IMF: Central African Republic progress on reforms, but fuel supply woes linger
The International Monetary Fund (IMF) has assessed the economic situation in the Central African Republic (CAR) and identified on Wednesday a mix of progress and challenges. While the country is making strides in public finance management and governance reforms, a persistent issue with fuel supply threatens to derail economic recovery, the IMF said in a statement.
Positive Developments
CAR’s Public finances are improving, with domestic revenue collection reaching an all-time high in the first half of 2024. The country continues to implement public finance management and governance reforms, despite the particularly difficult socio-economic context and significant financing needs.
Discussions with development partners are raising hopes for increased budget support, further improving financial stability.
Initiatives like the Ministry of Finance’s digital reform seminar demonstrate a commitment to fiscal responsibility.
An International Monetary Fund (IMF) team, led by Mr. Albert Touna Mama, visited Bangui from July 10 to 17, 2024, to take stock of the recent macroeconomic developments and the implementation of structural reforms, as well as to discuss the major budget allocations for the upcoming revised 2024 finance law.
“The positive progress in domestic revenue mobilisation since the start of the ECF (Extended Credit Facility) programme continued, reaching a record level of CFAF 80 billion during the first half of this year.” said IMF official Albert Touna Mama, who led the Fund’s team to the CAR from July 10 to 17, 2024.
“The prospects for budget financing also continue to improve, aided by ongoing discussions with technical and financial partners, which could lead to new budget support programmes. Likewise, fiscal reform has gained momentum, as illustrated by the strategic orientations resulting from the recent seminar on digital reforms organised by the Ministry of Finance and Budget.”
Looming Challenges
Fuel Supply Crisis
Despite these positive developments, the IMF identifies a critical hurdle – the ongoing struggle to establish a reliable fuel supply via the Ubangi River. This issue, persisting for the third consecutive year, has significant negative consequences.
Economic Disruption: Without proper fuel flow, economic activity slows down, hindering growth and development.
Strained Government Revenues: A sluggish economy translates to lower tax collection, making it harder for the government to meet its financial obligations.
Delayed Stabilisation: The IMF estimates that resolving the fuel supply issue is crucial for achieving projected economic stabilisation within a reasonable timeframe.
Control of Budgetary Risks
Another major challenge concerns for the IMF were the control of budgetary risks, in particular those pertaining to weaknesses in budget planning and execution. “These risks have already led to significant overspending during the first half of this year. The upcoming revised budget will therefore be an opportunity to take all appropriate measures to adapt to the economic situation and maintain a balanced budget.” Albert noted.
Economic Projections
The IMF’s macroeconomic projections for CAR remain cautiously optimistic, with growth expected to gradually increase to 1.4 per cent in 2024 and 2.9 per cent in 2025. However, these projections hinge on successfully resolving the fuel supply crisis and continuing with planned reforms. The IMF delegation commended the CAR authorities for their collaboration during the discussions and emphasised the importance of sustained reform efforts for achieving long-term economic stability.
“Our macroeconomic projections remain anchored on a gradual acceleration of economic activity to 1.4 per cent in 2024 and 2.9 per cent in 2025. However, these growth prospects will depend crucially on the country’s fuel supply and the effective implementation of the reforms planned under the ECF programme.” the IMF official stated.
Attribution: IMF Statement
