Central African Republic: IMF team cautions CAR on slow recovery

Bangui, Central African Republic (PANA) - Despite commendable efforts made by Central African Republic (CAR) to revamp the economy under difficult circumstances, "security remains fragile, the economic recovery slow, and domestic revenue largely insufficient to cover wages, pensions, and other priority spending," according to an International Monetary Fund team that on Friday concluded a 10-day visit to Bangui, the country's capital.

"The economy remains saddled with deep-rooted structural rigidities that hinder a sustainable recovery," said the IMF team leader Samir Jahjah after holding discussions with the CAR authorities on a long delayed Article IV consultation. The last consultation took place in 2012.

Discussions between the IMF staff  team and the country's authorities focused on economic policies and structural reforms needed to bring back the economy on the path of sustainable and inclusive growth, improve competitiveness, and foster good governance, following years of a protracted political and humanitarian crisis that started in 2012.

In his end-of-mission statement, Mr. Jahjah noted that CAR's transition government, in place during 2014-15, implemented an emergency programme aimed at restoring security, basic government functions, and fiscal discipline, as well as rebuilding administrative capacity.

“In 2015, the economy recovered and fiscal targets were met," he said. "Real GDP growth is estimated at 4.8 percent, reflecting a pickup in agricultural output, construction, trade, and services.

"Inflation averaged 4.5 percent due to lower import prices and improved security on the Douala-Bangui transport corridor. Good implementation of the tax and customs administration reforms and lower-than-budgeted expenditures resulted in an improvement in the primary fiscal deficit to 3 percent of GDP in 2015, from 5.1 percent in 2014."

In the IMF team's view, "the newly elected government will have to walk a fine line between restoring sustainable budget discipline and scaling up social spending and public investment" because "the challenges are significant and expectations high."

"The medium-term economic outlook is favourable assuming continued improvement in security and the successful reintegration of ex-combatants into the society," said the team, projecting CAR's economic growth at 5.2 percent in 2016 and at an annual average of 5.7 percent over 2016–21, "reflecting the gradual removal of structural rigidities and the reconstruction of infrastructure."

Mr. Jahjah said that the IMF mission reached staff-level agreement with CAR authorities on broad economic and financial policies that could be supported by a three-year arrangement under the Extended Credit Facility  (ECF).

"With revenue at historically low levels, commitments under the program would place significant emphasis on tax and customs administration reforms and tax policy measures to mobilize additional domestic resources, reduce aid dependence over the medium term, and scale up priority spending," he stated.
-0- PANA AR 27May2016

27 may 2016 19:09:58

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