IMF Staff Completes Mission to the Central African Republic

IMF News, May 21, 2021

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IMF team led by Mr. Édouard Martin conducted a virtual mission from May 4 to 20, 2021, to discuss a staff-monitored program (SMP) with the authorities.
The mission's discussions will continue with the aim of reaching an agreement that could be submitted for approval to IMF Management once the prior actions have been implemented.
The proposed SMP duration: 7-month.
Satisfactory implementation of the SMP would allow for the resumption of discussions under the Extended Credit Facility (ECF) supported program in the first half of 2022.

The deterioration of the security situation at the beginning of the year and the prolonged closure of the trade corridor between Bangui and Cameroon had a substantial social and economic impact.
Trade corridor closure effects:
- Sharp rise in consumer prices.
- Production affected owing to a lack of inputs.
- Reopening has allowed trade flows to resume, but they remain lower than in the past.
Growth:
- Economic activity is expected to contract slightly this year, compared to the 3½ percent growth expected before the security situation deteriorated.
Inflation:
- After rising sharply at the beginning of the year, inflation is expected to decline gradually, to just over 3 percent year-on-year by the end of 2021.
External sector:
- Owing mainly to lower imports, the current account deficit would decline to about 6½ percent of GDP in 2021 from 8½ percent of GDP in 2020.

Fiscal impact of corridor closure:
- Domestic government revenues in the first quarter were about 20 percent below expectations.
- Security spending increased sharply.
- Combined with budgetary slippages at the end of 2020 and lower budget support, this led to a rapid decline in government deposits with BEAC.
IMF team recommendations to ensure the government can meet financial obligations in the coming months:
- Revise downwards non-priority expenditures to offset the increase in security expenditures in the context of the supplementary budget law.
- In view of the apparent resurgence of the pandemic, accelerate the implementation of the vaccination strategy with the support of technical and financial partners.

The IMF team discussed a program of structural reforms for 2021 aimed at:
- Improving governance and public financial management.
- Strengthening domestic revenue mobilization.
Specific commitments by the authorities:
- Submit a new anti-corruption law to the National Assembly.
- Systematically publish public contracts.
- Make the e-procedures for tax filing and payment by large companies operational.

The IMF team met with President Touadéra, Finance Minister Dondra, Economy Minister Moloua, Mines Minister Mboli-Fatrane, BEAC National Director Chaïbou, other senior government officials, and representatives of technical and financial partners.
Discussions will continue in the coming days to reach an agreement on an SMP and associated prior actions.

IMF Press Release No. 21/137, May 21, 2021.