## Frequently Asked Questions on Central African Republic

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**Canonical URL:** [Frequently Asked Questions on Central African Republic](https://www.imf.org/en/countries/caf/central-african-republic-qandas)

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### IMF-supported program objectives and reform areas
- The IMF-supported program aims to:
  - enhance domestic revenue mobilization (DRM), including through the fuel market reforms,
  - improve public financial management (PFM),
  - overhaul public debt management, and
  - adopt governance reforms.
- DRM measures include:
  - digitalizing customs and tax offices,
  - reducing customs and VAT exemptions,
  - collecting tax arrears, and
  - centralizing revenue in the Treasury Single Account.
- PFM efforts focus on:
  - budget planning,
  - spending controls—particularly on extraordinary procedures, and
  - cash management.
- Governance reforms target:
  - anti-corruption legislation,
  - enhancing the court of audit, and
  - strengthening the financial intelligence unit.
- Bolstering the fiscal position and implementing the upcoming medium-term debt strategy are identified as key to safeguarding debt sustainability.

### Fuel market crisis, rationale for reforms, and program linkages
- Availability of fairly priced fuel is characterized as essential for:
  - businesses and households,
  - government revenue,
  - economic activity and the cost of living,
  - domestic revenue mobilization, public finances, and public debt sustainability.
- The government requested Fund financing in the context of a major crisis in the fuel market: prolonged fuel shortages that brought economic activity to a standstill and caused a collapse of tax revenue.
- The reform of the fuel market was an important part of program discussions initiated in November 2022 and concluded with approval of the ECF-arrangement in April 2023.
- The program sets quarterly targets for domestic revenue collection that depend in part on improved tax collection from the fuel sector.

### Action Plan for fuel-sector reform: objectives and key elements
- The February 2023 IMF technical assistance mission developed an Action Plan with three objectives:
  - i) enhancing fuel price structure transparency,
  - ii) improving predictability of fuel revenues by capping imports margins (like the distributors’ margins), and
  - iii) centralizing fuel import processes for efficiency and economies of scale.
- Key elements of the Action Plan included:
  - indexation of the price structure around an international reference price (instead of importers’ declarations), and
  - adopting a public and transparent auction system for fuel imports.
- Follow-up technical assistance reviewed the new market structure, resulting in an updated Action Plan and the President’s signature of decree N°24.157 on June 17, 2024, which mandates:
  - the online publication of price structures in a more transparent and predictable manner with the breakdown of every line.
- Downloadable price structures: June 2024, July 2024, August 2024, November 2024.
- The government has committed to address ongoing implementation challenges.

### IMF stance on pump prices and monopoly importer
- No, the IMF is not pushing CAR to increase pump prices.
- The IMF notes CAR’s situation differs from neighboring oil-exporting countries and that pump prices in CAR are already higher than in those countries and “among the highest in the world.”
- The Fund’s recommendations for CAR would likely be to reduce prices at the pump as soon as:
  - the margins made on imports are lowered to reasonable levels, and
  - fiscal revenues have significantly increased.
- The decision to have a monopoly fuel importer is a sovereign choice by the government.
- What is important, per the program, is that every actor abide by the new price structure required by Presidential decree 24.157 and comply with sector laws and regulations (examples listed: having an import license and a local registration, being a taxpayer, 80 percent imported through the river, etc.).
- Ongoing discussions on SOCASP’s ownership are not part of the policy recommendations under the program.

### Anticipated benefits from fuel-market reforms
- Expected outcomes for businesses, households, and government revenues:
  - more stable fuel supply,
  - a more transparent fuel market,
  - reduced reliance on informal imports,
  - increased fiscal revenues,
  - curbed energy price increases,
  - reduced costs for businesses and households supporting robust economic growth,
  - increased fiscal space to address essential social spending needs,
  - better combat against fraud in the fuel sector, and
  - increased investments in critical infrastructures.
- Enhanced governance in the fuel sector is expected to contribute to a more predictable business environment, supporting broader economic stability and growth.

### Current status, impacts, and key statistics
- Improvements since the 2022 crisis:
  - fuel supply has improved markedly, especially in 2024, eliminating most shortages.
- Ongoing problems:
  - fuel prices at the pump remain high—“ranking among the highest in globally”,
  - informal fuel imports continue to thrive,
  - volatility of fuel revenue causes acute liquidity pressures and makes it challenging to finance the budget.
- Fiscal revenue contribution from the fuel sector:
  - collapsed from around 20-25 percent in 2020-21 to an estimated 9 percent in 2024.
- Drivers of revenue volatility include insufficient backup stocks due to repeated failures of the river campaign, including in 2024.
- Historically, 80 percent of fuel imports have come through the Ubangi River; reliance on the road corridor (Limbe-Bangui) is described as inefficient and accelerates deterioration of main road infrastructure.
- Assessment: some improvements observed, but performance remains “very far from the historical performances observed before 2022.”

### Four main reasons for the collapse of fiscal revenues from the fuel sector
- First: imported volumes for local consumption (excl. security) have significantly decreased, partly because of successive failures of river campaigns.
- Second: high pump prices have created an incentive for smuggling cheap fuel from neighboring countries to supply the informal market, eroding the tax base.
- Third: reliance on importers’ price declarations for fuel imports instead of a predefined rule indexing import prices to an international reference price (Platts) has opened the door for major markups, raising import costs and causing the “soutien / reversement Etat” to become negative (i.e., a subsidy to consumers that the government pays to the importer). This practice has had markedly harmful effects on fuel revenues since the 2022 crisis.
- Fourth: major changes in the market structure—including the entry and exit of some actors—have resulted in large tax arrears for the government.

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## References

- [Central African Republic and the IMF](https://www.imf.org/en/countries/caf)
- [Extended Credit Facility (ECF) Factsheet](https://www.imf.org/en/About/Factsheets/Sheets/2023/Extended-Credit-Facility-ECF)

_Source: https://www.imf.org/en/countries/caf/central-african-republic-qandas_