Key macroeconomic assumptions (Text Table 3 excerpts) - DSA-ECF arrangement (2nd review) versus Proposed DSA-ECF arrangement (combined 3rd and 4th review) — averages by period: - GDP growth (percent): 2022-28 average 2.4; 2029-42 average 3.2 (previous DSA). Proposed: 2022-28 average 2.3; 2029-42 average 3.4. - GDP deflator (percent): previous 4.3 (2022-28), 2.7 (2029-42). Proposed 5.2 (2022-28), 3.6 (2029-42). - Non-interest current account balance: previous -7.0 (2022-28), -4.6 (2029-42). Proposed -6.6 (2022-28), -2.4 (2029-42). - Exports of goods and services: previous 15.5 (2022-28), 16.5 (2029-42). Proposed 14.9 (2022-28), 15.0 (2029-42). - Primary balance: previous -2.4 (2022-28), -0.2 (2029-42). Proposed -2.6 (2022-28), -0.4 (2029-42). - Revenues and grants: previous 16.0 (2022-28), 14.4 (2029-42). Proposed 15.1 (2022-28), 13.4 (2029-42). ### Long-term revenue and fiscal structural reforms (2029-42) - Domestic revenues (excluding grants) assumed to reach around 12.5 percent of GDP by end of projection period (2029-42). - Revenue reform measures assumed include: - establishment and publication of a streamlined price structure on a monthly basis, including for non-registered importers; - broadening of the usage of new software (SIM_Ba and SYDONIA World) to curb expenditure through extraordinary procedures and better register customs operations; - stronger collaboration between the Tax Agency and Customs to apply the established penalty on unregistered importers; - acceleration of consolidation of all fees and expenses of services collected by various ministries in the Treasury Single Account (TSA). - Budget support grants assumed to decline to less than 1 percent of GDP in the long run to reflect a shift toward IDA regular credit terms where grant financing has not already been committed. - Primary fiscal balance projected to reach a deficit of around 0.3 percent of GDP by the end of the forecast period, reflecting faster revenue mobilization amid continued fiscal reforms. ### External sector and capital flows - Current account (with grants) - Anticipated to have increased mildly in 2024 to 9 percent of GDP deficit from 8.8 percent in 2023. - Expected to improve to about 2.3 percent of GDP deficit by 2028 due to fiscal adjustment and export increases from diversification and value-adding reforms. - Impact of USAID withdrawal expected to be contained as about 88 percent of projects have been waived for humanitarian reasons. - Medium-term external flows: official budget support transfers expected to ramp up, project-support transfers remain relatively solid, and FDI inflows projected to increase moderately to 1.8 percent of GDP by 2028. ### Realism of the baseline assumptions and risks - Drivers of debt dynamics show a broadly unchanged trajectory for external PPG debt and public debt compared with the previous DSA; decompositions of debt-creating flows are similar. - Realism tools flag risks from the growth projection, projected fiscal consolidation, and long-term private investment outlook. - The envisaged 3-year primary balance adjustment is in the top quartile relative to comparison group and appears relatively ambitious. - Fiscal consolidation hinges on the authorities’ ability to increase domestic revenue mobilization per program commitments and attract donor support. - Growth in 2025 appears optimistic given standard fiscal multipliers; growth is expected to be driven mainly by private sector rebound after resolution of the fuel shock, particularly in agriculture and mineral extraction. - Over time, model assumes a switch from public to private investment as a growth driver; private investment growth depends on improved business and governance environment, infrastructure development, and financial sector deepening. - Downside realization risk: the domestic revenue mobilization projections carry significant downside risk; achieving projected improvement depends on recovery of the fuel market and sustained reform efforts by the Ministry of Finance and Budget, supported by international partners. ### Country classification, thresholds, and debt-carrying capacity - CAR’s debt carrying capacity assessed as weak, unchanged from the last DSA in June 2024. - Composite indicator (CI) is 2.35 based on October 2024 World Economic data and 2023 CPIA scores. - Under weak debt carrying capacity, applicable thresholds: - PV of debt-to-GDP ratio: 30 percent - PV of debt-to-exports ratio: 140 percent - Debt service-to-exports ratio: 10 percent - Debt service-to-revenue ratio: 14 percent - Benchmark for PV of