INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND CENTRAL AFRICAN REPUBLIC Joint World Bank-IMF Debt Sustainability Analysis April 2020 Prepared Jointly by the staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) Approved by Marcello Estevão (IDA), Annalisa Fedelino, Seán Nolan (IMF) Central African Republic 1 : Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress High 2 Overall risk of debt distress High Granularity in the risk rating Sustainable Application of judgement No Macroeconomic projections This DSA update factors in the expected economic impact of the pandemic, with a significant decline in growth and trade flows and a sizeable widening of the fiscal and current account deficits in 2020. Growth is assumed to partially rebound in 2021 as the situation is assumed to start normalizing in the second half of 2020. Financing strategy Due to C.A.R.’s weak liquidity indicators, the country’s strategy remains to seek additional grant financing from multilateral and bilateral donors to cover the residual financing gaps arising from the economic impact and mitigation efforts of the COVID-19 pandemic. Realism tools flagged n.a. Mechanical risk rating under the external DSA High Mechanical risk rating under the public DSA. High 1 Debt coverage has not changed since the last DSA. 2 With a score of 2.44, C.A.R.’s composite indicator, which is based on the October 2019 WEO and the 2018 CPIA, signals a weak debt-carrying capacity. This debt sustainability analysis (DSA) updates the joint World Bank-IMF analysis of December 2019 to reflect the most recent outlook, which has been substantially altered by the COVID-19 pandemic. The Central African Republic (C.A.R.) remains at high risk of external debt distress and overall high risk of debt distress, unchanged from the most recent DSA of December 2019. 3These risks have increased owing to the high uncertainty surrounding the economic impact of the COVID-19 pandemic. While solvency indicators remain below their relevant thresholds, the disbursement under the RCF is projected to accentuate the breaches of the liquidity indicators over the medium term. Sensitivity of debt indicators to standard stress tests, the high uncertainty surrounding macroeconomic projections, a volatile security environment, and sizeable contingent liabilities are all considerations supporting the high-risk assessment. Debt is projected to remain sustainable over the medium term provided that the authorities move ahead with the policies and structural reforms committed under the ECF arrangement once the effects of the COVID crisis wear off. Given the difficult debt situation, staffs recommend that the government’s investment program requires grant financing, with concessional debt financing to be considered in exceptional cases. The current macroeconomic framework reflects currently available information. Updates of the economic impact and policy response to the COVID-19 crisis are rapidly evolving and risks are heavily tilted to the downside. 3 Country Report No. 20/1, January 2020. 