Translated Document

AFRICAN DEVELOPMENT BANK GROUP

CENTRAL AFRICAN REPUBLIC

EMERGENCY POST-CRISIS AND ECONOMIC RECOVERY SUPPORT PROGRAMME (PUASCRE)

APPRAISAL REPORT

OSGE DEPARTMENT

June 2014

TABLE OF CONTENTS

I. PROPOSAL ........................................................................................................................... 1

II. COUNTRY AND PROGRAMME CONTEXT .................................................................... 2

2.1 Recent Political, Economic and Social Developments .......................................................... 2

2.2 Government’s Strategy and Priorities .................................................................................... 5

2.3 Status of Bank’s Portfolio ...................................................................................................... 5

III. RATIONALE, KEY DESIGN ELEMENTS AND SUSTAINABILITY .............................. 6

3.1 Linkages with CSP and Analytical Underpinnings ................................................................ 6

3.2 Collaboration and Coordination with the Other Donors ........................................................ 8

3.3 Results and Lessons from Similar Operations ....................................................................... 9

3.4 Relationship to Other Bank Operations ............................................................................... 10

3.5 Bank’s Comparative Advantages and Added-Value ............................................................ 10

3.6 Good Practice Principles for the Application of Conditionality .......................................... 10

IV. PROPOSED PROGRAMME ............................................................................................... 10

4.1 Programme Goal .................................................................................................................. 10

4.2 Components, Objectives and Expected Outcomes ............................................................... 11

4.3 Financing Requirements and Modalities .............................................................................. 13

4.4 Programme Beneficiaries ..................................................................................................... 14

4.5 Social Impact ........................................................................................................................ 14

4.6 Gender Impact ...................................................................................................................... 14

4.7 Environmental Impact .......................................................................................................... 15

V. IMPLEMENTATION, MONITORING AND EVALUATION .......................................... 15

5.1 Implementation Arrangements ............................................................................................. 15

5.2 Monitoring and Evaluation Arrangements ........................................................................... 16

VI. LEGAL DOCUMENTATION AND LEGAL AUTHORITY ............................................ 16

6.1 Legal Documents: ................................................................................................................ 16

6.2 Conditions Associated with Fund’s Intervention ................................................................. 16

6.3 Compliance with Bank Group Policies ................................................................................ 17

VII. RISK MANAGEMENT ....................................................................................................... 17

VIII. RECOMMENDATION ....................................................................................................... 18

Tables

Table 1 – Crisis Response Budget Support Eligibility Conditions ..................................................... 7 Table 2 – CAR – Financing Requirements for 2014 ........................................................................ 13

Table 3 – Risks and Mitigation Measures ........................................................................................ 17

List of Figures and Boxes

Box 1- Roadmap Priorities ................................................................................................................ .5

Figure 1 – Bank’s Active Portfolio in CAR…………………………………………………………6

Annexes

ANNEX 1 – Letter of Development Policy ........................................................................................ I ANNEX 2 – Programme Matrix of Measures ................................................................................... X ANNEX 3 – Note on Relations with IMF ..................................................................................... XIII

ANNEX 4 – Key Macroeconomic Indicators ................................................................................. XV ANNEX 5 – Donor Interventions in CAR (USD million) ............................................................. XVI ANNEX 6 – Measures relating to the Fiduciary Framework in the Exceptional

Period of the Crisis ...................................................................................................................... XVII

ANNEX 7 – Administrative Map of CAR .................................................................................. XVIII

Fiscal Year

1 January - 31 December

Currency Equivalents

April 2014

Currency Unit CFAF

UA 1 USD 1.54563 UA 1 EUR 1.12100 UA 1 CFAF 735.328

This report was prepared following discussions with the Central African Authorities in Yaoundé from 24-28 February 2014,

and in Douala from 24 March to 2 April 2014, by a team led by Mr. Alain EKPO, Principal Economist, OSGE.1 and

comprising Messrs. L. KEVIN, Senior Macroeconomist in OSGE; S. KEITA, Regional Financial Management Coordinator,

ORPF.2; J. BISSANKONOU, Social Development Specialist, OSHD and K. DIALLO, Senior Country Economist, ORCE.

Questions on this report should be referred to Mr. N. LOBE, Director, OSGE (Extension 2077) and Mr. A. COULIBALY,

Ag. Division Manager, OSGE.1 (Extension 2536).

i

Acronyms and Abbreviations

ADF African Development Fund

AfDB African Development Bank

BEAC Bank of Central African States

CAR Central African Republic

CCIMA Chamber of Commerce, Industry, Mines and Crafts

CFA African Financial Community

CNLC National Anti-Corruption Committee

CPIA Country Policy and Institutional Assessment

CS-REF Economic and Financial Reforms Monitoring Unit

DDRR Disarmament, Demobilization, Reintegration and Repatriation

DGB General Directorate of the Budget

DGDDI General Directorate of Customs and Indirect Taxes

DGID General Directorate of Taxation and State Land

DGTCP General Directorate of the Treasury and Public Accounts

DSP Country Strategy Paper

DSRFP Public Finance Reform Global Strategy Paper

EITI Extractive Industries Transparency Initiative

EU European Union

FSF Fragile States Facility

GBSF General Budget Support Framework

GESCO Public Finance Management Information Support System

IMF International Monetary Fund

MDG Millennium Development Goals

MFB Ministry of Finance and Budget

MINUSCA United Nations Multidimensional Integrated Stabilization Mission in CAR

MoU Memorandum of Understanding

OAP Program-Based Operations

OCHA United Nations Office for the Coordination of Humanitarian Affairs

PARCGEF Economic and Financial Management Capacity Building Support Project

PARE Economic Reform Support Programme

PFM Public Finance Management

PUASCRE Emergency Post-Crisis and Economic Recovery Support Programme

PURD Emergency Programme for Sustainable Recovery in CAR

RCF Rapid Credit Facility

TFP Technical and Financial Partner

TOFE Government Financial Operations Table

UA Unit of Account

UNDP United Nations Development Programme

USD United States Dollar

WB World Bank

ii

Grant and Loan Information

Client Information

DONEE: Central African Republic

EXECUTING AGENCY: Ministry of Economy and Finance

Financing Plan

Source Amount

(in UA million) Instrument Disbursement

Period

ADF Grant UA 2.3 Crisis Response Budget Support July 2014

FSF Grant 12.7 million

including 5.87

under

restructuring

Crisis Response Budget Support July 2014

ADF and FSF Financing Information

Currency of ADF and FSF Grants

Unit of Account

Interest Rate Type NA

Base Rate NA

Interest Rate Spread NA

Financing Margin NA

Commitment Fee None

Other Charges None

Tenor NA

Grace Period NA

Indicative Timeframe

Activities Date

1. Negotiation of ADF and FSF

Grant Agreements

May 2014

2. Board Presentation 18 June 2014

3. Effectiveness 25 June 2014

4. Single Tranche Disbursement 15 July 2014

5. Supervision September 2014 ; March 2015

6. Last disbursement date 31 Mars 2015

7. Completion Report December 2015

iii

Programme Summary

Programme

Overview

Programme Name / Number: Emergency Post-Crisis and Economic Recovery Support Programme

(PUASCRE) / SAP Id. P-CF-KZ0-002.

Geographic Scope: Countrywide

Total Period: 15 months, from 1 July 2014 to 30 September 2015.

Financing: ADF Grant: UA 2.3 million and FSF Grant (Pillar I): UA 12.7 million, including UA 5.87 million

from the restructuring portfolio.

Operational Instrument: Crisis Response Budget Support (CRBS)

Sector: Economic Governance

Programme

Description

The Emergency Post-Crisis and Economic Recovery Support Programme (PUASCRE) is the Bank’s

contribution to the International Community’s joint effort, announced at the Brussels Conference in February

2014, to help the new Transitional Authorities to address the social and economic impact of the crisis on the

population and foster economic recovery in the country. The Central African Republic has faced a serious

crisis since the overthrow of François Bozizé’s regime in March 2013 and the ensuing intercommunity

violence. This military/political crisis has seriously affected social cohesion and dislocated public institutions.

The economic and humanitarian consequences are very severe, especially as the country was already struggling

to recover from over two decades of socio-political instability arising from coups d’état and recurring armed

conflicts. The aim of the proposed programme is to support this inclusive dialogue initiated by the authorities

by contributing to the return to normal functioning of institutions and the recovery of economic activities. The

Programme is in keeping with the priorities of the Government’s Roadmap and the Bank’s Interim Assistance

Paper for the 2014-2016 period. PUASCRE will also provide assistance for the redeployment of civil servants

and rehabilitation of their working tools. Furthermore, it will help the authorities to lay the foundations for the

recovery of economic activities by supporting the resumption of private sector/government dialogue as well as

measures aimed at helping enterprises to renew their production tools destroyed by the crisis. The programme

comprises two components: (i) restoration of the functioning of the financial administrations and basic social

services; and (ii) creation of the conditions necessary to ensure economic recovery. PUASCRE will be

implemented over a 15-month period. It is linked to the ongoing Economic and Financial Management

Capacity Building Support Project (PARCGEF), which has been restructured accordingly. Expected

Programme

Outcomes

and

Beneficiaries

The programme’s main expected outcomes are: (i) a reduction in the number of vulnerable people; (ii) recovery

of economic growth; (iii) the redeployment of at least 60% of civil servants following the resumption of regular

salary payments; and (iv) a reduction in central government debt owed to suppliers in order to facilitate the

recovery of private sector activities required for the reintegration of ex-combatants into active life.

Needs

Assessment

and

Relevance

The Roadmap adopted by the authorities in October 2013 and updated in February 2014 presents the priority

activities to be implemented to ensure a return to constitutional order and mitigate the negative impacts of the

crisis on the population. In view of the country’s multidimensional fragility, the international community’s

strong commitment is essential to ensure implementation of urgent actions. This Crisis Response Budget

Support operation, which is in line with the first pillar of the Fragile States Facility (FSF), is justified by the

fragility of CAR’s economy and sociopolitical systems. It is consistent with the International Community’s

efforts to provide the country with financial and technical support. The assessment of the country’s urgent

needs was the subject of discussions between the authorities and technical and financial partners (TFPs) at joint

meetings held in Bangui, Brussels, Yaoundé and Douala.

Bank’s

Comparative

Advantages

and

Additionality

In the past, the Bank has provided support to CAR and other fragile countries experiencing crises, such as Mali

and Côte d’Ivoire. The lessons from these experiences have provided the Bank with expertise that was

capitalized on in preparing this operation. Furthermore, the programme’s alignment with an institutional

support project, namely, PARCGEF, restructured to adapt it to the needs arising from the crisis gives the Bank

a comparative advantage in terms of support to economic and financial reforms. It should also be noted that, in

addition to the cyclical measures, which are usual for this type of programme, PUASCRE also tackles the root

causes of the country’s fragility. The programme also supports the revival of the EITI and Kimberley processes

with a view to strengthening governance in these sectors, which have very often fueled the military/political

crises in the country. Institutional

Development

and

Knowledge

Building

The main objective of PUASCRE is to restore the normal functioning of public institutions in CAR by

supporting the redeployment of government services and through the adoption of economic and financial

measures. In this regard, PUASCRE contributes to the institutional development of public administration and

the private sector. Furthermore, its alignment with the restructured PARCGEF will have a positive impact on

knowledge building by providing the Government with international experts in different areas of public finance

and private sector management.

iv

RESULTS-BASED LOGICAL FRAMEWORK

Programme Country and Name: CAR– Emergency Post-Crisis and Economic Recovery Support Programme (PUASCRE)

Project Goal: Contribute to the return to normal functioning of the administration and the creation of the necessary

conditions to ensure economic recovery.

RESULTS CHAIN PERFORMANCE INDICATORS

MEANS OF

VERIFICATIO

N

RISKS/

MITIGATION

MEASURES Indicator

(incl. CSIs) Baseline

Situation Target

IMPACT

Restoration of

basic social

services and

economic

recovery

Proportion of

vulnerable people 35% of the

population by

end 2013

30% of

population by

end 2015

OCHA Report

Real GDP growth

rate - 36% in 2013 +1.5% en

2014 IMF RCF

Review

OUTCOME

S

Outcome I :

The normal

functioning of

public

administration

is restored and

central

government’s

capacity to

provide basic

social services

(health,

education) is

rebuilt

Proportion of civil

servants in public

administration who

have resumed duty

< 20% by end

2013 > 60% by end

2014 IGF Report Major risk:

Political

instability and

persisting

insecurity in

Bangui and in

the provinces

Mitigation

Measure:

Formation in

January 2014 of

a Government of

consensus and

UN Resolution

in April 2014

authorizing the

deployment of

12 000 peace-

keepers to

strengthen

security in the

country and

support MISCA

and the French

troops

Number of months

of current salaries

paid to civil

servants during the

year

9 out of 12

months in

2013

12 months in

2014

CS-REF Report

Outcome II :

Conditions for

economic

recovery are

met

Rate of reduction of

government

commercial debt

audited in 2012

0% of stock

cleared in 2013

At least 4% of

stock cleared in

2014

Cash flow plan

OUTPUTS

Component 1: Rebuild the Capacity of Financial Administrations and Basic Social

Services

Risk 1: Weak

capacity of the

administration to

implement

reforms and the

emergency

programme

Mitigation

measure: TFP

assistance for the

resumption of

salaries of civil

servants and

technical

assistance to

public services

Macroeconomic

risk: this risk is

I.1. Capacity of

economic and

financial

administration

s are rebuilt

I.1.1 Redeployment

of economic and

financial

administrations

(Customs, Tax,

Treasury and

Budget)

Less than 10 %

of personnel

deployed by

end 2013

At least 50%

of personnel

deployed by

end 2014

CS-REF Report

I.1.2. Reactivation

of the institutional

framework for

budget and cash

flow management

(*)

Decree

establishing

the Cash Flow

Committee

and Public

Finance

Monitoring

and

Management

Committee not

adopted

Adoption by

the Council

of Ministers

of the

Decrees

establishing

the two

committees

signed and

published

before end

April 2014

Copies of

Decrees

forwarded by

CS-REF

v

I.1.4 Reactivation

of public finance

management

system (GESCO)

(structural

benchmark)

Malfunctioning

of GESCO

preventing

reconciliation

between

payment

authorizations

and actual

payments

Restoration of

the connection

between

GESCO-

Budget and

GESCO-

Accounts by

end

September

2014

CS-REF Report related to the

serious

destruction of

assets and

pillaging of

businesses

during the crises.

