World Bank Supports Fiscal Consolidation and Reform in Central African Republic

News Release No: 2000/153/AFR
WASHINGTON, December 17, 1999 - The World Bank has approved a US$20.0 million Fiscal Consolidation Credit to the Central African Republic (CAR).

The Credit aims at fiscal consolidation to help the state carry out its basic functions in a still fragile post-conflict context, with an immediate objective of timely payment of wages to government employees and the military. This should enhance the prospects for sustained civil peace and economic recovery, which will lay the foundations for poverty reduction. Privatization of four state-owned banks and enterprises, should help improve the fiscal position, through lower losses and subsidies, while enhancing transparency and efficiency, and allowing the state to focus on its basic functions.

A growing consensus appears to have emerged across the political spectrum in CAR that fiscal consolidation, economic reform, improved governance and civil peace are all needed to put the country back on the development path and that they must go hand-in hand. The credit seeks to support this consensus and the new government's commitment to fiscal discipline, improved governance and economic reform.

The Fiscal Consolidation Credit will be financed by a US$20.0 million equivalent credit from the International Development Association (IDA), the World Bank's lending arm for the poorest countries. The IDA credit is on standard terms of 40 years maturity, and would be disbursed in three tranches.

Central Africa Republic

Poor economic management and governance prevented the development of CAR's rich natural resources and led to political unrest and successive army mutinies with strong ethnic overtones in 1996-97, which wrecked the economy. An inter-African and a UN peacekeeping force helped restore security in the capital city and gradually improved security in the rest of the country.

As a result, per capita income is just above US$300 and poverty is pervasive, particularly in the rural areas, where two-thirds of the country's population of 3.5 million people live. Life expectancy is low at 49 years and HIV/AIDS prevalence is estimated at 11 percent, and may be higher. Illiteracy is widespread (about 40 percent), while gross school enrollment is low. Only 18 percent of the population has access to safe water.

Contact Person:

Media Contact: In Washington Sharon Cox (202) 473-2035
Operational Contact: Slaheddine Khenissi (202) 458-9293