CAR’s Economic Prospects Brighten as Revenue Mobilization Improves

BANGUI, CENTRAL AFRICAN REPUBLIC - The Central African Republic’s (CAR) economic outlook has shown significant improvement in recent months, with revenue mobilization on the rise and spending management demonstrating signs of improvement.

IMF Report Highlights Improved Macroeconomic Situation

According to a report by the International Monetary Fund (IMF), CAR’s macroeconomic situation is bouncing back from last year’s fuel crisis. Fuel imports have improved, although not enough to make up for the shortfall caused by the weak river campaign in 2022. Financing conditions have also improved markedly after the program approval.

Real GDP Growth Projection Revised Downward

The IMF has cut its real GDP growth projection for 2023 from 2.2 percent to 1.0 percent due to limited fuel imports hindering manufacturing and transportation. However, the medium-term outlook remains uncertain, with a baseline scenario assuming a resolution to the fuel shortages, significant strengthening of policies, and partial resumption in donor support.

Fiscal Performance Mixed

The report highlights that inflation remains elevated driven by energy and food prices, but is expected to subside in the second half of 2023 provided fuel supply does not deteriorate. The fiscal performance has been mixed, with revenues reflecting adequate internal tax collection and some non-recurrent revenues. 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 Improves

Access to regional financing has also improved, with subscriptions to regional debt issuances rising from an average of below 20 percent in 2023Q1 to about 70 percent in May and June. The authorities have also opened a credit line with a local bank to address short-term liquidity needs.

Structural Benchmarks Met

The report notes that all but one structural benchmark for the first review were met, including the reduction in fuel prices at the pump targeted for October 2023. The medium-term budget objectives are expected to be met if policies remain consistent and donor support resumes.

Senior IMF Official’s Statement

“The CAR’s economic prospects have brightened significantly in recent months,” said a senior IMF official. “However, there are still risks ahead, particularly related to fuel supply and security needs. We urge the government to continue implementing prudent fiscal policies and strengthening public financial management.”

Medium-Term Outlook

The report concludes that if the medium-term budget objectives are met, CAR’s real GDP growth could accelerate to 3.7 percent by 2026, driven by a stronger governance and business environment that attracts donor support and private investment.