By Modupe Gbadeyanka
On December 19, 2016, the Executive Board of the International Monetary Fund (IMF) completed the first review under the Extended Credit Facility (ECF) arrangement for the Central African Republic (CAR).
The Executive Board’s decision was taken on a lapse-of-time basis.
The completion of the review enables a disbursement of $16.8 million, which will bring total disbursements under the arrangement to $33.6 million.
The three-year ECF arrangement for CAR was approved by the Executive Board on July 20, 2016 for $111.9 million, 75 percent of the country’s quota at the IMF.
Program implementation through end-August has been satisfactory. All quantitative and indicative targets were met, with the exception of the criterion on non-accumulation of external payments for which the authorities are taking corrective measures. Improvement in tax revenue, albeit in line with the program target, remains fragile. All structural reforms have been implemented, albeit with some delays.
However, renewed violence is slowing the nascent recovery, with disruptions to trade and agriculture, pushing the growth rate for the year to 4.5 percent, lower than initially programmed. In addition, it has triggered a rise in consumer prices.
Strengthening security is a prerequisite for the successful implementation of the government’s National Recovery and Peace building Plan to build national cohesion and for economic recovery in the Central African Republic.
Resolute implementation of the authorities’ structural reform agenda is critical to support economic growth and reduce poverty. Improving domestic resource mobilization, which remains extremely low, will support a scaling up of expenditure in priority sectors such as health, education, security, and public investment. The planned review of tax policy, the ongoing strengthening of tax administration, and the streamlining of tax exemptions should gradually bring tax revenue back to its potential.
Reforms aimed at strengthening public financial management, improving cash management and transparency in the execution of the budget are well underway. Strengthening the institutional framework to better coordinate technical assistance from development partners will be key to build capacity, improve governance, encourage private sector development, and attract foreign direct investment.
