US$ 23.5 Million ADB Grant * Boards of Directors Approve Lifting of Sanctions Imposed on CAR * ADB Group and Donors Clear Each 49.5% of CAR's Arrears and CAR the balance The Boards of Directors of the African Development Bank and the African Development Fund, meeting today in weekly ordinary session in Tunis, recognized that the Central African Republic has met the criteria for receiving financial assistance within the framework of the institution Post Conflict Country Facility.
Accordingly, they decided to approve a grant of 15.57 million Units of Account (US$ 23.5 million or 11.7 billion CFA Francs) in favor of CAR to conclude the country's arrears clearance program.
The AfDB and ADF also committed to lift the sanctions imposed on CAR as soon as ADB and ADF receive evidence of the donors' irrevocable financial commitments. The financing arrangements for this operation have been concluded, based on tripartite burden sharing between the country (which has already paid to the AfDB Group its contribution of 1%, equivalent to approximately UA 314,500 or US$ 474,000), the donors which have pledged to contribute 49.5% (UA 15.57 million) and the AfDB Post Conflict Country Facility, which will provide the remaining 49.5% (another UA 15.57 million).
The arrears clearance operation seeks to assist CAR in renewing relations with the donor community and securing future assistance under the Highly Indebted Poor country (HIPC) Facility, in order to return to a sustainable debt situation. The AfDB Post Conflict Country Facility assistance is a key stage in the global reengagement process aimed at normalizing the country's relations with its development partners for full resumption of their normal activities.
This arrears clearance operation entails exceptionally favorable treatment in the case of CAR, taking into account the unique aspects of the country's situation, which is marked by serious economic and financial difficulties. CAR's economic situation has, over the last years, been characterized by: * a protracted economic decline which has translated into a significant GDP decline and an marked increase in poverty; * a chronic budget deficit, aggravated by fiscal receipts that are constantly on the decline; * an unsustainable debt level with major internal and external payment arrears and indicators by far exceeding all the HIPC criteria; * major arrears in payments owed to private operators and in wages at unprecedented levels (over 30 months) which have contributed to bringing the internal debt up to approximately 26% of GDP; * extreme poverty characterized by one of the lowest human development index (HDI) rates and one of the largest proportions of persons living below the poverty level on the continent; * an extremely fragile security situation with obvious sub-regional implications.
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To reverse this overall worrying trend and deepen the ongoing structural and policy reforms so as to improve economic and global governance, the country is in urgent need of support from its development partners.
The Boards of Directors of the AfDB Group acknowledged that besides fulfilling the general conditions for Post Conflict Country Facility eligibility, the country has met the five criteria enabling it to be defined as a post conflict country. It has made significant progress in restoring peace, improving economic and political governance and reviving economic activity as well as in the disarmament reinsertion and resettlement of the displaced populations. It is also classified as a post conflict country (PCC) under stress by the World Bank and the IMF respectively.
CAR is eligible for debt reduction under the HIPC Initiative. It is satisfactorily undertaking structural and policy reforms coordinated with the international financial institutions and the donor community.
Lastly, it has honored its part of the arrangement for financing the arrears to the ADB Group and has collaborated with the Bank in mobilizing adequate resources from donors to wrap up the financing of the clearance operation. Considering its current situation and the government cash projections, CAR is considered to have made a maximum effort in paying its share of the proposed operation.
* UA 1 = US$ 1.50773 = CFA 749.247