Mitigation

measures:

Government

commitment to

resume dialogue

with the private

sector, assess the

losses suffered

and capacity

building for

private sector

support

structures; IMF

and TFP support

to restore a

viable

macroeconomic

framework.

I.2 Social

services are

provided with

human and

financial

resources

I.2.1 Redeployment

of health personnel

and teachers

Less than 25%

of medical

personnel and

teachers

deployed at end

2013

60% of

medical

personnel and

teachers

deployed by

end 2014

CS-REF Report

I.2.2 Ensuring the

security of budget

appropriations

allocated to the

social sectors

(education, health,

infrastructure and

social affairs and

rural development)

Only 20% of

CFAF 4.7

billion of

appropriations

executed in

2013.

At least 40%

of budget

appropriations

totaling CFAF

4.2 billion

executed in

2014

CS-REF Report

Component II: Support for the Establishment of Conditions Necessary to Ensure

Economic Recovery Conditions met

for the

resumption of

activities

II.1. Revitalize the

Joint Government/

Private Sector

Committee with a

view to the joint

evaluation of

damage suffered by

private enterprises,

the auditing of

domestic debt,

adoption of private

sector support

measures and

continuing

clearance of

government

commercial debt.

Joint

Committee

meetings

suspended in

2013

Resumption of

Joint

Committee

Meetings

CS-REF Report

II.2 Measures

necessary to lift the

suspension of CAR

from the Kimberley

Process and EITI

CAR was

suspended

from the EITI

and Kimberley

Process in

2013

Implementa-

tion of

measures and

request to lift

the suspension

submitted to

the EITI

Committee by

end 2014

-Mining GD

Report; -Report

of Permanent

Secretariat of

Kimberley

Process and EITI

Technical

Committee

Resources:

ADF Grant of UA 2.3 million

FSF Grant of UA 12.7 million (*): Condition precedent to presentation of the programme to the Board

1

REPORT AND RECOMMENDATION OF THE MANAGEMENT TO THE BOARDS OF

DIRECTORS CONCERNING A PROPOSAL TO AWARD A GRANT TO THE CENTRAL

AFRICAN REPUBLIC FOR THE EMERGENCY POST-CRISIS AND ECONOMIC

RECOVERY PROGRAMME (PUASCRE)

I PROPOSAL

1.1. This proposal submitted for approval by the Board concerns an ADF grant of UA 2.3

million and an FSF (Pillar I) Grant of UA 12.7 million to finance an Emergency Post-Crisis and

Economic Recovery Support Programme (PUASCRE). This is an emergency budget support

operation in response to the urgent needs of the Central African population now faced with an

unprecedented humanitarian crisis following the military coup perpetrated in March 2013 by an armed

rebellion that overthrew the regime in power for ten years. It is in keeping with the joint effort

announced by the international community at the Brussels Conference in February 2014 to help the

new transitional authorities to restore the normal functioning of public administration, mitigate the

socio-economic impact of the crisis on the population and foster economic recovery.

1.2. PUASCRE’s design is based on an assessment of the social, economic and humanitarian

situation now prevailing in the country, characterized by: (i) the disorganization of public services;

(ii) the collapse of the health system and the rising number of people affected by food insecurity; (iii)

the partial destruction of economic and social infrastructure; (iv) the displacement of the population,

especially women and children (80%, 60% of whom are children); (v) insecurity affecting assets and

individuals; (vi) collapse of agricultural production and food supplies to the population; (vii)

tremendous difficulties encountered by the new transitional authorities in restoring order and security in

the country, especially in Bangui, the capital; and lastly (viii) the worrisome rise in armed

confrontations based on religious beliefs between communities, resulting in the massive exodus of

250,000 Central Africans seeking refuge in neighbouring countries. To address this new socio-political

and economic context and all types of pressing needs expressed, it has become necessary to establish a

new programme to support CAR that differs from the previous one (PARE III) approved in 2012,

which was focused on reforms but whose implementation was disrupted by the recent events.

PUASCRE appears to be an appropriate response by the Bank to support the country’s dialogue and

recovery processes embarked upon by the new transitional authorities appointed on 28 January 2014.

1.3. In the current situation, the TFPs and the new Government have agreed on the establishment

of an ad hoc framework for implementing external support operations and public finance management.

This mechanism entails, in particular: (i) the establishment of a Cash Flow Committee under the

authority of the Minister of Finance to improve cash flow management; and (ii) the establishment of a

Public Finance Management Committee to ensure joint monitoring with the TFPs of both budget

support and national budget resources.

1.4 Linked in its implementation to the institutional support programme (PARCGEF) approved by

the Bank in December 2010, and restructured to better address immediate needs, PUASCRE, at the end

of its 15-month implementation period, should achieve the following outcomes: (i) a reduction in the

number of vulnerable people; (ii) recovery of economic growth; (iii) the redeployment of at least 60%

of civil servants following the resumption of regular salary payments; and (iv) a reduction in central

government debt owed to suppliers in order to facilitate the recovery of private sector activities

required for the reintegration of ex-combatants into active life.

2

II COUNTRY AND PROGRAMME CONTEXT

2.1 Recent Political, Economic and Social Developments

Political Context

2.1.1 The Central African Republic faces one of the most serious crises in its history in terms of

scale, duration and social and humanitarian impact on the population as well as the ensuing

weakening of central government capacity. The coup perpetrated by an armed rebellion from the

North of the country against the existing regime resulted in the seizure of power by the rebels in March

2013, followed by the establishment of a National Transition Council comprising all vital elements of

the nation. The said Council appointed the rebel leader as Transitional President. However, faced with

the upsurge in violence fueled by uncontrolled elements of the new authorities and the Government’s

inability to restore security and the functioning of institutions, the Transitional President and rebel

leader was forced to resign on 10 January 2014. The Transition Council, at its meeting of 20 January

2014, appointed Mrs. Catherine Samba-Panza, Mayor of Bangui, as the new Transitional President and

a new Government, expanded to include the different political movements was formed on 28 January

2014. With the support of the international community, the new Transitional Government has begun to

implement the urgent measures and actions contained in the Transition Roadmap adopted in October

2013 and updated in February 20141, namely: (i) rapidly restore the security of goods and persons

nationwide; (ii) rapidly guarantee access by the vulnerable segments of the population to humanitarian

assistance; and (iii) create the conditions for the organization of free, democratic and transparent

elections aimed at ensuring a return to constitutional order. The intervention of the French forces and

the AU contingent (MISCA) on the ground, and the deployment from 15 September 2014 of the

MINUSCA peacekeepers following the Security Council Resolution, should help to restore peace and

security in the country.

Economic Context

2.1.2 Economic Growth and Inflation: Following a period of stable growth of about 3.2% of

real GDP in 2011 and 2012, CAR’s economy contracted sharply in 2013 with a drop of about

36% in real GDP. This recession was due to the following factors: (i) the widespread pillaging and

destruction of public and private assets as the rebellion moved towards the capital; and (ii) the

slowdown in agricultural production as a result of large-scale population displacement. Mainly

dependent on agriculture (50% of GDP and over 40% of export earnings), the Central African economy

shifted from a pre-crisis situation of food self-sufficiency to one of food insecurity. In the primary

sector, which was hardest hit by the crisis, production fell by 36.9% as a result of the pillaging of seeds

and the suspension of agricultural sector support projects. The fall in production throughout the secondary

sector was 23% as a result of the destruction of the production tools and 67% in 2013 for mining

production, in particular, compared to an increase of 10.7%, in 2012, due to the occupation of production

areas by the Seleka rebellion. Lastly, the tertiary sector was affected by transport difficulties and the

massive departure of petty traders as a result of insecurity and the malfunctioning of public

administration, resulting in an estimated 14.3% drop in activities. The crisis also had significant impacts

on the country’s financial system comprising 4 banks and 7 micro-finance establishments. Financial

losses of micro-finance establishments were estimated at CFAF 1.3 billion and virtually all bank branches

in the provinces remain closed. Inflation, fuelled by a shortage of essential foodstuffs, rose to 7.2% in

2013 compared to 2.7% in 2012.

1 These events that took place in December 2013 ushered the country into a second phase of the transition and led the new authorities to

review the Roadmap to take new needs into account, especially the inclusion of the “anti-balaka” in the DDR process.

3

2.1.3 The public finance recovery measures implemented by the authorities in 2011 and 2012

which had begun to produce tangible results (level of taxation up from 9.5% of GDP in 2012 to 9.9% of

GDP in 2013, reduction in arrears) have given way to bad management practices. The perceived

consequences of the crisis on public finances have included: (i) a drop of about 52% in revenue actually

collected by the Treasury due to the occupation of the customs corridors by the rebellion; (ii) a

contraction in taxable assets as a result of the pillaging and destruction of the production tools of the

majority of taxpayers, in particular, large enterprises established in Bangui and in some of the country’s

provinces; (iii) the loss of control of budget expenditure by the Chief Authorizing Officer for the

central government budget (iv) paralysis of government revenue services; (v) the government’s

inability to pay the totality of salaries and pensions in 2013; (vi) rising domestic debt owed to

government suppliers; and (vii) an accumulation of new arrears equivalent to about 2.3% of GDP.

Overall, the crisis has dealt a fatal blow to the progress made in public finance management.

Governance

2.1.4. Overall, CAR has made little progress in the area of corruption over the past two years.

Transparency International’s Corruption Perceptions Index shows that between 2012 and 2013, the

country stagnated at the 144th

position out of the 175 countries assessed. The Government had taken

measures to combat corruption with the establishment of a National Anti-Corruption Committee

(NACC) in 2008. However, the successive crises prevented the achievement of significant results in

that area. The Government also initiated measures in the aimed at strengthening natural resource

management transparency within the EITI context. CAR was accepted as an EITI Candidate Country

in November and achieved EITI-compliant status in March 2011. The country was temporarily

suspended from the EITI process on 10 April 2013 and the Kimberley System Certification Process

mainly as a result of smuggling that has blighted the diamond trade. To lift this suspension, the country

must submit a request and provide evidence of the implementation of measures to kick-start the

process, including a work plan for the publication of the 2011 EITI report.

Social Context

2.1.5. CAR’s 2010 Poverty Profile estimated the incidence of monetary poverty at 62% of the

population. Well before the outbreak of the current crisis, the country’s humanitarian situation was

already highly critical. The North and North-East regions as well as those in the East were already

seriously affected by the conflicts triggered by successive rebellions. By the end of 2012, almost the

entire CAR territory was affected by an acute humanitarian crisis and especially by severe malnutrition

in children below five years of age. Social infrastructure (nursery schools, Support Centres for

Orphans and Vulnerable Children, hospitals, health centres and schools) and government service

buildings (town halls, sub-prefectures, police stations and gendarmerie posts) were pillaged, resulting

in the flight of social and administrative service personnel. The humanitarian agencies2 operating in the

country have made the following assessment of the situation: about 1.6 million highly vulnerable

people urgently require protection; 1.3 million people require foodstuffs; 3.2 million people require

adequate health care; 1.4 million do not have access to clean water, sanitation and hygiene; 1.7 million

children have been left to their own resources, 3,500 of whom have been conscripted by armed forces

and groups. Lastly, over 250,000 inhabitants of the Central African Republic have purely and simply

fled their country to seek refuge in neighbouring countries, in particular, the Democratic Republic of

Congo. The population is exposed to famine, endemic and sexually transmitted diseases (STI and HIV).

In addition to this already bleak picture, intercommunity quarrels have widened the social divide

2 According to OCHA reports as of 25 October 2013.

4

between Muslim and Christian communities. Thus, the migration of the Muslim community, the

mainstay of the country’s economy, has exacerbated the food and humanitarian crisis due to a lack of

supplies of essential products.

Short and Medium-Term Prospects

2.1.6 Since the formation of the new Transitional Government in January 2014, mobilization

of the international community to support the country’s emergence from the crisis has been

significantly stepped up. There are ongoing measures to reinforce security and restore the smooth

functioning of the public administration. Furthermore, with the planned arrival of a contingent of

12,000 United Nations peacekeepers in September 2014, the existing security mechanism comprising

French SANGARI forces, African Union forces (MISCA) and probably also the forthcoming support

of the European Union, will be strengthened. These different foreign forces will ensure the security of

assets and persons, and the restoration of public order, facilitation of access to humanitarian services,

human rights monitoring and the fight against impunity. Already, actions to ensure the security of the

Douala-Bekolo-Bangui corridor by MISCA troops have resulted in the resumption of supplies of

essential products to the capital. With the financial support of some neighbouring countries, two

months’ salaries have been paid to civil servants, which have facilitated their gradual resumption of

duty. Under these conditions, the prospects for the recovery of economic activity are promising since a

slight increase in economic growth of about 1.5% of real GDP is expected in 2014. However, the

public finance situation is not expected to improve in the short-term. Significant structural measures

will have to be implemented to increase tax revenue and control expenditure, especially the wage bill

which, in 2013, represented 135% of the country’s own revenue. Only in 2015 will the growth rate

reach pre-crisis levels. With an improvement in the country’s security situation and the recovery of

agricultural production as well as diamond exports, the real growth rate in 2015 is expected to be 5.3%

and the fiscal deficit should narrow from 8.3% in 2014 to 5.3% in 2015.

Constraints and Challenges

2.1.7 The country’s main constraints relate to its situation of fragility. These main factors

of fragility are:

(i) The serious undermining of social cohesion due to inter-community conflicts, resulting in

violence of dreadful atrocity;

(ii) Central government’s weak capacity to ensure its core functions (general administration,

socio-economic infrastructure, security and justice) and provide the population with basic social

services (education, health, sanitation and clean water);

(iii) The country’s landlocked situation, which has always affected the economy’s

competitiveness;

(iv) The lack of dialogue between central government and the private sector, which weakens the

latter’s involvement in the design of, and contribution to, implementation of development

strategies and policies;

(v) The country’s very heavy dependence on international aid due to weak mobilization of

domestic resources; and

5

(vi) Poor governance of natural resources, especially of diamonds, which seems to be one of the

main reasons for the country’s political instability because of covetousness.

The military/political crisis that has serious affected these factors of fragility and hastened the massive

exodus of the inhabitants of the different production areas for reasons of security has plunged one-

quarter (¼) of the population into a situation of food and physical insecurity.