2 Table 1. Central African Republic: External Debt Sustainability Framework, Baseline Scenario, 2017–40 (Percent of GDP, unless otherwise indicated) Actual Projections Average 8/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections External debt (nominal) 1/ 35.4 37.2 37.2 39.7 38.0 35.7 33.8 32.3 31.1 29.1 27.4 28.7 32.4 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 35.4 37.2 37.2 39.7 38.0 35.7 33.8 32.3 31.1 29.1 27.4 28.7 32.4 Is there a material difference between the No two criteria? Change in external debt 0.4 1.8 0.0 2.5 -1.7 -2.2 -1.9 -1.5 -1.1 0.1 -0.1 Identified net debt-creating flows ... 3.9 3.8 4.9 2.7 2.1 2.6 2.7 2.7 0.2 -0.2 3.9 1.7 Non-interest current account deficit 7.7 7.8 4.8 5.5 5.1 5.1 5.6 5.6 5.5 2.8 2.7 7.1 4.2 Deficit in balance of goods and services 16.4 17.8 18.3 17.3 15.9 15.0 14.5 14.2 14.0 8.8 8.5 15.0 12.3 Exports 15.9 15.9 15.7 14.4 14.7 15.0 15.0 15.0 15.1 15.2 15.5 Debt Accumulation Imports 32.4 33.7 34.1 31.7 30.6 30.0 29.5 29.3 29.1 24.0 24.0 14.0 60 Net current transfers (negative = inflow) -8.8 -9.9 -13.6 -11.8 -10.8 -9.9 -8.9 -8.5 -8.3 -7.3 -5.8 -7.8 -8.7 of which: official -3.2 -4.4 -7.3 -6.9 -5.5 -4.8 -4.0 -3.8 -3.7 -3.9 -2.9 12.0 Other current account flows (negative = net inflow) 0.0 -0.1 0.0 0.0 0.0 -0.1 -0.1 -0.1 -0.2 1.3 0.0 -0.1 0.6 50 Net FDI (negative = inflow) -0.8 -0.8 -1.1 -0.4 -1.0 -1.4 -1.5 -1.5 -1.5 -1.8 -2.3 -1.3 -1.5 10.0 Endogenous debt dynamics 2/ ... -3.1 0.2 -0.2 -1.3 -1.6 -1.5 -1.4 -1.3 -0.7 -0.6 40 Contribution from nominal interest rate 0.1 0.2 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 8.0 Contribution from real GDP growth -1.4 -1.2 -1.1 -0.4 -1.5 -1.8 -1.7 -1.6 -1.5 -0.9 -0.9 30 Contribution from price and exchange rate changes ... -2.0 1.1 … … … … … … … … 6.0 Residual 3/ ... -2.2 -3.8 -2.4 -4.4 -4.3 -4.5 -4.3 -3.8 -0.2 0.1 -3.0 -2.4 of which: exceptional financing ... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 4.0 Sustainability indicators 10 2.0 PV of PPG external debt-to-GDP ratio ... ... 18.6 21.1 20.8 20.0 19.0 17.9 16.9 14.5 17.0 PV of PPG external debt-to-exports ratio ... ... 118.3 147.2 141.2 133.4 126.7 119.0 112.2 95.4 109.7 0.0 0 PPG debt service-to-exports ratio 1.8 3.8 3.6 7.2 6.9 8.4 9.1 11.5 12.3 8.0 6.3 2020 2022 2024 2026 2028 2030 PPG debt service-to-revenue ratio 3.7 6.8 6.6 12.1 9.8 11.9 12.7 15.8 16.7 10.1 7.0 Gross external financing need (Million of U.S. dollars) 148.9 173.3 96.3 143.2 127.7 134.4 161.2 186.1 199.6 104.8 116.5 Rate of Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 4.5 3.8 3.0 1.0 4.0 5.0 5.0 5.0 5.0 3.4 3.4 -0.2 4.1 GDP deflator in US dollar terms (change in percent) 8.6 6.0 -2.9 1.8 3.5 3.0 2.8 2.7 2.7 2.5 2.5 2.5 2.9 Effective interest rate (percent) 4/ 0.4 0.5 0.4 0.4 0.4 0.4 0.5 0.6 0.6 0.8 1.2 1.1 0.6 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 0.3 10.2 -1.3 -6.1 10.3 10.2 7.9 8.3 8.2 6.2 6.2 6.1 6.9 of which: Private Growth of imports of G&S (US dollar terms, in percent) 6.8 14.6 1.0 -4.3 4.2 5.8 6.1 7.0 7.2 6.0 6.0 7.8 3.9 45 Grant element of new public sector borrowing (in percent) ... ... ... 35.6 36.3 36.3 53.1 53.3 53.2 46.6 31.9 ... 46.8 40 Government revenues (excluding grants, in percent of GDP) 7.8 8.9 8.7 8.5 10.3 10.6 10.7 10.9 11.1 12.1 14.0 8.0 11.0 Aid flows (in Million of US dollars) 5/ 14434.2 24576.8 9719.7 283.5 230.0 220.0 210.3 217.5 230.9 226.3 164.9 35 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 12.8 9.3 8.3 7.8 7.8 7.8 5.9 2.6 ... 8.0 30 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 80.1 88.9 88.4 89.7 87.2 85.3 80.4 64.2 ... 