On September 14, 2015, the Executive Board of the International Monetary Fund (IMF) approved SDR 8.355 million (about US$11.8 million) in financial assistance for the Central African Republic (C.A.R.) under the Rapid Credit Facility (RCF)1 to assist the authorities to meet urgent balance of payments of needs and to support the authorities’ emergency economic recovery program. The Board’s decision enables the disbursement of the full amount (15 percent of C.A.R’s quota at the IMF) and follows a disbursement of SDR 5.57 million (about $7.9 million) under the RCF in March 2015 (see Press Release No. 15/292).
The C.A.R authorities continued their efforts to improve security conditions, promote an inclusive domestic political dialogue and move forward with their economic program supported by the Fund and the international community. Reflecting a prudent spending policy, the government covered its key obligations, remained current on wage and debt service payments, and avoided accumulating arrears in salaries and pensions. They also implemented most of their quantitative and policy objectives under their economic program, including strengthening the institutional framework to enhance financial governance, appointing the head of the Treasury and accounting unit, enhancing revenue collection, and rationalizing the wage bill. Looking forward, economic prospects for 2016 are positive, with real GDP growth being projected at 5.7 percent, but risks remain high, including a protracted transition and lower external support.
Given the progress that was made in policy implementation under the authorities’ economic program, the new financial assistance will help the C.A.R. authorities to continue with implementation of a set of economic and structural policies aimed at restoring macroeconomic stability, achieving fiscal consolidation, and strengthening the capacity of the C.A.R. government. This new disbursement would also help the authorities address their urgent balance of payments needs and enable an orderly shift to the post-transition phase that should start after the elections.
Following the Executive Board’s discussion, Min Zhu, Deputy Managing Director and Acting Chair, said:
“The Central African Republic is gradually recovering from a major political and security crisis in 2013 that led to the collapse of the economy and a humanitarian crisis. In recent months, improved security conditions enabled the restoration of state authority in most regions of the country. The intensified domestic inclusive political dialogue was instrumental in laying out a schedule toward crucial elections that could end the political transition before year-end. On the economic side, the authorities are implementing their emergency reform program with donor support.
“Under challenging circumstances, the authorities have been rebuilding capacity, strengthening treasury and budget management, and reforming the civil service as well as the business environment. Reflecting fiscal prudence, they kept spending in line with available resources, clearing all outstanding wage arrears, and ensuring regular salary and pension payments to civil servants. Looking forward, mobilizing additional revenues, improving public finance management, returning to normal budget procedures, strengthening debt management, and preserving debt sustainability will be important.
“Economic prospects for 2016 look encouraging, but risks remain high, including a protracted political transition and lower external support. Public finances will remain under pressure, and comprehensive plans adopted to enhance revenue collection and further reform the wage bill are expected to facilitate the transition to the post-emergency phase. Continued external financial and technical assistance will remain critical for the economy to lift growth prospects and reduce poverty.
“The Fund will continue to play a key role in coordinating international efforts in support of the government’s economic, financial, and social strategies to step-up growth and promote inclusive social development and peace.”
1 The RCF (http://www.imf.org/external/np/exr/facts/rcf.htm) provides immediate financial assistance with limited conditionality to low-income countries with an urgent balance of payments need. In this context, the economic policies of a member receiving RCF financing are expected to address the underlying balance of payments difficulties and support policy objectives including macroeconomic stability and poverty reduction. Financing under the RCF carries a zero interest rate, has a grace period of 5.5 years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.
Source: International Monetary Fund (IMF)