Central African Republic: Risk Assessment
Country Risk Rating
Business Climate Rating
- Agricultural potential (cotton, coffee), forestry and mineral wealth (diamonds, gold and uranium)
- Significant international financial support
- Extreme poverty (over 76% of the population)
- Economy vulnerable to external shocks
- Poor transport infrastructure and inadequate power production capacity
- Geographic isolation
- Unstable political and security situation; presence of several armed foreign rebel groups
Growth Conditional on how the Security Situation Develops
The country remains one of the poorest in the world and is still marked by the humanitarian and security crisis of 2013. Progress on the National Recovery and Peacebuilding plan (DDRR, Disarmament, Demobilization, Reintegration and Repatriation) is very modest. The growth rate is forecast to accelerate slightly in 2018, thanks to recovery in farm activity (43% of GDP), as well as in mining and forestry – although this will take place in a security context that remains very tense. Activity will be buoyed by public spending thanks to international aid, which, notably funds the country’s water and electricity infrastructure programs (only 55% of health facilities are functional), under the Recovery and Peacebuilding plan. It will, nonetheless, still be hit by weak internal demand (taking into the account the population that has gone into exile), even if inflation is on a downward trend, while remaining above the 3% target set by the Economic and Monetary Community of Central Africa.
Public Finances Bolstered by International Aid
The country has shown progress on fiscal management, giving rise to the disbursement by the IMF of a second loan tranche in 2017 under the Extended Credit Facility arrangement (total aid amounts to almost 7% of GDP over three years) helping the country to pay its arrears and improve growth and social inclusion. The fiscal position should continue to improve thanks to contained fiscal spending and higher tax receipts on the back of stronger tax and customs administrations, even if progress is likely to be slow. The country will, however, still be highly dependent on international aid (IMF, EU, World Bank, BAD, etc.), and there is still a high risk of over indebtedness.
The current account deficit is expected to decline in 2018 thanks to a reduction in the trade deficit. A gradual recovery in diamond exports associated with the partial lifting of the embargo on Central African diamonds (suspension from the Kimberly process) is expected, as is a recovery in the exports associated with timber, coffee and cotton, which will continue to be hit by insecurity and the disruptions affecting the transport and logistics sector. Imports will remain significant given the country’s reconstruction needs.
The President is Struggling to Rebuild the Country Against a Background of Persistent Conflict
President Faustin-Archange Touadéra, who came to power in March 2016, is struggling to get the country back on its feet, despite his initial vow to make the CAR a united country by appointing opposition members to the government. The country is still in a very precarious position: civilians continue to be killed, and there is an ever increasing number of refugees (over 480,000 people or 10% of the population), most having fled from neighboring countries (Cameroon, Chad, Democratic Republic of the Congo). Clashes between the Seleka militia, a majority Muslim armed group, and the majority Christian Anti Bakala militia continue, and many armed groups are trying to gain a foothold in the political landscape. The government is hampered by the international arms embargo and cannot, as a result, create a Central African army in order to protect its civilians from attack. Following the completion of Operation “Sangaris” in October 2016, the security forces were unable to take over and Minusca, the UN peace mission, does not have sufficient resources to protect civilians. The UN has flagged up “early warning signs of genocide” and believes that another large-scale humanitarian crisis is on the cards.
In this context of ongoing violence, the business climate will remain unstable and tense. According to the Doing Business index, which measures the ease of doing business, the country is ranked among the worst in the world (and the last with regard to new start-ups).