2.1.8 The near-term challenges may be summarized as follows: (i) the countrywide restoration of

security; (ii) social cohesion and restoration of the normal functioning of public services to enable

central government to address major humanitarian needs and prepare the return to constitutional order;

(iii) implementation of the Disarmament, Demobilization, Reintegration and Repatriation (DDRR)

process, the success of which depends on the integration of ex-combatants into economic activities; (iv)

the regular payment of civil servants’ salaries and rehabilitation of infrastructure and their working

tools destroyed during the crisis; (v) economic recovery through the initiation of dialogue with the

different private sector actors to encourage them by all available means, (fiscal incentives,

compensation, reduction of arrears in accordance with an agreed upon timetable etc.) to resume

activities so as to gradually provide job opportunities to unemployed youths, victims of conscription

into armed militia. The medium-term challenges are to (a) engage in inclusive national political

dialogue in order to seek ways of creating the conditions of political stability in the country to prevent

the constant undermining of the democratically established order; and (b) boldly implement the reform

of the national army and public security forces (gendarmerie, police).

2.2 Government’s Strategy and Priorities

2.2.1 In October 2013, the Transitional Government of National Unity adopted a Roadmap for an 18-

to 24-month period aimed at laying the foundations of a new Central African Republic. Box 1 presents

the Roadmap’s priorities. In order to strengthen the relationship between response to the humanitarian

situation and development during the transition,

the authorities have also prepared an Emergency

Programme for Sustainable Development in CAR

(PURD) for the 2014-2016 period. The 2014-

2016 PURD is focused on 4 Pillars: (i) restoration

of security, peace and strengthening of

governance and the rule of law; (ii) strengthening

of civil protection, restoration and re-organization

of the administration nationwide; (iii) recovery of

activities in the key social sectors, intensification

of HIV/AIDS control and environmental

protection; and (iv) continuation of economic and financial reforms to promote robust and sustainable

growth. It is expected that implementation of this Roadmap will help CAR to return to stability and

constitutional order in 2015 through free, credible and transparent elections. The total estimated cost of

financing the Roadmap is CFA 490 billion (about USD 1 billion). The Government’s contribution is

estimated at CFAF 50 billion, leaving a gap of CFAF 440 billion. Several TFPs, including the Bank,

have undertaken to provide support to the Roadmap’s implementation.

2.3 Status of Bank’s Portfolio:

2.31 The March 2012 pre-crisis Portfolio Performance Review deemed the portfolio satisfactory

with an average score of 2.22 on a scale of 0 to 3. The portfolio comprised eleven (11) national projects

and two (2) regional projects, representing total net commitments of UA 127.1 million (i.e. about USD

196 million). Figure 1 on the following page gives the portfolio’s sector distribution. The portfolio’s

Box 1- Roadmap Priorities

1) Rapidly ensure the security of citizens and the State, the protection

of the right to life, peace and justice for all;

2) Rapidly guarantee access by the vulnerable population to

humanitarian assistance (education, health, water, sanitation and food

security);

3) Strengthen the presence of central government authority

(rehabilitation of public infrastructure and redeployment of public

officials, regular payment of salaries);

4) Build up central government’s financial capacity (ensuring the

security of customs corridors, redeployment, equipment and cleaning

up of the taxpayer database, etc.); and

5) Resumption of public/private sector dialogue (revitalization of the

public-private consultation framework, assessment of company losses,

revision of the investment charter, implementation of measures.

6

Agric. 3%

Energy 23%

Social 7%

Transport 25%

Multisect.

20%

Water and

Sanitation

22%

Figure 1 - Status of Bank Assets in CAR Breakdown of Commitments

(in volume) by Sector

average disbursement rate is estimated at about 26%, while the average project age is approximately 3

years. An evaluation carried out by the Bank’s services in November 2013 after the outbreak of the

crisis shows that the 11 ongoing projects have

suffered asset losses estimated at over CFAF 300

million (i.e. about USD 600,000). Following the

Bank’s evaluation and dialogue missions, it was

recommended that the portfolio be restructured to

address the priorities of the Transition Roadmap.

Thus, in the governance sector which concerned

two operations in the portfolio (PARCGEF and

PARE III), only PARCGEF will be maintained in

the portfolio. PARCGEF’s objectives remain

consistent with the country’s priorities. However,

this project has been restructured to take the new

priorities into account. About UA 800,000 out of a

total estimated project cost of UA 4.5 million has

been allocated to increased support to the financial authorities and structures in charge of private sector

development. Therefore, PARCGEF will help to equip the Treasury’s Central Accounting Agency,

currently being established, as well as the financial authorities (Customs and Taxes). PARGEF will

also provide technical assistance to the structures responsible for the revival of business activities, in

particular the One-Stop-Shop for Business Formalities (GUFE) and the Government/private sector

Permanent Consultation Framework (CPC). Technical Annex 1 provides greater detail on the

PARCGEF. PARE III has been cancelled and undisbursed resources (UA 8 million) have been

allocated to a new operation, in the context of portfolio restructuring.

III. RATIONALE, KEY DESIGN ELEMENTS AND SUSTAINABILITY.

3.1 Linkages with CSP and Analytical Underpinnings

3.1.1 Linkages with CSP: PUASCRE is the first emergency operation planned under the Bank’s

Interim Assistance Paper covering the 2014-2016 period. This strategy, which is aligned with the

Government’s Roadmap priorities and PURD, is focused on the following two priority thrusts: (i)

rehabilitation of socioeconomic and public interest facilities with a view to improving basic service

delivery; and (ii) rebuilding of institutional capacity and promotion of good governance. The first

thrust aims to help the Government to meet the population’s urgent socio-economic demands with

special emphasis on the equitable and sustainable accessibility of the vulnerable segments to the

following essential goods and services: education, health, social protection, rural roads and productive

activities (with special emphasis on agricultural activities and other job-creating activities for youth

employment and the economic reintegration of ex-combatants. The specific objective of the second

thrust is to assist the rapid resumption of central and devolved administrative services to ensure the

delivery of essential basic services to the population and especially vulnerable communities in the rural

areas worst affected by the conflict.

3.1.2 PUASCRE contributes to the achievement of the outcomes of the second thrust of the Interim

Strategy. The programme is also in line with the Bank’s Ten-Year Strategy (2013-2022) regarding its

priorities in fragile States, and is consistent with the Governance Strategic Framework and Action Plan

for the 2014 – 2018 period (GAP II) which pays special attention to fragile States with the Bank’s

interventions aimed at contributing to lasting peace and the establishment of resilient, stable States with

adequate capacity.

7

3.1.3 Prerequisites for the Implementation of a Programme-based Operation: the proposed

operation - which is a Crisis Response Budget Support (CRBS) - is in keeping with the Bank Group

Policy on Program-Based Operations adopted in March 2012 (ADF/BD/WP/2011/38). The Country

Readiness Assessment presented in Table 1 below shows that CAR meets the CRBS eligibility

conditions. Especially with regard to the fiduciary framework and in consultation with the other TFPs,

the Bank carried out a fiduciary assessment and agreed with the government and the TFPs on the

minimum arrangements that would, in the very near-term, mitigate the risks and create an acceptable

framework for the implementation of TFP operations. The authorities have undertaken to very rapidly

resume their weekly treasury meetings and revitalize the Budget Management Monitoring Committee

expanded to the TFPs. Furthermore the Treasury’s Central Accounting Agency (ACCT) will be

operationalized following the appointment of its chief officer and his/her deputy, based on a

competitive process. While the political stability component is linked to the country’s overall security

situation, there has been an improvement in confidence in the transitional authorities since the

appointment of the new Transitional President in January 2014.

Table 1 – Crisis Response Budget Support Eligibility Conditions Conditions Assessment of the Fulfilment of Conditions Government

Commitment to

Poverty

Reduction

In 2013, the Transitional Government of National Unity adopted a Roadmap and an

Emergency Programme presenting the priorities of the 2014-2015 transitional period. The

Government priorities are defined as follows: (i) restoration of security and peacebuilding; (ii)

provision of emergency humanitarian assistance to the population; (iii) ensuring the return to

constitutional order and consolidating good institutional governance; and (iv) creation of

conditions for the recovery of the productive sector to achieve the MDGs. Preparation of the

Roadmap and the Emergency Programme is carried out in accordance with a participatory

process. The donor community has undertaken to support the Government in implementing

these priorities, especially during the meeting organized in Brussels by the United Nations and

the European Union on 20 January 2014. Macroeconomic

Stability The macroeconomic situation deteriorated considerably in 2013 as a result of the crisis. The

growth rate fell by about 36% and the Government accumulated significant arrears of

payment, including on the salaries and pensions of government employees. Structurally, the

Government’s own resources are insufficient to cover the wage bill. The country remains

dependent on external aid to meet its recurrent and investment expenditure. The crisis has

increased this dependency with its negative impacts (contraction of the economy and drop in

tax revenue). With the gradual rehabilitation of public institutions and support of the

international community, especially the financial programme supported by the IMF’s Rapid

Credit Facility (RCF) and this operation, growth should improve slightly in 2014. The

macroeconomic framework will improve from 2015. A 1.5% increase in real GDP is

expected as well as a 4.9% drop in inflation compared to 7.2% in 2013. The transitional

authorities have demonstrated strong commitment to reforms implementation and a return to a

normal economic situation by succeeding in concluding a RCF arrangement within six (6)

months despite the current difficult context. Satisfactory

Fiduciary Risk

Assessment

In accordance with the provisions of the PBO policy document, the Bank carried out a

fiduciary assessment, a summary of which is presented in Annex 6 and the detailed analysis in

Technical Annex 2. The country’s situation of institutional fragility caused by its repeated

crises has led to the deterioration of the fiduciary environment. Although the fiduciary risks

are high, failure of the development partners to take action would have even greater

consequences on CAR’s economic and social situation. Aware of this situation, the authorities

have agreed with the TFPs on emergency and operational actions to be taken to mitigate these

risks. The reform programme supported by the IMF’s Rapid Credit Facility and measures

contained in this programme as well as in the World Bank programme will help to

significantly mitigate the fiduciary risks. The main measures are: (i) operationalization of the

Cash Flow Committee and the Public Finance Management Committee expanded to the TFPs;

(ii) operationalization of the Treasury’s Central Accounting Agency (ACCT) for the

centralization of accounts as well as updating and keeping records of the State accounts; (iii)

operationalization of the Integrated Public Finance Management System (GESCO); and (iv)

fine-tuning of the civil service database with the technical and financial support of the

8

development partners. All these measures are jointly monitored by all TFPs. Political

Stability CAR has experienced a fairly difficult situation since the triggering of the military/political

crisis in 2012. Under the mediation of ECCAS Heads of State and with the support of the

international community, the country has gradually embarked on the path of political

normalization. Following the overthrow of the regime of President Bozizé on 24 March 2013,

and the ensuing unrest, the new authorities have endeavoured to restore democratic

institutions. A National Transitional Council (CNT) was established and a Constitutional

Charter prepared and promulgated in July 2013. The swearing in of the former Transitional

President, Michel Djotodia, on 18 August 2013, was the starting point for the 18-month

transitional period following which free and transparent presidential and legislative elections

would be organized. The new government of broad consensus formed in January 2014 in the

wake of serious intercommunity violence in December 2013 and the resignation of Michel

Djotodia is striving hard to restore social cohesion and security in order to adhere to the

electoral timetable. Harmonization Despite the situation of insecurity and its impact on the presence of TFPs in the country, the

partnership between the government and donors has been maintained. This led to joint

missions in November 2013 to Bangui and to other meetings in 2014 to Brussels and

Yaoundé. The preparation of the different CAR support missions benefited from close

collaboration between various donors in terms of joint missions and document sharing. TFP

support to the restoration of the functioning of the administration, security and for

humanitarian assistance are complementary. The main structural benchmarks for monitoring

progress in these different areas are widely shared by all the TFPs. Annex 5 presents the main

TFP interventions and the complementarity between the different operations.

3.1.4 Analytical Underpinnings: This report draws on the report of the High Level Panel on

Fragile States3, the Transitional Government’s Roadmap and various working documents submitted by

the authorities following the joint TFP missions. The High Level Panel report recommended that

several factors be taken into account when providing support to countries in situations of fragility like

CAR, especially State building, implementation of inclusive policies, restoration of security and justice,

building of basic economic management capacity, and establishment of legitimacy through public

service delivery. The report also recommends taking advantage of the resilience displayed by African

companies by supporting private sector activities. Action will also have to be taken at regional level to

curb illicit arms and mineral trading, both of which fuel wars. Measures under this programme, aimed

at restoring public institutions and recovery of economic activities, have taken these different aspects

into account.

3.2 Collaboration and Coordination with Other Donors

3.2.1 Before the recent crisis, a Global Budget Support Framework (GBSF) and Memorandum of

Understanding (MoU) signed by all the parties in December 2010 defined the donors’ intervention

framework in CAR. Following the overthrow of the regime in March 2013, CAR’s main TFPs

including, in particular, the Bank, the World Bank, IMF and the European Union had to suspend their

operations in the country as a precautionary measure. With the gradual improvement in the security

situation, virtually all TFPs have renewed dialogue with the country and resumed their operations.

Consultations are held during joint missions and by regular exchanges of information. Pending an

improvement in the security situation in Bangui, UNDP is trying to formalize monthly TFP meetings in

Yaoundé for exchanges on the evolution of the situation in CAR and to help harmonize interventions.

3.2.2 PUASCRE was entirely designed in close collaboration with all the above-mentioned TFPs

during joint missions. Because of insecurity in the country and the urgency, the Bank was unable to

3 Ending Conflicts and Building Peace in Africa – A Call to Action (ADB/BD/IF/2014/13 – ADF/BD/IF/2014/11), 23 January 2014

9

have direct contact with the Central African Republic’s population during the programme’s appraisal.

However, the Bank was kept regularly informed of social developments through exchanges with the

humanitarian agencies of the United Nations on the ground. The measures supported under this

programme were the subject of consensus between the TFPs and the authorities to ensure

complementarity between the different operations and meet the country’s most pressing needs. The

emergency operations of the World Bank and the European Union (EU) contribute directly to the

payment of civil servants’ salaries and the rehabilitation of their working tools. The EU is also

contributing to the DDRR Programme and to improving security in the country. The IMF, through its

RCF supported programme, provides support to measures aimed at a return to orthodoxy in financial

and budget management. In the social sector, the United Nations Development Programme (UNDP)

and several humanitarian agencies are already carrying out targeted actions in the education, health,

gender, food security and drinking water sectors. It is worth noting that, in addition to this operation,

the Bank has initiated the preparation of an Emergency Programme for the Rebuilding of Grassroots

Communities (PARCB), which will complement ongoing actions. PARCB will seek to facilitate social

cohesion and intercommunity dialogue, rehabilitate social structures and infrastructure, community

reintegration of displaced persons and refugees as well as reintegration of ex-combatants. Psycho-

medical and legal assistance will be provided to women victims of rape and other forms of physical

abuse.