total public debt: 35 percent of GDP ### External debt sustainability findings - External debt solvency indicators remain broadly similar to previous DSAs. - Present value of external debt-to-GDP ratio remains well below relevant threshold under baseline but approaches threshold under most extreme standardized stress test. - Present value of debt-to-exports ratio declines from close to the 112 percent threshold in 2024 to well below its threshold in the medium term. - Setting key variables to historical averages leads to upward trend in debt ratios due to large past shocks (e.g., 2013 crisis). - Liquidity indicators breach thresholds - Liquidity indicators of external PPG debt breach their thresholds for 3 years starting from 2025 under the baseline scenario. - External debt service-to-exports and debt service-to-revenue ratios both breach respective thresholds for 3 years starting in 2025, driven by significant uptick in debt service, primarily related to increased repayments to the Fund in that period. - Mitigating factors: CAR is part of CEMAC and has access to its pool of reserves (conditional on budgetary resources to purchase them) and to the CEMAC regional debt market; recent commitments to regional stability and increased foreign borrowing by larger CEMAC countries expected to reduce pressures on regional securities markets. - Larger breaches occur under historical and extreme standardized stress tests (shocks to exports and exchange rate depreciation). ### Public debt sustainability findings - Total public debt indicators are high but decline below indicative benchmark starting in 2027. - PV of debt-to-GDP ratio breaches its indicative benchmark in 2025 and 2026 due to rising regional debt issuances and domestic debt reconciliation that added two previously excluded bank loans. - PV of debt-to-GDP ratio shows gradual decline under conservative financing assumptions (financing gaps mostly covered by concessional external debt and renewed donor support). - PV of debt-to-revenue ratio shows a declining path through projection period. - Debt-service-to-revenue-and-grants ratio remains elevated, reflecting higher domestic debt service payments. - Standardized shock to combined contingent liabilities would breach the PV of debt-to-GDP indicative benchmark and significantly increase the PV debt-to-revenue ratio. - Worsening macro outlook (e.g., donor budget support not resuming) would exacerbate domestic arrears and contingent liabilities from vulnerable SOEs, severely affecting the budget and debt risks. *Source: IMF staff projections and analysis in the provided chapter.* ### 18. CAR remains at high risk of external debt distress and overall high risk of debt distress, ### 18. CAR remains at high risk of external debt distress and overall high risk of debt distress, but debt is assessed to be sustainable ### Risk assessment and drivers - Rating: high risk of external debt distress and overall high risk of debt distress, while public debt is assessed to be sustainable. - Primary drivers: - Persistent breaches in the medium term of the thresholds for the external debt service-to-exports ratio and, in particular, the external debt service-to-revenue ratio (breaches are substantial under the baseline). - Still subdued budget support and weakening fiscal revenue linked to fuel shortages. - Significant near-term uncertainty in macroeconomic projections due to overlapping crises and delayed full resumption of donor support. - Large financing needs through 2026 that have exacerbated rollover risks and increased liquidity vulnerabilities. ### Liquidity, financing sources, and conditionalities - Short-term support expected to help close the 2025 financing gap: World Bank, African Development Bank, France, and disbursements under the ECF-arrangement. - Regional market access: CAR still has access to the regional CEMAC market, which should finance around half of this year’s gross financing needs. - Risks from regional borrowing: Excessive regional borrowing could trigger further increases in financing costs as regional liquidity tightens. - Reserves: Pooled foreign exchange reserves mitigate repayment risks provided the government has sufficient local currency resources. - External borrowing cautions: - Disbursing the highly non-concessional BDEAC loan signed in 2021 would worsen external debt sustainability indicators; staff continue to advise against it. - Required actions: urgency of fiscal measures to strengthen revenue and renewed efforts to restore relations with donors to ensure sustainability; ensuring