By Marino Donati | 20 November 2014
The International Monetary Fund has agreed to extend support for the Central African Republic to help restore macroeconomic stability.
The agreement will see the IMF use its Rapid Credit Facility to provide the equivalent of CFAF 4 billion to CAR. This is to help set economic and structural policies aimed at achieving fiscal consolidation, strengthening the capacity of the CAR government, coordinating technical assistance, and maintaining the commitment of international donors.
IMF deputy division chief Ekué Kpodar said: ‘The protracted political and security crisis in the CAR and the resulting collapse of economic activity continue to present major challenges to the transitional authorities.’
The IMF said the support would reinforce the progress made since the previous RCF approved by the IMF in May this year, bringing its total financial assistance to CAR in 2014 to the equivalent of around CFAF10 billion. Including contributions from development partners this would reach CFAF 80 billion for 2014.
Although economic activity is gradually resuming, a volatile security situation has led to a downward revision of the GDP growth forecast to 1%.
Inflation is projected to have reach 11.6% by the end of 2014, well above the Central African Economic and Monetary Community convergence criterion of 3%.
The external current account deficit is projected to narrow to 6.4% of GDP in 2014, reflecting the substantial financial support from the donor community as well as the Economic Community of Central African States countries.
CAR’s transitional authorities will continue to strengthen public financial management by better monitoring of cash flow management, further cleaning up the civil servants roster and payroll, revising the convention with commercial banks to administer tax collection, and strengthening transparency in oil taxation.
Kpodar said that the IMF expected the return of security and the completion of the political transition next year to mark the beginning of a sustainable economic recovery.
It predicted GDP growth of 5.7% with inflation being contained at 5.7%, but public finances would continue to require continued support from the international community.