84.1 Nominal GDP (Million of US dollars) 2,072 2,280 2,279 2,345 2,525 2,732 2,948 3,178 3,427 4,858 8,687 25 Nominal dollar GDP growth 13.5 10.1 0.0 2.9 7.7 8.2 7.9 7.8 7.8 6.0 6.0 2.1 7.1 20 Memorandum items: 15 PV of external debt 7/ ... ... 18.6 21.1 20.8 20.0 19.0 17.9 16.9 14.5 17.0 10 In percent of exports ... ... 118.3 147.2 141.2 133.4 126.7 119.0 112.2 95.4 109.9 Total external debt service-to-exports ratio 1.8 3.8 3.6 7.2 6.9 8.4 9.1 11.5 12.3 8.0 6.3 5 PV of PPG external debt (in Million of US dollars) 424.5 495.9 524.7 545.9 559.4 569.0 580.1 704.7 1477.5 0 (PVt-PVt-1)/GDPt-1 (in percent) 3.1 1.2 0.8 0.5 0.3 0.3 1.0 1.3 2020 2022 2024 2026 2028 2030 Non-interest current account deficit that stabilizes debt ratio 7.3 6.0 4.8 3.0 6.8 7.3 7.5 7.2 6.6 2.7 2.8 Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes valuation adjustments. For projections also includes contribution from price and exchange rate changes. High value of the residual is related to capital grants which are not captured in this presentation. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 3 Table 2. Central African Republic: Public Sector Debt Sustainability Framework, Baseline Scenario 2017–40 (Percent of GDP, unless otherwise indicated) Actual Projections Average 6/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections Public sector debt 1/ 50.3 50.0 47.8 47.1 44.5 41.5 39.3 37.5 36.1 30.6 28.7 44.7 36.7 Definition of external/domestic Residency- of which: external debt 35.4 37.2 37.2 39.7 38.0 35.7 33.8 32.3 31.1 29.1 27.4 28.7 32.4 debt based of which: local-currency denominated Change in public sector debt -3.6 -0.2 -2.2 -0.7 -2.6 -3.0 -2.3 -1.7 -1.5 -0.3 -0.1 Is there a material difference Identified debt-creating flows -7.9 0.0 -2.8 -0.8 -2.7 -3.0 -2.1 -1.7 -1.2 -0.3 0.0 0.8 -1.5 No between the two criteria? Primary deficit 0.7 0.6 -1.8 1.8 -0.7 0.1 0.9 1.2 1.4 1.1 1.2 0.8 0.8 Revenue and grants 12.8 16.6 18.3 19.6 18.9 18.3 17.5 17.4 17.3 16.7 15.9 13.9 17.6 of which: grants 5.0 7.8 9.6 11.0 8.7 7.6 6.8 6.5 6.3 4.7 1.9 Public sector debt 1/ Primary (noninterest) expenditure 13.5 17.2 16.6 21.3 18.3 18.4 18.4 18.6 18.7 17.8 17.1 14.6 18.4 Automatic debt dynamics -8.6 -0.8 -1.4 -1.5 -2.8 -3.0 -2.7 -2.5 -2.3 -1.4 -1.2 of which: local-currency denominated Contribution from interest rate/growth differential -5.2 -2.2 -2.3 -1.2 -2.6 -2.9 -2.6 -2.4 -2.3 -1.5 -1.2 of which: foreign-currency denominated of which: contribution from average real interest rate -2.8 -0.3 -0.8 -0.7 -0.8 -0.7 -0.6 -0.5 -0.5 -0.4 -0.3 of which: contribution from real GDP growth -2.3 -1.9 -1.4 -0.5 -1.8 -2.1 -2.0 -1.9 -1.8 -1.0 -0.9 50 Contribution from real exchange rate depreciation -3.5 1.3 0.9 ... ... ... ... ... ... ... ... 45 Other identified debt-creating flows 0.0 0.2 0.4 -1.0 0.8 -0.1 -0.3 -0.4 -0.3 0.0 0.0 0.1 -0.1 40 35 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Change in deposits ... 