successful execution of the ongoing UCT (Upper Credit Tranche) program. ### Authorities’ views - Authorities broadly agreed with the vulnerabilities assessment. - They identified liquidity challenges in the short to medium term as the greatest hindrance to debt sustainability. - Agreed priorities: - Full implementation of the ECF-supported program, particularly revenue measures, to reduce debt service vulnerabilities. - Revenue-led fiscal consolidation, strong governance, and transparency reforms to improve donor relations and unlock financing. - A proactive debt management system to reduce debt vulnerabilities and arrears. - Need for grant financing and concessional external financing to meet development needs while improving debt sustainability. ### Debt sustainability indicators and selected projections (external and public DSA excerpts) - External debt (nominal) series (2022–2035 as shown): 32.1 31.4 32.0 30.0 28.1 25.7 24.6 23.7 24.6 25.6 21.7 33.3 25.7 - PV of PPG external debt-to-GDP ratio (selected series shown): 17.8 17.4 16.0 14.5 14.1 13.7 14.8 16.9 17.2 - PV of PPG external debt-to-exports ratio (selected series shown): 121.2 116.0 104.9 93.9 86.6 80.2 89.1 106.1 132.5 - PPG debt service-to-exports ratio (selected series shown): 3.7 3.9 5.3 13.8 14.2 12.5 8.8 7.7 6.1 8.3 8.8 - PPG debt service-to-revenue ratio (selected series shown): 6.6 6.9 8.5 21.4 22.8 20.1 13.7 13.0 9.9 11.8 9.1 - Gross external financing need (Million of U.S. dollars) series (selected as shown): 303.2 212.8 231.3 241.7 157.6 121.0 57.9 89.8 66.4 47.5 -6.2 - Real GDP growth (in percent) series (selected as shown): 0.8 -0.1 1.9 2.9 3.3 3.6 3.8 3.7 3.9 0.8 4.9 2.4 3.1 - Government revenues (excluding grants, in percent of GDP) series (selected as shown): 7.6 8.0 9.1 9.7 9.5 9.6 10.5 10.1 10.2 11.2 12.5 - Aid flows (Million of US dollars) series (selected as shown): 125.9 174.8 169.3 201.6 251.8 264.1 268.9 184.9 183.4 146.8 86.0 - Public sector debt (percent of GDP) series (2022–2035 as shown): 50.0 55.7 60.7 57.0 51.2 46.3 42.9 42.3 40.7 37.0 28.3 50.0 42.7 - PV of public debt-to-GDP ratio (selected series shown): 45.6 41.3 36.4 32.7 30.1 30.2 29.0 27.0 22.9 - Debt service-to-revenue and grants ratio (selected series shown): 8.6 22.3 29.8 36.3 36.3 44.6 35.1 40.7 28.5 25.3 20.9 (Note: series above are quoted exactly as presented in the DSA tables and figures.) ### Stress tests, scenarios, and realism tools - Stress tests show substantial breaches for key debt service ratios under multiple shocks; the most extreme shocks presented include one-time depreciation, export shocks, and combined contingent liabilities. - Table 4 sensitivity analysis highlights that several alternative and bound tests produce values exceeding thresholds (bold values indicate breaches in the original DSA tables). - Realism tools and fiscal adjustment analysis indicate that significant fiscal adjustments will be required over the medium term; distributional evidence from LIC Fund-supported programs suggests a substantial 3-year adjustment is common in such programs. *Italic: Source — IMF staff report excerpt (Central African Republic DSA and related sections).* ### 2. Primary balance141413109789101010 ### 2. Primary balance ### Sensitivity analysis and debt indicators - Table 5: Central African Republic: Sensitivity Analysis for Key Indicators of Public Debt, 2025-2035 (Sources: Country authorities; and staff estimates and projections). - Note: 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. - The supplement includes extended sensitivity and bound tests covering: - Alternative scenarios (e.g., A1: Key variables at their historical averages in 2025-2035). - Bound tests (B1. Real GDP growth; B2. Primary balance; B3. Exports; B4. Other flows; B5. Depreciation; B6. Combination of B1-B5). - Tailored tests (C1. Combined contingent liabilities; C2. Natural disaster; C3. Commodity price; C4. Market Financing). - Total public debt benchmark indicated as 35 35 35 35 35 35 35 35 35 35 35 (as presented in the table). - Projections and indicators in the table include PV of debt-to-GDP ratio, PV of debt-to-exports ratio, PV of debt-to-revenue ratio, Debt service-to-exports ratio, and Debt service-to-revenue ratio for 2025–2035. ### Recent developments (supplemental information) - The supplement provides information that became available since the staff report (EBS/25/37) on May 21, 2025, related to fulfillment of two prior actions and legacy arrears to Russia. The additional information does not change the thrust of the staff appraisal. - Prior actions