A rebound in growth subject to domestic insecurity and climatic phenomena
After a 2022 that was marked by internal security problems and the inflationary consequences of the Russian-Ukrainian conflict, growth in the Central African Republic (CAR) is set to rebound in 2023 and continue into 2024 provided that internal security and fuel supplies improve. Exports (13% of GDP in 2022) will contribute to this recovery in 2023 and 2024 thanks to the durably high prices of gold and diamonds, which, together, accounted for 57% of the country's exports in 2022. Nevertheless, the forestry industry will suffer in 2023, and probably again in 2024, from the consequences of the 2022 floods, despite being one of the country's main sources of export revenue. Furthermore, although the outlook for growth is positive, it is subject to domestic developments. President Touadéra's proposed constitutional reform that was endorsed at the referendum of 30 July 2023 has widened the factional rifts in government that have been aided by mercenaries from the Wagner Group, and the various rebel groups. In addition, with food insecurity affecting almost half the population, the situation is likely to be further exacerbated by continued high food prices in 2024. The expected El Niño weather-related disruptions are likely to have a negative impact on harvests in the Asian countries from which CAR mainly imports rice. This will push up the price of foodstuffs, which are already more expensive owing to higher transport costs. However, the Extended Credit Facility (ECF) granted by the IMF in May 2023 will help the CAR to finance the top-priority public services (health and education) needed to offset the effects of food insecurity. As the CFA franc is pegged to the euro, inflationary pressures in CAR remain relatively moderate compared with some neighbouring countries. That said, the Banque des Etats de l'Afrique Centrale (BEAC) is expected to continue raising its key rate, which is expected rise to 5.5% by the end of 2023, with some easing envisaged for 2024, following in the footsteps of the European Central Bank.
Crucial aid from the IMF
CAR's budgetary situation will improve in 2023 and 2024 thanks to increased revenues from gold, diamond and timber royalties. The granting of a new Extended Credit Facility (ECF) by the IMF in May 2023 will contribute to this improvement. The USD191.4 million disbursed over 38 months will encourage the return of international donors such as the World Bank, which is expected to grant USD28 million to CAR in 2023 to finance social services as part of the humanitarian crisis. This funding will enable CAR to pursue the structural reforms implemented from 2022 to strengthen its public finances through a reform of the fiscal framework for the telecommunications and tobacco sectors, and price adjustment measures to limit fuel imports on the black market. However, the implementation of these structural reforms could be hampered if security problems continue to emerge. In addition, despite the amendment in March 2023 of the 2022 law adopting bitcoin as an official currency alongside the CFA franc, a prerequisite for the new FEC agreement, the legalisation of the use of crypto-currencies is fuelling the mistrust of international donors and risks delaying the disbursements planned for 2023 and 2024. Furthermore, after a sharp deterioration in 2022 due to the non-disbursement of the budget support from the World Bank and the European Union initially planned for the first half of the year, as well as the rise in import prices, the current account deficit should narrow in 2023 and 2024 thanks to the reduction in the trade deficit. The public debt burden, after reaching 51.9% of GDP in 2022 due to the increase in domestic debt (30% of total debt), is expected to fall in 2023 and 2024 provided that the government manages to bring the primary deficit below 2% of GDP, mainly by increasing domestic revenues and improving the efficiency of public spending. The external public debt, 70% of which is held by multilateral creditors, is considered sustainable by the IMF, despite CAR's exposure to a high risk of debt distress due to the vulnerability of its service to international budgetary aid and the internal security situation.
Security is the linchpin of the political situation
The CAR remains in a very precarious political and security situation since the outbreak of civil war in 2013. Despite a peace agreement signed in February 2019 between the government and the various rebel groups, aimed at integrating rebel representatives into the government and allowing the national army to regain control of the territory, the security situation is very weakened, particularly following the disputed re-election of President Faustin-Archange Touadéra in February 2020. Although the 2021 legislative elections resulted in a relative majority for the President, frequent clashes continue to pit government supporters against the Coalition des patriotes pour le changement (CPC), an armed movement created in 2020 by the merger of six rebel groups. The situation is likely to be further exacerbated by the President's proposed Constitution reform, which was endorsed at the referendum of 30 July 2023, although a section of the population is formally opposed to it. The reform, by removing the limit on the number of terms a president can serve, would enable Touadéra, with the help of mercenaries from the Wagner Group, to retain power. Internationally, CAR's relations with the West will remain strained because of its economic and military links with Russia, including illegal gold and diamond activities, the presence of Wagner Group instructors in the country and the collaboration of the CAR armed forces with Wagner Group mercenaries. Against this backdrop, the mission of MINUSCA (United Nations Multidimensional Integrated Stabilisation Mission in the Central African Republic), a peacekeeping operation that has been led by the UN in the Central African Republic since 2014 owing to the civil war, has been extended until November 2023 despite the tensions existing between the peacekeepers and the CAR executive, and the population. At the same time, the proportion of the population affected by food insecurity is likely to exceed 50% between 2023 and 2024, which will exacerbate existing political tensions. Since April 2023, the CAR has also had to cope with an influx of refugees fleeing Sudan, a neighbouring country in the throes of civil war, with the result that the prices of certain foodstuffs, such as sugar and millet, have risen in the northern host region of the CAR.
Le déficit du compte courant devrait se réduire en 2024, dans le sillage d’exportations dynamiques qui participeront à l’élargissement de l’excédent commercial. Cependant, il sera encore entretenu par une balance des services (principalement de transports) déficitaire (5 % du PIB), et le rapatriement de bénéfice des sociétés étrangères (principalement dans le secteur minier). L’instabilité politique et sécuritaire persistante continuera de limiter les entrées d’IDE et l’aide extérieure.