0.2 0.4 -0.8 0.8 -0.1 -0.3 -0.4 -0.3 0.0 0.0 15 Residual 4.3 -0.2 0.6 -0.4 -0.2 -0.2 -0.2 -0.1 -0.3 0.0 0.0 2.0 -0.2 10 5 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 29.4 28.5 27.3 25.7 24.4 23.2 21.8 15.9 18.3 2020 2022 2024 2026 2028 2030 PV of public debt-to-revenue and grants ratio … … 160.4 145.6 144.1 141.0 139.6 133.2 126.0 95.4 115.1 Debt service-to-revenue and grants ratio 3/ 9.2 18.6 17.1 20.9 10.1 12.2 14.5 19.5 23.1 13.6 9.3 Gross financing need 4/ 1.7 3.4 1.4 5.7 1.2 2.3 3.4 4.5 5.3 3.4 2.6 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 50 Real GDP growth (in percent) 4.5 3.8 3.0 1.0 4.0 5.0 5.0 5.0 5.0 3.4 3.4 -0.2 4.1 45 Average nominal interest rate on external debt (in percent) 0.5 0.5 0.4 0.4 0.4 0.4 0.5 0.6 0.6 0.8 1.2 1.1 0.6 40 Average real interest rate on domestic debt (in percent) -5.3 -0.4 -0.7 -0.4 -0.1 0.0 0.3 0.9 1.4 3.3 5.7 -1.9 1.1 35 Real exchange rate depreciation (in percent, + indicates depreciation) -10.9 4.0 2.4 … ... ... ... ... ... ... ... 2.9 ... 30 25 Inflation rate (GDP deflator, in percent) 6.4 1.3 2.4 2.3 2.5 2.5 2.5 2.5 2.5 2.5 2.5 4.5 2.7 20 Growth of real primary spending (deflated by GDP deflator, in percent) 22.4 31.8 -0.9 30.1 -10.9 5.7 5.1 5.9 5.8 3.0 2.9 3.1 5.2 15 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 4.3 0.8 0.5 2.5 1.9 3.1 3.2 2.9 2.8 1.5 1.2 1.9 2.3 10 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5 0 2020 2022 2024 2026 2028 2030 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central, state, and local governments plus social security, central bank, government-guaranteed debt. Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 4 Figure 1. Central African Republic: Indicators of Public and Publicly Guaranteed External Debt under Alternative Scenarios, 2020–30 PV of debt-to GDP ratio PV of debt-to-exports ratio 45 300 40 250 35 30 200 25 150 20 15 100 10 50 5 Most extreme shock is Combination Most extreme shock is Exports 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Debt service-to-exports ratio Debt service-to-revenue ratio 25 30 25 20 20 15 15 10 10 5 5 Most extreme shock is Exports Most extreme shock is Combination 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Historical scenario Most extreme shock 1/ Threshold 1 December 2019 DSA 2/ Customization of Default Settings Borrowing Assumptions for Stress Tests* Size Interactions Default User defined Shares of marginal debt Standardized Tests Yes No External PPG MLT debt 100% Tailored Tests Terms of marginal debt Combined CLs Yes Avg. nominal interest rate on new borrowing in USD 0.8% 0.8% Natural Disasters n.a. n.a. USD Discount rate 5.0% 5.0% 30 30 3/ Commodity Prices n.a. n.a. Avg. maturity (incl. grace period) Market Financing n.a. n.a. Avg. grace period 6 6 Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the stress tests are interactions of the default settings for the stress tests. assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal "n.a." indicates that the stress test does not apply. debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The alternative scenario corresponds to the latest DSA (December 2019) 3/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 5 Figure 2. Central African Republic: Indicators of Public Debt Under Alternative Scenarios, 2020–30 PV of Debt-to-GDP Ratio 70 60 50 40 30 20 Most extreme shock is Growth 10 0 2020 2022 2024 2026 2028 2030 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 350 45 40 300 35 250 30 200 25 150 20 15 100 10 50 Most extreme shock is Growth 5 Most extreme shock is Growth 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Most extreme shock 1/ Public debt benchmark Historical scenario December 2019 DSA 2/ Borrowing Assumptions for Stress Tests* Default User defined Shares of marginal debt External