Coronavirus: Minimising pandemic impact slows down CAR’s economy
Bangui, CAR (PANA) – Though the start of a recovery appears to be underway in the Central African Republic (CAR), economic activity is expected to stagnate in 2020 before growing by around 3½ percent in 2021, according to an International Monetary Fund (IMF) observation disclosed on Saturday.
“Owing to the impact of the economic slowdown on government revenue and the additional spending needed to fight the COVID-19 pandemic, the domestic primary budget deficit is expected to be around 6 percent of GDP this year,” said a statement issued at the end of a virtual mission to CAR by the Fund’s staff.
Led by Édouard Martin, the mission had discussions from 28 September to 9 October, 2020 with the authorities in CAR as part of the first and second reviews of the country’s economic reform programme supported by the IMF’s Extended Credit Facility (ECF).
The pandemic and the measures aimed at minimising its health impact, combined with the drop in external demand, resulted in a marked slowdown in economic activity in the first half of the year. The most affected sectors were transport, tourism, hotels, and the mining sectors, said Mr. Martin..
“Inflation rose significantly in the first half of the year mainly due to higher food prices stemming from the temporary closure of the border with Cameroon. The downward correction in these prices recorded since July is expected to continue, allowing average inflation to remain below 3 percent in both 2020 and 2021.”
The current account deficit is expected to widen to 6½ percent of GDP in 2020, from 5 percent of GDP in 2019, mainly due to weak external demand and private transfers, which would be only partly offset by greater budget support and the drop in the oil bill.
The IMF team has welcomed the progress made by the authorities in the fight against the COVID-19 pandemic, noting that more than 4,800 cases and 60 deaths have been recorded since the first case was confirmed in March. The number of new cases and deaths appears to have fallen sharply in recent months.
“We hope this improvement will be sustained. However, it is important to remain vigilant, to continue to apply social distancing measures and to be ready to implement additional measures, if need be.
“In this context, and while the security situation remains fragile, the mission also welcomes the progress made in the preparation of next December’s presidential and legislative elections,” Mr. Martin said.
Owing to a large extent to the pandemic, the CAR authorities have been unable to meet all the objectives set under the ECF supported programme.
“Most of the quantitative performance criteria could not be met and significant delays were experienced in the implementation of structural reforms,” the IMF mission pointed out.
The CAR authorities and the IMF staff have agreed that the main objectives of the programme, such as maintaining macroeconomic stability and debt sustainability and restoring sustainable inclusive growth, remain central to the government's efforts to restore lasting peace and prosperity.
According to Mr. Martin, notable progress has been made towards the implementation of structural reforms delayed by the pandemic.
Discussions focused on controlling non-COVID-19 related expenditure, on the parameters of the draft budget law for 2021 and on the structural reforms to be implemented over the next twelve months.
“We agreed that the latter should aim to improve domestic revenues and the efficiency of public spending, and to strengthen governance and the business climate. These discussions will continue over the next few days,” he said.
-0- PANA AR/MA 10Oct2020
