Central African Republic Economic Overview

By | July 24, 2022

International partners are motivated to provide financial and strategic support for the security stabilization of the country, especially economically and humanitarianly, but also by the efforts of the democratically elected government headed by President Touadéra. In early November, the French Minister of Foreign Affairs, Jean-Yves Le Drian, pledged €24 million in financial support for the SAR national security forces. In reality, however, the government’s territorial and jurisdictional power is very limited, which hinders the distribution of financial subsidies from the EU, the UN and the World Bank. Among European dignitaries, Portuguese President Marcelo Rebelo de Sousa visited the country last year. SAR is still close to the Vatican, which is also involved in solving the crisis (Pope Francis visited Bangui during his first trip to Africa in 2015).

Russia is a new player in the foreign policy field of the SAR. In December 2017, the two countries signed an agreement to strengthen diplomatic, economic and military cooperation, the main objective of which is to renew FACA, both in terms of equipping the army and in terms of military training. Military instructors and 170 advisers were sent to the SAR; since January 2018, 9 shipments of weapons have already arrived in the country. In May 2018, on the sidelines of the International Economic Forum in Saint Petersburg, Faustin-Archange Touadéra held talks with President Putin and Minister Lavrov. The Russians are also interested in cooperation in the area of ​​mineral extraction in the SAR. Although Touadéra emphasized at the December meeting with representatives of the EU Delegation in Bangui that the EU is his main partner, it is expected that military cooperation between the two countries will deepen further in the coming years.

The influence of regional partners on national SAR matters is indisputable. Chad remains the most active in this direction for a long time, which tries to influence the behind-the-scenes games of the Central African government. The other partners, i.e. the Republic of Congo, Cameroon and Gabon, will probably continue to hold a common line of political support for the government, but not for altruistic reasons – the porous border of the unstable country brings them many difficulties. For that reason, they also provide the most troops to the MINUSCA peacekeeping forces. However, the presence of foreign soldiers is also one of the sources of tension in the country, accusations of sexual violence and other gross violations of human rights have been brought against them in the past. A number of them were subsequently proven.

The international community (mainly AU, UN, EUTM-SAR, France, USA and Russia, but also regional partners) is significantly involved in the negotiation of a ceasefire between rebel factions and the legitimate government. However, despite numerous attempts, there was no progress during 2018. In July, President Touadéra invited the heads of rebel and armed groups to a round table. The commanders expressed distrust in both Touadér and MINUSCA, as they do not see the guarantees of their impunity as sufficient. With the support of Sudan and Russia, it was possible to organize negotiations in Khartoum on August 27, 2018, but even this initiative did not bring the desired fruits.

A peace agreement between the government and 14 armed groups was signed on February 6, 2019. The Central African President highlighted among the main elements of the agreement: the cessation of arms, the establishment of an inclusive government, the creation of a mixed judicial commission that will not respect the principles of impunity, a mixed military unit of FACA and militants, reestablishment of the state across the entire territory and its subsequent decentralization, respect for human rights and support for development and infrastructure projects. The question is whether the agreement will be implemented better than its previous attempts.

The Central African Republic is a member country of the Economic and Customs Union of Central African Countries (CEMAC – Communauté économique et monétaire de l’Afrique centrale), CEMAC members are Cameroon, Chad, Gabon, the Republic of Congo and Equatorial Guinea). CEMAC was created in 1994 and is part of a wider entity – the “Economic Community of Central African States” (ECCAS; it also includes Burundi, Rwanda, Angola, DRC and the Democratic Republic of São Tomé and Príncipe). However, the Union is functional only to a limited extent, there is an imbalance between the positions of richer and poorer member states. Within CEMAC, for example, the agreement on the free movement of persons within all member countries is valid, but it is not applied in practice. see also: www.cemac.int. SAR is also a member country of The Community of Central African, Caribbean and Pacific States (EACPS). Visit Allunitconverters for more information about Central African Republic culture and traditions.

SAR belongs to the group of the poorest highly indebted landlocked countries, it is referred to as a so-called “collapsed state”. The economy is severely damaged by crises and fighting between individual armed groups (often fighting for control over raw material resources) and disastrous economic management. In addition to security problems, the country faces many other problems – the disintegration of the state administration and the legal system, a humanitarian crisis, hundreds of thousands of internal refugees, a completely neglected infrastructure, an unfavorable investment and business climate, large corruption, and an illiterate workforce, which further hamper its economic development.

