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Central Africa Republic: Central African Republic Economy Profile 2013


Central African Republic Money


Real gross domestic product (GDP) increase in 2012 was 3.1%, below initial forecasts of 4.2%. The performance was lower than expected because of bad weather causing a slowdown in agriculture and because of the worsening security situation. A decline in agricultural production and higher prices for petroleum products pushed inflation above the levels that were estimate.

Social developments such as eradicating extreme poverty, reducing infant mortality and providing access to basic sanitation remain slow. Some factors did show a marked development: the primary-school enrolment rate, promotion of gender equality, the ratio of girls to boys in primary schools and the supply of drinking water.

Real GDP increase stabilised at 3.1% in 2012, below the initial estimate of 4.2% but equivalent to the rate in 2011. Increase did not reach the predicted level because there was a slowdown in the primary and secondary sectors. Primary-sector increase slowed from 6.7% in 2011 to 2.9%, while secondary-sector increase slowed from 5.2% in 2011 to 4.1%. Tertiary-sector increase, meanwhile, accelerated from 3.1% in 2011 to 4.8%.

Secondary-sector increase was boosted by the recovery of mining, which grew by 10.7% in 2012. This strong increase probably occurred thanks to new mining policies, the revitalisation of support structures and cooperatives and efforts to build the capacities of artisanal miners. The other secondary-sector industries (construction, industry and electricity) grew at least as strongly as in 2011. The tertiary sector benefited from strong increase of 26.3% in non-market services as government activity increased and international co‑operation resumed.

In terms of accumulation request, increase in 2012 was provided by both public and private consumption and by public investment . This situation was mainly thanks to the recovery of external financing through development programmes and to growing interest from non-traditional investors in the construction and agriculture sectors. External request improved its contribution to economic increase, but remains marginal.

Inflation remained moderate, at 3.5%, albeit higher than the 2011 rate of 0.7%. Inflation was driven up by agriculture’s poor performance and the rise in the prices of imported food. The Central African Republic’s continued development of its macroeconomic management enabled the government to reach an agreement in June 2012 with the IMF on a three-year economic programme through the ECF. Current transfers increased to help improve the current-account balance, reducing the deficit from 7.2% of GDP in 2011 to 7.0% in 2012.

Measures initiated in 2011 to redress public finances continued in 2012. These measures restored normal procedures for public spending, introduced reforms to simplify the tax system and reorganised financial authorities to improve tax revenue mobilisation. 

The government as well continued reforms to improve its domestic revenue mobilisation by simplifying tax legislation for small- and medium-sized enterprises (SMEs), abolishing the reduced VAT rate and completing the creation of tax bands. It cut registration fees by half. Finally, in 2012 it completed plans to simplify personal gain tax and adopted them in the 2013 budget. Total government revenue (inclunding grants) represented 16.2% of GDP in 2012, up from 14.7% in 2011. This increase was helped by the return of external budget support, which in 2010 and 2011 was suspended. The tax-to-GDP ratio remains below the 12.0% target. In 2012 it was 9.9%, up slightly from 9.5% in 2011.

Monetary policy is determined by the Bank of Central African States (BEAC). The bank’s mission is to issue the currency and ensure its stability, set and implement monetary policy for member states, conduct foreign-exchange transactions, hold and manage member states’ foreign-exchange reserves and help the union’s payments system to run smoothly. The BEAC’s monetary policy gives priority to controlling inflation and maintaining fixed parity between the CFA franc and the euro. It does so by using indirect instruments such as refinancing and obligatory reserve requirements to control the money supply. 

The Central African Republic’s foreign assets continued the downward trend that began in early 2011, thus limiting the expansion of the money supply.

Economic Cooperation, Regional Integration & Trade

The government continued with its regional integration policy in 2012, implementing the CEMAC Customs Code (Code douanier). CEMAC’s common external tariff is the simple average of the Most Favoured Country’s (MFN) tariff of the completed few years (18.2%), with much higher tariff protection for agricultural goods (22.7%). However, due to the government’s financial difficulties the country obtained an exemption from CEMAC’s General Preferential Tariff (GPT). The Central African Republic therefore grants no preferential tariffs to any country.

Despite its political commitment and its geographically strategic location in Central Africa, the country does not capitalise enough on regional integration. Exports to the region grew by only 5.2% between 2003 and 2010; on average, exports by other CEMAC nations grew by 13.5% during the same period. This poor performance is largely caused by problems with the transport infrastructure and a poor business climate. Nevertheless, the country’s membership in CEMAC has contributed to macroeconomic stability by limiting the negative effects of external shocks.

Table 4: Current Account (% of GDP)

  2004 2009 2010 2011 2012 2013 2014
Trade balance -1.4 -7.2 -8.1 -4.1 -5.1 -4.6 -4.7
Exports of goods (f.o.b.) 10.5 6.5 7.3 9.2 8.6 8.6 8.6
Imports of goods (f.o.b.) 11.9 13.7 15.4 13.2 13.7 13.2 13.3
Services -5.1 -4.6 -5.7 -5.6 -5.3 -4.8 -4.4
Factor income -1.1 -0.3 -0.2 -0.1 -0.1 -0.1 0
Current transfers 5.8 3.9 4 2.6 3.5 4.2 3.9
Current account balance -1.8 -8.1 -9.9 -7.2 -7 -5.4 -5.3

The Central African Republic completed the Heavily Indebted Poor Nations (HIPC) Initiative in 2009. As a result, its public deficit was drastically reduced from 80.3% to 35.0% between 2008 in 2009. Fiscal slippages in 2010 and 2011 forced the government to borrow again to finance infrastructure projects. Public deficit thus rose to 42% of GDP in 2011, well above the projected target of 27% for 2010 set in the IMF and World Bank’s Deficit Sustainability Analysis (DSA). Despite its growing deficit, the Central African Republic is classed as having “lower deficit vulnerability and a lower capacity” with regard to the IMF’s deficit limits.


