IMF Staff Completes Mission to the Central African Republic

IMF News, May 3, 2019

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An IMF team, led by Mr. Édouard Martin, visited Bangui from April 24 through May 3, 2019 to conduct discussions for the sixth and final review of the Central African Republic’s economic reform program supported by an Extended Credit Facility (ECF).
The team met with President Touadéra, President of the National Assembly Ngon-Baba, Minister of Finance Dondra, Minister of Economy Moloua, National Director of the BEAC Chaibou, other senior government officials, parliamentarians, and representatives of the business and donor communities.
The peace agreement signed on February 6, 2019 by the government and representatives of 14 armed groups is characterized as a unique opportunity to improve C.A.R.’s security situation and create conditions for sustained and inclusive growth, poverty reduction, and job creation.

Economic growth is estimated at around 4 percent in 2018 and is projected to reach 4½ percent in 2019.
Inflation was subdued at 1.6 percent in 2018 and is expected to remain contained.
The current account deficit (excluding grants) would decline from about 12 percent in 2018 to around 11 percent in 2019.
The banking sector remains well capitalized and liquid, with the share of non-performing loans decreasing significantly thanks to the repayment of commercial arrears by the government.

The ECF-supported program will expire on July 19, 2019, as initially envisaged.
Program performance at end-December 2018 is satisfactory overall:
- All quantitative performance criteria were met, except:
- The domestic primary deficit, reflecting higher-than-expected current spending.
- The repayment of domestic arrears, which was slightly delayed.
Domestic revenue in the first quarter of 2019 was lower than expected, owing mainly to:
- The forced closure in March of the main road from Cameroon.
- Delays in the transfer on budget of parafiscal taxes collected by public agencies.
Most structural reforms have been implemented, except:
- The elimination of parafiscal taxes without economic justification, which will require more time than initially estimated.
- The submission to parliament of the draft law on public agencies, expected in the coming days.

Discussions focused on the parameters of a revised budget for 2019—to be submitted to parliament before mid-June—with a view to optimize the use of additional budget support provided by international partners to meet new priority spending needs generated by the peace agreement.
Additional measures emphasized to improve and sustain revenue mobilization:
- Strengthening imports and export valuation.
Fiscal and governance recommendations:
- Accelerate the integration of parafiscal taxes in the treasury single account.
- Implement the planned elimination of taxes and fees with no economic justification to support private sector development.
- Continue strengthening public expenditure management to promote transparency and good governance.
The authorities requested an IMF governance diagnostic mission.
The authorities confirmed their commitment to limit borrowing—including concessional loans—to safeguard debt sustainability.

IMF staff note that good progress was made in discussions with the authorities on economic and financial policies that could support completion of the sixth and final program review.
The team thanked the authorities for their warm hospitality, cooperation, and constructive discussions.

IMF Press Release No. 19/141, May 3, 2019