3.3 Results and Lessons from Similar Operations

3.3.1 The lessons learned from the preparation of the Emergency Economic Recovery Support

Programme in Mali (PUARE) were reflected during preparation of this programme. Mali

experienced a political/military crisis in 2012 that fragilized public institutions, making it difficult to

provide basic social services in the country’s northern regions. The social fabric greatly deteriorated

and the population was displaced, the education and health systems were highly disorganized, the

economic fabric seriously affected and infrastructure destroyed. PUASCRE has also drawn on Côte

d’Ivoire’s experience during the implementation of the Emergency Programme for the restoration of

Basic Social and Administrative Services (PURSSAB) in the wake of the 2010 post-electoral crisis.

These two experiences (Mali and Côte d’Ivoire) show that priority was given to the rebuilding of

central government capacity both from the standpoint of the functioning of public administration and

the population’s access to basic social services, as well as the creation of conditions for inclusive

dialogue and economic recovery.

3.3.2 This programme in favour of CAR shares the same logic and draws on the following lessons:

(i) Adaptation of the programme to the context of fragility and urgency of a post-crisis

situation. Given the nature of the crisis, the proposed programme aims to help the State to regain

its sovereignty and restore its presence throughout the national territory. This is essential in order

to mitigate the impacts of the crisis on the population. The programme has only retained a limited

number of well-targeted, mainly cyclical, measures given the limited capacity of CAR

government services;

(ii) The maintenance of ongoing dialogue with the authorities on programme objectives. The Bank took part in the different dialogue missions on CAR. This dialogue was maintained

throughout the programme preparation process and will be strengthened during the

implementation phase by regular missions to CAR with the other TFPs;

(iii) Collaboration with the other partners in the operation’s formulation and

implementation: The Bank has maintained close collaboration with the other TFPs in preparing

10

this programme. The programme’s key measures were discussed with France, EU, the World

Bank, UNDP and IMF during joint missions in CAR and to Cameroon.

3.4 Relationship to Other Bank Operations

The Bank’s ongoing portfolio comprises one institutional support operation (PARCGEF), which was

restructured during the preparation of this programme. This restructuring made it possible to adapt

PARCGEF to the country’s urgent requirements and to ensure its complementarity with PUASCRE.

Thus, the financial administrations and private sector support structures will receive increased

assistance for training, the rehabilitation of their working tools and their supervision. Technical Annex

1 presents details of PARCGEF’s restructuring.

3.5 Bank’s Comparative Advantages and Added-Value

The Bank’s comparative advantages stem from the experience it has acquired in implementing reform

support programmes in emergency contexts and post-crisis situations (particularly in Mali and Côte

d’Ivoire). The Bank has proven experience in the design of this type of near-term targeted operation

aimed at helping countries to gradually emerge from situations of fragility and meet the population’s

urgent needs. The Bank’s value added consists in its responsiveness that allows it to rapidly design

crisis response budget operations, and its flexibility to adjust its project portfolio to meet immediate

priorities. Thus, the alignment of the programme with the ongoing PARCGEF gives the Bank a

comparative advantage for reform support operations in the economic and financial areas.

3.6 Good Practice Principles for the Application of Conditionality

The programme design has taken into account good practice principles for the application of

conditionality especially concerning the selection of key measures to be implemented over the

transitional period. In agreement with other TFPs, only the most relevant measures have been retained.

Most of these measures are not new and are aimed at channeling domestic and international aid

resources towards the most pressing humanitarian needs as well as the private sector for the recovery of

economic activities. The authorities have expressed a strong commitment to implement these measures

to restore a calm social climate and preserve the country’s macroeconomic fundamentals. In light of

these efforts and because of the urgency attached to emergency humanitarian requirements, no

condition precedent to disbursement of the programme’s single tranche has been retained except for the

opening of two special accounts for the payment of the ADF and FSF grant resources. Only the

conditions precedent to presentation of the operation to the Board of Directors has been retained in

order to maintain the authorities’ commitment to implement the priority reforms.

IV. PROPOSED PROGRAMME

4.1 Programme Goal

The overall goal of PUASCRE is to contribute to the rebuilding of central government capacity to

provide basic social services and to create the necessary conditions for the rapid recovery of economic

activities.

11

4.2 Components, Objectives and Expected Outcomes

4.2.1 PUASCRE is broken down into two main components: (i) rebuilding of government financial

and social services; and (ii) support to the creation of conditions necessary to ensure economic

recovery.

Component I – Rebuilding the Capacity of Financial and Social Administrations

4.2.2 This component comprises two sub-components: (i) restoration of the normal functioning of

financial administrations; and (ii) rebuilding central government capacity to provide basic social

services.

Subcomponent I-1 Restoration of the Normal Functioning of Financial Administrations

4.2.3 Context and Challenges: The generalization of the military/political crisis has resulted in the

paralysis of almost all financial administrations. The government estimates that 95% of buildings and

offices in the regions have been sacked and pillaged. In Bangui, the capital, pillaging has affected over

60% of government financial services. The computerized Budget and Cash Management system

(GESCO) has been almost completely destroyed as a result of the theft and pillaging of computer

equipment and networks. The customs offices in Bangui and in the provinces were ransacked and

occupied by various armed groups who replaced customs officers to collect taxes and duties. In

addition to the destruction of its buildings and working tools, the Financial Control Department lost

two senior officials during the crisis. The Government’s immediate challenges are to rapidly ensure the

security of the country’s main customs corridors and rebuild the capacity of the customs authority and

the Treasury. The other administrations will be gradually rehabilitated. Rebuilding the capacity of the

customs authority will help to rapidly boost domestic resources. For its part, against a backdrop of

dwindling resources and institutional weaknesses, the public treasury will play a key role in ensuring

efficient government cash flow management. To that end, the new authorities intend to operationalize

the Treasury Central Accounting Agency (ACCT) established in 2012 to ensure budget execution, cash

management, centralization of accounts and production of government accounts. The establishment of

this agency was backed by all the TFPs including the Bank, to resolve the persistent issues regarding

weaknesses in budget execution and cash flow problems. It is expected that the TFPs will support the

establishment of this agency through technical assistance. In addition to the ACCT, the Government

has undertaken to establish a Cash Flow Committee and a Public Finance Monitoring and Management

Committee to ensure transparency in the management of all public resources.

4.2.4 Programme Measures include: (i) redeploy financial administration (Customs; Taxes;

Treasury; Budget) personnel; (ii) ensure the payment of 12 months civil servants’ salaries in 2014; (iii)

ensure the presence of the customs authority on the Beloko-Bangui and Gamboula-Bangui road

corridors; (iv) prepare a 12-month work programme for the customs authority; (v) operationalize

ACCT by recruiting the accountant and his/her deputy through calls for candidacy (September 2014);

(vi) operationalize the public finance management system, GESCO (September 2014); and (vii)

operationalize the Cash Flow Committee and the Public Finance Monitoring and Management

Committee through the signature of the Decree establishing these committees (trigger).

4.2.5 Expected Outcomes: At least 50% of the personnel of the financial administrations (Customs,

Taxes, Treasury and Budget) have assumed duty and are deployed by the end of 2014; and tax revenue

is up by 10.3% compared to 2013.

12

Sub-Component I-2 Rebuilding Government Capacity to Provide Basic Social Services

4.2.6. Context and Challenges: The crisis has disorganized and considerably reduced public service

delivery capacity, in particular in the areas of health, basic education and sanitation. Access to them

remains very limited due to the destruction of many public, religious and cooperative facilities, and the

theft of drugs and medical equipment in Bangui and in the hinterland. Fearing for their safety, most

health officers have had to abandon their posts and fall back to Bangui, thus making health centres

inoperative, with far-reaching consequences – especially, high risks of morbidity and mortality related

to the resurgence of cholera, measles and even leprosy. The crisis has also aggravated the drinking

water supply situation. Even before December 2012, only 32% of the population had access. In urban

and semi-urban areas, only 4 out of 11 centres of the water distribution utility are operational. The 7

other centres are regularly affected by water distribution cuts. It is now estimated that over 85% of

villages and 45% of urban areas do not have access to drinking water. The crisis has also led to the

suspension of several borehole drilling projects. Conditions of cleanliness and hygiene which were

already precarious have seriously deteriorated. In 2012, the country’s sanitation coverage rate was

estimated at below 11%. Solid waste management by the municipal sanitation services, limited to

Bangui alone, remains very inefficient and is responsible for the high prevalence of vector-borne

diseases such as malaria. With regard to education, the re-opening of schools is difficult not only

because of the absence of teachers at their place of employment, but also because of a lack of furniture

and benches/tables which were destroyed or used as firewood by the warring parties during the crisis.

Some school roofs were also removed or deliberately destroyed by the belligerent forces. The most

pressing challenges are the following: (i) redeployment of health personnel and teachers; (ii) supply of

foodstuffs and other items to the vulnerable population who have mainly taken refuge in Bangui; (iii)

supply of emergency medical kits to health centres; and (iv) rehabilitation of health facilities in Bangui

and other refugee reception localities.

4.2.7 Programme Measures: To help the Government to address these challenges, the programme

proposes to support the following measures (i) redeploy health and education personnel in the different

regions as security is restored; (ii) increase the execution rate of social expenditure in the 2014 budget

in order to rehabilitate and equip health centres and schools; and (iii) re-launch the borehole

programme.

4.2.8. Programme Expected Outcomes: (i) at least 60% of health personnel and teachers are

redeployed by the end of 2014; and (ii) the budget provision execution rate for the social sectors

(excluding personnel expenditure) is at least 40% in 2014.

Component II – Support to the Creation of the Necessary Conditions for Economic Recovery

4.2.9 In its Roadmap, the Government dedicates the fourth pillar to economic recovery and identifies

the following intervention thrusts: (i) implementation of the suspended economic reforms; (ii)

rehabilitation of infrastructure; and (iii) private sector promotion. PUASCRE is focused solely on the

most urgent actions and measures for economic recovery. These measures will foster the restoration of

confidence at private sector level and the resumption of activities.

4.2.10 Context and Challenges: the recurring crises in CAR have made the business environment in

the country one of the least attractive in the world (188th

out of 189 countries according to the 2014

Doing Business Index). The country is structurally constrained by the lack of infrastructure (transport

and electric energy), instability of the legal and institutional framework, the absence of appropriate

financing systems and support policy for financing the economy (guarantee fund, lease financing, etc.)

13

for SMEs, and the distrust that characterizes relations between the administration and the private sector.

In addition to these structural factors, the crisis has created a climate of insecurity and led to the

suspension of official diamond exports under the Kimberley Process. This is compounded by the

destruction and pillaging of companies’ production tools and the accumulation of central government

arrears owed to the private sector and banks. A 2012 audit of the arrears over the 2008-2012 period

resulted in the government’s validation of commercial debts estimated at CFAF 11.7 billion. These

debts have been partly cleared, but the crisis has created new arrears amounting to an estimated 2.3% of

GDP. The government’s main near-term challenge is to restore government/private sector dialogue to

assess the damage suffered by businesses, audit central government domestic arrears and agree upon

support measures to facilitate the resumption of business activities. It will be necessary to revitalize the

Joint Committee and the Permanent Framework for Government/Private Sector Consultation. The

second near-term challenge consists in implementing actions that will lead to the lifting of CAR’s

temporary suspension from the Kimberley Process and EITI. Indeed, the lifting of this suspension is

contingent on the recovery of diamond exports. Under the emergency programme, the Government has

also included other measures, in particular rehabilitation of some main roads, the dismantling of illegal

roadblocks countrywide, the strengthening of the judicial governance framework and the revision of the

mining and investment codes.

4.2.11 Programme Measures: in view of the limited duration of PUASCRE, only the most urgent

measures will be retained, i.e.: (i) revitalization of the Joint Committee and the Permanent Framework

for Government/Private Sector Consultation with a view to a joint assessment of the damage suffered

by private enterprises; (ii) auditing of domestic debt and private sector support measures; (iii)

continuation of government commercial debt clearance; and (iv) implementation of the necessary

measures to lift CAR’s temporary suspension from the EITI and Kimberley processes.

4.2.12. Programme Expected Outcomes: the expected outcomes from the implementation of these

measures are: (i) a reduction of the commercial debt audited in 2012 by at least 4% in 2014; (ii) an

agreement between the Government and private sector representatives on the actions and measures to

be taken over the 18-month transitional period to facilitate the resumption of business activities; and

(iii) the lifting of CAR’s temporary suspension from the EITI and Kimberley processes by end-2014.

4.3 Financing Requirements and Modalities

The respective financing requirements for 2014 and

2015 are CFAF 83.5 and 52.2 billion. These

requirements are due to the underlying weakness of the

country’s own resources in relation to the level of

irreducible expenditure. Priority expenditure allocated

for the 2014 and 2015 period, estimated at CFAF 341.8

billion (about USD 221 million) in the Roadmap has

increased pressure on central government finances. The

Government intends to make efforts to mobilize more

own resources with the redeployment of the customs

authority on the country’s different corridors, and to

rebuild the capacity of the financial authorities

(Customs, Taxes and Treasury). Tax revenue which

dropped to 5.2% of GDP in 2012, is expected to rise to

5.4% of GDP in 2014 and 6.9% of GDP in 2015. On

the expenditure front, measures will be taken to ensure

Table 2 – CAR – Financing Requirements 2014

(In billions of CFA francs) Budget

2014

Budget

2015

TOTAL 1. Total revenue and grants 75.3 111.9 187,2

Tax Revenue 43.9 61.7 105,6 Nontax Revenue 8.0 17.9 25,9 Grants 23.4 32.3 55,7

2. Expenditures 142.3 159.1 301,4 2.1. Current expenditures 107.8 99.9 207,7

Salaries 57.3 53.7 111 Goods and services 23.6 22.3 45,9 Other current expenditures 26.9 23.9 50,8

2.2. Capital expenditures 28.9 53.2 82,1 Domestically financed 5.5 8.0 13,5 Externally financed 23.4 45.2 68,6

3. Overall balance (Order basis) -67.0 -47.2 -114,2

Net change in arrears -16.5 -5.0 -21,5

4. Overall Balance (cash basis) -83.5 -52.2 135,7

5. Financing 2.4 2.2 4,6 5.1. External Financing -5.4 7.7 2,4

Of which project loans 0.0 12.9 12,9 Programme loans 0.0 0.0 0,0

6.2. Domestic financing 7.8 -5.4 2,4 Errors and omissions / financing need -81.1 -50.0 -131,1 Financing capacity 81.1 0.0 81,1

IMF 10.0 WB 13.5 10,0 EU 19.7 13,5 FRANCE 7.9 19,7 ECCAS 20.0 7,9 AfDB 10.0 20,0

Residual Financing need 0.0 -50.0 10,0

Source: CAR authorities, February 2014

14

tighter control of the wage bill by cleaning up the civil servants’ database. TFP support is essential to

enable the Transitional Government to implement the priority measures of the Roadmap. Several

TFPs have pledged assistance in different forms for 2014 and 2015. For 2014, the IMF approved

financial assistance on 14 May 2014 equivalent to SDR 8.355 million (approximately USD 12.9

million) under the Rapid Credit Facility (RCF). It plans to renew the financing by year end provided

CAR meets the policy requirements for repeated use, especially the establishment of a track record of

adequate macroeconomic policies for a six-month period. The World Bank has awarded a grant of

USD 30 million to contribute to the payment of civil servants’ salaries to the tune of USD 27 million

(CFAF 13.5 billion). Other financing has been approved by ECCAS member countries and the

European Union. Taking into account the Bank’s budget assistance (UA 15 million), total financing

assistance has closed the entire financing gap for 2014. For 2015, IMF is envisaging another support

under the RCF or the Extended Credit Facility. The Bank will contribute through the above-mentioned

Reconstruction Programme.

