CAR struggles to stabilise economy against complex humanitarian crisis
Bangui, Central African Republic (PANA) – The authorities in Central African Republic (CAR) and the International Monetary (IMF) staff have reached agreement on the economic policies that may underpin the forthcoming approval by the IMF Executive Board of the second review of the Extended Credit Facility (ECF)-supported programme.
Despite an extremely challenging economic and social context, CAR continues to make headway in stabilising its economy and in achieving fiscal consolidation.
According to the IMF, the effective implementation of reforms, particularly in the fuel market, will be key to addressing the numerous economic and social challenges facing the authorities in an environment of fiscal constraints.
A team from the IMF, led by Mr. Albert Touna Mama, held discussions with the CAR’s authorities in Bangui from 3-12 April 2024, and then in Washington DC on 18 April 2024, in connection with the second review of CAR’s ECF-supported programme.
In its assessment of the current situation, the Fund said that the resumption of budget support from the African Development Bank and from the IMF as well as assistance from the World Bank have served to improve the country’s prospects for financing on the regional market, to ensure fiscal continuity and to safeguard the delivery of basic social services.
Economic growth is estimated as being slightly up, reaching 0.7 percent in 2023, albeit reflecting the country’s fuel and electricity supply difficulties, while inflationary pressures are beginning to ease.
“Central African Republic is continuing to make progress in stabilising its economy and in achieving fiscal consolidation, in spite of an extremely challenging economic and social context. Government tax revenues—a prerequisite if the government is to meet the needs of the CAR people on a long-term basis—increased by 0.5 percent of GDP in 2023,” Mr. Touna Mama said at the end of the discussions.
“Programme implementation has been broadly satisfactory, notwithstanding certain obstacles. All the quantitative performance criteria for end-December 2023—regarding tax revenue, the primary deficit, and domestic financing—have been met,” he remarked.
Furthermore, the reforms anticipated for end-April—regarding administrative fees, taxes, fines, and levies (“menues recettes”), the interconnection between taxes and customs, the institutional strengthening of the Financial Intelligence Unit (ANIF), and the review of the organic law governing the state audit office—are on track, according to the IMF team.
However, the indicative criteria regarding the floor for expenditures in favour of the social sectors and expenditures executed via exceptional procedures have not been met, reflecting the severe cash-flow pressures as well as structural constraints in expenditure execution.
“Despite these notable achievements in fiscal consolidation, a number of economic and social challenges have still to be addressed in the short to medium term,” Mr. Touna Mama pointed out.
He explained that the first relates to the crisis confronting the energy sector (fuel and electricity), whose persistent difficulties continue to have an impact on business activity and household welfare.
In addition, he said that the succession of shocks in recent years, combined with the weakness of social safety nets, have compounded the complex humanitarian crisis which the country is experiencing.
Finally, this situation is exacerbated by the limited fiscal space available to the government in view of the heightened risks affecting public debt.
Against this backdrop, the CAR government has adopted a series of undertakings and emergency measures under the ECF programme with the aim of addressing this situation. These efforts include: adopting an action plan consisting of reforms in the fuel market which are designed to end the supply constraints, boost the tax revenues associated with this sector, and provide consumers with relief.
The government endeavours include delivering a budgetary injection to the National Electricity Company, ENERCA; clearing arrears in favour of certain government suppliers while providing the local private sector with relief; and adopting measures to raise the government’s own revenues with the aim of broadening fiscal margins.
Mr. Touna Mama said that the authorities were pursuing key reforms in the digitalisation and modernisation of government finance, through the ongoing deployment of new IT systems and modern applications within the tax administration, Customs, and the Treasury, among other initiatives, with the support of technical and financial partners.
“Given the major challenges currently confronting public debt management, we are encouraging the authorities to press ahead with implementation of the new National Public Debt Management Committee (CNDP) chaired by the Minister of Finance, as well as the new Treasury Liquidity Committee chaired by the Head of State. These fora for dialogue are expected to allow for better decision-making in the management of the limited fiscal space available to the government.
“In terms of outlook, we anticipate a gradual acceleration of economic activity to around 1.3 percent in 2024. However, these growth prospects will be crucially dependent on the success of the campaign for importing fuels via the Oubangui river, as well as on the extent to which electricity supply difficulties can be overcome.
Accordingly, we encourage the authorities to implement the agreed action plan, take all appropriate steps to ensure the success of the ‘river campaign (campagne fleuve),’ and safeguard the attainment of the tax revenue targets which the authorities have set themselves under the ECF program,” the IMF official added.
-0- PANA AR/MA 21April2024
