## _cr12238

## Source details

**Canonical URL:** [_cr12238](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12238.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12238.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12238.pdf.json)

---

### Recent economic developments and outlook
- Macroeconomic performance since the end of conflict in 2003: "broadly satisfactory," but growth modest and below SSA and other fragile states.
- Key constraints: insufficient domestic and external resources; deep-rooted structural deficiencies; weak institutional capacity; lack of economic diversification.
- Domestic revenue:
  - At less than 10 percent of GDP, it "barely covers current expenditures."
- Poverty and social indicators:
  - Poverty rate: "63 percent."
  - UNDP HDI score 2010: "0.34" (ranked "179 out of 187 countries").
  - Life expectancy: "50 years in the 1990s" to "45 years in 2007."
  - Maternal mortality: "850 per 100,000 live births in 2009."
  - HIV/AIDS prevalence: "6.3 percent for the 15–49 age group in 2005."
- Recent macro outcomes (2010–2011):
  - Real GDP growth: 2010 "3.3 percent"; 2011 estimated "3.1 percent."
  - Inflation (average): 2010 "1.5 percent"; 2011 "0.7 percent."
  - Fiscal deterioration in 2010:
    - Domestic revenue in 2010: "11.6 percent of GDP."
    - Expenditures in 2010: "19.4 percent of GDP."
    - Large improper Treasury payments in 2011: "about 5 percent of GDP."
  - 2011 fiscal adjustment:
    - Expenditures projected to decrease to "17.7 percent of GDP."
    - Overall fiscal deficit (excluding grants) reduced by "1.2 percentage points to 6.5 percent of GDP."
- Monetary and external:
  - Credit to the economy projected end-2011: "10.9 percent of GDP" (comparators: fragile SSA "14.7 percent"; SSA "40.5 percent").
  - Current account deficit: 2010 about "10 percent of GDP"; 2011 projected "7.2 percent of GDP."
  - International reserves expected to fall to "2.7 months of goods and services imports" in 2011.
- Medium-term projections (Text Table 3):
  - Real GDP growth (percent): 2010 "3.3", 2011 "3.1", 2012 "4.1", 2013 "4.2", 2014 "5.9".
  - Consumer prices (avg, percent): 2010 "1.5", 2011 "0.7", 2012 "2.5", 2013 "1.9", 2014 "2.3".
  - Current account (percent of GDP): 2010 "-9.9", 2011 "-7.2", 2012 "-6.8", 2013 "-5.9", 2014 "-5.4".
  - Reserves coverage (months of imports, f.o.b.): 2010 "3.2", 2011 "2.7", 2012 "3.0", 2013 "3.6", 2014 "4.3".
  - Public sector debt (percent of GDP): 2010 "37.8", 2011 "39.6", 2012 "38.2", 2013 "36.5", 2014 "33.7".
- Downside risks: poor weather; delays in public/private investments (including mining); political uncertainty and insecurity; accumulation of domestic payment arrears; volatility in domestic food supply and international oil prices; potential weakening of European demand.

### Issues of discussion and priorities
- Immediate and medium-term priorities:
  - Restore fiscal discipline and strengthen budget execution.
  - Create fiscal space to meet critical needs.
  - Strengthen institutional capacity to support reforms.
  - Accelerate structural reforms to improve external competitiveness and support sustained growth.
- PRSP II pillars (adopted November 24, 2011):
  - (i) Consolidation of peace, governance and the legally constituted state;
  - (ii) Economic revival and regional integration;
  - (iii) Development of human capital and essential social services.
- Donor Roundtable planned: February 2012 in Bangui to mobilize financing for Program of Priority Actions in PRSP II.

### Domestic revenue mobilization — priority findings
- Revenue performance and potential:
  - Revenue-to-GDP ratio averaged "9.2 percent" over the last two decades.
  - Tax potential hovered at about "11 percent of GDP" during 1990–2010.
  - Actual revenue collection averaged "9.2 percent of GDP" = "84 percent" of potential, leaving scope to raise revenue by about "1.8 percentage points of GDP."
  - For the SSA sample, actual revenue collection exceeded potential of "15 percent of GDP."
- FAD/TA recommendations (selected):
  - Fundamental review of the tax system: simplify personal income tax; streamline corporate tax; tax small businesses more effectively.
  - Reform customs administration: reduce exemptions; concentrate customs clearance at points of entry.
- Policy emphasis:
  - Focus on tax administration reforms to broaden the tax base and improve efficiency until structural transformation increases tax potential.

### Petroleum pricing and fiscal impact
- Historical mechanism:
  - Automatic quarterly petroleum pricing formula implemented June 2008; intermittently applied thereafter; automaticity abandoned.
- Fiscal outcomes and staff estimates:
  - Revenue loss in 2011 estimated at CFAF "8.1 billion" ("0.8 percent of GDP") based on 2008 pricing structure.
  - Direct subsidies reached CFAF "3.6 billion" (repaid to marketers).
  - Staff estimates for 2012: using WEO oil prices and 2008 pricing structure, additional revenue up to "1.3 percent of GDP" could be generated if truly automatic monthly adjustments are implemented.
- Staff recommendations:
  - Implement automatic monthly adjustment mechanism based on current pricing formula to eliminate consumer subsidies and safeguard 2012 fiscal framework.
  - Replace broad oil subsidies with targeted fiscal measures (e.g., subsidies for urban bus transport; direct subsidies to the most vulnerable).
  - Put in place well targeted social mitigation: improve product distribution countrywide; subsidize public transportation; consider well-targeted cash transfers.
- Authorities’ stance:
  - Committed to regular adjustments; noted 2008 pricing structure outdated and work to update pricing underway for early 2012 implementation in the budget submitted to parliament.
  - Consideration for civil servants affected by frozen career advancement since 2004.

### Public financial management (PFM), transparency, and arrears
- PFM weaknesses:
  - Fiscal slippages and delays in PFM reforms led donors to withhold planned budget support.
  - Donors suspended budget support following weakened fiscal discipline in 2010–11.
- Staff encouraged authorities to:
  - Restore the centrality of the budget in the PFM process and prioritize expenditures.
  - (i) Adhere strictly to established expenditure procedures.
  - (ii) Establish monthly cash flow plans and commit expenditures based on these plans.
  - (iii) Pay only expenditures processed through computerized system (Gesco).
  - (iv) Operationalize the liquidity management committee.
- Authorities committed actions:
  - Revived and strengthened committees for liquidity management and monitoring macroeconomic developments; Technical Unit set up to assist committee chaired by the Prime Minister.
  - Preparing monthly cash flow projections and weekly monitoring of expenditure commitments.
  - Set up a National Committee on Public Debt under the Minister of Finance; committed to strengthen the debt unit.

### Banking system, debt sustainability, and statistics
- Banking sector structure and indicators:
  - Financial system small: total assets "17.6 percent of GDP" at end-2010; four commercial banks represent "93 percent" of assets.
  - Other institutions: two insurance companies ("4 percent" of assets); eleven microfinance institutions ("3 percent" of assets).
  - Main loan recipients: trade and commerce "20 percent"; transport and communications "16 percent"; forestry "12 percent"; other services "28 percent"; agriculture "4 percent".
  - Statutory capital rose by "71 percent y-o-y" in August 2011.
  - Liquid assets to short-term liabilities declined from "177 percent" in 2009 to "96 percent" in August 2011; two banks failed to comply with liquidity requirement of "100 percent."
  - Funding structure: sight deposits "56 percent" of total liabilities; time deposits "13 percent."
  - Government exposure to banking sector tripled between Sept. 2010 and Sept. 2011; represents "1.8 percent of GDP."
  - Government recapitalized an ailing bank via Treasury bond (CFAF "5.5 billion"), acquiring "51 percent" of share capital; local shareholders increased capital by CFAF "500 million."
- Debt sustainability:
  - DSA main finding: C.A.R. continues to face a "moderate risk of debt distress."
  - All debt indicators remain below policy-dependent thresholds but vulnerable to export shocks; commercial borrowing is risky; concessional external financing required.
- Statistics and data collection:
  - Resources insufficient; price indices not collected in July 2011 due to lack of financial resources.
  - Delays in clearing accounts at national branch of regional central bank led to harmonization issues in monetary data.
  - Authorities and donors should ensure resources to collect consistent data series.

### External stability assessment and competitiveness (Appendix I)
- REER assessment:
  - Exchange rate estimated overvalued by "12–30 percent" under MB approach; ES approach indicates overvaluation below "25 percent."
  - Last exchange rate assessment used elasticity of CAB w.r.t. REER = "0.37."
  - Staff conclusion: REER is moderately appreciated but congruent with regional external position sustainability.
- Export performance and structural constraints:
  - Export growth 2003–2010 averaged "5.2 percent" (SSA benchmark ~ "14.5 percent"; CEMAC ~ "13.5 percent").
  - Doing Business overall ranking: DB 2011 Rank "182"; DB 2010 Rank "182" (No change).
  - Severe weaknesses in trading across borders, paying taxes, closing a business, and other indicators (selected ranks provided).
- Policy implications:
  - Improve competitiveness via structural reforms; prioritize measures with high payoff (e.g., one-stop center for business registration).
  - Security improvements to raise investor attraction.

### DSA update — main findings and stress tests
- Main finding: C.A.R. continues to face a "moderate risk of debt distress."
- Baseline debt indicators below thresholds with stable downward trends but vulnerable to extreme export shocks.
- Selected projection series and snapshots (exact figures preserved from source tables):
  - External debt (nominal) (selected entries): 56.9, 14.6, 16.5, 18.3, 20.5, 21.7, 21.9, 22.2, 22.1, 18.0, 12.0.
  - PV of PPG external debt (selected entries): ......, 10.7, 12.3, 13.1, 13.4, 13.2, 12.9, 12.5, 10.7, 7.4.
  - PV of PPG external debt in percent of exports (selected): ......, 99.3, 97.0, 97.7, 99.4, 97.8, 94.9, 91.6, 76.4, 47.2.
  - PV of PPG external debt in percent of government revenues (selected): ......, 92.2, 110.4, 113.2, 115.6, 108.0, 101.5, 94.9, 70.8, 37.5.
  - Nominal GDP (US$ billions) (selected): 2.0, 2.0, 2.0, 2.2, 2.4, 2.5, 2.7, 2.9, 3.1, 4.6, 10.8 (mem. items).
  - Real GDP growth (percent) (selected projection entries): 2.0, 1.7, 3.3, 1.1, 3.2, 3.1, 4.1, 4.2, 5.9, 5.4, 5.7, 4.7, 6.0, 6.9, 6.2.
- Stress tests:
  - Most extreme stress tests:
    - PV of debt-to-GDP: Combination shock.
    - PV of debt-to-exports: Exports shock.
    - PV of debt-to-revenue: Combination shock.
    - Debt service-to-exports and debt service-to-revenue: Terms shock.
  - Example scenario impact (PV of debt-to-exports under B2): 97, 138, 194, 190, 176, 157, 121, 115, 108, 101, 92, 84, 76, 69, 61, 54, 60.
- Policy implication: Maintain high concessionality and grant-equivalent financing to preserve debt sustainability.