4.4 Programme Beneficiaries

In general, programme beneficiaries are the population of the Central African Republic as a

whole, i.e. about 4.3 million inhabitants and, in particular, people displaced by the conflict. More

specifically, these are people living in precarity due to the absence of basic public services in the

affected areas and the congestion of public services in the reception areas. The main beneficiary

structures comprise the school network, public health services and generally, the public administration

which must resume normal functioning.

4.5 Social Impact

The restoration of social, administrative and security services will provide the population with

renewed hope and create a feeling that the central government has returned to the localities. The

rehabilitation of administrative infrastructure and reorganization of the health and education systems

will facilitate the return of health care workers, teachers and personnel of the other public

administrations to the localities, disease management and access to health care with a view to reducing

maternal and child mortality. The resumption of classes will dissipate the specter of a lost year, which

entails financial cost for government, parents and the students themselves. The presence of

administrative clerks in the localities will also encourage the return of displaced people and refugees to

their areas of origin as well as the recovery of economic activity, seriously disrupted by the crisis. The

economic recovery, backed by the revival of private sector activities, will foster job creation

particularly in labour intensive sectors like BPW.

4.6 Gender Impact

The scale of the crisis has not spared the different segments of the CAR population (women,

youths, men and the disabled). Women and children have suffered psychological trauma due to the

tragic deaths of their relatives. The same applies to child soldiers conscripted into the rebellions and

traumatized by the events. PUASCRE measures will help to mitigate the impact of the crisis on the

most vulnerable segments of the population, including women and children. Indeed, the restoration

of basic social services and rehabilitation of basic infrastructure will enable displaced people, the

majority of whom are women and children, to return to their regions and gradually resume their

activities. Women, girls and children who were victims of gender-based violence will be able to receive

moral and psychological assistance. An assessment of their situation will allow the subsequent

organization of targeted support in terms of social assistance and economic recovery.

15

4.7 Environmental Impact

The proposed programme is a Crisis Response Budget Support. It will have no environmental impact

and is classified in Category III.

V. IMPLEMENTATION, MONITORING AND EVALUATION

5.1 Implementation Arrangements

5.1.1. Institution Responsible: the Ministry of Finance and Budget which chairs the Public

Finance Reform Steering Committee (CPR), will be responsible for PUASCRE’s implementation. The CPR comprises officials from the action plan implementation structures (Ministry of Finance and

Budget, National Assembly Finance Commission, the Court of Auditors, the State Inspectorate

General, Public Procurement Regulatory Authority), a representative of civil society and

representatives of technical and financial partners. The Ministry of Finance and Budget will ensure that

the administrative structures concerned fully play their roles in implementing specific measures falling

within their respective areas of competence. The routine monitoring and evaluation of the programme

will be the responsibility of the Economic and Financial Reforms Monitoring Unit (CS REF). The

proposed programme will be implemented over a 15-month period starting from its effectiveness date.

5.1.2 Disbursement: the UA 15 million financing will be disbursed in a single tranche subject to

fulfilment by the Borrower of the related general and specific conditions as mentioned in § 6.2

below. The option of a single tranche disbursement is mainly justified for the following reasons: (i) the

need to cover the most urgent financing requirements in a watershed year to mitigate the impacts of the

crisis on the population and foster the rapid recovery of the economy; (ii) a firm commitment by the

Government to implement urgent measures, supported by the international community’s combined and

urgent effort to restore the State’s legitimacy, foster economic recovery and help the country to address

the deteriorating humanitarian situation; and (iii) measures to mitigate the country’s fiduciary risks. At

the Borrower’s request, the Bank will disburse funds into a Treasury account opened at the BEAC.

5.1.3 Procurement of Goods and Services: the assessment of the national public procurement

framework carried out by the Bank in May 2012 concluded that overall, the national procurement

procedures for national competitive bidding were compliant with the Bank’s Rules and Procedures.

This assessment also revealed the existence of an adequate institutional mechanism based on the

separation of procurement, control and regulatory functions as well as the introduction of an appeal

mechanism for bidders. It was also confirmed that National Standard Bidding Documents are, on the

whole, similar to those of the Bank. Notwithstanding the quality of the legal, regulatory and

institutional framework, these organs are not operational because of the military/political crisis in the

country. Consequently, this budget support aimed at rebuilding the capacity of CAR administrations

will contribute greatly to restoring the functioning of the organs responsible for public procurement,

ensuring the de facto mitigation of the fiduciary risk. Therefore, the use of Bank resources through a

budget support to achieve these objectives seems appropriate.

5.1.4 Financial Management and Auditing: since this programme is a budget support, the

resources allocated to it will pass along the entire public expenditure circuit (resource allocation,

expenditure chain, control). The Ministry of Finance and Budget will assume responsibility for the

administrative, financial and accounting management of the said resources. As pointed out in Table 1

of paragraph 3 on the analysis of pre-requisites for PBOs, PUASCRE will be implemented in an

exceptional fiduciary environment with a high fiduciary risk, combined with the weak capacity of the

16

fiduciary and control institutions and the absence of budgetary orthodoxy. The fiduciary framework

was assessed based on the following principles: (i) an exceptional context of crisis and insecurity for

the duration of the transitional period; (ii) the Ministry of Finance and Budget will be responsible for

the fiduciary framework monitoring process; and (iii) the traceability of funds will be assured by the

establishment of key controls in the revenue/expenditure cycles/circuits. Therefore, the fiduciary

framework will be strengthened by the combined efforts of the government and all CAR’s technical

partners, since no individual action or institution can alone achieve global visibility of the fiduciary

framework or any significant reduction of the fiduciary risk. The detailed analysis of the fiduciary risk

is presented in Technical Annex 2. It was carried out in compliance with the policy on the financial

management of projects financed by the Bank Group. Hence, it was performed based on the four (4) pillars

of Budget (I), Financial Reporting and Auditing (II), Procurement (III), and Corruption (IV)

recommended by the Policy on Program-Based Support in a crisis situation and in compliance with the

policy on the financial management of operations financed by the African Development Bank Group.

An audit of the flow of funds will be carried out by an independent audit firm .Annex 6 and Technical

Annex 2 present the measures related to the fiduciary framework, taking into account the exceptional

nature of the crisis in CAR.

5.2 Monitoring and Evaluation Procedures

5.2.1. Programme implementation will be monitored through the Matrix of Measures and the

cash flow table. The Results-Based Logical Framework will be the common framework for

evaluating programme outcomes. The Ministry of Finance will be responsible for data collection and

coordination of monitoring/evaluation, and make the information available to the Bank. The operation

will be monitored by ongoing dialogue between the authorities and the Bank in collaboration with the

other TFPs, and during regular supervision missions. This mechanism will be used to assess the

progress made on the basis of indicators agreed upon, in accordance with the new results monitoring

framework established by the Bank.

VI. LEGAL DOCUMENTATION AND LEGAL AUTHORITY

6.1 Legal Documents:

The legal documents that will be used for the programme are: • An ADF Grant Agreement for an amount not exceeding UA 2.3 million will be signed

between ADF and the Central African Republic;

• A Letter of Agreement for FSF resources in an amount not exceeding UA 12.7 million will

be signed between the President of the Bank Group and the Central African Republic.

6.2 Conditions Associated with Fund’s Intervention

6.2.1 Conditions precedent to presentation of PUASCRE to the Board of Directors: based on

dialogue with the Government, it is envisaged that the Government will implement measures prior to

the programme’s presentation to the Board of Directors. These conditions are:

• The signing of an agreement with the IMF under the Rapid Credit Facility;

Evidence: Copy of IMF Press Release on the Agreement under the RCF submitted by the Minister of

Finance and Budget;

17

• Government decision to establish the cash flow and public finance monitoring

committees;

Evidence: Copies of the Decrees establishing the Cash Flow Committee and the Public Finance

Monitoring Committee submitted by the Minister of Finance and Budget.

6.2.2. Effectiveness: effectiveness of the ADF Grant and FSF Grant will be subject to the signing of

the ADF and FSF Grant Agreements by the Bank Group and the Donee.

6.2.3. Conditions Precedent to Grant Disbursement: in addition to the conditions precedent to

effectiveness as stipulated in paragraph 6.2.2 above, disbursement of the ADF Grant resources and

those of the grant awarded from FSF Pillar 1 resources shall be subject to the following condition

precedent:

• Provide evidence of the opening in the BEAC books in Bangui of two special accounts

into which the ADF and FSF grant resources will be paid.

6.3 Compliance with Bank Group Policies

PUASCRE is in keeping with the strategic directions of the Bank’s long-term strategy, in particular, the

pillar relating to governance. It is also consistent with the Bank Group’s Policy on Program-Based

Operations, in particular the instrument concerning Crisis Response Budget Support. No waiver request

has been made in this proposal regarding these Guidelines.

VII. RISK MANAGEMENT

Table 3 below presents an overview of the risks that could affect the implementation of the programme

or the achievement of its outcomes.

Table 3 – Risks and Mitigation Measures

Risks Mitigation Measures Political and Security Risk: this risk is related to the fragility of public institutions and the

climate of insecurity prevailing in Bangui and

in several of the country’s provinces.

This risk is mitigated by the formation of a new Transitional Government and increased support from international forces to restore security. The recent decision of the United

Nations Security Council on 10 April establishing the United Nations Multidimensional

Integrated Stabilization Mission in CAR (MINUSCA) and scheduling its deployment from 15 September 2014 will contribute to the improvement of security conditions nationwide.

Macroeconomic Risk: this risk is linked to the

serious destruction of assets and pillaging during the crisis. This situation has a

significant impact on the productive sectors,

economic growth and public finances.

This risk is mitigated by the Government’s undertaking to resume dialogue with the private

sector and modalities for assistance mainly through private sector support strategies. The TFPs will provide financial support to re-establish a viable macroeconomic framework.

MINUSCA, MISCA and the SANGARIS forces will ensure the country’s security,

especially in the production areas and customs corridors. The restructured PARCGEF will provide support to the recovery of economic activities through technical assistance to the

structures responsible for promoting business activities. Risk of limited capacity to implement

emergency measures: the limited capacity of

government services exacerbated by the

malfunctioning of the public administration could prevent implementation of the

emergency measures.

Through this programme and the PARCGEF, the Bank contributes alongside the other

TFPs to the rebuilding of central government’s administrative capacity. With these support

operations, the Government will be able to ensure the regular payment of civil servants’

salaries and renew the working tools destroyed by the crisis.

Fiduciary Risks: the crisis has seriously

distorted the budget circuit and control systems.

The fiduciary risks were jointly analyzed by the TFPs and minimal mitigation measures

adopted, taking into account the limited capacity of the public administration at programme start-up. A cash-flow plan has been discussed with the Government as well as budget

management and cash flow monitoring modalities. Therefore, regular meetings of the cash

flow committee and public finance monitoring committee will, therefore, be held with TFP participation. Annex 6 and Technical Annex 2 provide further details on the fiduciary risk

mitigation measures

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VII. RECOMMENDATION

Given the foregoing, it is recommended: (i) the Boards of Directors of the Bank and the Fund approved

a grant not exceeding UA 12.7 million from the resources under the Pillar I of the Fragile States

Facility (FSF); and (ii) the Boards of Directors approved an ADF grant not exceeding UA 2.3 million

to finance the Emergency Post-Crisis and Economic Recovery Support Programme (PUASCRE) in

favour of the Central African Republic.

I

ANNEX 1

Letter of Development Policy

Ministry of Economy, Planning and International

Cooperation

**********

Office of the Minister

**********

N0._______/2014/MEPCI/DIRCAB

CENTRAL AFRICAN REPUBLIC

Unity – Dignity – Labour

TRANSITIONAL GOVERNMENT

2014 – 2015

I. INTRODUCTION

1. The Transitional Government’s Economic Programme is focused on the strategic directions determined by the

Heads of State of the Economic Community of Central African States (ECCAS), through the resolutions of

the Extraordinary Summits of Heads of State and Government on 3 and 18 April and recalled in the message

from the President of the Republic at the first Council of Ministers in which she expressed her strong

determination to commit her Government to adhere to the Transition Roadmap and her determination to

implement the measures and actions of the Emergency Programme for Sustainable Development (PURD) in

order to address the challenges facing the country as a priority.

2. The different crises experienced by the country have jeopardized implementation of the PRSP II (2011-2015)

focused on the following three (3) pillars, namely: (i) the strengthening of Security and Peace, Governance and

the Rule of Law; (ii) economic recovery and regional integration; and (iii) the development of human capital

and essential social services, and resulted in the breakdown of dialogue between CAR and its development

partners. The Transitional Government has redefined its priorities to support the protection of communities and

the country’s recovery during this phase in a document entitled Emergency Programme for Sustainable

Development in CAR (PURD-CAR 2014 – 2016). The urgent needs linked to the crisis are aligned on the

strategic directions determined by the ECCAS Heads of State and Transitional Authorities. This

Programme, accompanied by a matrix of measures, has made it possible to: (i) carry out a comprehensive

analysis of the socio-economic and political context; and (ii) identify the challenges to be addressed in order to

provide a response to the population’s urgent needs, stabilize the security situation, consolidate social peace,

achieve economic stability and revive growth.