PPG medium and long-term 77% 77% Domestic medium and long-term 8% 8% Domestic short-term 15% 15% External MLT debt Avg. nominal interest rate on new borrowing in USD 0.8% 0.8% Avg. maturity (incl. grace period) 30 30 Avg. grace period 6 6 Domestic MLT debt Avg. real interest rate on new borrowing 5.5% 5.5% Avg. maturity (incl. grace period) 2 2 Avg. grace period 1 1 Domestic short-term debt Avg. real interest rate 2% 2.0% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The alternative scenario corresponds to the latest DSA (December 2019) 6 Table 3. Central African Republic: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2020–2030 Projections 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of debt-to GDP ratio Baseline 21.1 20.8 20.0 19.0 17.9 16.9 15.5 14.9 14.5 14.4 14.5 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2040 1/ 21.1 22.8 24.3 25.3 26.0 26.8 29.1 31.3 33.8 36.6 39.7 A2. Alternative Scenario : December 2019 DSA 19.6 19.1 18.3 17.3 15.9 14.8 14.1 13.5 13.3 13.4 13.7 B. Bound Tests B1. Real GDP growth 21.1 25.6 30.3 28.8 27.1 25.7 23.5 22.6 22.0 21.9 22.0 B2. Primary balance 21.1 22.5 23.1 22.2 21.0 19.9 18.3 17.7 17.2 17.0 17.0 B3. Exports 21.1 22.1 23.7 22.6 21.4 20.3 18.6 18.0 17.5 17.2 17.1 B4. Other flows 2/ 21.1 24.8 27.4 26.1 24.8 23.6 21.7 21.0 20.4 19.8 19.5 B5. One-time 30 percent nominal depreciation 21.1 26.1 21.6 20.4 19.2 18.1 16.5 15.8 15.4 15.5 15.8 B6. Combination of B1-B5 21.1 31.2 36.2 34.5 32.7 31.0 28.5 27.5 26.5 26.0 25.8 C. Tailored Tests C1. Combined contingent liabilities 21.1 27.1 27.0 26.2 24.9 23.7 21.8 21.1 20.7 20.5 20.5 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 30 30 30 30 30 30 30 30 30 30 30 PV of debt-to-exports ratio Baseline 147.2 141.2 133.4 126.7 119.0 112.2 102.8 98.7 95.8 95.1 95.4 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2040 1/ 147.2 154.9 162.3 168.6 172.8 177.7 192.9 207.3 223.0 241.3 261.2 A2. Alternative Scenario : December 2019 DSA 128.8 126.8 121.6 114.0 104.8 94.9 90.6 87.1 85.7 86.0 88.0 B. Bound Tests B1. Real GDP growth 147.2 141.2 133.4 126.7 119.0 112.2 102.8 98.7 95.8 95.1 95.4 B2. Primary balance 147.2 153.3 153.9 148.1 139.8 131.8 121.1 117.0 113.7 112.3 112.0 B3. Exports 147.2 177.2 219.3 208.9 196.9 186.2 171.0 164.9 159.9 156.9 155.6 B4. Other flows 2/ 147.2 168.5 182.7 174.4 165.0 156.5 144.0 139.3 134.4 130.7 128.3 B5. One-time 30 percent nominal depreciation 147.2 141.2 114.9 108.8 101.8 95.5 87.3 83.5 80.9 81.3 82.7 B6. Combination of B1-B5 147.2 188.1 160.5 187.4 176.8 167.3 153.7 148.3 142.7 139.8 138.4 C. Tailored Tests C1. Combined contingent liabilities 147.2 183.9 179.9 175.0 165.7 156.9 144.5 139.9 136.5 135.2 135.1 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 140 140 140 140 140 140 140 140 140 140 140 Debt service-to-exports ratio Baseline 7.2 6.9 8.4 9.1 11.5 12.3 13.9 13.6 11.8 9.6 8.0 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2040 1/ 7.2 7.2 9.5 10.9 14.5 16.4 20.3 20.8 19.4 17.2 15.7 A2. Alternative Scenario : December 2019 DSA 6.3 6.7 8.0 8.4 10.3 11.9 11.9 11.4 10.4 8.3 5.9 B. Bound Tests B1. Real GDP growth 7.2 6.9 8.4 9.1 11.5 12.3 13.9 13.6 11.8 9.6 8.0 B2. Primary balance 7.2 6.8 8.6 9.4 11.7 12.5 14.1 13.7 12.4 10.6 9.1 B3. Exports 7.2 8.2 12.0 13.2 16.5 17.6 19.9 19.4 17.4 15.2 13.0 B4. Other flows 2/ 7.2 6.9 8.8 9.8 12.1 12.9 