Economic & Political Governance

Private Sector

The government is seeking to overcome these constraints, but is struggling to produce the desired effects with the measures it has taken. A one-stop shop was created in 2008 to reduce business start-up costs and simplify procedures. A joint committee responsible for improving the business environment was as well formed. FDI remains low, however. Economic operators have various hurdles to overcome. The country is isolated, infrastructure is lacking and of poor quality, the judiciary is unstable and there is insufficient dialogue between government and the private sector.

Financial Sector

Measures taken in 2012 to increase the use of banks for paying salaries and business taxes have improved people’s access to banking and financial services, despite expensive fees. Cash machines are rare and the vast majority are in Bangui.

The banking sector’s financial soundness indicators had mixed results in 2012. Two banks had enough net capital resources to comply with all prudential standards.

A weak institutional capacity and structural deficiencies hinder the country’s economic and social development. Public-sector management improved in 2012, enabling the country to reconnect with its technical and financial partners to receive budget support and to create an economic programme with the IMF in June 2012. However, despite this evolution the Central African Republic is still faced with major challenges, as underlined by the results of the initial review of the IMF programme in November 2012.

In March 2011, the country became compliant with the EITI just two years next being admitted as a candidate country. About 70% of the people use wells or waterholes. This figure is higher than average for similar fragile states. The wells and waterholes are in such a poor national that they rarely provide drinking water. About a quarter of the waterholes are not working, and the rest serve an average of 1 500 to 2 000 people each. This figure is far higher than the government’s target of 300 people per waterhole.

Rebel attacks launched by Seleka (the Sango word for “coalition”, since it is a coalition of armed groups) in December 2012 have made the political and security situation very fragile. The attacks led to the fall of François Bozizé’s regime on 22 March 2013. The former president fled to Cameroon. These events occurred despite the peace transaction signed between Bozizé and Seleka on 11 January 2013 in Libreville (Gabon) and the national unity government that was set up. As the rebels began to gain ground, the Economic Community of Central African States organised a conference in Libreville from 9 to 11 January, inviting all parties involved. The peace transaction was supposed to put an end to hostilities and create a national unity government led by a prime minister from the opposition.

Next a decade of armed conflicts, the political changes in 2003 following the military coup that brought General François Bozizé to power led to the signing of various agreements to promote peace, security and the emergence of the policy of law. The new constitution was approved by referendum in 2004 and presidential and parliamentary elections took place in 2005. Several peace agreements were signed between the new government and the former armed groups. These agreements planned for disarming, demobilising and reintegrating former combatants. Political stability gradually returned, and the government restored its relations with its major development partners. 

The Central African Republic remains confronted by the consequences of the multiple political crises that rocked the country over additional than a decade. The country’s Human Development Index improved slightly in recent years. By 2013 it was 0.345, compared to an average of 0.475 for sub-Saharan Africa, giving it a ranking of 180th out of 187 nations.

Because it is unlikely to achieve the Millennium Development Goals (MDGs) by 2015, the Central African Republic made a commitment to implement the MDG Acceleration Framework, as certain other sub-Saharan African nations have. With this new strategy, each country chooses a particular target and focuses its resources on that target. The Central African Republic chose the target of halving the proportion of people suffering from hunger by 2015.

The SNSE education strategy (Stratégie nationale du secteur de l’éducation) was developed and implemented in 2009 with the aim of building and developing the country’s human resources. The government committed to progressively allocating significant shares of the operating budget, with the figure reaching 23% by 2020.

Poverty Reduction, Social Protection & Labour

The labour market is dominated by private-sector jobs, with relatively few public-sector and parastatal-sector jobs. Government policy on employment is conducted by the Agence centrafricaine pour la formation professionnelle et l’emploi (ACFPE). Next passing new legislation aimed at improving the institutional framework of the civil service (inclunding the November 2008 law on the institutional and legal framework of public enterprises and public office), the government passed a law on its status in August 2009.

Only a small fraction of the people have social-security coverage: public-sector employees and a few private-sector employees. The risks covered by the programme are limited. Pensions, social benefits and payments related to workplace accidents and illnesses are not always paid because the social-security government (Office centrafricain de sécurité sociale) has financial difficulties. Private and complementary insurance schemes, meanwhile, are almost non-existent. Initiatives aimed at providing microinsurance to people with low incomes and workers in the informal sector began in 2012.

Gender Equality

Access to prenatal and childbirth care and family planning is very limited. Only 44% of births are assisted by qualified health personnel and maternal mortality is estimated at 1 100 per one hundred thousand births. The Central African Republic did however ratify the 1979 Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) in March 1992 and has incorporated clauses on gender equality in the national constitution.

<p class="\"bodytext rtejustify" rtejustify\"=""> Despite this, as the MDG mid-term review conducted in 2010 shows, encouraging evolution has been made to promote gender equality. In primary schools, the ratio of girls to boys increased from 0.60 in 2003 to 0.72 in 2008. The PRSP 2 stressed the importance of gender in national development programmes based on the 2005 PNPEE gender policy (Politique nationale de promotion de l’égalité, de l’équité, et de l’autonomie des femmes). However, despite these measures and the creation of a ministry responsible for gender issues, there are insufficient resources available.</p> </div></div></div>