completed: - First prior action: Submission to Parliament on May 9 a revised Budget Law for 2025 consistent with the program’s macroeconomic framework; the revised budget was adopted by Parliament on May 28, 2025. Domestic revenue and domestic primary balance projections are in line with related end-December performance criteria (PC) of the ECF-supported program. The regional financing envelope is also consistent with the end-December net domestic financing PC. - Second prior action: Strengthening the tax clearance certificate (quitus fiscal) regime. The revised Budget Law for 2025 includes amendments to the General Tax Code and the Book of Tax Procedures introducing requirements to obtain the tax clearance certificate, valid for 3 months, to be eligible for tax exemptions and to process transfers overseas. - Prepared by the African Department in consultation with Strategy, Policy, and Review Department as well as the Legal and Fiscal Affairs Departments. Dated May 29, 2025. ### Recent developments on official bilateral arrears - Legacy arrears to Russia: - Central African Republic has official bilateral arrears to Russia that staff had not been aware of. - The arrears (from the Soviet period) total US$2.3 million and are subject to a near total write-off under the HIPC initiative, with a residual of US$18.3 thousand which is subject to write-off within the framework of the Statement of the Government of the Russian Federation. - The authorities are in the process of fulfilling all requirements for clearance of the arrears. - Russia has consented to the completion of the review despite the arrears. - Additional arrears reported (June 4, 2025 supplement): - New official arrears in May: Kuwait (about CFAF 300 million) and International Fund for Agricultural Development (FIDA) (CFAF 100.1 million). - This brings the total amount of new arrears incurred as at end-May 2025 to CFAF 2 billion instead of the CAFA 1.6 billion reported in the Staff Report. - Kuwait consented to completion of the third and fourth combined review despite the new arrears; staff assesses there is a credible plan to clear the arrears to FIDA. - Prepared by the African Department in consultation with Strategy, Policy, and Review Department as well as the Legal and Fiscal Affairs Departments. Dated June 4, 2025. ### Program performance and recent macroeconomic indicators - Security/humanitarian and macro context: - About 31 percent of the population faced food insecurity over September 2024 to March 2025. - Real GDP growth for 2024 is estimated at 1.9 percent. - End-December 2024 inflation was 4.2 percent (almost 2 percentage points higher than during the same period in 2023). - The current account deficit edged up to 12.1 percent of GDP in 2024, 0.2 percent of GDP higher than the year earlier. - The primary fiscal deficit widened by nearly 1.5 percent of GDP in 2024, to 4.9 percent, due to spending pressures, mainly on security outlays. - Program conditionality and performance: - Completion of the third review had been delayed but challenges were addressed (regional policy assurances, financing assurances, credible funding for 2025 budget). - Program performance for the combined third and fourth reviews was broadly satisfactory albeit mixed: - The authorities met half of the six quantitative performance criteria (QPCs) for end-June and end-December 2024. - Targets for the domestic primary deficit and net domestic financing were missed due to weaknesses in revenue collection and public financial management (PFM). - Continuous PC on non-accumulation of new external arrears was missed owing to liquidity pressures and sub-optimal coordination between the Debt Directorate and the Central Accounting Agency of the Treasury (ACCT). - Indicative targets (ITs) for social spending and extraordinary expenditures were not observed. - Structural reforms: Three out of seven structural measures for the reviews were met (including one implemented with a delay). Three structural benchmarks on fuel market efficiency were missed; authorities requested rescheduling/revision and implemented three proposed prior actions considered critical. - Milestones: operationalization of e-Tax, strengthening of the Court of Audit, allocation of funding to parts of the institutional plan of the Financial Intelligence Unit. ### Outlook and risks - Growth and inflation projections: - Real GDP growth projected at 3.0 percent in 2025 and 3.3 percent in 2026 (compared with an estimate of just under 2.0 percent in 2024). - Inflation projected to decline to 1.3 percent by the end