The protracted political and security crisis in Central African Republic (CAR) and the resulting collapse of economic activity continue to present major challenges to the Transitional Authorities, according to an International Monetary Fund (IMF) mission that has just concluded a week-long visit to the country’s capital, Bangui.
Scarcity of basic consumption goods has translated into a steady rise in prices, with inflation projected to reach 11.6 percent on average in 2014, well above the Central African Economic and Monetary Community (CEMAC) convergence criterion of 3 percent, the Fund’s staff mission observed.
“The external current account deficit is projected to narrow to 6.4 percent of GDP in 2014, reflecting the substantial financial support from the donor community as well as the Economic Community of Central African States (ECCAS) countries,” said mission leader Ekué Kpodar. “However, the strong reliance on food and oil imports and the lagging performance of the exporting industries make further balance of payments support necessary.”
In a statement made available to PANA here Thursday, Kpodar announced that the Transitional Authorities and the IMF mission have ”reached staff-level understandings on a macro-fiscal framework and a set of economic and structural policies to reinforce the progress made since the previous Rapid Credit Facility (RCF) approved by the IMF Executive Board in May 2014”.
He said the policies were aimed at further restoring macroeconomic stability, achieving fiscal consolidation, strengthening the capacity of the CAR government, coordinating technical assistance, and maintaining the commitment of international donors.
According to Kpodar, under these understandings, CAR could receive support on these policies through a follow-up RCF for an amount of SDR 5.57 million (equivalent to CFAF 4 billion).
The IMF’s total financial assistance to CAR for 2014 would thus reach SDR 13.925 million (equivalent to approximately CFAF10 billion). Additional contributions from development partners to the IMF’s assistance would bring the total external budgetary support to CAR to approximately CFAF 80 billion for 2014.
For 2014, while economic activity is gradually resuming and some of the displaced persons have been able to return, the volatile security situation led the mission and the CAR authorities to revise the GDP growth forecast downward to 1 percent.
The external current account deficit is projected to narrow to 6.4 percent of GDP in 2014, reflecting the substantial financial support from the donor community as well as the Economic Community of Central African States (ECCAS) countries.
Kpodar observed that the country’s strong reliance on food and oil imports and the lagging performance of the exporting industries make further balance of payments support necessary.
“In the budget area,” he said, “the priority remains to further improve the mobilisation of domestic revenues and enhance the quality of spending with a view to limiting the domestic primary balance to 5 percent of GDP in 2014 and 4.1 percent in 2015.”
In the view of the IMF mission, CAR’s Transitional Authorities should continue implementing measures to strengthen public financial management by enhancing the monitoring of cash flow management, further cleaning up the civil servants roster and payroll, revising the convention with commercial banks to administer tax collection, and strengthening transparency in oil taxation.
Following the mission’s in-depth discussions with the government on a draft budget and policies for 2015, Kpodar said: “For next year, we expect that the return of security and the successful completion of the political transition will mark the beginning of a sustainable economic recovery with a real GDP growth rate estimate of 5.7 percent with inflation being contained at 5.7 percent.
“However, public finances will continue to be under pressure and will require continued support of the international community.”
In Bangui, the mission met with CAR President Catherine Samba-Panza, and held discussions with Prime Minister Mahamat Kamoun, Minister of Finance and Budget Bounandele Koumba, and representatives of development partners, the diplomatic community, and the private sector.