### Relations with the Fund and development partners (Appendix I & II)
- Fund relations (As of November 30, 2011):
  - Membership: Joined 07/10/1963; Article VIII.
  - Quota: "55.70" (SDR million); Fund holdings of currency: "55.45"; Reserve position: "0.26."
  - PRGF/ECF arrangements outstanding: "58.68" (SDR million; "105.35 percent of quota").
  - Latest financial arrangements: PRGF/ECF Approval Date Dec. 22, 2006; Expiration Date Sept. 2, 2010; Approved "69.62"; Drawn "69.62."
  - HIPC: Decision point Sept. 2007; Completion point June 2009; Assistance committed (US$ million) "578.00"; IMF Assistance (US$ million) "26.77" (SDR equivalent "17.19").
- Fund technical assistance chronology: numerous FAD/AFRITAC/STA/MCM missions listed (2007–2011) on public financial management, fuel pricing, customs, tax administration, national accounts, debt management, and statistics.
- World Bank / JMAP coordination (Nov. 2011–Dec. 2012):
  - Agreed macro-critical structural reform areas: financial resource mobilization; PFM; social sector spending; investment climate reform; infrastructure and SOEs rehabilitation; debt management.
  - Authorities intend to request a new ECF arrangement.
  - Division of labor: Fund leads on tax/revenue mobilization TA; Bank leads on PFM support, social sector monitoring, infrastructure project preparation; joint work on DSA and PRSP II assessment.
- AfDB relations and planned financing (as of Nov. 2011):
  - ADF-12 resource allocation US$ "178.9 million" broken into US$ "25.9 million" (PBA); US$ "41 million" (FSF); US$ "111 million" (regional).
  - Selected projects, approvals, and disbursement rates listed (project-level UA million figures and percentages preserved).

### Key executive and Board assessments (Public Information Notice and Directors’ views)
- Board and Executive Directors:
  - Welcomed resilience of economy; short-term outlook favorable but significant challenges remain.
  - Stressed importance of strengthening budget execution; addressing structural and infrastructural bottlenecks; building capacity; improved security and political stability.
  - Regretted fiscal slippages and governance issues in 2010 and early 2011.
- Directors welcomed:
  - adjustment in domestic petroleum prices; importance of regular adjustments to ensure full pass through of international prices while protecting the poor.
  - authorities’ intent to seek a Fund-supported program; noted strong ownership and commitment are key.

### Selected exact economic indicators (figures preserved)
- GDP at constant prices (annual percent change): 2008 "2.0"; 2009 "1.7"; 2010 "3.3"; Est. 2011 "3.1"; Proj. 2012 "4.1".
- Inflation (period average): 2008 "9.3"; 2009 "3.5"; 2010 "1.5"; Est. 2011 "0.7"; Proj. 2012 "2.5".
- Current account (percent of GDP): 2008 "-9.9"; 2009 "-8.1"; 2010 "-9.9"; Est. 2011 "-7.2"; Proj. 2012 "-6.8".
- Total revenue (percent of GDP): 2008 "15.2"; 2009 "16.1"; 2010 "18.0"; Est. 2011 "14.7"; Proj. 2012 "16.2".
- Total expenditure (percent of GDP): 2008 "-16.2"; 2009 "-16.2"; 2010 "-22.8"; Est. 2011 "-17.7"; Proj. 2012 "-17.2".
- Public sector debt (percent of GDP): 2008 "80.3"; 2009 "35.0"; 2010 "37.8"; Est. 2011 "39.6"; Proj. 2012 "38.2".
- Reserves coverage (months of imports, f.o.b.): 2010 "3.3"; 2011 "2.7"; 2012 "3.0"; 2013 "3.6"; 2014 "4.3".

*Source: INTRODUCTION and chapters/appendices of CENTRAL AFRICAN REPUBLIC 2011 ARTICLE IV REPORT, INTERNATIONAL MONETARY FUND (document _cr12238).*

### INTRODUCTION __________________________________________________________________________________  4

### INTRODUCTION

### Recent Economic Developments and Outlook
- Macroeconomic performance since the end of conflict in 2003 has been "broadly satisfactory," but growth remained modest and below averages for sub-Saharan Africa (SSA) and other fragile states.
- Key constraints: insufficient domestic and external resources, deep-rooted structural deficiencies, weak institutional capacity, and lack of economic diversification.
- Domestic revenue mobilization:
  - C.A.R. has one of the lowest domestic revenue-to-GDP ratios in SSA: "At less than 10 percent of GDP, it barely covers current expenditures."
  - Dependency on volatile donor assistance.
- Poverty and social indicators:
  - Poverty rate: "63 percent."
  - UNDP HDI score in 2010: "0.34" (ranked "179 out of 187 countries").
  - Life expectancy fell from "50 years in the 1990s to 45 years in 2007."
  - Maternal mortality: "850 per 100,000 live births in 2009."
  - HIV/AIDS prevalence: "6.3 percent for the 15–49 age group in 2005."
- Recent macro outcomes (2010–2011):
  - Real GDP growth: 2010 "3.3 percent"; 2011 estimated "3.1 percent."
  - Inflation (average): 2010 "1.5 percent"; 2011 "0.7 percent."
  - Fiscal deterioration in 2010:
    - Domestic revenue in 2010: "11.6 percent of GDP" (benefitted from one-offs).
    - Expenditures in 2010: "19.4 percent of GDP."
    - Note: large improper Treasury payments in 2011 amounted to "about 5 percent of GDP."
  - 2011 fiscal adjustment: expenditures projected to decrease to "17.7 percent of GDP"; overall fiscal deficit (excluding grants) reduced by "1.2 percentage points to 6.5 percent of GDP."
- Monetary and financial sector:
  - Credit to the economy projected to reach "10.9 percent of GDP" by end-2011.
  - Comparators: fragile SSA countries average "14.7 percent"; SSA average "40.5 percent."
  - Agriculture receives little bank financing despite being a main growth driver.
- External sector:
  - Current account deficit widened to about "10 percent of GDP" in 2010.
  - 2011 current account deficit projected to decline to "7.2 percent of GDP."
  - International reserves expected to fall to "2.7 months of goods and services imports" in 2011.
- Medium-term projections and risks:
  - 2012 growth projected: "4.1 percent."
  - 2012 inflation projected: "2.5 percent."
  - 2012 fiscal outlook: government aims to reduce current primary expenditures to "10.9 percent of GDP" and has capital expenditures budgeted at "10.6 percent of GDP" assuming donor financing of "8.1 percent of GDP."
  - 2012 external current account projected: "6.8 percent of GDP."
  - Medium-term macro framework (Text Table 3):
    - Real GDP growth: 2010 "3.3", 2011 "3.1", 2012 "4.1", 2013 "4.2", 2014 "5.9" (percent).
    - Consumer prices (avg): 2010 "1.5", 2011 "0.7", 2012 "2.5", 2013 "1.9", 2014 "2.3" (percent).
    - Current account (percent of GDP): 2010 "-9.9", 2011 "-7.2", 2012 "-6.8", 2013 "-5.9", 2014 "-5.4".
    - Reserves coverage (months of imports, f.o.b.): 2010 "3.2", 2011 "2.7", 2012 "3.0", 2013 "3.6", 2014 "4.3".
    - Public sector debt (percent of GDP): 2010 "37.8", 2011 "39.6", 2012 "38.2", 2013 "36.5", 2014 "33.7".
  - Risks (downside): poor weather, delays in public/private investments (including mining), political uncertainty and insecurity, accumulation of domestic payment arrears, volatility in domestic food supply and international oil prices, and potential weakening of European demand from the Euro-area crisis.

### Issues of Discussion
- Immediate and medium-term priorities:
  - Restore fiscal discipline and strengthen budget execution to address 2010 and early 2011 fiscal slippages.
  - Create fiscal space to meet critical needs.
  - Strengthen institutional capacity to support reforms.
  - Accelerate structural reforms to improve external competitiveness and support sustained growth.

#### A. Mobilizing Domestic Resources for Poverty Reduction — Background and Findings
- Revenue performance:
  - Staff analytical work indicates revenue performance in C.A.R. has been "about 2 percentage points below the tax potential during 1990–2010."
  - This gap indicates the realistic range of improvement in revenue going forward.
- Policy and implementation gaps:
  - Measures adopted under the ECF-supported program yielded gains but were not sustained during the electoral period.
  - Implementation of technical assistance recommendations on revenue administration stalled.
- Petroleum pricing:
  - Failure to pass through world oil prices to domestic petroleum prices in 2011 caused significant fiscal losses and direct subsidies (see Box 3 as referenced).

### Social Development and MDGs — Key Indicators (selected)
- MDG1: Proportion of population below $1.25 (PPP) per day:
  - Baseline 1990 "83"; Objective 2015 "41.5"; Status 2009 "63" (percent).
- MDG2: Total enrollment ratio in primary education:
  - Baseline 1990 "58"; Objective 2015 "100"; Status 2009 "67" (percent).
- MDG3: Ratio of girls to boys primary enrollment:
  - Baseline 1990 "63"; Objective 2015 "100"; Status 2009 "71" (percent).
- MDG4: Under five mortality rate:
  - Baseline 1990 "175"; Objective 2015 "70"; Status 2009 "171".
- MDG5: Maternal mortality ratio (per 100,000 live births):
  - Baseline 1990 "880"; Objective 2015 "293"; Status 2009 "850".
- MDG6: HIV prevalence among population aged 15-49 years:
  - Baseline 1990 "3.1"; Objective 2015 "1.5"; Status 2009 "4.73" (percent).
- MDG7: Proportion of population using improved drinking water source:
  - Baseline 1990 "58"; Objective 2015 "79"; Status 2009 "67" (percent).
  - Proportion using improved sanitation facility:
    - Baseline 1990 "11"; Objective 2015 "55"; Status 2009 "34" (percent).

### Institutional and Programmatic Actions
- The 2012 budget approved on December 29, 2011 targets further reduction in current primary expenditures and assumes donor financing for capital projects; staff views the donor financing assumption of "8.1 percent of GDP" as unrealistic and projects a more realistic path with fiscal consolidation beginning in 2012.
- A Donor Roundtable was planned for February 2012 in Bangui to mobilize financing for the Program of Priority Actions in PRSP II (adopted November 24, 2011), which has three pillars:
  - (i) Consolidation of peace, governance and the legally constituted state;
  - (ii) Economic revival and regional integration;
  - (iii) Development of human capital and essential social services.

*Source: INTRODUCTION, CENTRAL AFRICAN REPUBLIC 2011 ARTICLE IV REPORT, INTERNATIONAL MONETARY FUND*

### 19.      Domestic revenue mobilization

### Domestic revenue mobilization

### Priority and overall findings
- Domestic revenue mobilization should be given top priority.
- Staff urged implementation of a comprehensive tax policy and customs administration reform aimed at improving the efficiency of taxation while broadening the tax net.
- FAD provided substantive technical assistance and recommended:
  - A fundamental review of the tax system to simplify the personal income tax system, streamline the corporate tax systems, and tax more effectively small businesses.
  - A reform of the customs administration to reduce exemptions and concentrate customs clearance at the points of entry.

### Tax potential and revenue performance (Box 2)
- Over the last two decades, the revenue-to-GDP ratio has averaged 9.2 percent.
- The study used a panel dataset covering 32 SSA countries from 1990 to 2010 to estimate determinants of revenue-to-GDP ratios and infer C.A.R.’s potential.
- Main findings:
  - Tax potential for C.A.R. hovered at about 11 percent of GDP during 1990–2010, 4 percentage points below the estimate for SSA.
  - Actual revenue collection averaged 9.2 percent of GDP during the period, or just 84 percent of C.A.R.’s potential, leaving scope to raise revenue by about 1.8 percentage points of GDP.
  - For the SSA sample, actual revenue collection has been above the potential of 15 percent of GDP.

