Financial Crime World

Central African Republic’s Economy Shows Mixed Performance

Bangui, Central African Republic - A Recent Report by the International Monetary Fund (IMF)

The Central African Republic’s economy has shown mixed performance under its current program, according to a recent report by the International Monetary Fund (IMF). While there have been some positive developments, the country still faces several challenges.

Revenue and Expenses

  • The country recorded significant non-recurring revenues of CFAF 4 billion in recoveries of past dues and CFAF 1.75 billion in BEAC dividend distribution.
  • However, expenses exceeded government projections by CFAF 7.8 billion due to payments of overdue teachers’ benefits and recruitment of new education and security personnel.

Access to Regional Financing

  • Subscriptions to regional debt issuances rose from an average of below 20 percent in 2023Q1 to about 70 percent in May and June.
  • The authorities also opened a credit line with a local bank to address cash management challenges due to undersubscribed auctions and subpar revenue collections from fuel sales.

Financial Soundness

  • The country’s aggregate financial soundness indicators remain broadly adequate, with the banks’ capital adequacy ratio standing at 23.5 percent and the short-term liquidity ratio at 151.8 percent as of end-December 2022.
  • However, gaps in liquidity and concentration of non-performing loans among banks call for increased vigilance.

External Position

  • The external position remains substantially weaker than implied by fundamentals and desirable policy settings, due to a lack of competitiveness, weak buffers, and low donor support.

Program Performance

  • The country missed two out of three end-June quarterly performance criteria (QPCs), with the domestic primary balance exceeding its QPC by CFAF 2.5 billion due to small expenditure overruns mostly in the security and education sectors.
  • The adjusted net domestic financing QPC was missed by around CFAF 8 billion, including the treasury’s decision to frontload domestic financing.

Medium-Term Outlook

  • The medium-term outlook has been slightly marked down from the time of program approval and remains uncertain.
  • Real GDP is expected to rebound to 1.5 percent in 2024 as manufacturing and services recover, while inflation is expected to decline towards the CEMAC’s 3 percent convergence criterion.

Risks and Challenges

  • The country’s economy faces several risks, including:
    • A failure to address corruption
    • A lack of competitiveness
    • A continued decline in donor support
  • However, with a strong commitment to reform and a favorable policy environment, the Central African Republic has the potential to achieve stronger growth and stability in the medium term.