Mining industry:
Oil: According to the information so far, there are five promising areas in the north of the country near the border with Chad, where the Chinese company CNPC started exploration in 2012. Estimated reserves are 1 billion barrels.

Other mineral resources: the French company Areva was exploring for Bakouma uranium deposits, mining was not started for safety and financial reasons. Gold is mined in the traditional way in small volumes. Rough diamond production was estimated at 500,000 carats in 2012. But the government does not control the mining areas and some of the mined diamonds are exported illegally. In 2013, SAR was excluded from the Kimberley Process and is not (officially) allowed to export diamonds. The Kimberley Process partially lifted the ban on diamond exports from the country in 2015, but ongoing uncertainty will prevent GDP from reaching its pre-2013 level.

Construction: So far insignificant, contributing about 4% of GDP. The infrastructure construction (currently suspended) is mainly financed by international donors.
Agriculture: Subsistence agriculture, along with logging, remains the backbone of the Central African economy and employs more than 70% of the population. It contributes 54% to the creation of GDP. Cotton, coffee, tobacco, cassava, yam, corn, sugar cane and bananas are grown. Mainly beef cattle are raised, to a lesser extent sheep, pigs and poultry. 30% of the territory is still covered by tropical forests. Timber exports account for approximately 50% of the value of all the country’s exports, and license fees and timber exports represent a significant source of state revenue. SAR signed an agreement in 2011 to prevent the export of illegally harvested timber to European Union countries. The granting of licenses, but also the protection of the forest, is governed by the Régime forestier law. The export of wood, which is currently the most important source of income for the state budget.

Services: The sector is very underdeveloped (especially public services), it accounts for about 32% of GDP. The largest part of the service sector remains simple wholesale and retail services, as well as transport and logistics for regional trade and connections. Telecommunications are developing, although their services are expensive and the number of users is limited. Tourism in the country is practically non-existent, the banking sector is small. Services will grow in the coming years, telecommunications and banking will play a major role.
Infrastructure: It is traditionally the weakest link of the economy – it is very bad even compared to other developing countries. The backbone of the transport network consists of roads and roads, of which there are a total of about 25,000 km, of which only 650 km are paved (asphalt). The majority of the road network thus far consists of dirt roads, the rest of the “roads” are only unmaintained (mostly impassable in the rainy season) roads. The main traffic artery is the Douala – Bethoua – Bangui road, which is mostly supplied to the SAR. There are 2,800 km of waterways in the country (mainly the Ubangi River and its tributaries), the rivers are navigable especially in the rainy season, there is no railway.

There are three river ports in the country (only Bangui is significant – 350,000 tons). There are 40 airports, 2 of which have paved runways. The international airport is only in Bangui. Only Air France flies here regularly from Europe (once a week). Ethiopian Airlines, Kenya Airways, Royal Air Maroc and some other African local lines (ASKY, Camair Co.) also provide air connections with foreign countries. Domestic transport is provided by the company MINAIR, irregularly also by Via Air and Lapara. The annual production of electricity was only 150 million kWh, yet this capacity was enough to fully cover the country’s domestic electricity consumption (148 million kWh). However, the current crisis has also affected the state of the infrastructure – the supply of electricity (and thus also water) in Bangui is very chaotic and practically unavailable, the use of generators is limited (lack of PHM). They are not available in rural areas at all. The level of telephony in SAR is very low, telecommunication services are very expensive. Mobile networks are slowly developing. Currently, 4 operators provide services (Telecel, Moov, Nationlink and Orange). Only one state television and radio station (RNC) operates in the country, two licenses for private TV stations have been granted. It does, however, broadcast several private radio stations.

Development aid received and given:
SAR, which belongs to the group of low-income least developed countries, remains a large recipient of foreign humanitarian and development aid, on which it is completely dependent. In 2013, SAR received US$189 million in aid, the largest donors being the EU ($38 million), France ($27 million), the US ($19 million), the IMF and Sweden. Cooperation with donors
was suspended in 2013 due to the crisis. In May 2014, the World Bank and the IMF renewed their programs in the country, providing a loan of USD 13 million under the Rapid Credit Facility. In September, the African Development Bank provided 16 million Euros and the EU 24 million Euros. In November 2014, an evaluation mission of the IMF took place, which decided on additional support in the amount of 6 million Euros. In 2015, SAR’s total foreign aid reached USD 505 million.

