On December 21, 2016, the Executive Board of the International Monetary Fund (IMF) completed the first review under the Extended Credit Facility (ECF)
[1]
for the Central African Republic (CAR). The Executive Board’s decision was taken on a lapse-of-time basis.
[2]
The completion of the review enables a disbursement of SDR 12.525 million (about US$16.8 million), which will bring total disbursements under the
arrangement to SDR 25.05 million (about US$33.6 million).
The ECF arrangement for the CAR was approved by the Executive Board on July 20, 2016 (see
Press Release No. 16/352
) for SDR 83.55 million (about US$111.9 million, 75 percent of Central African Republic’s quota at the IMF).
Program implementation through end-August has been satisfactory. All quantitative and indicative targets were met, with the exception of the criterion on
non-accumulation of external payments for which the authorities are taking corrective measures. Improvement in tax revenue, albeit in line with the program
target, remains fragile. All structural reforms have been implemented, albeit with some delays.
However, renewed violence is slowing the nascent recovery, with disruptions to trade and agriculture, pushing the growth rate for 2016 to 4.5 percent,
lower than initially programmed. In addition, it has triggered a rise in consumer prices. Strengthening security is a prerequisite for the successful
implementation of the government’s National Recovery and Peacebuilding Plan to build national cohesion and for economic recovery in Central African
Republic.
Resolute implementation of the authorities’ structural reform agenda is critical to support economic growth and reduce poverty. Improving domestic resource
mobilization, which remains extremely low, will support a scaling up of expenditure in priority sectors such as health, education, security, and public
investment. The planned review of tax policy, the ongoing strengthening of tax administration, and the streamlining of tax exemptions should gradually
bring tax revenue back to its potential. Reforms aimed at strengthening public financial management, improving cash management and transparency in the
execution of the budget are well underway. Strengthening the institutional framework to better coordinate technical assistance from development partners
will be key to build capacity, improve governance, encourage private sector development, and attract foreign direct investment.
[1]
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. Details on Central African Republic’ arrangement are available at www.imf.org/external/country/CAF.
[2]
The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening
formal discussions.