14.4 14.1 13.5 12.3 10.6 B5. One-time 30 percent nominal depreciation 7.2 6.9 8.4 8.9 11.2 12.1 13.7 13.4 11.6 8.5 7.0 B6. Combination of B1-B5 7.2 7.6 10.8 11.6 14.4 15.4 17.4 17.0 16.3 13.5 11.5 C. Tailored Tests C1. Combined contingent liabilities 7.2 6.8 9.0 9.7 12.1 12.8 14.4 14.0 12.2 10.0 8.4 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Debt service-to-revenue ratio Baseline 12.1 9.8 11.9 12.7 15.8 16.7 18.6 17.9 15.3 12.2 10.1 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2040 1/ 12.1 10.4 13.4 15.2 20.0 22.3 27.2 27.4 25.1 22.0 19.8 A2. Alternative Scenario : December 2019 DSA 9.9 10.1 11.6 12.1 14.6 16.8 16.5 15.6 13.9 10.8 7.6 B. Bound Tests 9.9 10.1 11.6 12.1 14.6 16.8 16.5 15.6 13.9 10.8 7.6 B1. Real GDP growth 12.1 12.1 18.0 19.3 24.0 25.4 28.1 27.1 23.1 18.5 15.3 B2. Primary balance 12.1 9.8 12.1 13.1 16.2 17.1 18.8 18.0 16.1 13.6 11.5 B3. Exports 12.1 9.9 12.2 13.3 16.5 17.4 19.2 18.4 16.3 14.0 11.8 B4. Other flows 2/ 12.1 9.8 12.4 13.6 16.7 17.5 19.3 18.5 17.5 15.7 13.4 B5. One-time 30 percent nominal depreciation 12.1 12.3 14.9 15.5 19.4 20.6 22.9 22.1 18.9 13.7 11.1 B6. Combination of B1-B5 12.1 12.3 18.7 19.9 24.5 25.8 28.5 27.4 26.0 21.2 17.9 C. Tailored Tests C1. Combined contingent liabilities 12.1 9.8 12.7 13.5 16.6 17.5 19.2 18.5 15.9 12.8 10.6 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 Sources: Country authorities; and staff estimates and projections. 1/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 2/ Includes official and private transfers and FDI. 7 Table 4. Central African Republic: Sensitivity Analysis for Key Indicators of Public Debt, 2020-2030 Projections 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of Debt-to-GDP Ratio Baseline 28.5 27.3 25.7 24.4 23.2 21.8 19.0 17.6 16.7 16.3 15.9 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2040 1/ 28.5 28.8 28.3 27.6 26.9 25.9 24.4 23.1 22.1 21.4 20.9 A2. Alternative Scenario : December 2019 DSA 27.1 23.6 22.4 20.8 18.9 17.1 14.9 13.8 13.0 12.8 12.8 B. Bound Tests B1. Real GDP growth 28.5 42.1 52.5 53.3 54.1 54.7 52.0 52.7 54.1 56.2 58.4 B2. Primary balance 28.5 29.8 29.8 28.2 26.8 25.4 22.2 20.8 19.8 19.2 18.8 B3. Exports 28.5 28.5 29.1 27.7 26.3 24.9 21.8 20.4 19.4 18.8 18.3 B4. Other flows 2/ 28.5 31.3 33.1 31.5 30.1 28.5 25.2 23.7 22.6 21.7 20.9 B5. One-time 30 percent nominal depreciation 28.5 40.1 37.4 35.0 32.5 29.8 25.0 22.3 20.2 18.8 17.6 B6. Combination of B1-B5 28.5 32.3 32.3 31.6 30.7 29.6 26.4 24.8 23.8 23.2 22.8 C. Tailored Tests C1. Combined contingent liabilities 28.5 37.0 34.3 32.3 30.8 29.2 25.8 24.3 23.3 22.7 22.2 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Public debt benchmark 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 PV of Debt-to-Revenue Ratio Baseline 145.6 144.1 141.0 139.6 133.2 126.0 111.2 103.7 99.0 96.7 95.4 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2040 1/ 146 150 151 153 148 141 132 125 120 117 114 A2. Alternative Scenario : December 2019 DSA 20.7 10.5 12.4 14.4 18.9 22.7 18.9 16.7 15.5 13.9 11.7 B. Bound Tests B1. Real GDP growth 145.6 200.9 236.2 253.9 260.9 266.0 259.7 266.2 276.6 290.2 305.2 B2. Primary balance 145.6 157.6 163.4 161.1 154.2 146.5 130.5 122.5 117.3 114.3 112.2 B3. Exports 145.6 150.4 159.5 158.3 151.4 143.6 127.9 120.2 115.0 111.6 109.2 B4. Other flows 2/ 145.6 165.3 181.4 180.4 173.0 164.5 