- Actual and predicted fiscal revenue indicators, 1990–2010 (Percent of GDP):
  - Central African Republic
    - Total revenue: Actual 9.2; Predicted 11.0; Gap -1.8
    - Tax revenue: Actual 8.5; Predicted 8.6; Gap -0.1
    - Income and profit tax: Actual 2.2; Predicted 2.6; Gap -0.4
    - Tax on goods and services: Actual 3.4; Predicted 4.3; Gap -0.9
    - Tax on international trade: Actual 2.9; Predicted 2.3; Gap 0.6
    - Non-tax revenue: Actual 3.7; Predicted 2.1; Gap 1.6
  - Sub-Saharan Africa
    - Total revenue: Actual 18.2; Predicted 15.0; Gap 3.3
    - Tax revenue: Actual 13.6; Predicted 12.0; Gap 1.6
    - Income and profit tax: Actual 4.4; Predicted 3.6; Gap 0.8
    - Tax on goods and services: Actual 4.4; Predicted 4.8; Gap -0.3
    - Tax on international trade: Actual 4.8; Predicted 3.5; Gap 1.3
    - Non-tax revenue: Actual 3.7; Predicted 3.2; Gap 0.5

- Interpretation and implications:
  - Levying tax on goods and services, and income and profit tax are the areas where C.A.R. underperformed, suggesting efficiency problems with the tax administration.
  - Until structural transformation increases tax potential, focus should be on tax administration reforms to broaden the tax base and improve efficiency.
  - Taxation of petroleum products (and pass-through of world oil prices to domestic prices) constitutes a source to raise government revenue based on 2009–10 experience.

### Petroleum pricing and revenue impact (Boxes and paras 20–23, Box 3)
- Adjustment of domestic petroleum prices would provide an immediate boost to revenue.
- Staff recommended implementation, at monthly intervals, of the automatic adjustment mechanism of domestic petroleum prices based on the current pricing formula to eliminate consumer subsidies and safeguard the 2012 fiscal framework.
- Staff further recommended targeted fiscal measures (e.g., subsidies for urban bus transportation or direct subsidies to the most vulnerable) instead of general oil subsidies that benefit mostly the better-off.
- Historical context:
  - An automatic quarterly petroleum pricing formula was implemented in June 2008 to ensure full pass-through of world oil prices and taxes; it contributed to significant increases in domestic revenue in 2008–09.
  - The mechanism was intermittently applied thereafter; pump prices were adjusted only three times and automaticity was abandoned.
- Fiscal outcomes and estimates:
  - Revenue loss in 2011 as a whole is estimated at CFAF 8.1 billion (0.8 percent of GDP) based on the 2008 pricing structure.
  - Direct subsidies reached CFAF 3.6 billion; these subsidies have to be repaid directly to the marketers.
  - Staff estimates that in 2012, using WEO oil prices and the 2008 pricing structure, additional revenue of up to 1.3 percent of GDP could be generated if truly automatic monthly adjustments are implemented.
- Social mitigation:
  - Well targeted social measures need to be put in place to mitigate negative impacts on the most vulnerable, e.g., improving product distribution countrywide, subsidizing public transportation, or considering well-targeted cash transfers.
- Authorities’ stance:
  - Authorities committed to adjusting domestic petroleum prices regularly but noted the 2008 pricing structure was outdated and needed streamlining to lessen steep price adjustments; work to update pricing was well underway to enable implementation in early 2012 in the context of the budget submitted to parliament.
  - Authorities recognized importance of targeted measures to mitigate social impact, including consideration for civil servants whose career advancement had been frozen since 2004.

### Public financial management (PFM) and transparency (paras 21, 26, 29)
- Strengthening PFM and enhancing transparency in the use of public funds is necessary.
- Fiscal slippages and delays in PFM reforms led donors to withhold planned budget support.
- Staff encouraged authorities to:
  - Restore the centrality of the budget in the PFM process and prioritize expenditures while making public spending more effective and transparent.
  - (i) Adhere strictly to established expenditure procedures.
  - (ii) Establish monthly cash flow plans and commit expenditures based on these plans.
  - (iii) Pay only expenditure duly processed through the computerized information system (Gesco).
  - (iv) Operationalize the liquidity management committee.
- Authorities committed to intensifying PFM reforms, indicated NFPF recommendations align with donor-supported PFM reform programs, and stressed the need for a Fund-supported program to anchor reforms and catalyze donor support.

### Strengthening institutional capacity and debt management (paras 24–30)
- Capacity constraints are prevalent: weak administrative capacity, institutions, and high turnover of trained staff limit effectiveness.
- Staff advice:
  - Strengthen administrative capacity and institutions durably across the public sector.
  - Enhance donor coordination and leverage TA resources; post resident advisors to foster capacity building.
  - Strengthen the debt management unit to ensure new debts are consistent with debt sustainability and clear arrears.
- Authorities’ actions and commitments:
  - Revived and strengthened committees for liquidity management and monitoring macroeconomic developments and structural reforms; a Technical Unit set up to assist the committee chaired by the Prime Minister.
  - Preparing monthly cash flow projections and weekly monitoring of expenditure commitments.
  - Set up a National Committee on Public Debt under the Minister of Finance; committed to strengthen the debt unit through staffing and capacity building.

### Banking system, debt sustainability, and statistics (paras 40–43)
- Banking sector:
  - All four private banks now meet the regional minimum capital standard of CFAF 5 billion, including an ailing bank recapitalized via a government bond to dilute the former majority holder’s share.
  - An international bid to select a new strategic investor was launched but declared unsuccessful; staff urged intensified efforts to find a strategic investor and divest the majority stake.
  - Financial indicators of the banking system are stable, but regional supervisor COBAC’s methodology does not account for accumulation of government payment arrears that would require much higher provisioning for banks’ sovereign exposure.
- Debt sustainability:
  - Updated debt sustainability analysis indicates C.A.R. continues to face a moderate risk of debt distress.
  - All debt indicators remain below policy-dependent thresholds, but the debt position is vulnerable to export shocks; commercial borrowing is risky and largely concessional external financing is needed.
- Statistics and data collection:
  - Resources to collect statistical data are insufficient; price indices could not be collected in July 2011 due to lack of financial resources.
  - Delays in clearing accounts at the national branch of the regional central bank have led to problems harmonizing and updating monetary data.
  - Authorities, in coordination with donors, should ensure sufficient resources are available to collect consistent data series.

*Source: IMF staff report chapter “Domestic revenue mobilization” (Central African Republic, 2011 Article IV Report).*

### 44.      Key stakeholders shared staff and

### _cr12238 - 44.      Key stakeholders shared staff and

### Stakeholders’ views and priorities
- Key stakeholders (private sector, civil society, donor community, and parliamentarians) concurred with the importance of mobilizing domestic revenues, partly through fuel taxation, and strengthening PFM and governance.
- Parliamentarians considered budgetary support essential to alleviate the liquidity constraints facing the government and set the stage for strong growth to reduce poverty.

### Box 4 — Central African Republic: A Small but Growing Domestic Financial Sector
Findings on structure and intermediation
- C.A.R.’s financial system is small (total assets are 17.6 percent of GDP at end-2010) and heavily concentrated in four commercial banks, representing 93 percent of the financial system’s consolidated assets.
- Other financial institutions include two insurance companies (4 percent of assets) and eleven microfinance institutions (3 percent of assets).
- Main sectors benefitting from bank loans:
  - Trade and commerce: 20 percent
  - Transport and communications: 16 percent
  - Forestry: 12 percent
  - Other services: 28 percent
  - Agriculture: 4 percent

Financial soundness and risks
- Commercial banks increased their capital to the mandatory CFAF 5 billion.
- Statutory capital rose by 71 percent y-o-y in August 2011, increasing the buffer against shocks and helping comply with prudential regulations.
- The banking system’s liquidity has tightened considerably:
  - Liquid assets to short-term liabilities declined from 177 percent in 2009 to 96 percent in August 2011.
  - Two banks failed to comply with the liquidity requirement of 100 percent.
- Funding structure:
  - Sight deposits: 56 percent of total liabilities
  - Time deposits: 13 percent of total liabilities
- Government exposure:
  - Within CEMAC only Chad and C.A.R. have (net) debts vis-à-vis the banking sector.
  - Government’s exposure to the banking sector in C.A.R. has tripled between September 2010 and September 2011, and represents 1.8 percent of GDP.
- Bank restructuring:
  - Government temporarily recapitalized an ailing bank through Treasury bond (CFAF 5.5 billion), thus holding 51 percent of the share capital.
  - Local shareholders increased their capital by CFAF 500 million.
  - Government’s disengagement delayed after authorities declared unsuccessful the bid to select a strategic investor, despite interest by an international banking group.

### Staff appraisal — macroeconomic outlook and policy recommendations
Economic assessment and priorities
- C.A.R.’s economy has been resilient and is set to recover over the medium term.
- Sustaining recovery requires avoiding further delays of major public and private investments, including in the mining sector.
- Expansion in agricultural output needs to be sustained through appropriate policies as security returns to the countryside to lessen inflationary pressures from international food prices.
- Authorities are encouraged to monitor global developments despite C.A.R.’s limited integration into the global economy.

Growth and poverty reduction
- Growth take-off over a long period is critical for poverty reduction.
- A comprehensive multidisciplinary strategy is required as articulated in the PRSP II, including:
  - Substantially increase investment to address infrastructural gap.
  - Improve the business climate.
  - Deepen financial intermediation.

Fiscal management and governance
- Fiscal slippages in 2010 have set back gains under the ECF-supported program.
- With the electoral process over, full attention should be given to macroeconomic management and respect of rules and regulations pertaining to PFM.
- Accountability should be enforced and steps taken to improve governance on a durable basis.
- Authorities need to consolidate recent progress to ensure the budget is executed in line with priorities approved by parliament and ensure effective implementation via a fully staffed coordination unit with strong mandate.

Monetary union and competitiveness
- Membership in the monetary union has helped cushion the impact of the global crisis on C.A.R.
- It is imperative to restore non-price competitiveness through structural reforms aimed at improving the business climate and addressing infrastructure gap.

Program support and fiscal safeguards
- Authorities’ intention to seek a Fund-supported program is welcome.
- Authorities need to forge ahead with pending measures to strengthen budget execution and improve governance.
- Implementing the mechanism for automatic adjustments, on a monthly basis, of petroleum prices early in the year, together with measures to strengthen revenue administration, will safeguard the 2012 fiscal framework and partly provide resources for critical social and infrastructure needs.

Public debt and statistics
- Management of public debt needs to be strengthened given weak debt management capacity and moderate risk of debt distress.
- Contracting new debt on concessional terms is critical to preserve debt sustainability.
- Arrears on nonreschedulable external debt should be cleared to help unlock access to concessional financing consistent with C.A.R.’s post-HIPC status.
- Adequate resources should be devoted for data collection: authorities are encouraged to commit sufficient budgetary resources to strengthen the statistical agency to collect reliable data necessary for macroeconomic analysis and program monitoring.

