IMF Executive Board Concludes 2011 Article IV Consultation with the Central African Republic

Public Information Notice (PIN) No. 12/14
February 9, 2012

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On January 30, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Central African Republic (C.A.R.).1


Since the conclusion of the last Article IV consultation in December 2009, the C.A.R. continued to grapple with the challenges of a fragile post-conflict state. Macroeconomic performance over the past few years has been broadly satisfactory but growth remained modest and well below the averages for sub-Saharan Africa and other fragile states. Insufficient domestic and external resources, deep-rooted structural deficiencies, weak institutional capacity, and a poor business environment are enduring factors holding back economic take-off. The economy is highly dependent on external assistance, poverty is pervasive, and social indicators are generally weak.

In 2010–11, real gross domestic product (GDP) growth averaged 3.2 percent, thanks mainly to rebounding agricultural production, which helped to bring down inflation to less than 1 percent by end-2011. Growth in 2011 was slightly weaker than forecast because the expected post-election recovery of domestic demand did not materialize and uncertainties delayed major investments in the mining sector and oil exploration. However, the prospects for 2012 are favorable, predicated on continued good performance of the primary sector, particularly agriculture and forestry activities, and the resumption of delayed investments in the mining sector. But risks to this outlook are on the downside, as domestic and global uncertainties continue to weigh on the C.A.R. economy.

The fiscal position deteriorated sharply in 2010 with payment arrears accumulated to domestic and external creditors, reversing hard-won gains under the program supported by the Extended Credit Facility (ECF). Also, lack of transparency and due process in budget execution led to serious governance concerns and the suspension of budget support by donors. Though domestic revenue benefitted from a number of one-off effects to reach 11.6 percent of GDP, expenditures surged, fueled by election-related spending, sending the overall budget deficit, excluding grants, to 7.7 percent of GDP. A tight liquidity situation in 2011, mainly resulting from donors suspending budget support, prompted the authorities to curtail expenditures, which resulted in a decline of the overall deficit by 1.2 percentage points of GDP. The fiscal position is projected to improve further in 2012 on strengthened expenditure control and revenue measures adopted together with the 2012 budget.

Following a slowdown during the period leading to the elections, the C.A.R. authorities have recently stepped up implementation of structural measures, including strengthening budget execution and the monitoring capacity of macroeconomic developments, and improving the operations of state-owned enterprises and key public agencies.

Executive Board Assessment

Executive Directors welcomed the resilience of the economy of the Central African Republic (C.A.R.) in the face of the global crisis. While the short term outlook is favorable, C.A.R. faces significant challenges as a fragile state to enhance medium term growth prospects and reduce poverty. Directors stressed the importance of strengthening budget execution, addressing structural and infrastructural bottlenecks, and building capacity, along with improved security and political stability.

Directors regretted the fiscal slippages and underlying governance issues in 2010 and early 2011. They welcomed the measures taken to restore budget discipline and enhance transparency in the use of public funds and called for their steadfast implementation. They encouraged the authorities to redouble their efforts to strengthen public financial management, increase domestic resource mobilization, prioritize spending, and enhance donor coordination to better leverage Technical Assistance resources. Directors welcomed the recent adjustment in domestic petroleum prices. They stressed the importance of regular adjustments to ensure full pass through of international prices and safeguard fiscal resources for priority investments, along with measures to protect the poor.

Directors welcomed the second generation Poverty Reduction and Strategy Paper (PRSP). It lays out a comprehensive reform strategy to help mobilize donor assistance to build capacity, boost investment in physical infrastructure and social programs, and make progress towards the Millennium Developments Goals.

Directors noted that formidable challenges remain to improve competitiveness and develop the private sector. They encouraged the authorities to persevere in their efforts to address the structural weaknesses confronting the economy, improve the business climate, enhance the delivery of public services, and deepen financial intermediation. Directors welcomed the recapitalization of commercial banks, and encouraged the authorities to step up their efforts to divest their majority stake in the ailing bank.

Directors regretted the accumulation of external payment arrears, including to Paris Club and multilateral creditors, and urged the authorities to settle these arrears as soon as possible. They encouraged the authorities to strengthen public debt management and avoid contracting nonconcessional loans, including expensive domestic bank financing, to preserve debt sustainability. They supported the authorities’ continued efforts in seeking debt relief from all bilateral and commercial creditors on terms consistent with the HIPC/MDRI Initiatives.

Directors stressed the importance of adequate macroeconomic data and encouraged the authorities to strengthen the statistical agency.

Directors considered that a new Fund arrangement could help solidify macroeconomic stabilization and support the authorities’ reform agenda. They stressed that strong ownership and commitment, including strengthened budget execution and governance, will be key.

Central African Republic: Selected Economic Indicators
  2008 2009 2010
  (Annual percentage change)

National accounts and prices


GDP at constant prices

2.0 1.7 3.3 3.1 4.1

Inflation (period average)

9.3 3.5 1.5 0.7 2.5

Unemployment rate (in percent)

External sector


Current account balance (in percent of GDP)

-9.9 -8.1 -9.9 -7.2 -6.8

Exports, f.o.b. (US$ basis)

-16.9 -12.6 11.9 42.0 16.6

Export volume of goods

-15.5 -21.9 10.0 21.0 14.6

Import, f.o.b. (US$ basis)

20.3 -9.9 12.5 -2.6 19.7

Import volume of goods

-2.2 13.3 3.6 -16.3 18.2

Gross national savings (percent of GDP)

2.9 5.1 5.1 6.9 7.7

Gross domestic investment (percent of GDP)

12.7 13.2 15.1 14.1 14.5

Terms of trade (change in percent)

-20.1 40.8 -6.3 0.9 0.6

Nominal effective exchange rate

1.7 -0.8 -4.2

Real effective exchange rate

7.5 2.0 -4.7

Money and credit


Broad money

15.9 14.4 14.2 5.5 8.4
  (In percent of GDP)

Central government finance


Total revenue

15.2 16.1 18.0 14.7 16.2

Total expenditure

-16.2 -16.2 -22.8 -17.7 -17.2

Overall balance

-1.0 -0.1 -1.4 -3.0 -1.0

Public debt


Total debt

80.3 35.0 37.8 39.6 38.2

Domestic debt

23.3 20.4 21.2 21.3 17.9

Sources: C.A.R. authorities and IMF staff estimates and projections.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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