Public finances, state budget – income, expenditure, balance for the last 5 years
|% of GDP||2014||2015||2016||2017||2018|
|Budget balance % of GDP||-3.0||-3.1||-4.4||-1.0||0.9|
The data on income, expenditure and the deficit of the state budget differ according to the source (OECD, IMF), but they all agree that the management of state finances and budget discipline, already very bad in the past, fell apart with the crisis.
The 2017 budget was set at 237.23 billion FCFA ($378.33 million), compared to 164 billion FCFA francs in 2016. Revenues were expected to reach 203 billion FCFA and 237 billion FCFA.
The 2018 budget was CFAF 219.3 billion (about US$375 million), with a revenue account of CFAF 161 billion (about $289 million) and a budget deficit of $48 billion. Check ebizdir for economical facts of Central African Republic.
The 2019 budget is set at 23billion FCFA, an increase of more than 6% compared to 2018.
Balance of payments (current, capital, financial account), foreign exchange reserves (last 5 years), public debt to GDP, foreign debt, debt service
|foreign exchange reserves||237.1||on||on||362.7||355.1|
|public debt to GDP||68.3||65.0||67.2||53.4||48.6|
Data in millions of USD
After stabilizing in 2018, growth is expected to pick up again, driven by forestry, agriculture and mining. It will also be supported by international support mobilized for infrastructure projects, especially in the water and communications sectors. An example can be the CAB project, which will enable the country to have an optical network in 2022 and which is mainly financed by the AfDB. However, the country remains one of the poorest in the world and still bears the scars of a humanitarian and security crisis in 2013. Growth will suffer in this fragile context as the agricultural sector – which accounted for 42% of GDP in 2017 – is affected by regular violence in rural areas. However, the timber industry is expected to continue its development and account for almost half of exports ahead of gold, coffee and cotton. Predictions say that due to the partial lifting of the embargo in 2016, the recovery of diamond exports will continue. Domestic demand will continue to be weak, affected by the large number of people fleeing the country.
Inflation will remain above CEMAC’s 3% target in 2019 and will continue to decelerate in 2019. Again, it will be driven by oil prices that will continue to be high and occasional supply disruptions linked to the security situation. Since the CFA franc is indexed to the euro, inflation will also be affected by movements in the euro-US dollar exchange rate.
The country, which committed itself to the IMF under the extended credit system, is trying to push through fiscal reforms. These efforts led to the disbursement of the fourth tranche of loans by the IMF in July 2018 and are expected to lead to a small budget surplus again in 2019. Revenue should increase, both through domestic revenue and budget support. The country remains dependent on international aid from the IMF, AfDB, the EU and others. The public debt-to-GDP ratio is expected to decline further as arrears are repaid, but the country remains at high risk of over-indebtedness.
Despite remittances from international partners and expatriates, which together represented 10% of GDP in 2018, the current account, especially linked to the trade deficit (16% of GDP in 2018), is expected to show a large deficit. Expected growth in exports will be offset by growth in imports, which will be further exacerbated by high oil prices. In addition, exports will suffer as uncertainty affects their supply. The financing of the current account will be financed by subsidized loans from international organizations, whether it is a project or not. In addition, foreign exchange reserves, pooled among the CEMAC countries, began to build up again, reducing the risk of a balance of payments crisis.
Banking system (major banks and insurance companies)
The banking system of the SAR is controlled by the joint central bank of the Central African countries – Banque des Etats de l’Afrique Centrale (BEAC) based in Yaoundé. It oversees the activities of banks in the other five member countries of the Central African Integration Group (Congo, Chad, Gabon, Cameroon and Equatorial Guinea). The Central Bank of BEAC issues currency and oversees liquidity within the Central African Monetary Zone, in its monetary policy it basically copies the decisions of the European Central Bank. In 1993, the BEAC member countries also created a transnational institution of banking supervision – COBAC (Commission Bancaire de l’Afrique Centrale), which has special powers to regulate the activity and observe discipline for all banking institutions of the CEMAC integration group. Like all other signatories to the 1948 CFA Franc Zone in Africa, the SAR is also required to hold at least 60% of its foreign reserves in a “compte d’operation” account managed in Paris. The SAR banking system is small and hard hit by the crisis.
There are four commercial banks operating in the country:
- Banque Populaire Morocco Centrafricaine
- Banque Sahélo-Saharan pour l’investissement et le Commerce Centrafrique
- Commercial Bank Central Africa
The SAR tax system is only slowly being adapted to the unified system within the CEMAC countries, it is still very complicated and due to high corruption (and pocket-picking) tax evasion is very common. During the crisis in 2013, the customs and collection authorities ceased to perform their functions, currently their activities are only partially restored. There are two extremes, either an entrepreneur does not pay any taxes thanks to his activity in the informal sector, while legally operating businesses, on the contrary, pay excessively high taxes. The main source of tax revenue is wood mining companies.
The official tax system consists of the following basic direct and indirect taxes and social insurance
- Personal income tax is progressive according to income in the range of 10-50%,
- Corporate tax – 30% or 1% of turnover
- Value Added Tax (VAT) – 19%
Business is burdened by a number of other payments and levies (real estate tax 15%, tax for apprentices 2%). The employer contributes 19% of the salary to the employee’s social insurance. The Investment Law distinguishes a preferential regime for companies investing more than 0.1 billion FCFA, companies investing 0.1-1 billion FCFA and large investors (investment more than 1 billion FCFA). New investors can get various tax benefits depending on their inclusion in the privileged regime (zero corporate tax for up to 5 years ),they can import equipment and material duty-free for a certain period, they can depreciate faster and reduce the tax base for investments in employee education, research, infrastructure construction; companies operating in remote areas have additional concessions. Oil and mining companies (code minier, code petrolier) and wood mining companies (code forestier) have a special tax regime www.droit-afrique.com.