IMF Executive Board Completes Sixth Review Under the Extended Credit Facility Arrangement for the Central African Republic and Approves US$31.70 Million Disbursement

IMF News, July 1, 2019

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IMF Executive Board Completes Sixth Review Under the Extended Credit Facility Arrangement for the Central African Republic and Approves US$31.70 Million Disbursement

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Bibliographic details

• Published: July 1, 2019

Key action

• On July 1, 2019, the IMF Executive Board completed the Sixth and final review under the Extended Credit Facility (ECF) arrangement for the Central African Republic.
• Completion of the review enabled a disbursement of SDR 22.84 million (about US$ 31.70 million).
• The disbursement will bring total disbursements under the arrangement to SDR 133.68 million (about US$ 185.56 million).

Financial and program background

• The three-year ECF arrangement for the Central African Republic was approved by the IMF’s Executive Board on July 20, 2016 (see Press Release No. 16/352) for SDR 83.55 million, about US$ 115.97.million and subsequently augmented twice to a total of SDR 133.68 million (about US$185.56million, 120 percent of the Central African Republic’s quota at the IMF).
• The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.[1]

Findings and assessment of performance

• Substantial progress has been achieved under the ECF arrangement, including in:
  • stabilizing the economy,
  • reducing fiscal vulnerabilities,
  • improving public financial management.
• The Central African Republic’s performance under the ECF arrangement is described as satisfactory despite:
  • a challenging security environment,
  • difficult humanitarian conditions.
• The recent peace agreement between the government and 14 armed groups could constitute a pivotal step toward ending the ongoing crisis and, with emphasis on power-sharing and implementation, should contribute to:
  • improving security,
  • creating conditions for sustained and inclusive growth.

Policy priorities and recommendations

• The authorities remain committed to pursuing fiscal policy consistent with macroeconomic stability.
• The 2019 revised budget provides for the gradual allocation of additional grant financing to key government initiatives, including:
  • implementation of the peace agreement,
  • strengthening of national security forces,
  • preparation of the 2020-21 elections.
• Further efforts needed:
  • strengthen domestic revenue mobilization, which remains weak, to sustainably finance initiatives.
• Structural reforms progressed and further actions recommended:
  • strengthen the treasury single account,
  • streamline parafiscal taxes,
  • improve budget transparency,
  • continue structural fiscal reforms to further reduce the use of exceptional payment procedures,
  • comprehensively audit all potential domestic arrears,
  • complement fiscal reforms with reforms to improve the business climate and governance, including strengthening the AML/CFT framework.

Regional and institutional support

• The program has been supported by supportive policies and reforms by regional institutions in:
  • foreign exchange regulations,
  • monetary policy framework,
  • measures to support an increase in regional net foreign assets,
• These regional measures are described as critical to the program’s success.

Official statement

• “The Central African Republic’s performance under the ECF arrangement remains satisfactory despite a challenging security environment and difficult humanitarian conditions. Since its adoption in July 2016, substantial progress has been achieved under the ECF arrangement, including in stabilizing the economy, reducing fiscal vulnerabilities, and improving public financial management.

The recent peace agreement between the government and 14 armed groups could constitute a pivotal step toward ending the ongoing crisis. Emphasizing power-sharing, its implementation should contribute to improving security and creating the conditions for sustained and inclusive growth. The authorities remain committed to pursuing fiscal policy consistent with macroeconomic stability. The 2019 revised budget provides for the gradual allocation of additional grant financing to key government initiatives, including the implementation of the peace agreement, the strengthening of national security forces, and the preparation of the 2020-21 elections. Further efforts to strengthen domestic revenue mobilization, which remains weak, will be critical to sustainably financing these initiatives. Structural reforms have progressed, including with regard to the strengthening of the treasury single account, streamlining of parafiscal taxes, and improved budget transparency. Looking ahead, structural fiscal reforms should continue—including to further reduce the use of exceptional payment procedures and comprehensively audit all potential domestic arrears—while being complemented by reforms to improve the business climate and governance, including strengthening the AML/CFT framework. The Central African Republic’s program has been supported by the implementation of supportive policies and reforms by the regional institutions in the areas of foreign exchange regulations and monetary policy framework and to support an increase in regional net foreign assets, which are critical to the program’s success.” — Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair

IMF Press Release No. 19/259, July 1, 2019

References

• Mitsuhiro Furusawa
• Central African Republic and the IMF
• Special Drawing Rights (SDRs) -- A Factsheet
• Press Releases
• PRESS CENTER
• Press Release No. 16/352
• ECF
• www.imf.org/external/country/CAF
• https://www.imf.org/en/home