147.7 139.7 133.6 128.9 125.2 B5. One-time 30 percent nominal depreciation 145.6 219.9 212.0 206.7 193.0 177.2 150.6 134.8 122.9 114.5 107.9 B6. Combination of B1-B5 145.6 165.5 163.4 168.0 164.4 159.0 144.9 137.2 132.6 130.4 129.2 C. Tailored Tests C1. Combined contingent liabilities 145.6 195.4 188.0 184.7 177.1 168.7 151.4 143.1 137.9 135.0 133.1 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 20.9 10.1 12.2 14.5 19.5 23.1 26.2 21.4 17.5 15.0 13.6 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2040 1/ 20.9 10.1 14.2 16.3 21.0 25.4 30.2 24.9 20.9 18.4 16.9 A2. Alternative Scenario : December 2019 DSA 20.7 10.5 12.4 14.4 18.9 22.7 18.9 16.7 15.5 13.9 11.7 B. Bound Tests B1. Real GDP growth 20.9 11.1 17.7 24.4 32.1 37.4 42.3 37.1 33.5 31.6 31.2 B2. Primary balance 20.9 10.0 15.8 19.6 21.8 23.7 26.3 21.5 18.2 16.2 14.9 B3. Exports 20.9 10.1 12.3 14.7 19.8 23.3 26.4 21.6 18.0 16.2 14.7 B4. Other flows 2/ 20.9 10.1 12.5 15.0 20.1 23.6 26.6 21.8 19.0 17.5 16.0 B5. One-time 30 percent nominal depreciation 20.9 10.6 14.2 16.6 22.4 26.2 29.7 24.9 20.6 17.4 15.4 B6. Combination of B1-B5 20.9 10.4 13.1 17.4 24.1 28.6 32.4 27.5 23.6 21.0 19.6 C. Tailored Tests C1. Combined contingent liabilities 21 10 26 24 22 24 27 22 18 16 14 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 2/ Includes official and private transfers and FDI. 8 Figure 3. Central African Republic: Drivers of Debt Dynamics - Baseline Scenario Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 40 80 Residual 35 Previous DSA proj. 70 DSA-2014 30 Interquartile 20 range (25-75) Price and 60 exchange rate 25 50 20 Real GDP growth 0 Change in PPG 40 15 debt 3/ 30 Nominal 10 interest rate -20 20 5 Median Current 10 account + FDI 0 0 -40 -5 Contri bution of Change in 5-year 5-year Di s tribution across LICs 2/ unexpected 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PPG debt 3/ historical projected -10 cha nges change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 10 Previous DSA proj. Residual 20 DSA-2014 Interquartile 80 range (25-75) Other debt 0 15 70 creating flows 60 Real Exchange rate 10 50 depreciation -10 Real GDP Change in debt 40 growth 5 30 Real interest -20 rate 20 0 Primary deficit 10 -30 -5 Median 0 5-year 5-year Change in debt Distribution across LICs 2/ 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 historical projected Contribution of -10 unexpected change change 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 9 Figure 4. Central African Republic: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 7 3 14 Distribution 1/ 6 2 12 Projected 3-yr adjustment 3-year PB adjustment greater than 2.5 percentage points of GDP in approx. top In percentage points of GDP 5 1 10 quartile 4 0 In percent 8 3 -1 6 2 -2 4 2 1 -3 0 0 -4 2014 2015 2016 2017 2018 2019 2020 2021 More -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real GDP size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is growth paths under different fiscal multipliers (left-hand side scale). found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (% of GDP) (percent, 5-year average) 10 6 5 8 4 6 3 2 4 1 2 0 0 -1 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gov. Invest. - Prev. DSA Gov. Invest. - Current DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Current DSA Contribution of government capital 10