Economy of the Central African Republic

Infrastructure

Much of the country's limited electrical supply is provided by hydroelectric plants located 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.

Forestry

There are 22.9 million hectares (56.5 million acres) of forest (37 percent of the total land area), but only 3.4 million hectares (8.4 million acres) of dense forest, all in the south in the regions bordering the DRC. The CAR’s exploitable forests cover 27 million hectares (68 million acres), or 43% of the total land area. Transportation bottlenecks on rivers and lack of rail connections are serious hindrances to commercial exploitation. Most timber is shipped down the Ubangi and Zaire rivers and then on the Congo railway to the Atlantic. More than a dozen types of trees are felled, but 95 percent of the total is composed of obeche, sapele, ebony, and sipo.

A dozen sawmills produced 516,000 m³ (18 million cu ft ) of sawn logs and veneer logs in 2003. The government is encouraging production of plywood and veneer. Roundwood removals were estimated at 2.8 million m³ (99.7 million cu ft ) in 2003. Competition from lower-cost Asian and Latin American loggers has hurt the local industry, which is encumbered with high transportation and labor costs. In 2003, the country exported $89.8 million of forest products.

Agriculture

74 percent of the population in the Central African Republic works in the agriculture industry, so Central African Republic's economy 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 $400 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.

Finance and banking

The financial sector of the CAR, the smallest in the CEMAC, plays a limited role in supporting economic growth. Suffering from weak market infrastructure and legal and judicial frameworks, the financial system remains small, undeveloped, and dominated by commercial banks. Because of economic and security concerns, financial institutions, and particularly microfinance institutions (MFIs), have consolidated their business in the capital, Bangui, over the past few years.

With less than 1 percent of the total population holding a bank account, access to financial services is extremely limited in the CAR. Microfinance accounts only for 1 percent of the total credit facilities, serving 0.5 percent of the population. Low levels of mobile penetration – which stand at 30 percent, a significantly lower percentage than in the rest of the continent – dampen the potential expansion of access to financial services through mobile technology.

Fishing

Fishing is carried on extensively along the rivers, but most of the catch is sold or bartered on the Democratic Republic of the Congo (DRC) side of the Ubangi River. In 1950, the government began a fish-farming program, and by the end of 1968 there were almost 12,000 ponds. The 2003 fish catch was about 15,000 tons.

Economic aid and development

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.

In the 40 years since independence, the CAR 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 gross national product over the last 40 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 70% in 1994 and nearly 50% 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 International Monetary Fund (IMF) approved an Extended Structure Adjustment Facility in 1998. The government has set targets of annual 5% growth and 25% 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.{{}}