*2011 ARTICLE IV REPORT CENTRAL AFRICAN REPUBLIC — INTERNATIONAL MONETARY FUND*

### 53.      Article IV consultation cycle. Staff

### 53.      Article IV consultation cycle. Staff

### Recommendation on consultation cycle
- Staff recommends that the next Article IV consultation with C.A.R. be held on the standard 12-month cycle.

### Recent economic performance (high-level findings from Figures 3–6)
- Growth has been very modest, keeping C.A.R. as one of the poorest countries even compared to other fragile states.
- Real GDP (annual percent change) series shown for 2003–2010 (Figure 3).
- Real GDP per capita (U.S. dollars, at 2000 prices, using 2000 exchange rates) compared: Fragile countries, CAR, SSA (2003–2010).
- Inflation developments:
  - CPI (annual average) and CPI (end-of-period) series presented for 2003–2010; inflation “reverted to low levels” owing to moderating food inflationary pressure.
  - Food inflation and non-food inflation series for 2003–2010 (Figure 3).
- Investment and savings:
  - Public Investments (% of GDP), Private Investments (% of GDP), and Investments (% of GDP) series for 2003–2010 show steadily rising (though very low) investment.
  - Private S-I balance (% of GDP), Public S-I balance (% of GDP), and S-I balance (% of GDP) series indicate a widening savings–investment imbalance (Figure 3).

### Fiscal developments (Figure 4 and Tables 1–3)
- Domestic revenue collection improved moderately, driven by consumption taxes.
- Key fiscal patterns 2003–2010:
  - Tax revenues (% of GDP), Non-tax revenues (% of GDP), Grants (% of GDP), Domestic revenues (% of GDP).
  - Income tax (% of GDP), Tax on int'l trade (% of GDP), Consumption tax (% of GDP).
- Expenditure and balances:
  - Capital spending (% of GDP), Current spending (% of GDP), Total spending (% of GDP) — expenditure increased sharply in 2010 as budgetary discipline weakened.
  - Overall fiscal balance (% of GDP) and Primary fiscal balance (% of GDP) show a marked deterioration in fiscal balances in 2010.
- Financing and debt:
  - External financing (% of GDP) and Domestic financing (% of GDP) — domestic financing, including accumulation of payment arrears, soared.
  - Central Gov't external debt (% of GDP), CG domestic debt (% of GDP), Central Gov't total debt (% of GDP) — resulting in a modest buildup of public debt.
- Selected fiscal figures (Table 1, headline items):
  - GDP at constant prices: 2008 2.0; 2009 1.7; 2010 3.3; 2011 3.3; 2012 4.1; 2013 3.1; 2014 4.1; 2015 4.2; 2016 5.9 (note: table spans 2008–14 in source layout).
  - CPI (annual average): 2008 9.3; 2009 3.5; 2010 1.5; 2011 1.5; 2012 2.7; 2013 0.7; 2014 2.5; 2015 1.9; 2016 2.3.
  - Total revenue and grants (% of GDP): 2008 15.1; 2009 11.5; 2010 9.5; 2011 17.5; 2012 1.4; 2013 -14.8; 2014 17.3; 2015 11.9; 2016 11.9.
  - Total expenditure (% of GDP): 2008 33.5; 2009 5.4; 2010 13.8; 2011 25.8; 2012 -1.9; 2013 -5.1; 2014 3.8; 2015 11.6; 2016 8.2.
  - Overall balance including grants (% of GDP): 2008 -1.0; 2009 -0.1; 2010 -0.6; 2011 -1.4; 2012 -0.8; 2013 -3.0; 2014 -1.0; 2015 -1.0; 2016 -0.4.
  - Public sector debt (% of GDP): 2008 80.3; 2009 35.0; 2010 32.7; 2011 37.8; 2012 35.4; 2013 39.6; 2014 38.2; 2015 36.5; 2016 33.7.
  - Gross official foreign reserves (US$ millions, end-of-period): 2008 120.6; 2009 148.4; 2010 130.9; 2011 125.1; 2012 145.6; 2013 129.0; 2014 149.7; 2015 186.4; 2016 236.1.
  - Gross official foreign reserves (months of imports, f.o.b.): 2008 3.5; 2009 3.3; 2010 3.3; 2011 3.2; 2012 3.0; 2013 2.7; 2014 3.0; 2015 3.6; 2016 4.3.

### Monetary developments (Figure 5 and Table 4)
- Overall money supply remained under control, with velocity of broad money relatively stable, and net domestic assets increasing in line with stepped up credit to the private sector.
- Key monetary indicators (selected from Table 4):
  - Net foreign assets (CFAF billions): 2008 32.3; 2009 71.0; 2010 9.5; 2011 15.2; 2012 31.5; 2013 46.4; 2014 72.8.
  - Net domestic assets (CFAF billions): 2008 109.7; 2009 124.1; 2010 169.2; 2011 138.5; 2012 173.5; 2013 174.3; 2014 165.4.
  - Credit to the economy (CFAF billions): 2008 64.2; 2009 63.2; 2010 88.7; 2011 111.3; 2012 125.7; 2013 133.6; 2014 144.8.
  - Broad money (money and quasi-money, CFAF billions): 2008 137.3; 2009 156.9; 2010 179.2; 2011 189.2; 2012 205.0; 2013 220.7; 2014 238.2.
  - Nonperforming loans to total gross loans (percent): plotted 2003–2011 with value points including 2011 series (Figure 5).
  - Velocity (end of period): 2008 6.5; 2009 6.0; 2010 5.9; 2011 5.5; 2012 5.9; 2013 5.4; 2014 5.3.

### External developments (Figure 6 and Table 5)
- The trade deficit remained large because of unfavorable terms of trade, leading to a deterioration of the current account balance despite increasing current transfers.
- Capital and financial account balances were positive mainly due to increasing capital transfers while FDI remained low.
- Gross international reserves coverage remained at acceptable levels.
- Selected external figures (from Table 5):
  - Current account (CFAF billions): 2008 -87.6; 2009 -75.7; 2010 -97.7; 2011 -74.0; 2012 -74.2; 2013 -68.8; 2014 -67.6.
  - Exports, f.o.b. (CFAF billions): 2008 66.1; 2009 61.0; 2010 71.7; 2011 94.8; 2012 110.3; 2013 119.6; 2014 130.9.
    - Diamonds (CFAF billions): 2008 22.2; 2009 23.3; 2010 25.9; 2011 30.9; 2012 34.8; 2013 37.0; 2014 39.3.
    - Wood products (CFAF billions): 2008 33.6; 2009 24.7; 2010 29.6; 2011 42.6; 2012 52.5; 2013 57.5; 2014 63.7.
  - Imports, f.o.b. (CFAF billions): 2008 -134.4; 2009 -128.0; 2010 -151.1; 2011 -136.9; 2012 -163.4; 2013 -179.6; 2014 -195.3.
    - Petroleum products (CFAF billions): 2008 -41.3; 2009 -30.9; 2010 -40.6; 2011 -38.6; 2012 -48.5; 2013 -52.2; 2014 -57.2.
  - Capital account (percent of GDP): 2008 3.3; 2009 4.6; 2010 4.9; 2011 3.5; 2012 3.7; 2013 3.8; 2014 3.7.
  - Gross official foreign reserves (CFAF billions, end-of-period): 2008 58.1; 2009 66.7; 2010 62.1; 2011 58.8; 2012 69.0; 2013 86.7; 2014 110.7.
  - Gross official foreign reserves (months of imports, f.o.b.): 2008 3.3; 2009 3.3; 2010 3.2; 2011 2.7; 2012 3.0; 2013 3.6; 2014 4.3.
  - Current account (percent of GDP): 2008 -9.9; 2009 -8.1; 2010 -9.9; 2011 -7.2; 2012 -6.8; 2013 -5.9; 2014 -5.4.
  - NPV of external public and guaranteed debt (percent of GDP): 2008 36.2; 2009 7.5; 2010 10.7; 2011 12.3; 2012 13.0; 2013 13.4; 2014 13.1.

### Financial soundness and social indicators (Tables 6–9)
- Financial soundness indicators (selected):
  - Regulatory capital to risk-weighted assets: 2001 10.2; 2004 11.0; 2007 16.2; 2008 17.4; 2009 16.1; 2010 16.1; Aug-11 24.1.
  - Nonperforming loans (gross) to total loans (gross): 2001 26.4; 2004 31.1; 2007 21.0; 2008 16.5; 2009 14.4; 2010 10.6; Aug-11 11.2.
  - Assets of banks (FCFA billion): 2001 52.7; 2004 59.5; 2007 98.4; 2008 113.8; 2009 136.1; 2010 156.6; Aug-11 174.7.
- Millennium Development Goals and social indicators (selected from Tables 7–8):
  - Life expectancy at birth (2009) 47.3.
  - Infant mortality (per 1,000 live births, 2009) 112.0.
  - Prevalence of HIV, total (% of population ages 15–49, various years): 3.1; 9.7; 9.4; 6.6; 4.7 (table entries across years).
  - PPP gross national income per capita (2009) 750.0.
  - Total population (millions, 2009) 4.48; Annual rate of growth (percent) 1.9.
  - Access to improved water source (percent of population, 2008): Total 67.0; Rural 28.0; Urban 92.0.

### Key projection themes (from projections in tables)
- Macroeconomic projections through 2014 emphasize:
  - Modest positive GDP growth in the 3.0–5.9 range across years presented in tables.
  - Continued low inflation with CPI annual averages in the low single digits.
  - Persistent external current account deficits (e.g., current account percent of GDP projected -7.2 in 2011, -6.8 in 2012, -5.9 in 2013, -5.4 in 2014).
  - Public debt ratios projected to remain elevated though variable (Public sector debt percent of GDP: 2011 37.8; 2012 35.4; 2013 39.6; 2014 38.2).

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

### Appendix I. External Stability Assessment and Competitiveness

### Appendix I. External Stability Assessment and Competitiveness

### External stability and exchange rate assessment
- Staff’s assessment suggests that, under current policies, the exchange rate is overvalued by 12–30 percent, well within the margin of errors given the nature of the exercise.  
- Although the REER appreciation deviates from that of the region, staff concludes that it has remained moderate and is congruent with regional external sustainability.  
- C.A.R. is a member of the CEMAC currency union (Communauté économique et monétaire d’Afrique centrale) whose currency (CFA franc) is pegged to the Euro. The sustainability of the union closely depends on the external stability of individual countries; the extent to which C.A.R. deviates from the regional assessment indicates the policies necessary to secure the regional peg and advance national competitiveness.

### Developments in the REER
- C.A.R.’s REER has appreciated since 1994, eroding competitiveness gained after the devaluation of the CFA franc.  
- This appreciation closely tracked that of the CEMAC as a whole, though moderately higher.

### Model-based assessment of the REER (current account-based approaches)
- The assessment is based on current account balance (CAB) appraisal using standard methodologies: the macroeconomic balance (MB) and the external sustainability (ES) approaches, and the elasticity of the CAB with respect to the REER used for the CEMAC’s most recent exchange rate assessment.
- The last exchange rate assessment used an elasticity of the CAB with respect to the REER of 0.37.

MB approach findings
- The MB approach measures the RER adjustment needed to close the gap between the projected medium-term CAB at the prevailing REER and the current account norm consistent with sustainable medium-term fundamentals.  
- Comparing the CEMAC current account norm to the medium-term current account deficit of C.A.R. yields an overvaluation of its implicit effective exchange rate of between 12 and 30 percent, which is well within the margin of errors.