  • Official name of the state, composition of the government
  • Demographic trends: Population, average annual increase, demographic composition (including nationalities, religious groups)
  • Basic macroeconomic indicators for the last 5 years (nominal GDP/cap., development of GDP volume, inflation rate, unemployment rate). Expected development in the territory with an emphasis on the economic sphere.
  • Public finances, state budget – income, expenditure, balance for the last 5 years
  • Balance of payments (current, capital, financial account), foreign exchange reserves (last 5 years), public debt to GDP, foreign debt, debt service
  • Banking system (major banks and insurance companies)
  • Tax system

 

Basic macroeconomic indicators for the last 5 years (nominal GDP/cap., development of GDP volume, inflation rate, unemployment rate). Expected development in the territory with an emphasis on the economic sphere.

2014 2015 2016 2017 2018
GDP (billion USD) 1,803 1.6 1.8 2.0 2.3
real GDP growth (%) 1.0 4.8 5.2 4.3 4.3
consumer price inflation (%) 16.0 8 4 4.1 6.0
Population (millions) 4.55 4.73 4.9 4.66 4.74
GDP per capita in USD 600 600 700 700 454

Source: EIU, CIA Factbook

SAR belongs to the group of poorest and highly indebted landlocked countries. The economy, severely damaged by fighting between individual armed groups and disastrous economic management, is recovering very slowly. Incessant violence is hindering the economic revitalization of the country. As a result of the large-scale exodus during the 2013-14 civil war of the predominantly Muslim population, mostly small traders, the business sector was further paralyzed. In addition to security problems, the country also faces completely neglected infrastructure, an unfavorable investment and business climate, high levels of corruption, inefficient state administration and an illiterate workforce. SAR has large reserves of mineral resources (diamonds, uranium, gold, etc.), but its economy depends to a large extent on subsistence agriculture (it provides sustenance for 70% of the population).

Real GDP growth in 2018 reached 4.3%, and no major increase is expected in the coming years, as refugees and IDPs are not expected to return due to ongoing uncertainty, and the current risky security situation in the region also does not encourage the start of economic activities.

Rough diamond mining, which was estimated at 500,000 carats in 2012, is not controlled by the government and some of the mined diamonds are therefore exported illegally. In 2013, SAR was excluded from the Kimberley Process. The export of diamonds from the country was partially relaxed in 2015. President Touadéra subjected the current situation to criticism during the meeting with representatives of the EU Delegation. In his opinion, the situation is more conducive to illegal exports, from which insurgents and other criminal elements profit, while the government obtains the permits necessary for mining only with great difficulty. Despite these restrictions, diamond exports continue to drive certain economic activities. The service sector, which was hit the hardest during the civil war, is slowly recovering. Agricultural production (timber, cotton and coffee are the main export items), which makes up more than 40% of GDP,

The monetary policy of the SAR is managed by the regional central bank Banque des Etats de l’Afrique centrale (BEAC), which focuses mainly on controlling inflation and maintaining a strong peg of the CFA to the EUR. The current value of the CFA is 655.96 CFA per €1 and its value moves in line with the EUR-USD fluctuations. BEAC took measures to support structural adjustments in its member states after the 2014-16 collapse in global oil prices led to a sharp increase in statutory bank reserves and, in turn, a rapid increase in the drawdown of foreign exchange reserves. In response, the BEAC raised key interest rates by 50 percentage points in March 2017 to 2.95%, leading to SAR inflation stabilizing at 6% in the second half of 2018. However, it is predicted to increase to 6.4% in 2019.

Public finances remain in deficit as ongoing instability continues to constrain the performance of fiscal policy. In 2018, parliament approved an increase in taxes on forestry and diamond exports, but the implementation of other tax measures in 2018 was delayed. The government can be expected to intensify its efforts to improve tax collection and implement further tax reforms to achieve support for the IMF program. Steps will also be taken to streamline information sharing between customs and the Treasury to maximize revenue from growing trade transactions. The government will also try to curb cases of tax evasion and tax evasion. This means that the revenue base (without grants) remains relatively limited and, due to the catastrophic security conditions and the paralysis of self-government, no major improvement can be expected.

Central African Republic Economic Overview