3. In accordance with Article 43 of the Constitutional Charter adopted and promulgated on 18 July 2013, and

drawing on the main thrusts of PURD, the Government prepared a Roadmap which was presented to the

National Transitional Council (CNT) following validation by the Monitoring Committee for Implementation of

the Libreville Agreements and the International Contact Group in October 2013. This Roadmap, which takes

into account the country’s urgent requirements, is aligned on the four PURD Pillars. The events of December

2013 brought the country into a second transitional phase prompting the new authorities to revise the Roadmap

to take into account the new needs, in particular integration of the anti-balakas into the DDR process.

II

4. Accompanied by Priority Action Matrices, the Roadmap and PURD will serve as a dialogue framework and

facilitate mobilization of the development partners including the provide sector around CAR’s humanitarian

assistance requirements and recovery.

5. Political stability and peacebuilding have been consolidated by the adoption of the Constitutional Charter and

effective mobilization of the soldiers of the International Support Mission to CAR led by the African Union (MISCA) and the French SANGARIS support force. Under the implementation of the United Nations

Security Council Resolution 2121 and in compliance with the decisions of the African Union’s Peace and

Security Council, two consultation frameworks have been established for Disarmament, Demobilization and

Reintegration (DDR) and Security Sector Reform (SSR) with two (2) levels of responsibility: Strategic and

Technical. A DDR pilot programme covering 2000 ex-combatants is already operational. The Confidence-

Building Measures signed by FOMAC/MISCA and the SANGARIS force have helped to: (i) reverse the

military balance which is expected to become gradually favourable to rapid adherence to the DDR process; (ii)

ensure the gradual neutralization of armed groups whose security activities will become increasingly limited;

and (iii) bring about the gradual stabilization of the security situation which could make it possible to carry out

activities on the ground. Similarly, implementation of confidence-building measures by the SANGARIS force

has contributed to the assembly of armed groups corresponding to the effective launching of a preliminary

phase of the future DDR Programme, starting with the pilot phase.

II. MACROECONOMIC AND FISCAL FRAMEWORK IN 2013 AND PROSPECTS FOR 2014

2.1 Economic Framework

2.1.1 Situation in 2013

6. The economic and financial situation in 2013 evolved against a backdrop of widespread insecurity. The

political and social crisis, and the ensuing deterioration of the security situation had very severe economic,

financial and administrative impacts. Economic activity slumped due to the destruction of almost the entire

productive fabric, massive population displacement, food precarity, the destruction of infrastructure, pillaging

of natural resources and the freezing of project financing.

7. Real GDP growth contracted by 36.7% in 2013 following a 4% rise in 2012. This sharp downturn in growth

was mainly due to domestic demand affected by a sharp fall (-68.6%) in final consumption. Public and private

consumption slumped by 85% and 57.4%, respectively, linked to the delays in the payment of civil service

salaries, the drop in agricultural revenue and the paralysis of the administration.

8. In 2013, the primary sector growth rate fell by 41.5% in volume due to insecurity, the lack of finance, ageing

of the main plantations, a fall which is attributed to food crop farming (-46.4%) and cash crops (-46%). The

pillaging of seeds and the brutal suspension of the agricultural sector support projects (PRAP, PREVES…) led

to a 46.4% contraction of agriculture sector and food production. The decline in cash crop growth is partly due

to the absence of financing and the ageing of the main plantations.

The forestry sector growth rate fell by 18.2% in 2013 mainly due to the suspension of production by companies, the

impassibility of roads and paralysis of the Bangui-Béloko corridor.

9. The secondary sector performed poorly, down by 23% in 2013, mainly due to the occupation of mining

production areas by armed men, the destruction of the Ndassima gold mine and the suspension of CAR from

the Kimberley and EITI processes.

10. There was a 13% downturn in water and energy sector activities in 2013 due to the destruction of the Boali

hydro-power facilities, the suspension of the project to rehabilitate drinking water supply systems in Berberati,

Bouar and Bossangoa on AfDB financing in the water sub-sector and the temporary suspension of financing

for the main energy sub-sector recovery projects.

III

11. Manufacturing sector output fell by 13.3% in 2013 as a result of pillaging and theft.

12. The tertiary sector growth rate fell by 28% in 2013 as a result of a drop in merchant (-24.1%) and non-

merchant services (-45.9%). This situation was mainly due to road transport difficulties, the closure of several

businesses, the destruction of mobile phone facilities and fuel supplies in the country’s interior, internal and

external population displacements and the destruction of administrative infrastructure.

13. Fanned by price hikes in the last quarter of 2013, inflation accelerated to an annual average of 3.9% in 2013.

14. The external position deteriorated sharply in 2013 despite a strong contraction in imports of about 28%. The

external current account deteriorated considerably because of a sharp contraction in exports (-57.5%), affecting

all export sectors.

15. At the end of November 2013, an analysis of money supply component trends revealed, on the one hand, an

increase in fiduciary money (+10.9%) and, on the other, a fall in both bank money (-10.9%) and quasi-money

(-7%). The external coverage rate of money was 68.68%, credits to the economy contracted by 15.2% and net

claims on government rose by 4.4% as a result of cash flow problems which prompted the central government

to turn to the primary banks.

16. In 2013, there were serious budget execution problems chiefly resulting from the slump in tax revenue.

Because of the difficult economic situation and the pernicious political/military climate, domestic revenue only

represented 6.1% of GDP in 2013, a sharp drop mainly due to the collapse of economic activities and the

paralysis of the government revenue services in the performance of their core functions to be able to assess and

collect taxes and duties, similar to the operating difficulties of the customs network.

2.1.2 Prospects for 2014

17. The economic recovery in 2014 is expected to begin with a projected real GDP growth rate of 1.3%. These

growth projections are based on the assumption of the restoration and maintenance of security and political

stability, the return of displaced communities to resume agricultural activities, the distribution of seeds and

processing tools, the resumption of activities at the Bossangoa cotton ginning plant, the lifting of the embargo

on diamond exports and the countrywide resumption of government services.

18. The primary sector growth rate could reach 0.5% in 2014. Food crop production is expected to benefit from the

resumption of Government and development partner support through the supply of seeds, agricultural inputs

and small implements. Cash crop production will also be boosted by the recovery of the cotton sub-sector,

especially through Chinese support and the resumption of activities at the Bossangoa plant. The coffee sector is

expected to improve as a result of the strategies implemented to increase yield and because of expected good

distribution of rainfall. Forestry activities are expected to increase by 0.6% in 2014.

19. The secondary sector growth rate is expected to be -2.1% in 2014, a significant improvement on 2013.

20. There is expected to be an upturn in the water/energy sector to 2.8% in 2014 due to several operations aimed at

building production capacity such as the coupling of the Boali 2 generators and the installation of a turbine at

the Mbali dam (Boali 3).

21. Manufacturing output is expected to increase slightly in 2014 (1.2%), depending on the reduction of

production costs and possible improvement of water and energy production. In the wake of all the destruction

perpetrated in 2013 (-17.2%), a recovery (1.3%) of BPW activities is expected in 2014, subject to external

financing (development assistance in particular, in favour of road and air infrastructure).

22. The tertiary sector growth rate is expected to increase steadily to 4.8% in 2014. The transport sub-sector, after

the lean period in 2013 (20%), is expected to grow by 1% in 2014. Lastly, following the strong contraction of

2013, non-merchant services will recover significantly as a result of the different external pledges made and

IV

the resumption of government services throughout the territory of the Central African Republic with a view to

forthcoming elections.

23. The sharp rise in prices in the last quarter of 2013 and in the first semester of 2014 will fuel inflation during

the second semester of 2014 before it starts to fall during the second semester of 2014 to approach the CEMAC

convergence criterion (3%).

Public Finances

2.2.1 Measures taken by the Government

24. Under the 2014 fiscal policy, some bold measures will be taken: (i) establishment of the Treasury Central

Accounting Agency which represents a strong commitment by the Government to clarify the functioning of the

Treasury, improve transparency and accounting traceability; (ii) the establishment of a Cash Flow Committee

under the authority of the Minister of Finance to improve cash flow management; and (iii) the establishment of

a public finance management committee aimed at ensuring joint monitoring with the technical and financial

partners of all budget support operations and public financing. The establishment of the Treasury Central

Accounting Agency (ACCT), planned for mid-July, will ensure budget management on an informed basis

aimed at streamlining the public expenditure circuit. The objective will be to create the conditions to improve

the linkages between budget commitment and accounting treatment using the GESCO computer application

and to facilitate decision-making by producing reliable financial information.

25. Following submission of the Draft 2006 Budget Review Law to the National Assembly in December 2011, the

Government is working on the other fiscal years. Thus for the 2009 fiscal year, all the required documents, i.e.

the management account, the administrative account, the general finance and administration account as well as

the draft Budget Review Law, have already been submitted to the Court of Auditors. The Directorate-General

of Treasury is currently working to compile the support documents to accompany the documents already

submitted. For the 2010 fiscal year, there are only four outstanding commitments before inputting all the

accounting entries. Inputting this information will give the different accounts to be produced before tackling

the preparation of the Budget Review Law. The most serious constraint concerns the 2011 fiscal year. Indeed,

given the political change that occurred in 2013 characterized by the systematic pillaging of working tools in

government services, the Directorate-General of Treasury has lost all its IT equipment, including the server for

the GESCO computer application, and is suddenly faced with database access difficulties. However, efforts are

being made to make this application operational again.

26. The trimming of the number of Ministerial portfolios to twenty in the current Transitional Government is a

major achievement to be capitalized on in order to ensure the sincerity of the 2015 budget programming.

Depending on resource availability, the strengthening of the already initiated participatory process will aim to

cover all sector departments.

27. To improve budget execution, measures have been taken, especially in the area of budget execution

monitoring. The Liquidity Monitoring Commission established by Decree No. 08.317 of 29 August 2008 has

been strengthened by a Budget Management Monitoring Committee established by Order No. 002 of 11

January 2012. The holding of regular meetings organized by these structures contributed to the effective

focusing of budget execution in 2012. To take into account the impact of the crisis on the 2014 budget

execution and in the following years, a new Order was recently issued establishing the Cash Flow Committee

and confirming its attachment to the Office of the Minister of Finance. A draft decree establishing the Budget

Support Monitoring Committee is being prepared.

2.2.2 The Main Thrusts of the 2014 Budget and Medium-Term Policies

28. In implementing the Roadmap and PURD, the Government will attach priority to: (i) building the population’s

resilience capacity and the recovery of grassroots communities; (ii) the restoration of essential public and

social services (through development poles); and (iii) human and institutional capacity building.

V

29. The Government must remain consistent in implementing its development projects. To this end, the draft 2014

Budget Law earmarks, under investment expenditure, a budget allocation of CFAF 83.62 billion corresponding

to a 19% increase on 2013 linked to the increase in resources allocated to the following priority sectors:

• Justice, security and DDR for the financing of the justice and police sector reform programme as

well as the community integration project;

• Economy and finance development pole whose components concern: (i) support to the global

public finance reform programme; (ii) the financing of projects identified in the area, namely

technical assistance, support to the national EDF payment authorization officer, economic and

financial management capacity building, strengthening statistical capacity in CARA, monitoring

and evaluation, and accelerated growth to achieve the MDG, support to livelihood stabilization,

community protection and resilience in conflict-affected areas in CAR and programmes for

micro-projects, improving access to the development poles as well as support to the coordination

and monitoring of the SDP programme;

• Education to support projects relating to the education/training sector strategy in CAR, support to

the educational system, increased access to and use of user-friendly services by teenagers and

EDUCA study funds;

• Health and social affairs with a view to improving health care service delivery through the

rehabilitation and equipping of health posts, procurement of equipment and drugs, support to

health care programmes (management of malaria at home, national leprosy control programme) as

well as a health system in CAR; building capacity to promote gender equality and support

vulnerable groups for community development;

• Infrastructure and access facilitation by financing the following projects: institutional support to

road maintenance (Bouar-Garoua-Mboulaï), preliminary design for, and construction work on the

Sapéké bridge, labour intensive work (LIW), urban development programme and the Emergency

Urban Services Infrastructure Rehabilitation Programme (PIRUSU);

• Energy, mining and water with a view to financing drinking water supply projects in some of the

country’s towns, the Boali 3 Hydro-Power Plant, the Emergency Energy Crisis Programme as

well as the financing of programmes in the water and sanitation sector;

• Rural development and livestock, to finance the Food Crop and Small Livestock Recovery Project

in Savannah Areas (PREVES), the Emergency Food Crisis Response and Agriculture Recovery

Project (PURCARA), the Poultry Production Support Project in CAR and support to rural

infrastructure rehabilitation;

• Forestry, hunting and fishing to build institutional capacity with a view to reducing emissions

resulting from deforestation and forest degradation to ensure sustainable management, the

financing of Ecofauna Programmes and the conservation of biodiversity in Central Africa.

2.2.3. Domestic Resource Mobilization Efforts

30. To improve mobilization of its own resources, the Government is planning to define and implement the

reforms of the financial authorities. Such an initiative should ensure the comprehensive reform of the tax

services and reorganization of the customs administration as recommended by the IMF technical assistance

missions. At the level of the tax administration, with the assistance of IMF and the European Union, two types

of measures will be implemented. These are measures of a legislative and administrative nature. The legislative

measures concern strategies to broaden the tax base and to provide tax incentives for investment prepared

under the 2014 Budget Law. The legislative measures will entail the creation of two levels for action. The tax

base broadening strategy will entail the re-introduction of contributions from licenses, the revision of the

VI

personal income tax scale applicable to wage earners, the introduction of deduction at source of the Single

Fixed Tax at the customs post and streamlining of tax exemptions by measures to restrict the granting of tax

relief and exemptions, and by suppressing exemptions that are not legally justified.

31. In the second phase, action will focus on investment strategies through tax incentives and measures to improve

the business climate. At this level, action will be focused on a series of measures aimed at mobilizing domestic

tax resources, designed and assigned to the General Directorate of Taxes and State Land.

32. With regard to customs services, the reform will focus mainly on the continuation of the customs

modernization plan carried out with the assistance of the World Customs Organization (WCO), the

establishment of a customs clearance centre at Beloko and the use of two scanners donated by China, the

continuing fight against fraud and the strict control of exemptions. During the 2014 fiscal year, special

emphasis will be placed on the mobilization of customs revenue. The actions underpinning these measures aim

to control the supply and customs clearance chain after ensuring the security of the main corridors, especially

the Bangui-Béloko corridor, assisted by the international forces in the country to ensure the deployment of

customs officers to the different posts. There will also be a series of sensitization sessions for operators on the

resumption of their activities. Action will be taken to improve the flow by alleviating the customs clearance

system through the operationalization of the Beloko platform and the establishment of partnerships with

credible operators. A large-scale operation will focus on the combat against fraud especially in regions that

have become oil product smuggling centres. Lastly, to mitigate fiduciary risks, adequate measures such as the

re-opening of banking establishments in the provinces, the recruitment of tax receipt officers for the customs

services and periodic controls will be applied. The withdrawal of SODIF from the customs service system will

enable the General Directorate of Customs and Indirect Taxes to improve its performance. Consequently, and

in agreement with the technical and financial partners, the National Directorate of Customs Investigations will

be strengthened with human and material resources in order to produce the expected results.