ES approach findings
- The ES approach—based on stabilizing C.A.R.’s 2015 net foreign assets position at the 2010 level—points to an overvaluation below 25 percent, also within the margin of errors.

Regional comparison
- The appreciation of C.A.R.’s REER appears significant compared to the most recent regional assessment where the appreciation was evaluated to 3–10 percent.  
- Given high uncertainty and data limitations, staff concludes that C.A.R.’s REER is moderately appreciated but remains congruent with the regional external position sustainability.

### Structural performance and competitiveness
- Export performance:
  - Between 2003 and 2010, C.A.R.’s export growth averaged only 5.2 percent, far below the SSA benchmark of about 14.5 percent and the CEMAC benchmark of about 13.5 percent.
- Institutional and structural constraints:
  - C.A.R. ranked 182 among 183 countries in the 2010 and 2011 Doing Business reports of the World Bank, lagging particularly on indicators relevant for export performance; topic rankings revealed backsliding in most respects.
- Doing Business 2010–2011 indicators (selected)
  - Starting a business: DB 2011 Rank 161; DB 2010 Rank 160; Change in Rank -1  
  - Dealing with construction permits: DB 2011 Rank 148; DB 2010 Rank 152; Change in Rank 4  
  - Registering property: DB 2011 Rank 141; DB 2010 Rank 140; Change in Rank -1  
  - Getting credit: DB 2011 Rank 138; DB 2010 Rank 135; Change in Rank -3  
  - Protecting investors: DB 2011 Rank 132; DB 2010 Rank 131; Change in Rank -1  
  - Paying taxes: DB 2011 Rank 182; DB 2010 Rank 179; Change in Rank -3  
  - Trading across borders: DB 2011 Rank 182; DB 2010 Rank 181; Change in Rank -1  
  - Enforcing contracts: DB 2011 Rank 173; DB 2010 Rank 172; Change in Rank -1  
  - Closing a business: DB 2011 Rank 183; DB 2010 Rank 183; Change in Rank No change  
  - Overall ranking: DB 2011 Rank 182; DB 2010 Rank 182; Change in Rank No change

### Policy implications and reform priorities
- Improve competitiveness to address poor export performance and weak institutions.  
- Significant reform measures are required to improve conditions for private sector development and to compensate for geographic isolation, weak infrastructure, and persisting security risks; these reforms aim to induce growth-enhancing domestic and external private investments in mining and manufacturing industries.  
- Some structural measures could be implemented quickly and have high payoff—for example, establishment of a one-stop center for business registration.  
- Progress toward more stability and security should increase investor attraction.  
- C.A.R. shares these challenges with other CEMAC countries; improvement in security environment and business climate is needed to exploit the economy’s potential and compensate for remoteness.

*Source: Appendix I. External Stability Assessment and Competitiveness, IMF staff report content provided.*

### 3.      As in the full DSA, this update

### _cr12238 - 3.      As in the full DSA, this update

### Main finding
- The update suggests that C.A.R. continues to face a “moderate risk of debt distress”.
- All baseline debt indicators remain below the thresholds with stable downward trends, although somewhat higher compared to last year’s exercise.
- The debt position could be vulnerable to the most extreme shock to exports, yielding the highest ratio by 2021.

### Key observations from baseline projections
- External debt (nominal) (selected entries): 56.9, 14.6, 16.5, 18.3, 20.5, 21.7, 21.9, 22.2, 22.1, 18.0, 12.0 (as presented across historical and projection columns).
- PV of PPG external debt (selected entries): ......, 10.7, 12.3, 13.1, 13.4, 13.2, 12.9, 12.5, 10.7, 7.4 (table 1a).
- PV of PPG external debt in percent of exports (selected): ......, 99.3, 97.0, 97.7, 99.4, 97.8, 94.9, 91.6, 76.4,   47.2.
- PV of PPG external debt in percent of government revenues (selected): ......, 92.2, 110.4,   113.2,   115.6,   108.0,   101.5, 94.9, 70.8,   37.5.
- PPG debt service-to-revenue ratio (in percent) (selected entries in table 1a): -2.5, -2.5, 0.6, 3.0, 7.6, 8.2, 8.4, 10.3, 10.8, 1.6, 2.3.
- Grant-element of new public sector borrowing (in percent) (projection entries): 32.8, 46.5, 46.5, 46.5, 46.5, 46.5, 44.2,   46.5,   46.5, 46.5.
- Grant-equivalent financing (in percent of GDP) (selected entries): ........., 4.7, 6.7, 7.1, 6.8, 6.9, 6.7, 6.0, 5.7, 5.8.
- Nominal GDP (billions of U.S. dollars) (selected): 2.0, 2.0, 2.0, 2.2, 2.4, 2.5, 2.7, 2.9, 3.1, 4.6,   10.8 (mem. items).
- Real GDP growth (in percent) (selected projection entries): 2.0, 1.7, 3.3, 1.1, 3.2, 3.1, 4.1, 4.2, 5.9, 5.4, 5.7, 4.7, 6.0, 6.9, 6.2.
- Debt service-to-exports ratio (in percent) (selected series): -2.4, -2.7, 0.6, 2.7, 6.6, 7.0, 7.6, 9.6, 10.4, 1.8, 2.9.

### Stress tests and scenario results
- The most extreme stress test is defined as the test that yields the highest ratio in 2021.
  - In figure b (PV of debt-to-GDP) it corresponds to a Combination shock.
  - In figure c (PV of debt-to-exports) it corresponds to an Exports shock.
  - In figure d (PV of debt-to-revenue) it corresponds to a Combination shock.
  - In figure e (Debt service-to-exports) it corresponds to a Terms shock.
  - In figure f (Debt service-to-revenue) it corresponds to a Terms shock.
- Sensitivity tables (Table 1b / 1c) present alternative scenarios and bound tests for PV of debt-to-exports, PV of debt-to-revenue, and PV of debt-to-GDP with exact scenario series (baseline, A1, A2, B1–B6) across 2011–31. Examples of scenario outcomes (selected snapshots):
  - PV of debt-to-exports ratio — Baseline series (selected): 97, 97, 99, 97, 89, 78, 60, 57, 54, 51, 47, 43, 40, 36, 33, 29, 33.
  - Under B2 (Export value growth at historical average minus one standard deviation in 2012-2013) the PV of debt-to-exports rises (selected): 97, 138, 194, 190, 176, 157, 121, 115, 108, 101, 92, 84, 76, 69, 61, 54, 60.
  - PV of debt-to-GDP ratio — Baseline series (selected): 110, 113, 115, 108, 95, 81, 55, 52, 48, 45, 41, 38, 35, 32, 30, 28, 26.
  - Under A2 (less favorable financing) PV of debt-to-GDP rises (selected): 110, 128, 140, 139, 129, 114, 85, 81, 77, 73, 68, 64, 61, 57, 54, 51, 49.
- Table 1c provides scenario outcomes for debt service-to-revenue and debt service-to-exports ratios with baseline and alternative scenarios; memorandum item: Grant element assumed on residual financing = 43 (applies to stress scenarios except A2).

### Public sector debt framework highlights
- Public sector debt (selected entries): 80.3, 35.0, 37.8, 39.6, 38.3, 36.6, 33.8, 32.0, 30.2, 20.7,   12.1 (table 2a).
- PV of public sector debt (selected projection entries): ......, 32.0, 33.6, 31.0, 28.3, 25.0, 22.7, 20.7, 13.4, 7.4.
- PV of public sector debt-to-revenue and grants ratio (in percent) (selected): ......, 177.9, 228.4, 191.8, 166.7, 143.0, 126.1, 111.6, 65.4,   29.9.
- Gross financing need (selected): -0.3, -0.6, 1.3, 3.4, 2.5, 2.2, 1.7, 2.6, 2.3, 0.5, 0.7.
- Primary deficit that stabilizes the debt-to-GDP ratio (selected): -2.0, 44.3, -2.4, 0.5, 1.7, 2.2, 2.9, 2.5, 2.2, 2.1, 1.2.

### Policy implications and recommendations (explicit in source)
- Considering that C.A.R. is categorized as having “lower debt vulnerabilities and lower capacity” under the debt sustainability framework, high concessionality is required to preserve debt sustainability.
- Implicit policy emphasis: maintain high grant-equivalent financing and concessional borrowing terms to keep baseline indicators below thresholds and limit vulnerability to downside shocks (as reflected in the grant-element and grant-equivalent financing projections and stress-test scenarios).

*Source: _cr12238 - 3.      As in the full DSA, this update (Central African Republic IMF 2011 Article IV informational annex and DSA tables and figures).*

### APPENDIX I. CENTRAL AFRICAN REPUBLIC: RELATIONS

### APPENDIX I. CENTRAL AFRICAN REPUBLIC: RELATIONS WITH THE FUND (As of November 30, 2011)

### Membership
- Status: Joined: 07/10/1963; Article VIII

### General Resources Account (SDR million)
- Quota: 55.70 (100.00 percent)
- Fund holdings of currency: 55.45 (99.55 percent)
- Reserve position in Fund: 0.26 (0.37 percent)

### SDR Department (SDR million)
- Net cumulative allocation: 53.37 (100.00 percent)
- Holdings: 2.76 (5.16 million)

### Outstanding Purchases and Loans (SDR million)
- PRGF/ECF arrangements: 58.68 (105.35 percent of quota)

### Latest Financial Arrangements (SDR millions)
- PRGF/ECF: Approval Date Dec. 22, 2006; Expiration Date Sept. 2, 2010; Approved 69.62; Drawn 69.62
- PRGF: Approval Date Jul. 20, 1998; Expiration Date Jan. 19, 2002; Approved 49.44; Drawn 24.48
- Stand-By: Approval Date Mar. 28, 1994; Expiration Date Mar. 27, 1995; Approved 16.48; Drawn 10.71

### Projected Payments to the Fund (without HIPC Assistance) (SDR million; based on existing use of resources and present holdings of SDRs)
- Principal:
  - 2013: 1.49
  - 2014: 3.53
  - 2015: 10.05
- Charges/interest:
  - 2011: 0.24
  - 2012: 0.24
  - 2013: 0.23
  - 2014: 0.21
- Total:
  - 2012: 0.24
  - 2013: 1.72
  - 2014: 3.76
  - 2015: 10.26

### Implementation of HIPC Initiative (Enhanced)
- Decision point date: September 2007
- Assistance committed by all creditors (US$ million): 578.00
- Of which: IMF Assistance (US$ million): 26.77
- (SDR equivalent in millions): 17.19
- Completion point date: June 2009

Disbursement of IMF Assistance (SDR million)
- Assistance disbursed to the member: 17.19
- Interim assistance: 6.59
- Completion point balance: 10.60
- Additional disbursement of interest income: 0.90
- Total disbursements: 18.09

Notes:
- Assistance committed under the original framework is expressed in NPV terms at the completion point; assistance committed under the enhanced framework is expressed in NPV terms at the decision point. These amounts cannot be added.
- Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

### Implementation of Multilateral Debt Relief Initiative (MDRI)
- MDRI-eligible debt (SDR Million): 4.02
  - Financed by: MDRI Trust 1.90; Remaining HIPC resources 2.13
- Debt Relief by Facility (SDR Million): Delivery Date July 2009; GRA N/A; PRGF 4.02; Total 4.02

### Implementation of Post-Catastrophe Debt Relief (PCDR)
- Not applicable

### Safeguards Assessments
- The Bank of the Central African States (BEAC) is the regional central bank for the Central African States.
- Most recent safeguards assessment completed on July 6, 2009.
- Findings indicated limited implementation of previous safeguards recommendations on financial reporting, internal audit, and internal control; changing risk profile of BEAC foreign exchange holdings required further action.
- Following revelation of Paris office fraud, measures and longer term safeguard measures were agreed between the IMF and BEAC to continue with country programs.
- BEAC adopted an action plan for 2010 to strengthen key safeguards and recently adopted additional measures responding to weaknesses highlighted by the special audit on headquarters operations and to strengthen governance.
- CEMAC-country reviews are allowed to proceed through end December 2011 (Staff Note on BEAC Safeguards Concerns and Implications for Programs with CEMAC Member Countries; FO/DIS/11/130).

### Exchange Rate Arrangement
- The C.A.R. participates in a currency union with five other members of the CEMAC and has no separate legal tender.
- De facto exchange rate arrangement: conventional peg; the CFA franc is officially pegged to the euro at CFAF 655.957 per €1.
- On November 30, 2011, the rate of the CFA franc in terms of SDRs was SDR 1 = CFAF 758.5.
- The exchange system common to all members operates without restrictions on the making of payments and transfers for current international transactions.

### Article IV Consultations
- The C.A.R. is on the standard 24-month cycle for Article IV consultations for program countries.
- The last Article IV consultation was concluded on December 4, 2009.

### Resident Representative
- The Fund’s office in Bangui reopened in October 2007 (after being closed in September 2003).
- The Resident Representative, until end-November 2011, was Joseph Ntamatungiro.
- A new Resident Representative is being appointed.

### Fund Technical Assistance (selected chronology and purposes)
- Jan. 2007–Aug. 2008: FAD — Public financial management.
- Apr–May 2007: FAD — Fuel pricing policies, distributional impact, mitigating measures.
- Oct. 2007: AFRITAC/FAD — Custom administration and new customs organization.
- Oct. 2007: AFRITAC/FAD — Implementation of tax administration reforms.
- Dec. 2007: AFRITAC/STA — National account data.
- March 2008: AFRITAC/MCM — Debt management.
- June 2008: AFRITAC — Follow-up on implementation of tax administration.
- Aug. 2008: AFRITAC/STA — National account data.
- Sept. 2008: AFRITAC — Public financial management.
- Sept.–Oct. 2008: AFRITAC/FAD — New accounting framework and budget classification system.
- Oct. 2008: AFRITAC — Tax collection and use of tax administration information.
- Jan. 2009: AFRITAC — Implementation of tax collection reform measures.
- March 2009: AFRITAC/FAD — Accounting procedures reforms.
- March 2009: AFRITAC — Elaboration of public debt management manual; improvement in coordination of customs procedures.
- May 2009: AFRITAC/FAD — Assessment of tax administration and outline for new reforms.
- May 2009: AFRITAC — Reform of debt administration.
- May–Sept. 2009: AFRITAC — Modernizing compilation of national account data.
- July/Dec. 2009: AFRITAC — Rebasing of price statistics.
- Sept. 2009/Feb. 2010: AFRITAC — Assessment of customs administration/reform.
- Nov. 2010: FAD/AFRITAC — Assessment of public financial management.
- Jan. 2010: AFRITAC — National account statistics.
- Feb. 2010: FAD — Tax administration reform strategy.
- Feb./Oct. 2010: AFRITAC — Customs management and reform.
- March 2010: AFRITAC — Debt management and arrears.
- June 2010: STA — BoP and IIP statistics.
- June/July/Oct. 2010: AFRITAC — National account statistics.
- Aug. 2010: AFRITAC — Follow-up on public financial management.
- Nov. 2010: FAD — Revenue administration.
- Dec. 2011: FAD — Tax policy and fiscal reform.
- Jan./July 2011: AFRITAC — Public accounting plan.
- Feb. 2011: AFRITAC — Tax administration.
- March/June/Oct. 2011: AFRITAC — National account statistics.
- April 2011: AFRITAC — Customs administration and information system.
- June 2011: AFRITAC — Treasury management and unified treasury account.
- October 2011: AFRITAC — Customs management and reform.

*Source: APPENDIX I. CENTRAL AFRICAN REPUBLIC: RELATIONS WITH THE FUND (As of November 30, 2011)*

### APPENDIX II. RELATIONS WITH THE WORLD BANK UNDER THE JOINT BANK-FUND WORK PROGRAM (JMAP)

### Context and assessment
- Fund C.A.R. team led by Mr. Toé (mission chief) met World Bank C.A.R. team led by Mr. Binkert (Country Director) to identify critical structural reforms and coordinate work programs for November 2011–December 2012.
- C.A.R. is described as a fragile post-conflict country with security challenges, deep-rooted structural weaknesses, and significant social and infrastructural needs that hinder growth and progress toward the MDGs.
- Debt position remains vulnerable despite HIPC and MDRI relief in June 2009; preserving debt sustainability remains a challenge due to difficulties managing domestic and external debt.

### Main macroeconomic challenges (agreed)
- Create fiscal space.
- Strengthen public financial management (PFM).
- Improve policy and project implementation capacity.

Policy advice priorities:
- Promote prudent fiscal policies.
- Accelerate growth through efficient and prioritized public investment and active participation of the private sector.
- Deepen financial sector development.
- Improve human capital formation.
- Strengthen institutions, transparency and governance.

### Authorities’ intent and program prospects
- Authorities intend to request a new Extended Credit Facility (ECF) arrangement from the Fund.
- Repeated delays in negotiating such a program were caused by a collapse of budgetary discipline and serious slippages in fiscal performance.
- The Fund stands ready to initiate program negotiations after completion of the 2011 Article IV consultation expected for January 2012, contingent on authorities’ progress in implementing corrective measures.

### Six macro-critical structural reform areas identified
- Financial resource mobilization:
  - C.A.R. has one of the lowest revenue-to-GDP ratios in sub-Saharan Africa.
  - Donor contributions uneven and declining due to poor PFM practices.
  - Priority: maximize domestic revenue mobilization by expanding the tax base and passing-through world oil prices to domestic petroleum product prices per established pricing formula.
  - Comprehensive reforms of tax and customs administrations are laid out and await forceful implementation.
- Public financial management (PFM):
  - Progress in computerizing and integrating the expenditure chain, but fiscal discipline weakened during 2010–11 elections, causing slippages and accumulation of domestic and external payment arrears.
  - Challenges remain in standard budget execution procedure, integrating all budgetary transactions, liquidity programming, single treasury account operation, and programming/accounting/reporting of investment spending.
  - Technical assistance is available for budget execution, public accounting, controls of tax expenditures, and cash flow management.
  - Government accounts for FY2008 finalized for the first time with World Bank assistance.
- Social sector spending:
  - PRSP II (2011–15) emphasizes promoting agricultural production, security in the countryside, and resumption of the DDR process.
  - PRSP II served as a blueprint at a development partners’ Roundtable in mid-June 2011.
- Investment climate reform:
  - C.A.R. ranks next to last in the Bank’s “Doing Business 2012 Index”.
  - Use of new forestry and mining codes and elimination of uncertainties, including taxation, could improve long-term growth prospects via new mining projects.
  - Strengthening banking sector and developing market instruments to enhance financial intermediation.
- Infrastructure investment and rehabilitation of SOEs:
  - Lack of infrastructure and deficient public utilities (electricity, water, telecommunications) are major drags on investment and growth.
  - Need enhanced financial resources (domestic and external, concessional terms) for scaling up public investment and improving SOE financial management.
- Debt management:
  - HIPC/MDRI relief granted in 2009; weak debt management capacity noted in DeMPA exercise.
  - Recourse to non-concessional borrowing is ill-advised for the time-being; may be considered for specific, well-defined infrastructure projects during future program reviews.
  - Adherence to domestic payment arrears reduction plan, improved cash management, and control of commercial bank financing costs are priorities.

### Division of labor between Fund and World Bank
- Financial resource mobilization:
  - Fund leads TA and recommendations for domestic resource mobilization (including review of personal income taxation, simplification of tax assessment, reducing tax exemptions).
  - Bank and Fund continue to support customs administration reforms, aiming to bring customs clearance to point of entry.
- PFM:
  - Bank leads support with policy notes and dialogue, monitoring socioeconomic developments, implementing PRSP II, and governance/action plan for PFM.
  - Fund (FAD and AFRITAC-Centre) provides TA on government reform agenda implementation; Bank focuses TA on programming, accounting, and oversight.
  - Bank supports Court of Accounts, parliamentary oversight, financing/implementing computer systems, and targeted training.
  - EU (€5 million), AfDB (SDR4.5 million grant), and France (two resident advisors) to leverage efforts.
- Social sector spending:
  - Bank leads monitoring social sector interventions and pro-poor policies and will update poverty data and define social spending for monitoring Fund ECF benchmarks.
  - Joint Bank-Fund assessment of PRSP II macroeconomic impact in a Joint Staff Assessment Note.
- Investment climate reform:
  - World Bank Group (DPO IV and IFC) assists with private sector development; IFC focuses on reform design, coordination, institutional capacity, and support to local financial intermediaries for SME finance.
  - AfDB emphasizes this area in its 2012–13 budgetary support operation.
- Infrastructure and SOEs:
  - Bank assists in project preparation and improving implementation capacity; leads on formulating realistic public investment programs and advising on upgrading utilities (Socatel, Enerca, Sodeca).
  - Fund will monitor regular billing, sustained government payments for utility consumption, and reduction of public sector payment arrears as structural benchmarks under a future Fund-supported program.
- Debt management:
  - Bank and AfDB will assess specific infrastructure projects requiring non-concessional financing and propose actions to the Fund during program reviews.
  - Fund will monitor repayments of domestic payment arrears; debt department to continue receiving TA from Fund, Bank, and AfDB.
  - Bank and Fund staff will jointly prepare a full debt sustainability analysis (DSA) and assist in strengthening debt management based on DeMPA results.

*Source: APPENDIX II. RELATIONS WITH THE WORLD BANK UNDER THE JOINT BANK-FUND WORK PROGRAM (JMAP), Central African Republic — Joint Bank-Fund team communications and assessments (November 2011).*

### 8.      The teams have the following

### _cr12238 - 8.      The teams have the following

### Requests for information and dissemination
- Fund team requests:
  - To be kept informed by the Bank of progress in the above macrocritical structural and sectoral reform areas and of major strategic decisions and programs on the macroeconomic and sectoral level.
  - Timing: when milestones are reached (and at least semi-annually).
- Bank team requests:
  - To be kept informed of the Fund’s assessments of macroeconomic policies and prospects.
  - Timing: in the context of program reviews, Article IV consultations, and other missions (and at least semi-annually).
- Dissemination of technical assistance reports:
  - The authorities have committed to sharing technical assistance reports with relevant partners in the donor coordination framework (CGAR-PRGF).
- The attached table lists the teams’ separate and joint work programs during the period of November 2011—December 2012.

### Joint Bank-Fund Work Program, 2011–12 — Mutual information on relevant work programs (selected items)
- World Bank work program (products and timing):
  - Health sector support Project to increase use and improve the quality of health services in rural areas with special emphasis on maternal and child health.
    - Provisional timing of missions: Sept. 2011
    - Actual or Expected delivery date: May 2012
  - Country Status report on Health and health system: a study on the availability of health services in C.A.R.
    - Provisional timing of missions: July 2011
    - Actual or Expected delivery date: Jan. 2012
  - Public Expenditure Review (FY11): Review of budget implementation.
    - Provisional timing of missions: July 2011
    - Actual or Expected delivery date: Jan. 2012
  - Technical assistance on Mining sector: Technical Assistance to develop the sector strategy in the mining sector.
    - Provisional timing of missions: Jan. 2012
    - Actual or Expected delivery date: Dec. 2012
  - Monitoring of PRSP implementation.
    - Provisional timing of missions: Jan. 2012
    - Actual or Expected delivery date: Dec. 2012
  - Policy notes on Growth.
    - Provisional timing of missions: Dec. 2011
    - Actual or Expected delivery date: Nov. 2012
  - Technical assistance to procurement reforms implementation.
    - Provisional timing of missions: Nov. 2011
    - Actual or Expected delivery date: Nov. 2012
  - Third Economic Management and Governance Reform Grant (EMGRG III): Financing from the Crisis Response Window to protect spending in priority sectors and limit the poverty impact of the global economic crisis.
    - Provisional timing of missions: Feb. 2010
    - Actual or Expected delivery date: March 2012
  - Debt Management Performance Analysis (DeMPA).
    - Provisional timing of missions: Sept. 2011
    - Actual or Expected delivery date: March 2012
  - New Country Partnership.
    - Provisional timing of missions: April 2012
    - Actual or Expected delivery date: June 2012
- IMF work program (products and timing):
  - Macroeconomic policy analysis and advice.
    - 2011 Article IV consultation.
      - Provisional timing of missions: Nov. 2011
      - Actual or Expected delivery date: Jan. 2012
    - Negotiation new ECF arrangement.
      - Provisional timing of missions: March 2012
      - Actual or Expected delivery date: June 2012
    - First ECF review.
      - Provisional timing of missions: Sept. 2012
      - Actual or Expected delivery date: Nov. 2012
    - Revenue mobilization seminar.
      - Provisional timing of missions: Nov. 2011
      - Actual or Expected delivery date: (blank)
  - Technical assistance programs (FAD, STA, AFRITAC-Center):
    - Tax reform and revenue mobilization.
      - Provisional timing of missions: ongoing
      - Actual or Expected delivery date: ongoing
    - Public financial management.
      - Provisional timing of missions: (not explicitly dated)
    - Customs reform.
    - National account statistics.
    - Consumer price indices.

### Requests for work program inputs (B)
- Fund request to Bank:
  - Periodic update on Bank activities and progress with sector reform programs.
    - Provisional timing of missions: ongoing
    - Actual or Expected delivery date: ongoing
- Bank request to Fund:
  - Regular update of medium-term macroeconomic framework covering the period until 2016.
    - Provisional timing of missions: ongoing
    - Actual or Expected delivery date: ongoing
  - Participation in Fund program review missions.

### Agreement on joint products and missions (C)
- Joint products in the next 12 months:
  - Joint Debt Sustainability Analysis.
    - Provisional timing of missions: Sept. 2012
    - Actual or Expected delivery date: Nov. 2012
  - Joint Staff Assessment Note.
    - Provisional timing of missions: Sept. 2012
    - Actual or Expected delivery date: Nov. 2012

### Relations with the African Development Bank (AfDB) — summary of objectives and financing
- JCPSP (Joint Country Partnership Strategy Paper) for C.A.R. prepared jointly by the AfDB Group and the World Bank Group for 2009–12.
- Objectives: promote strong economic growth and employment through main pillars:
  - (i) Consolidation of Economic Governance and Institutional Capacity; and
  - (ii) Rehabilitation and Development of Socio-Economic Infrastructure.
- Resources and Financing Instruments:
  - For 2009–10 C.A.R. benefited from AfDB support through ADF-11 window:
    - (i) approximately US$30 million representing performance-based allocation (PBA);
    - (ii) US$18.5 million for Supplementary Support - Fragile States Facility (FSF) Pillar I; and
    - (iii) US$4.8 million for Targeted Support (FSF Pillar III).
  - Financing of CPS activities for 2011–12 is planned under ADF-12 (2011–13). C.A.R.’s resource allocation under ADF-12 is US$178.9 million consisting of:
    - (i) US$25.9 million for PBA;
    - (ii) US$41 million for FSF; and
    - (iii) US$111 million for the regional operations window.
- Portfolio (As of November 30, 2011):
  - Five national operations (projects) for total net commitments amounting to US$43.1 million, and one regional sector operation (US$43 million).
  - C.A.R. was awarded US$4.8 million as Targeted Support (Pillar 3 of the FSF).
- Financing planned for 2012:
  - Under CSP’s Pillar I: Economic Reform Support, Phase III (PARE III) for US$24.8 million (budget support).
  - Under Pillar II: three national operations planned:
    - Agricultural Infrastructure and Production Rehabilitation Project (US$14 million);
    - Rural Drinking Water and Sanitation Program (US$18 million);
    - Rural Financial Services Development Support (US$8 million).
  - Under the Regional operations window:
    - Regional Optical Fiber Infrastructure Project (C.A.R., Cameroon, Chad) for US$15.5 million;
    - Regional Boali III and Interconnection with DRC (US$47 million).
  - FSF Pillar 3: institutional and human capacity building and studies (examples: preparation of the Bangui master plan, recruitment of four experts, two studies on domestic public resources mobilization and on the determinants of growth).

### AfDB portfolio (Table 1) — selected project figures (As of November 2011)
- Project to Build Economic and Financial Management Capacity (PARGEF)
  - Approval Date: 01/31/11
  - Signature Date: 02/25/11
  - Effectiveness: 02/25/11
  - First Disbursement Date: 07/05/11
  - Closing Date: 12/31/15
  - AWF Grant: 4.00 (UA millions)
  - ADF Grant: 0.50 (UA millions)
  - FSF Grant: 16.4 (UA millions)
- Rural Infrastructure Rehabilitation Support Project (PARIR)
  - Approval Date: 12/17/09
  - Signature Date: 12/21/09
  - Effectiveness: 12/21/09
  - First Disbursement Date: 07/05/10
  - Closing Date: 12/31/15
  - ADF Grant: 3.85 (UA millions)
  - Disbursement Rate: 26.9 (in percent)
- Project for Community Development and Support to Vulnerable Groups (PDCAGV)
  - Approval Date: 07/22/09
  - Signature Date: 07/24/09
  - Effectiveness: 07/24/09
  - First Disbursement Date: 05/27/10
  - Closing Date: 12/31/14
  - ADF Grant: 8.00 (UA millions)
  - Disbursement Rate: 17.3 (in percent)
- Drinking Water Supply and Sanitation (PAEPA) in 3 Prefectures
  - Approval Date: 11/03/09
  - Signature Date: 11/10/09
  - Effectiveness: 11/10/09
  - First Disbursement Date: 07/21/10
  - Closing Date: 12/31/14
  - AWF Grant: 7.00 (UA millions)
  - ADF Grant: 2.89 (UA millions)
  - Disbursement Rate: 0.6 (in percent)
- Project for Institutional Support for Development of the Water Sector (PAIDSE)
  - Approval Date: 07/02/09
  - Signature Date: 08/31/09
  - Effectiveness: 08/31/09
  - First Disbursement Date: 04/30/10
  - Closing Date: 03/31/12
  - AWF Grant: 1.71 (UA millions)
  - Disbursement Rate: 36.5 (in percent)
- Transport and Transit Facilitation Program for the Douala-N’Djamena and Douala-Bangui Corridors
  - Approval Date: 07/05/07
  - Signature Date: 02/29/08
  - Effectiveness: 02/29/08
  - First Disbursement Date: 10/21/09
  - Closing Date: 12/31/12
  - ADF Grant: 27.80 (UA millions)
  - Disbursement Rate: 20.0 (in percent)

### Statistical issues (As of November 30, 2011) — data adequacy assessment
- General:
  - Data provision has shortcomings, but is broadly adequate for surveillance.
  - Issues with source data and compilation affect most data sets, particularly problematic in the real sector.
- National Accounts:
  - High degree of uncertainty attached to estimates of the level and growth rate of real GDP, as estimates for informal sector activity are still based on a 1982 survey.
  - Developments in the subsistence agriculture sector, accounting for an estimated 30 percent of the economy, are not tracked well and would benefit from the development of source data through surveys.
  - STA is providing technical assistance in national accounts to rebase series on an upgraded 2007 level and change the structure and sectoral contribution estimates.
- Price statistics:
  - Measurement of inflation is subject to a high degree of uncertainty since the CPI is based on expenditure weights that are thirty years old.
  - The index is highly skewed toward food items (70 percent), in particular basic foodstuff, and covers only a limited number of modern and service items.
  - STA is providing technical assistance to update and rebalance the index on a 2000 level and extend coverage to a number of provincial centers.
  - Price data for July 2011 were not collected for lack of resources at the national statistics institute.
- Government finance statistics:
  - Data provision is broadly satisfactory for surveillance purposes, although coverage is not complete.
  - Main shortcomings relate to:
    - (i) expenditures financed by line ministries’ and government agencies’ own resources, which are estimated on the basis of respective revenue estimates;
    - (ii) foreign-financed investment expenditures reported bi-annually by the Ministry of Planning;
    - (iii) domestic arrears accumulation.
  - Budget accounting and Treasury procedures, and domestic debt statistics, continue to suffer from serious shortcomings, delays and omissions in reporting, which are addressed through various reforms and are a major focus of technical assistance programs, including from the Fund/AFRITAC.
  - General government statistics are not available.
- Monetary statistics:
  - Data provision is broadly satisfactory for surveillance purposes, although subject to frequent revisions due to commercial banks’ accounting problems.
  - Delays have occurred in harmonizing databases among BEAC entities.

