Key Questions on Central African Republic

Last Updated: May 2, 2022

Answers to key questions about the IMF's program with Central African Republic.

Back to Top

Why does Central African Republic (CAR) need support from the IMF? support

A decade after its 2013 civil war, CAR is facing crisis upon crisis resulting in exceptional hardship that is bringing the country to the brink of a humanitarian crisis with acute food insecurity. The country remains one of the poorest in the world, with almost 80 percent of its people living in poverty, and it remains dependent on international support to achieve stabilization on several fronts, including basic human needs.

The 2021 suspension by donors of budget support—which has deprived the government of financing amounting to 5 percent of GDP—is now constraining. Fiscal buffers, including the 2021 SDR allocation by the IMF, have now eroded. The protracted balance of payment need is preventing the authorities from delivering basic public services to an already afflicted population. Against this backdrop, the authorities have requested Fund financial assistance.

Back to Top

What are the goals of the ECF-supported program?

On April 27, 2023, the IMF Executive Board approved a 38-month Extended Credit Facility (ECF) arrangement of SDR 141.68 million (about US$191.4million) with the Central African Republic. The Executive Board’s decision enables an immediate disbursement equivalent to SDR 11.3 million (about US$15.2 million).

The ECF-supported program is part of coordinated efforts by international financial institutions (IFIs) to support the people of CAR by sustaining basic public services, including in the health and education sectors. Its overarching goal is to mitigate the risk of a major humanitarian crisis and facilitate CAR’s gradual exit from acute fragility after its recent setbacks.

More specifically, the program will support critical reforms and policies with the view of (i) improving resilience to volatile terms-of-trade and financing shocks, (ii) supporting the most vulnerable, and (iii) unlocking additional donor support. Key governance reforms include the finalization and application of the anti-corruption legislation, adoption of new mining legislation (in collaboration with the World Bank), and Public Financial Management reforms focusing on controls and accountability.

The ECF-supported program will also help catalyze support from IFIs and donors, including budget support from the African Development Bank (AfDB).

Back to Top

How will the ECF-supported program help the most vulnerable who are experiencing sustained economic hardship?

Despite fiscal consolidation, the authorities are committed to keeping social expenditures at an adequate level in accordance with quantitative targets in the program.
In particular, timely payment of public spending targeted at vulnerable groups should contribute to fighting food insecurity. Transfers to groups such as old-age pensioners and vulnerable students are expected to be part of this priority spending.

Addressing fuel shortages will also be critical to stabilizing government finances and to avoid economic, humanitarian, and security activities being disrupted. Moreover, solving fuel shortages is also critical for revenue mobilization.

Reforms in this area involve establishing a transparent and efficient oil pricing mechanism during the period of the program, by (i) simplifying the price structure formula, rationalizing all the para-fiscals and quasi-taxes and accompanying the collection of said quasi-taxes by an investment plan; (ii) collecting all the taxes and quasi-taxes at customs; (iii) publishing the monthly price structure; (iv) conducting an audit of the import cost (margins and fees); and (v) revising the pump prices every six months until the automatic price adjustment is implemented.

A first step in this process is to apply the tax rates and quasi-taxes as stipulated in the tax code, finance law, and the Central African Economic and Monetary Community (CEMAC) directives to ensure revenue collection. Furthermore, to reduce informality, and protect the most vulnerable, official fuel pump prices will be reduced according to IMF technical assistance recommendations.

Back to Top

What safeguards measures have been put in place to ensure that the resources are used appropriately?

The government’s priority is to cover wage and salary payments as well as debt service which are non-discretionary payments that must be made to avoid default. This helps avoid diverting resources away from basic public services.

As such, the ECF-disbursement will be paid directly to i) CAR’s SDR account with the IMF to cover obligations due during the program; and ii) to an escrow account at Bank of Central African States (BEAC) to cover wage and salary payments.

The wage and salary payments will be subject to a three-layer safeguard system, including i) an audit and cleaning process of the civil-servant payroll system; ii) internal audit by Inspection General Finance and Ministry of Civil service; iii) external audit by an independent firm including third-party verification.

Back to Top

What governance reforms does the government intend to tackle during the program?

Key priorities include upgrading CAR’s anti-corruption legal framework, which includes passing an anti-corruption law and subsequent implementation, strengthening the operational and financial independence of institutions in charge of public oversight (e.g. Cour des Comptes), adopting a mining code in line with international standards, improving fiscal reporting, leveraging digitalization to improve transparency in the management of public resources, reinstating monthly Treasury Committee meetings with donors, and publishing the result of an ongoing Public Expenditure and Financial Accountability (PEFA) assessment.

The government is also committed to the implementation of accounting reform which aims to improve the accuracy, transparency, and accountability of financial reporting and management within government agencies and departments.

Back to Top

In 2022 CAR designated bitcoin as legal tender and launched the digital Sango coin. What’s the IMF’s view on CAR granting legal tender status to crypto assets?

The April 2022 legislation granting legal tender status to crypto assets and guaranteed convertibility raised multiple risks and legal challenges. It violated the BEAC’s exclusive right to issue the legal tender in the monetary union and gave rise to a host of risks ranging from significant macro-fiscal, financial stability, and financial integrity risks. However, the authorities agree that the legal tender and guaranteed convertibility are not necessary for achieving their goals. In April 2023, they agreed to amend the crypto legislation to repeal these two features.

A key policy commitment under the ECF-supported program is to ensure consistency with CEMAC’s monetary framework and to start de-risking the project Sango. To this end, the regulatory frameworks for digital assets should be coordinated at the regional level, to ensure monetary and financial stability, mitigate risks, ensure consumer protection, and foster compliance with AML/CFT standards. In particular, the tokenization of natural resources would require a strong legal framework consistent with the Financial Action Task Force (FATF) standards to address money laundering and terrorist financing risks.