2.3 Other Government Efforts

33. The recent crisis has aggravated the fragile nature of the Central African Republic’s judicial system by placing

all citizens in a situation of judicial insecurity. The absence of judicial administration in the different towns of

the interior places the population and economic operators in a situation of judicial insecurity and non-

assistance.

34. To gain the confidence of operators, improve the business environment and promote private investment, the

Government will implement measures and actions to speed up improvement of the business environment in

order to restore the confidence of the private sector and attract foreign direct investment. It will: (i) strengthen

the judicial governance framework; (ii) carry out a joint assessment of the damage suffered by private

enterprises; (iii) prepare measures to assist firms that have suffered damage; (iv) revitalize the Joint Committee

responsible for Improving the Business Climate and the Permanent State-Private Sector Consultation

Framework; (v) finalize the revision of the Investment Charter; (vi) build the capacity of Chambers of

Commerce (CCIMA, CAAEEFPCT); (vii) strengthen the overall business environment; (viii) lower the cost of

credit and improve access to financing; and (ix) strengthen the private sector promotion and support

mechanism.

35. Following the institutional change of 24 March 2013, the Central African Republic was temporarily suspended

from the Kimberley Process (KP) and the Extractive Industries Transparency Initiative (EITI) on 23 May

2013. Diamond production fell sharply to 44,000 carats (approximately CFAF 4.6 billion) in 2013 compared to

366,000 carats (about CFAF 33 billion) in 2012 and 302,000 carats (about CFAF 25.8 billion) in 2010. The

Government’s reaction was to meet the KP Working Group on Monitoring during a mission, following which

it was tasked with implementing a series of measures aimed at streamlining the diamond sub-sector circuit and

rationalizing the security environment with a view to lifting the suspension. These measures concern: (i) the

promulgation of new text on the restructuring and reorganization of SPPK taking into account the tripartite

participation of the public sector, private sector and civil society as well as the strengthening of its

decentralized structure established in all the diamond production areas; (ii) the establishment of a diamond

VII

sub-sector support mechanism able to provide technical and financial assistance to control and monitor

production with the participation of central government, private mining operators and technical and financial

partners with a view to ensuring the security of production as required under the KP; (iii) the introduction of

specific taxation for activities relating to the production, collection and export of artisanal gold; (iv) the

harmonization of the local gold trade with that of neighbouring countries; (v) the rapid deployment to the

hinterland of both national and international security forces to ensure the security of mining activities; (vi)

stepping up the combat against fraud by the redeployment of the mining police (USAF) in the mining and

border areas; (vii) preparation of taxation on mineral substances; and (viii) provision of adequate equipment.

36. The forest sector, which contributes an annual average of almost 10% to GDP and accounts for almost 50% of

CAR’s export earnings, remains the country’s biggest employer i.e. over 4,000 direct and 6,000 indirect jobs

prior to the recent crisis. The brutal repercussions of the military/political crises exacerbated by the persisting

insecurity connected to the change in constitutional order of 24 March 2013 have ruined all the sector’s assets:

(i) pillaging of production tools and the sector’s economic fabric have created a sharp increase in forestry tax

arrears; (ii) the risk of non-compliance with the implementation schedule of the Voluntary Partnership

Agreement, in particular, the VPA/FLEGT with the European Union due to lack of adequate resources for

forest governance; (iii) the scarcity of financing for the procurement of more modern wood processing tools to

create more value-added; (iv) a non-conducive business environment; and (v) weak human, institutional and

technical capacity. The Government intends to mobilize the necessary support to accelerate implementation of

the Voluntary Partnership Agreement (VPA) signed with the European Union in the context of the FLEGT

process. It will be responsible for implementing the different measures and actions planned, in particular: (i)

implementation of priority activities under the operational action plan of the study on the marketing of wood

and development of the wood sub-sector in CAR; (ii) building the operational capacity of the Wood Sector

Economic Observatory in CAR regarding the revision of market and FOT values; (iii) establishment of an

optimal management mechanism for the Special Allocation Account for Forestry Development; and (iv)

implementation of a recovery mechanism for all unpaid forest taxes.

III. PRESENTATION OF THE GOVERNMENT’S PROGRAMME

37. The Government has prepared an Emergency Programme for Sustainable Recovery (2014 – 2016 PURD)

whose Vision 2016 is based on its will to fulfil the commitments made before ECCAS Heads of State. Its

determination to create the conditions for the restoration of peace, security and constitutional order and good

governance is clear. Implementation of the strategies defined in PURD will allow CAR to be on track to

achieve the MDGs after 2015. These strategies are focused on four (04) interdependent strategic thrusts. The

first three (3) will enable the Government to meet the priorities of the Roadmap set by ECCAS. The last thrust

will enable it to lay the foundations for the stabilization of the macroeconomic framework, especially the

restructuring of public finances, and kick start the country’s recovery to place it on the path of real

development. This intervention strategy combines humanitarian assistance and early recovery actions by

rebuilding the capacity of national institutions and communities to recover from a crisis. It is necessary for the

Government to lay the foundations for sustainable recovery and development. The PURD strategy is designed

as an instrument to enhance the effectiveness of the humanitarian-development relationship during the

transition. Its four strategic thrusts are:

• Restoration of Security, Peace and Strengthening of Governance and the Rule of Law

38. Through this first area of concentration, the Government intends to implement rapid measures and actions with

the support of the international community to stabilize security. It will be necessary to take effective action

concerning the disarmament, demobilization, reintegration and repatriation (DDRRR) of ex-combatants of the

Seleka movement and the new anti-balaka militia. Implementation of the strategy to reform the security sector

will contribute to the restoration and re-establishment of the Defence and Security Forces. The strategy

concerning governance and the rule of law will enable the Government to conduct the electoral process to

restore regular republican institutions in the country.

VIII

• Strengthening of Civil Protection, Re-establishment and Reorganization of the Administration

throughout the National Territory

39. This Pillar is the second focal area and is entirely dedicated to general humanitarian assistance. To improve

coordination of humanitarian assistance, the Government intends to implement all possible measures that will

foster the return of internally displaced persons and refugees. Therefore, the focus will be on access to basic

social services (education, health, water and sanitation). Along with MISCA backed by the ‘SANGARIS’

forces of the French mission, the Government is determined to implement all actions aimed at contributing to

extensive protection for civilians and promoting human and humanitarian rights. Implementation of the

measures and actions relating to administrative governance and public services will enable the Government to

restore and reorganize the Administration countrywide.

• Revival of activities in the Key Social Sectors, Intensification of HIV/AIDS Control and

Environmental Protection

40. T hrough this strategic thrust, the Government will pursue the main actions embarked upon in the area of human

capital and initiate the implementation of reforms concerning: (i) rehabilitation of education; (ii) revitalization

of the health system; (iii) intensification of HIV/AIDS control; (iv) involvement of young people; (v) water

and sanitation; (vi) gender promotion; (vii) employment and social protection; and (viii) environment and

climate change.

• Strategic Thrust 4: Pursuit of Economic and Financial Reforms and Promotion of Robust and

Sustainable Growth

41. The success of all the Government’s actions will depend on improvement of the country’s economic and

financial performance. Thus, this thrust concerns all the main areas for action that will enable the Government

to leverage external resources with the assistance of the International Contact Group and initiate actions for the

country’s recovery. These main areas for action concern: (i) economic assistance; (ii) improvement of the

business climate; (iii) promotion of growth; (iv) promotion of growth support infrastructure; (v) pursuit of

global public finance reforms; and (vi) strengthening of regional economic integration.

42. The Transition Roadmap prepared pursuant to Article 43 of the Constitutional Charter is not only aligned on

the four PURD strategic thrusts but has also contributed to the identification of the main areas of action that

represent the Transitional Government’s top priorities focused on the following four pillars:

• Restoration of security and peace consolidation;

• Humanitarian assistance;

• Policy and governance;

• Economic recovery.

43. The Action Matrices track the investments that will enhance the visibility of actions that will contribute to the

achievement of these objectives. They are based on the priority strategic thrusts retained for PURD and are

placed in a multi-year perspective.

IV PROGRAMME IMPLEMENTATION INSTITUTIONAL FRAMEWORK

44. The existing structures which have been effective previously in programme management will be tasked with

the programme’s implementation, monitoring and evaluation. These include the Reforms Monitoring Unit (CS-REF)

and the PRSP National Technical Secretariat. They are under the umbrella of an international steering committee

composed of ministers involved in the programme’s implementation.

IX

45. Central to the institutional mechanism for public finance reform is the Public Finance Reform Steering

Committee (CPR). It is the organ for strategic directions, arbitration and monitoring of the public finance

reform strategy. The Steering Committee is chaired by the Minister of Finance or his/her representative. It

comprises officials from the action plan implementation structures (Ministry of Finance and Budget, National

Assembly Finance Commission, Court of Auditors, the State Inspectorate General, Public Procurement

Regulatory Authority), a representative of civil society and representatives of the technical and financial

partners.

46. Regarding programmes and projects, the Government has an institutional mechanism comprising the following

bodies: (i) The National Strategic Council (CNS) chaired by the Prime Minister; (ii) the National Technical

Committee (CNT) chaired by the Minister of Planning and International Cooperation; (iii) the PRSP National

Technical Secretariat (STN); (iv) the PRSP Thematic Groups (TG); the Ministerial Technical Committees

(CTM); and (v) the Regional Committees (RC). Emphasis will be placed on the already initiated

decentralization of the implementation and monitoring/evaluation mechanism in order to involve all the

Ministerial Departments in programme management. Since PURD will be implemented in a context marked by

a clearly defined transitional period, the Government will establish a Monitoring Committee to oversee the

implementation indicators defined for each programme, project and activity under PURD and informed by the

institutional mechanism. This Committee will be chaired by the Prime Minister and composed of members of

government and representatives of the actors involved (development partners, grassroots communities, civil

society and religious faiths).

V. CONCLUSION

47. With these two documents, the PURD and the Roadmap, the Government has advocacy instruments for the

mobilization of resources required to implement them. The Government undertakes, through the programme

timeframes, to adhere to the transitional period and provide the new post-2015 election authorities with a

rolling programme.

48. The main focal areas of the government’s priorities are marked by the will to restore security, provide social

protection and implement the DDR in order to reassure the population, rebuild a credible army, improve public

finance performance and put the Administration back to work.

49. To achieve these objectives, the government requires significant domestic and external resource mobilization.

Weak mobilization of domestic resources during the periods of crisis compels the government to count on the

support of its bi-and multilateral partners. Also, given the economy’s structural weakness, the government will

endeavour to demonstrate to its partners its strong resolve to improve the efficiency of its financial services,

improve revenue levels and public finance management, and mitigate the fiduciary risks to which the different

external financing operations might be exposed.

50. The performance of the different government actions will be measured by an improvement in public finance

management on both the budget and accounting fronts, as well as the national budget execution control and

monitoring. Control of public expenditure and increased domestic revenue will be necessary to ensure the

revitalization of socioeconomic activities.

Minister of Economy, Planning and International Cooperation responsible for Development Poles

Florence LIMBIO.-

X

ANNEX 2

Programme Matrix of Measures

EMERGENCY POST-CRISIS AND ECONOMIC RECOVERY SUPPORT PROGRAMME

(PUASCRE)

Objective Government Priorities

Defined in the

Emergency

Programme

Programme

Measures

Output

Indicators

Outcome

Indicators

Component I - Re-establishment of Fiscal Discipline and Restoration of Basic Social Services I. 1 – The

capacity of the

economic and

financial

administrations

are rebuilt

Resumption of the

normal functioning of

public administrations

• Ensure security in

the country, in

particular, on the

Bangui-Béloko,

Bangui-Gamboula

and Sido-Kabo-

Kaga-Bandoro-

Bangui corridors

• Redeploy tax

administrations to

secure areas

• Pay all civil

servants regularly

• Continue to

implement the

reforms already

embarked upon for

resource

mobilization

(improving the

monitoring of oil

taxation,

exemptions, tariff

values, cleaning up

taxpayer database)

• Reactivation of the

Cash Flow

Committee and

establishment of a

public finance

monitoring

committee

• Re-establishment of

the public

expenditure circuit

and reduction of

off-budget

expenditure

• Operationalization

of ACCT

established on

3012/2012

• Ensure the start-up

General Measures

• Redeploy

financial

administration

personnel

(Customs;

Taxes;

Treasury;

Budget)

• Ensure the

payment of 12-

months’ civil

servants’

salaries in 2014

Mobilization of tax

revenue

• Ensure the

effective

presence of the

Customs

Authority in the

secured

corridors

(Bangui-

Béloko,

Bangui-

Gamboula) and

strengthen the

control system

• Ensure the

payment of 12-

months salaries

in 2014

• Prepare a work

programme for

DGDDI and

DGID

Public Expenditure

Execution • Operationalize

ACCT through

• Tax

administration

employees

have resumed

work in the

secure areas of

the country

• Civil servants’

salaries are

paid regularly

• There are

sufficient

customs

officers with

working

resources in

the Bangui-

Béloko,

Bangui-

Gamboula

corridors. A

system is put

in place to

control

employees and

goods.