of 2025 compared with 4.2 percent for the same period in 2024. - Year-on-year inflation projected to reach 3.5 percent at end-2025 and stabilize at around the CEMAC convergence threshold of 3 percent over the medium-term. - Over the medium-term, growth projected to accelerate to nearly 4 percent by 2030 and average about 3.6 percent during 2026–2030. - Risk assessment: - Staff and authorities agree the balance of risks is tilted to the downside. - Downside risks include: funding pressures from difficulties refinancing domestic debt; postponements in securing additional concessional external financing owing to delays in governance and transparency reforms; elections-related budget pressures ahead of this year's general elections; security setbacks; challenges on fuel availability. - Upside factors: faster implementation of structural reforms; significant revenue mobilization gains and enhanced expenditure controls; consolidation of peace. ### Policies and reforms for remainder of 2025 and beyond - Alignment and priorities: - ECF-supported program priorities aligned with CAR’s National Development Plan (NDP), adopted in December 2024. - Authorities aim to improve fiscal performance, strengthen fiscal buffers, contribute to buildup of reserves at the CEMAC level, and enhance debt sustainability; also to deepen reforms for resilience, inclusion, governance, and rule of law. - Fiscal policy and reforms: - Fiscal consolidation plan based on stronger revenue mobilization and expenditure control. - Revenue measures include: broadening the tax base; increasing recovery of tax arrears; manual cross-check of tax returns between tax agencies; stopping tax and customs exemptions for companies with outstanding tax arrears; ensuring higher data consumption with new 4G reflected in higher collection from the telco tax (TIC-TECH); applying VAT on transportation of goods imported from other CEMAC countries; ensuring effective recovery of anticipated exceptional revenues. - Expenditure control measures: cap the wage bill; curb spending on goods and services; cut mission travel. - Fiscal reforms to reduce fiscal risks: full operationalization of e-Tax modules at the tax agency (Direction Générale des Impôts et des Domaines, DGID) through appointment of relevant staff and requirement of the use of e-Tax platform for online tax payments for all large taxpayers; deployment of institutional upgrades and compliance tools; setting up high-level PFM and treasury committees; ministerial circular restricting expenditures executed under extraordinary procedures. - Additional measures: boost revenue forecasting, budget preparation and execution, internal controls, and capacity building. - Fuel sector reforms: - Plan to setup a revolving mechanism using part of the proceeds from monetization of the in-kind fuel grant provided by Russia to import fuel through more efficient and cost-effective routes. - Commitment to enhanced transparency in use of the fuel grant, including financial disclosure from Société Panafricaine du pétrole et des produits Raffinés (SOPRAF). - Planned audit of the fuel procurement system to clarify cost structures and profit margins and aim to establish an appropriate margin cap. - Other structural and climate-related reforms: - Continue reforms to improve business climate, governance, and financial integrity; adopt new forestry code and implement mining code. - Published National Report on Climate and Development (CCDR) and Biennial Transparency Report. - Initiated study on Natural Capital Accounting and Climate Finance (CCN) in the Congo Basin forests. - Plan to request IMF technical assistance to conduct a Climate Change Public Investment Management Assessment (C-PIMA) and potentially seek IMF Resilience and Sustainability Facility (RSF) support in due course. ### Conclusion and requests - Authorities remain committed to IMF-supported economic and financial program despite challenges. - Considering generally satisfactory program implementation, corrective measures taken for missed PCs, and renewed commitment to program objectives, the authorities are requesting waivers for the missed PCs and completion of the third and fourth reviews under the ECF arrangement. The authorities request Executive Directors’ favorable consideration. *Prepared by the African Department in consultation with the Strategy, Policy, and Review Department as well as the Legal and Fiscal Affairs Departments. (May 29, 2025; June 4, 2025 supplements included.)* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1cafea2025001-print-pdf.pdf_