IMF completes second review of CAR’s ECF arrangement, approves US$25 million credit
Bangui, CAR (PANA) – The International Monetary Fund (IMF) Executive Board on Monday completed the second review under the Extended Credit Facility {ECF) arrangement for the Central African Republic (CAR), approving immediate disbursement of US$25 million for the country to address protracted balance of payments needs and sustaining priority on basic public services.
This brings total disbursements under the ECF arrangement, approved by the IMF Executive Board in April 2023, to US$65 million.
According to the IMF, the CAR economy is projected to grow by 1.4 percent in 2024, up from the 0.7 percent posted in 2023, while inflation gradually declines in subsequent years. These projections hinge on expediting reforms to the fuel market.
In completing the review, the Executive Board also approved the augmentation of access under the ECF to enable CAR to meet the additional balance of payment needs caused by delayed capital expenditure decisions in 2023.
The ECF is part of coordinated efforts by international financial institutions to support the people of CAR. It will continue to help the country meet protracted balance of payments needs and sustain spending on basic public services, including in the health and education sectors.
The ECF has allowed to anchor important governance-related initiatives, including the ongoing strengthening of the Court of Audit and the Financial Intelligence Unit. CAR authorities have committed to further strengthen governance, transparency, and financial integrity frameworks.
Following subdued growth in 2023, economic activity is projected to expand at a faster pace going forward contingent on a thorough implementation of the agreed reforms in the fuel market as those aim at improving fuel supply and reducing pump prices.
In 2024, according to the IMF, inflation is expected to remain high at around 5 percent, driven by energy and food prices. Spending pressures continue to overshadow CAR’s improvements in revenue collection. Achieving the targeted primary deficit of 2.8 percent of GDP this year would require more efforts. A tightening in the fiscal stance is important to address rising debt vulnerabilities.
The overhaul of the fuel market remains pivotal for CAR stabilisation and both sustained and inclusive growth in CAR. Since the subsidy system ended in 2022, the fuel market has been in flux with recurrent fuel shortages and prohibitive import costs.
It has also created the conditions for informal fuel markets to thrive and to erode fiscal revenues. The government, with the technical assistance missions of the IMF in February 2023 and 2024, has adopted an action plan of reforms in this sector.
Following the Executive Board’s discussion, IMF Deputy Managing Director and acting Chair, Mr. Kenji Okamura, issued a statement noting that the CAR has shown commitment to structural reforms under the ECF-arrangement despite facing deep-rooted fragility and significant uncertainty.
“Both financial and technical support from development partners remain vital to the programme’s success, to overcome fragility, and to alleviate humanitarian needs,” he stressed.
He emphasised that decisive steps are required to fully implement the action plan for the fuel market with the view of improving economic activity, revenue collection, and reducing cost of living.
“A well-functioning fuel market is critical for both fiscal sustainability and macroeconomic stability. In addition, the authorities should continue to enhance the non-fuel-related revenue measures, as well as recover past-due taxes,” Mr. Okamura stated.
The IMF Board has pointed out that the CAR authorities should implement the institutional plan for the Financial Intelligence Unit and take steps to operationalise the new law for the Court of Audit.
“CAR’s economic programme will remain supported by the implementation of policies and reforms agreed among CEMAC regional institutions, which notably aim at supporting an increase in regional net foreign assets which are ultimately critical to programme’s success,” Mr. Okamura added.
-0- PANA AR/MA 25June2024
