Economy of the Central African Republic

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[edit] Economic Overview

The economy of the Central African Republic is dominated by the cultivation and sale of foodcrops such as yams, cassava, peanuts, maize, sorghum, millet, sesame and plantains. The importance of foodcrops over exported cash crops is illustrated by the fact that the total production of cassava, the staple food of most Central Africans, ranges between c. 200,000 and 300,000 tons a year, while the production of cotton, the principal exported cash crop, ranges from c. 25,000 to 45,000 tons a year. Foodcrops are not exported in large quantities but they still constitute the principal cash crops of the country because Central Africans derive far more income from the periodic sale of surplus foodcrops than from exported cash crops such as cotton or coffee. Many rural and urban women also transform some foodcrops into alcoholic drinks such as sorghum beer or hard liquor and derive considerable income from the sale of these drinks. Much of the income derived from the sale of foods and alcohol is not "on the books" and thus is not considered in calculating per capita income, which is one reason why official figures for per capita income are not accurate in the case of the CAR. The per capita income of the CAR is often listed as being around $300 a year, said to be one of the lowest in the world, but this figure is based mostly on reported sales of exports and largely ignores the more important but unregistered sale of foods, locally-produced alcohol, diamonds, ivory, bushmeat, and traditional medicines, for example. The informal economy of the CAR is more important than the formal economy for most Central Africans.

Diamonds constitute the most important export of the CAR, frequently accounting for 40-55% of export revenues, but an estimated 30-50% of the diamonds produced each year leave the country clandestinely.

The CAR is heavily dependent upon multilateral foreign aid and the presence of numerous NGO's which provide numerous services which the government fails to provide. As one UNDP official put it, the CAR is a country "sous serum," or a country hooked up to an IV. (Mehler 2005:150) The very presence of numerous foreign personnel and organizations in the country, including peacekeepers and even refugee camps, provides an important source of revenue for many Central Africans.

The Central African Republic is classified as one of the world's least developed countries, with an estimated annual per capita income of $310 (2000). Sparsely populated and landlocked, the nation is overwhelmingly agrarian, with the vast bulk of the population engaged in subsistence farming and 55% of the country's GDP arising from agriculture. Subsistence agriculture, together with forestry, remains the backbone of the economy of the Central African Republic (CAR), with more than 70% of the population living in outlying areas. The agricultural sector generates half of GDP. Principal foodcrops include cassava, peanuts, sorghum, millet, maize, sesame, and plantainss. Principal cash crops for export include cotton, coffee, and tobacco. Timber has accounted for about 16% of export earnings and the diamond industry for nearly 54%.

The country also has rich but largely unexploited natural resources in the form of diamonds, gold, uranium, and other minerals. There may be petroleum deposits along the country's northern border with Chad. Diamonds are the only of these mineral resources currently being developed; reported sales of largely uncut diamonds make up close to 60% of the CAR's export earnings. Industry contributes less than 20% of the country's GDP, with artesian diamond mining, breweries, and sawmills making up the bulk of the sector. Services currently account for 25% of GDP, largely because of the oversized government bureaucracy and high transportation costs arising from the country's landlocked position.

Much of the country's limited electrical supply is provided by hydroelectric plants based in Boali. Fuel supplies must be barged in via the Oubangui River or trucked overland through Cameroon, resulting in frequent shortages of gasoline, diesel, and jet fuel. The C.A.R.'s transportation and communication network is limited. The country has only 429 kilometers of paved road, limited international, and no domestic air service, and does not possess a railroad. River traffic on the Oubangui River is impossible from April to July, and conflict in the region has sometimes prevented shipments from moving between Kinshasa and Bangui. The telephone system functions, albeit imperfectly. Four radio stations currently operate in the C.A.R., as well as one television station. Numerous newspapers and pamphlets are published on a regular basis, and one company has begun providing Internet service.

In the 40 years since independence, the C.A.R. has made slow progress toward economic development. Economic mismanagement, poor infrastructure, a limited tax base, scarce private investment, and adverse external conditions have led to deficits in both its budget and external trade. Its debt burden is considerable, and the country has seen a decline in per capita GNP over the last 30 years. Important constraints to economic development include the CAR's landlocked position, a poor transportation system, a largely unskilled work force, and a legacy of misdirected macroeconomic policies. The 50% devaluation of the currencies of 14 Francophone African nations on 12 January 1994 had mixed effects on the CAR's economy. Diamond, timber, coffee, and cotton exports increased, leading an estimated rise of GDP of 7% in 1994 and nearly 5% in 1995. Military rebellions and social unrest in 1996 were accompanied by widespread destruction of property and a drop in GDP of 2%. Ongoing violence between the government and rebel military groups over pay issues, living conditions, and political representation has destroyed many businesses in the capital and reduced tax revenues for the government.

The IMF approved an Extended Structure Adjustment Facility in 1998. The government has set targets of annual 5% growth and 2.5% inflation for 2000-2001. Structural adjustment programs with the World Bank and IMF and interest-free credits to support investments in the agriculture, livestock, and transportation sectors have had limited impact. The World Bank and IMF are now encouraging the government to concentrate exclusively on implementing much-needed economic reforms to jump-start the economy and defining its fundamental priorities with the aim of alleviating poverty. As a result, many of the state-owned business entities have been privatized and limited efforts have been made to standardize and simplify labor and investment codes and to address problems of corruption. The Central African Government is currently in the process of adopting new labor and investment codes.

GDP: purchasing power parity - $5.8 billion (1999 est.)

GDP - real growth rate: 5% (1999 est.)

GDP - per capita: purchasing power parity - $1,700 (1999 est.)

GDP - composition by sector:
agriculture: 53%
industry: 21%
services: 26% (1997 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 2.6% (1999 est.)

Labor force: NA

Unemployment rate: 6% (1993)

Budget:
revenues: $638 million
expenditures: $1.9 billion, including capital expenditures of $888 million (1994 est.)

Industries: diamond mining, sawmills, breweries, textiles, footwear, assembly of bicycles and motorcycles

Industrial production growth rate: NA%

Electricity - production: 105 GWh (1998)

Electricity - production by source:
fossil fuel: 19.05%
hydro: 80.95%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 98 GWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: cotton, coffee, tobacco, manioc (tapioca), yams, millet, maize, bananas; timber

Exports: $195 million (f.o.b., 1999)

Exports - commodities: diamonds, timber, cotton, coffee, tobacco

Exports - partners: Benelux 36%, Côte d'Ivoire 5%, Spain 4%, Egypt 3%, France (1997)

Imports: $170 million (f.o.b., 1999)

Imports - commodities: food, textiles, petroleum products, machinery, electrical equipment, motor vehicles, chemicals, pharmaceuticals, consumer goods, industrial products

Imports - partners: France 30%, Côte d'Ivoire 18%, Cameroon 11%, Germany 4%, Japan (1997)

Debt - external: $790 million (1999 est.)

Economic aid - recipient: $172.2 million (1995); note - traditional budget subsidies from France

Currency: 1 Communaute Financiere Africaine franc (CFAF) = 100 centimes

Exchange rates: Communaute Financiere Africaine francs (CFAF) per US$1 - 647.25 (January 2000), 615.70 (1999), 589.95 (1998), 583.67 (1997), 511.55 (1996), 499.15 (1995)
note: since 1 January 1999, the CFAF is pegged to the euro at a rate of 655.957 CFA francs per euro

Fiscal year: calendar year

[edit] See also

• Central African Republic
• Economy of Africa