• The customs

and tax

administration

s have a work

programme

covering at

least 12

months

• The Decrees

on the

appointment of

the Accounts

Officer and

his/her deputy

are adopted by

end September

2014

• Technical

assistants to

the Treasury

At least 50% of

the financial

administration

personnel

(Customs,

Taxes, Treasury

and Budget)

have resumed

duty and are

deployed by end

2014;

10.3% increase

in tax revenue

compared to

2013 ;

XI

of the GESCO

application at the

Treasury

• Adoption of a

domestic debt

treatment

mechanism

the appointment

of the Accounts

Officer and

his/her deputy

by calls for

applications

(structural

benchmark);

• Restore the

functionality of

GESCO

Treasury and

GESCO Budget

(structural

benchmark)

• Operationalize

the Cash Flow

Committee

and Public

Finance

Management

Monitoring

Committee

(trigger)

and Budget are

recruited by

end September

2014

• The functional

link between

GESCO

Treasury and

GESCO

Budget is re-

established by

end September

2014

• The Decrees

establishing

the Cash

Flow

Committee

and Public

Finance

Management

Monitoring

Committee

are adopted

by end April

2014

(measures

precedent to

presentation

of the

programme

to the Board)

I.2 - The social

services are

provided with

adequate human

and financial

resources to

provide a

minimum

service

• Redeploy health

personnel and

teachers to already

secure areas

• Rehabilitate health

facilities in Bangui

and in other refugee

reception localities

• Supply health

centres with

emergency medical

kits;

• Provide vulnerable

refugee

communities

mainly in Bangui

with food and non-

food products

• Re-launch the

borehole

programme in the

worst crisis affected

areas

• Redeploy

health and

education

personnel to the

different

regions of the

country as

security is

restored;

• Increase the

social

expenditure

execution rate

in the 2014

budget in order

to rehabilitate

and equip

health centres

and schools;

• Re-launch the

borehole

programme

• Health

personnel and

teachers have

effectively

resumed duty

in the different

areas where

security has

been restored

• The social

expenditure

execution rate

has improved

• Dialogue has

resumed with

the TFPs with

a view to re-

starting the

borehole

programme

financing

At least 60% of

health workers

and teachers

have resumed

duty by end

2014.

The social

expenditure

execution rate

(excluding

salaries) is 40%

in 2014

compared to

only 20% in

2013

XII

Component II Support the Creation of Conditions Necessary for Economic Recovery Improve the Business

Environment

• Revitalize the Joint

Committee and

Permanent

Framework for

Government-

Private sector

consultation

• Request the lifting

of CAR’s

temporary

suspension from the

Kimberley and

EITI processes

• Joint assessment of

damage suffered by

private enterprises;

• Auditing of

domestic debt;

• Adoption of an

option for the

treatment of arrears

owed to central

government

suppliers

• On-going clearance

of central

government

commercial debts;

• Promotion of high

growth potential

sectors (agriculture,

mines, forests)

• Promotion of

growth support

infrastructure

• Rehabilitation and

strengthening of

Chambers of

Commerce

(CCIMA,

CAAEEFPCT)

• Revitalize the

Joint Committee

and Permanent

Framework for

Government-

Private sector

consultation.

Assess damage

suffered by

private

enterprises.

• Continue the

clearance of

commercial debt

audited in 2012

• Implement

measures with a

view to lifting

CAR’s

temporary

suspension from

the Kimberley

and EITI

processes

• The meetings

of the joint

committee

and CPC

resume by

end

September

2014

The damage

suffered by

enterprises is the

subject of an

independent

assessment by 30

June, 2015.

Commercial debt

accumulated in

2012 and 2013 by

the central

government is

audited by June

2015

• Commercial

debt

clearance has

resumed

depending on

the cash

margins

• Measures

with a view

to lifting

CAR’s

temporary

suspension

from the

Kimberley

and EITI

processes are

implemented

by end 2014

Agreement

between the

Government and

private sector

representatives

on actions to be

carried out

during the 18-

month

transitional

period to

facilitate the

recovery of

business

activities and

treat new

government

arrears

The lifting of

CAR’s

temporary

suspension from

the Kimberley

and EITI

processes is

effective by end

2014

At least 4% of

the commercial

debt audited in

2012 is cleared

by 2014

.

XIII

ANNEX 3

Note on Relations with IMF

Press Release No. 14/226

15 May 2014

The Executive Board of the International Monetary Fund (IMF) approved on May 14, 2014 financial

assistance under the Rapid Credit Facility (RCF) in the amount equivalent to SDR 8.355 million (about

US$12.9 million) for the Central African Republic (C.A.R.) in support of the authorities’ emergency economic

recovery program. The financial assistance from the IMF will help the Transitional Authorities of the C.A.R.

to implement a set of economic and structural policies and measures aimed at restoring progressively

macroeconomic stability and strengthening the capacity of the C.A.R. government. The Executive Board’s

approval of the RCF will also enable the authorities to engage in discussions with development partners

regarding further assistance. The Executive Board’s approval enables the immediate disbursement of the full

amount, which is equivalent to 15 percent of C.A.R.’s quota in the IMF.

The Executive Board noted the authorities’ cancellation of the Extended Credit Facility (ECF) arrangement for

C.A.R. that was approved on June 25, 2012 (Press Release No. 12/237). The Executive Board can consider

renewal of financing under the RCF before the end of the year, provided the C.A.R. meets the policy

requirements for repeated use under the RCF, including the establishment of a track record of adequate

macroeconomic policies for a period of normally six-months prior to a new request for financial assistance

under the RCF. Timely provision of pledged financial and technical assistance is crucial to sustain the

momentum for the recovery, strengthen the capacity of the C.A.R. government and exit from the emergency

situation.

The RCF provides rapid concessional financial assistance with limited conditionality to low-income countries

with an urgent balance of payments need. In this context, the economic policies of a member receiving RCF

financing are expected to address the underlying balance of payments difficulties and support policy

objectives including macroeconomic stability and poverty reduction. Financing under the RCF carries zero

interest, has a grace period of 5 ½ years, and a final maturity of 10 years. The Fund reviews the level of

interest rates for all concessional facilities every two years.

Following the Executive Board’s discussion of the C.A.R.’s request for financial assistance under the RCF,

Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“The political and security crisis that followed the seizing of power by a rebel coalition in March 2013 has

produced large-scale economic dislocation in the C.A.R. and exacerbated an already fragile situation. The new

transition government is strongly committed to restoring security, mobilizing humanitarian assistance,

reviving the economy, and rebuilding democratic institutions, but faces daunting challenges.

“With support under the Fund’s Rapid Credit Facility, the transition authorities aim to implement

macroeconomic policies and structural reforms to restore macroeconomic stability, rebuild basic state

functions, improve domestic revenue mobilization, return to normal budgetary procedures, clear domestic

arrears, and ensure regular payments of salaries and pensions to civil servants. Transparent management of

public resources including external support, better prioritization of spending, and improving treasury

management will be critical for the success of the program. Preserving debt sustainability will also be

important.

“The Fund will continue to play a key role in coordinating international efforts in the provision of much

needed financial support and technical assistance to rebuild key financial functions of the government.”

XIV

Central African Republic: Prior Actions and Structural Benchmarks, 2014

Measures Timeframe Macroeconomic Fundamentals Signing of the Decree establishing the Treasury

Monitoring Committee (CST) and the effective

establishment of that body.

Prior Action Improve cash flow monitoring and

management

Signing of the Decree establishing the Public Finance

Monitoring Committee (CST) and the effective

establishment of that body.

Prior Action Improve public resource monitoring and

management

Adoption of the draft 2014 budget by the government

and submission to CNT Prior Action Normalize public finance management

Finalization of the first stage of the cleaning up of the

payroll database.

Structural

Benchmark

(June 2014)

Streamline the payroll database and

improve civil service efficiency

Reconnection of GESCO-Budget and GESCO-

Accounts computer applications Structural

Benchmark

(September

2014)

Strengthen the budget procedure and

accounting traceability

Recruit the Treasury’s Chief Accounting Officer and

his/her authorized representative. Structural

Benchmark

(September

2014)

Improve cash flow management as well as

account centralization and monitoring

XV

ANNEX 4

Key Macroeconomic Indicators

Indicators Unit 2000 2008 2009 2010 2011 2012 2013

(e)

National Accounts

GNI at current market prices USD Million 1,036 1,780 1,943 2,068 2,109 ... ...

GNI per capita USD . 280 420 450 470 470 ... ...

GDP at current prices USD Million . 917 1,981 1,985 1,984 2,186 2,010 2,213

GDP at current 2000 prices USD Million . 917 1,010 1,028 1,061 1,094 1,128 1,165

GDP growth in real terms % 1.9 2.0 1.7 3.3 3.1 3.1 3.2

GDP growth per capita in real

terms % 0.0 0.2 -0.2 1.4 1.1 1.1 1.2

Gross Domestic Investment % of GDP 10.0 12.7 13.2 14.3 12.4 14.8 15.3

Public Investment % of GDP 4.9 5.2 6.1 7.2 2.6 6.2 6.8

Private Investment % of GDP 5.1 7.5 7.0 7.1 9.8 8.6 8.5

National Savings % of GDP 8.6 2.8 4.0 4.1 3.6 7.3 9.5

Prices and Money

Inflation (CPI) % 3.2 9.3 3.5 1.5 0.7 3.5 2.4

Exchange Rate (annual average) Local currency

/US$. 712.0 447.8 472.2 495.3 471.9 510.5 ...

Money Supply, annual changes

(M2) % -6.0 16.9 13.8 15.5 11.8 ... ...

Velocity of Broad Money (GDP /

M2) % 15.6 12.8 13.8 15.2 16.2 ... ...

Government Finance

Total Revenue and Grants % of GDP 14.3 15.2 16.1 17.9 14.5 15.7 16.4

Total Expenditure and Net Loans % of GDP 16.2 16.2 16.2 19.3 17.4 19.2 19.8

Overall Deficit (-) / Surplus (+) % of GDP -1.9 -1.0 -0.1 -1.4 -2.9 -3.5 -3.4

External Sector

Change of Volume of Exports

(goods) % 17.6 -15.5 -21.9 9.7 5.1 11.6 4.9

Change of Volume of Imports

(goods) % -5.2 -2.2 13.3 3.6 -19.6 18.7 9.1

Change in Terms of Trade % -2.9 -20.5 40.6 -6.0 11.6 -3.4 7.6

Current Account Balance USD Million -13 -195 -160 -197 -156 -141 -119

Current Account Balance % of GDP -1.4 -9.9 -8.1 -9.9 -7.2 -7.0 -5.4

International Reserves Months of

imports 6.9 3.2 5.9 4.5 3.6 3.9 ...

Debt and Financial Flows

Debt Service % of exports 18.8 20.0 12.4 5.1 4.2 9.7 8.5

Total External Debt % of GDP 87.0 54.2 16.7 18.6 16.2 19.3 16.9

Total Net Financial Flows USD Million . 50 234 247 230 292 ... ...

Net Official Development

Assistance Million US$. 75 257 242 261 272 ... ...

Net Foreign Direct Investment USD Million . 1 117 121 92 109 ... ...

XVI

ANNEX 5 Donor Interventions in CAR (USD million)

Donor Project General

Support Sector

Support Scope Observations

World

Bank

Education Project 23

Construction and rehabilitation of

classrooms.

Higher quality of learning and teaching

conditions.

These two operations cover the social

sectors in the areas of infrastructure

rehabilitation and emergency health

care delivery. These operations

complement PUASCRE, which

supports the redeployment of teachers

and health personnel. Health Project 15

Emergency health care

Institutional support to the Ministry of

Health

FCP Project concerning public

finance

management

5

Improvement of revenue collection and

budget preparation and execution procedures; improvement of central

government and public administration

presence These two operations complement the

support operations of the Bank

(PUASCRE) and other TFPs Emergency Public

Services Response

Project 27

3

Payment of salaries to be made in 2014.

Technical Assistance provided to the

Ministry of Finance

United Nations

United Nations Peacebuilding Fund

12 An emergency stopgap measure intended to finance the police/gendarmerie

The UN support complements that of

the other TFPs to cover both the general administrations and armed

forces.

IMF Budget Support

20

Budget support through the Rapid Credit

Facility; the IMF mainly supports the

return to fiscal orthodoxy and cash flow

management with a view to restoring

macro-economic stability in the longer

term: improving cash flow monitoring

and management; public resource monitoring and management; normalizing

public finance management; rationalizing

the payroll database and enhancing civil

service efficiency; strengthening the

budget procedure and accounting

traceability; improving cash flow

management as well as the centralization and monitoring of accounts.

The programme measures are also supported by the World Bank, EU,

France and AfDB (PUASCRE)

France Budget Support /

Technical

Assistance

6

1

Budget support amounting to USD 6

million to be disbursed no later than June 2014. French technical assistance aims to

build the technical capacity of the

Customs Authority and the Directorate of

Public Accounting.

France’s budget support aims to help

the country to meet its external commitments to multilateral creditors.

The technical assistance component is

implemented jointly with the other

TFPs.

EU Budget Support /

Technical

Assistance 30 9

Technical assistance targets public finance

structures

TA to CS REF; TA Public Finance

Reform Plan

TA to ACCT; TA to CUSTOMS

(SYDONIA, oil taxation, Surveillance Brigade).

Technical assistance coordination is

carried out with the other TFPs to

prevent overlapping.

ECCAS Budget Support 40

The Republic of Congo, Angola and

Gabon have already disbursed their contributions. Angola has pledged a

supplementary loan of USD 10 million

and the other ECCAS countries are also

planning to disburse at least USD 5

million each

ECCAS support is helping to close the

financing gap and consolidate the

macroeconomic framework.

AfDB

Budget Support /

20

Budget support operation. Support to

redeployment of the administration,

improvement of tax revenue, public

finance management and economic

recovery

Coordination is carried out with the

IMF, WB, EU and France which also

support public finance management

structures. The Bank is involved in equipment and the provision of experts

in various areas PFM and Private Sector Assistance

(PARCGEF) 7

Technical assistance provided to several

Directorates in connection with the expenditure chain (Taxes, Customs,

Treasury, Budget, Chambers of

Commerce, One-Stop-Shop for Business

Formalities…)

Total 155 63

Source: Donor Roundtable and CAR Authorities

XVII

ANNEX 6

Measures relating to the Fiduciary Framework in the Exceptional Period of the Crisis

Measures Bank

Triggers Structural

Benchmark Lead Partner

Adoption of the draft 2014 budget by the transitional government

and submission to CNT to normalize public finance management Yes IMF / AfDB /

WB / France /

EU The establishment and operationalization of a cash flow committee

to improve cash flow monitoring and management Yes * IMF / AfDB /

WB / France /

EU The establishment and operationalization of a Public Finance

Management and Monitoring Committee to improve public

resource monitoring and management

Yes * IMF / AfDB /

WB / France /

EU Finalization of the first stage of the payroll database operation to

streamline the payroll database and improve civil service

efficiency

No WB / UNDP

Reconnection of GESCO Budget and GESCO Accounts IT

applications to strengthen the budget procedure and accounting

traceability

No Yes France,

ADB/IMF

Recruitment of the Chief Accounting Officer of the Treasury and

his/her authorized representative No Yes EU,

AfDB/IMF Auditing of program-based support operations to ensure

independent external control No AfDB

XVIII

ANNEX 7

Administrative Map of CAR

This map has been provided by the staff of the African Development Bank exclusively for the use of readers of the report to which it

is attached. The names used and the boundaries shown on the map do not imply on the part of the Bank Group or/and its Members

any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries.