Washington, DC: The Executive Board of the International Monetary Fund (IMF) today approved a 38-month Extended Credit Facility (ECF) arrangement of SDR 141.68 million (about US$191.4 million) with the Central African Republic. The Executive Board's decision enables an immediate disbursement equivalent to SDR 11.3 million (about US$15.2 million).
A decade after the 2013 civil war, CAR is facing crisis upon crisis resulting in exceptional hardship to its population and bringing the country to the brink of a humanitarian crisis with acute food insecurity. The country remains one of the poorest in the world, with almost 80 percent of people living in poverty.
The authorities have responded to risks to macroeconomic stability and to the financing shortfall from the 2021 suspension of donor-related budget support by adjusting spending, streamlining fuel subsidies, and postponing the clearance of domestic arrears. Against this backdrop, the government has requested Fund financial assistance to address the country's balance of payments needs.
The ECF-supported program is part of coordinated efforts by IFIs to support the people of CAR. It will help the country meet protracted financing needs and sustain spending on basic public services, including in the health and education sectors. According to the United Nations Office for the Coordination of Humanitarian Assistance (OCHA), 3.4 million people - 56 percent of the population - will need humanitarian assistance and protection in 2023, an increase of 10 percent compared to 2022.
Key policy commitments include i) safeguarding priority spending, ii) improving domestic revenue mobilization, iii) strengthening customs and tax administration, iv) streamlining tax exemptions, v) reinforcing fiscal governance and transparency, vi) reforming fuel market and fuel price structure, and vii) de-risking crypto-related projects.
At the conclusion of the Executive Board's discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, made the following statement:
"The Central African Republic (CAR) has been affected by a confluence of shocks related to the COVID-19 pandemic, internal security upheavals, and Russia's war in Ukraine. As a result, its humanitarian needs have spiked, and food insecurity has continued to deteriorate with up to 3 million inhabitants affected.
"With the suspension of budget support by donors, CAR is facing a difficult financing tradeoff at the time when demand for public services by an already afflicted population is most urgent, and the external environment is not favorable.
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"The ECF arrangement will help free up fiscal space and catalyze donor support for essential public services, as well as provide a framework for implementing domestic reforms. Thanks to additional financing and reforms, risks of a further deterioration in the humanitarian situation would be reduced and sustainability of public finances would be strengthened.
"Looking ahead, the authorities are expected to pursue deep fiscal reforms. The priority is to strengthen customs and tax administration and streamline tax exemptions to increase domestic revenue mobilization and expand the envelope for social spending. The IMF-supported program contains important governance safeguards for the use of Fund resources designed to help the country and its population avoid a humanitarian crisis.
"The authorities will continue to cooperate with the regional institutions on the Sango project and other crypto-related projects to ensure consistency with the Central African Economic and Monetary Community (CEMAC) legal framework.
"Continued financial and technical support from development partners remains critical to the program's success. Given its high risk of debt distress and limited revenue base, CAR will have to continue its effort to mobilize grants to finance its economic needs. Close cooperation with international partners on humanitarian assistance is also essential for supporting the population.
"CAR's economic program will continue to be supported by the implementation of policies and reforms agreed among the CEMAC regional institutions, which notably aim at supporting an increase in regional net foreign assets and which are ultimately critical to program's success."