### Common Indicators Required for Surveillance (Table 3) — selected observations (As of November 30, 2011)
- Exchange Rates
  - Date of Latest Observation: Current
  - Date Received: Current
  - Frequency of Data: D
  - Frequency of Reporting: D
  - Frequency of Publication: M
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities
  - Date of Latest Observation: Sept. 2011
  - Date Received: Dec. 2011
  - Frequency of Data: M
  - Frequency of Reporting: M
  - Frequency of Publication: M
- Reserve/Base Money
  - Date of Latest Observation: Sept. 2011
  - Date Received: Dec. 2011
  - Frequency of Data: M
  - Frequency of Reporting: M
  - Frequency of Publication: M
- Broad Money
  - Date of Latest Observation: Sept. 2011
  - Date Received: Dec. 2011
  - Frequency of Data: M
  - Frequency of Reporting: M
  - Frequency of Publication: M
- Cons. Bal. Sheet of the Banking System
  - Date of Latest Observation: Sept. 2011
  - Date Received: Nov. 2011
  - Frequency of Data: M
  - Frequency of Reporting: M
  - Frequency of Publication: M
- Interest Rates
  - Date of Latest Observation: Nov. 2011
  - Date Received: Dec. 2011
  - Frequency of Data: M
  - Frequency of Reporting: M
  - Frequency of Publication: M
- Consumer Price Index
  - Date of Latest Observation: Sept. 2011
  - Date Received: Dec. 2011
  - Frequency of Data: M
  - Frequency of Reporting: M
  - Frequency of Publication: M
- Rev., Exp., Balance and Composition of Financing – Central Government
  - Date of Latest Observation: Sept. 2011
  - Date Received: Nov. 2011
  - Frequency of Data: M
  - Frequency of Reporting: I
  - Frequency of Publication: M
- Stocks of Central Government and Central Government-Guaranteed Debt
  - Date of Latest Observation: June 2011
  - Date Received: Nov. 2011
  - Frequency of Data: A
  - Frequency of Reporting: I
  - Frequency of Publication: A
- External Current Account Balance
  - Date of Latest Observation: 2010
  - Date Received: July 2011
  - Frequency of Data: A
  - Frequency of Reporting: A
  - Frequency of Publication: A
- Exports and Imports of Goods and Services
  - Date of Latest Observation: 2010
  - Date Received: July 2011
  - Frequency of Data: A
  - Frequency of Reporting: A
  - Frequency of Publication: A
- GDP/GNP
  - Date of Latest Observation: 2010
  - Date Received: July 2011
  - Frequency of Data: A
  - Frequency of Reporting: A
  - Frequency of Publication: A
- Gross External Debt
  - Date of Latest Observation: 2010
  - Date Received: July 2011
  - Frequency of Data: A
  - Frequency of Reporting: I
  - Frequency of Publication: A
- International Investment Position
  - Date of Latest Observation: N/A
  - Date Received: N/A
  - Frequency of Data: N/A
  - Frequency of Reporting: N/A
  - Frequency of Publication: N/A

### Public Information Notice (PIN) No. 12/13 — Key points (February 9, 2012)
- On January 30, 2012, the Executive Board of the IMF concluded the Article IV consultation with the Central African Republic (C.A.R.).
- Background — macroeconomic performance and outlook:
  - Since December 2009, C.A.R. continued to grapple with the challenges of a fragile post-conflict state.
  - Macroeconomic performance over the past few years has been broadly satisfactory but growth remained modest and well below the averages for sub-Saharan Africa and other fragile states.
  - The economy is highly dependent on external assistance, poverty is pervasive, and social indicators are generally weak.
  - In 2010–11, real gross domestic product (GDP) growth averaged 3.2 percent, thanks mainly to rebounding agricultural production, which helped to bring down inflation to less than 1 percent by end-2011.
  - Growth in 2011 was slightly weaker than forecast because the expected post-election recovery of domestic demand did not materialize and uncertainties delayed major investments in the mining sector and oil exploration.
  - Prospects for 2012 are favorable, predicated on continued good performance of the primary sector, particularly agriculture and forestry activities, and the resumption of delayed investments in the mining sector.
  - Risks to this outlook are on the downside, as domestic and global uncertainties continue to weigh on the C.A.R. economy.
- Fiscal developments:
  - The fiscal position deteriorated sharply in 2010 with payment arrears accumulated to domestic and external creditors, reversing gains under the program supported by the Extended Credit Facility (ECF).
  - Domestic revenue benefitted from a number of one-off effects to reach 11.6 percent of GDP.
  - Expenditures surged, fueled by election-related spending, sending the overall budget deficit, excluding grants, to 7.7 percent of GDP.
  - A tight liquidity situation in 2011, mainly resulting from donors suspending budget support, prompted authorities to curtail expenditures, which resulted in a decline of the overall deficit by 1.2 percentage points of GDP.
  - The fiscal position is projected to improve further in 2012 on strengthened expenditure control and revenue measures adopted together with the 2012 budget.
- Structural measures:
  - Authorities have stepped up implementation of structural measures, including strengthening budget execution and the monitoring capacity of macroeconomic developments, and improving the operations of state-owned enterprises and key public agencies.

### Executive Board Assessment — summary points
- Executive Directors welcomed the resilience of the economy of the Central African Republic (C.A.R.) in the face of the global crisis.
- Short-term outlook is favorable, but C.A.R. faces significant challenges as a fragile state to enhance medium term growth prospects and reduce poverty.
- Directors stressed the importance of:
  - strengthening budget execution;
  - addressing structural and infrastructural bottlenecks;
  - building capacity;
  - improved security and political stability.
- Directors regretted the fiscal slippages and underlying governance issues in 2010 and early 2011.

*IMF staff report and annexes as presented in the source PDF.*

### 2011. They welcomed the measures taken to restore budget discipline and enhance

### _cr12238 - 2011. They welcomed the measures taken to restore budget discipline and enhance

### Budget discipline, public financial management, and petroleum pricing
- Directors welcomed measures to restore budget discipline and enhance transparency in the use of public funds and called for their steadfast implementation.
- Directors encouraged:
  - redoubling efforts to strengthen public financial management,
  - increasing domestic resource mobilization,
  - prioritizing spending,
  - enhancing donor coordination to better leverage Technical Assistance resources.
- Directors welcomed the recent adjustment in domestic petroleum prices and stressed:
  - the importance of regular adjustments to ensure full pass through of international prices,
  - safeguarding fiscal resources for priority investments,
  - implementing measures to protect the poor.
- Authorities’ actions and commitments:
  - ministerial order issued on December 30, 2011 implementing an adjustment of petroleum prices for January 2012,
  - commitment to reforms improving efficiency of tax and customs administration and broadening the tax base,
  - 2012 budget provides for increased spending in health and education and provisions to help vulnerable households cope with increased petroleum product prices,
  - instructions to ensure payments are made only for expenditures processed through GESCO (public expenditure management computerized system),
  - steps to commit expenditures on a weekly basis and ensure outlays are provisioned for in periodic cash flow plans,
  - creation of a technical committee to monitor budget execution.

### Poverty Reduction Strategy, donor engagement, and capacity building
- Directors welcomed the second generation Poverty Reduction and Strategy Paper (PRSP) as a comprehensive reform strategy to mobilize donor assistance, build capacity, boost investment in physical infrastructure and social programs, and make progress towards the Millennium Developments Goals.
- Authorities view re-engagement with the IMF as essential to:
  - preserve macroeconomic stability,
  - rebuild capacity,
  - catalyze donors’ assistance.
- Authorities requested IMF support in rebuilding technical capacity and took steps following the National Forum on Public Finance (September 2011) to strengthen operations of key economic management institutions, including Committees monitoring macroeconomic developments, structural reforms, and the Liquidity Committee.

### Financial sector, external arrears, and debt management
- Directors welcomed the recapitalization of commercial banks and encouraged authorities to step up efforts to divest their majority stake in the ailing bank.
- Directors regretted accumulation of external payment arrears, including to Paris Club and multilateral creditors, and urged authorities to settle these arrears as soon as possible.
- Directors encouraged authorities to strengthen public debt management and avoid contracting nonconcessional loans, including expensive domestic bank financing, to preserve debt sustainability.
- Directors supported authorities’ efforts to seek debt relief from all bilateral and commercial creditors on terms consistent with the HIPC/MDRI Initiatives.
- Authorities committed to intensify efforts to strengthen debt management capabilities, seek concessional financing for the development agenda, and continue good faith efforts to secure additional debt relief under HIPC terms.

### Macroeconomic outlook, recent developments, and risks
- Recent developments:
  - Real GDP growth: 3.1 percent in 2011, reflecting recovery in agricultural production and external demand but held back by election-related uncertainty and security challenges.
  - Inflation: fell to 0.7 percent in 2011 following a good harvest and contained domestic oil price increases.
  - Domestic revenue performance improved but expenditures increased during the electoral period, resulting in a significant increase in the domestic primary deficit.
  - External position weakened due to an increase in import prices, notably in petroleum products.
  - International reserves projected to fall to about 2.7 months of imports.
- Authorities’ outlook and risks:
  - Expect recovery to firm up as security and election-related uncertainties are resolved, aid flows resume, and investors regain confidence.
  - Acknowledge substantial downside risks, including global uncertainties.

### Directors’ assessment of Fund engagement
- Directors considered that a new Fund arrangement could help solidify macroeconomic stabilization and support the authorities’ reform agenda.
- Directors stressed that strong ownership and commitment, including strengthened budget execution and governance, will be key.

### Selected economic indicators (selected figures preserved exactly as presented)
- National accounts and prices (Annual percentage change):
  - GDP at constant prices: 2008: 2.0; 2009: 1.7; 2010: 3.3; Est. 2011: 3.1; Proj. 2012: 4.1
  - Inflation (period average): 2008: 9.3; 2009: 3.5; 2010: 1.5; Est. 2011: 0.7; Proj. 2012: 2.5
  - Unemployment rate (in percent): ... ... ... ... ...
- External sector:
  - Current account balance (in percent of GDP): 2008: -9.9; 2009: -8.1; 2010: -9.9; Est. 2011: -7.2; Proj. 2012: -6.8
  - Exports, f.o.b. (US$ basis): 2008: -16.9; 2009: -12.6; 2010: 11.9; Est. 2011: 42.0; Proj. 2012: 16.6
  - Export volume of goods: 2008: -15.5; 2009: -21.9; 2010: 10.0; Est. 2011: 21.0; Proj. 2012: 14.6
  - Import, f.o.b. (US$ basis): 2008: 20.3; 2009: -9.9; 2010: 12.5; Est. 2011: -2.6; Proj. 2012: 19.7
  - Import volume of goods: 2008: -2.2; 2009: 13.3; 2010: 3.6; Est. 2011: -16.3; Proj. 2012: 18.2
  - Gross national savings (percent of GDP): 2008: 2.9; 2009: 5.1; 2010: 5.1; Est. 2011: 6.9; Proj. 2012: 7.7
  - Gross domestic investment (percent of GDP): 2008: 12.7; 2009: 13.2; 2010: 15.1; Est. 2011: 14.1; Proj. 2012: 14.5
  - Terms of trade (change in percent): 2008: -20.1; 2009: 40.8; 2010: -6.3; Est. 2011: 0.9; Proj. 2012: 0.6
  - Nominal effective exchange rate: 2008: 1.7; 2009: -0.8; 2010: -4.2; 2011: ...; 2012: ...
  - Real effective exchange rate: 2008: 7.5; 2009: 2.0; 2010: -4.7; 2011: ...; 2012: ...
- Money and credit:
  - Broad money: 2008: 15.9; 2009: 14.4; 2010: 14.2; Est. 2011: 5.5; Proj. 2012: 8.4
- Central government finance (In percent of GDP):
  - Total revenue: 2008: 15.2; 2009: 16.1; 2010: 18.0; Est. 2011: 14.7; Proj. 2012: 16.2
  - Total expenditure: 2008: -16.2; 2009: -16.2; 2010: -22.8; Est. 2011: -17.7; Proj. 2012: -17.2
  - Overall balance: 2008: -1.0; 2009: -0.1; 2010: -1.4; Est. 2011: -3.0; Proj. 2012: -1.0
- Public debt:
  - Total debt: 2008: 80.3; 2009: 35.0; 2010: 37.8; Est. 2011: 39.6; Proj. 2012: 38.2
  - Domestic debt: 2008: 23.3; 2009: 20.4; 2010: 21.2; Est. 2011: 21.3; Proj. 2012: 17.9
- Sources cited in original: C.A.R. authorities and IMF staff estimates and projections.

*Statement by Kossi Assimaidou, Executive Director for Central African Republic; January 30, 2012.*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12238.pdf_