Central African Republic - Overview of economy

The Central African Republic's economy is based primarily on subsistence agriculture, with important mining and timber industries the main source of export earnings. Diamonds are the country's most profitable export, while agriculture occupies most of its working population. Farmers grow cotton, coffee, and tobacco for export and crops for local markets, but economic development is handicapped by the CAR's landlocked position, limited infrastructure , and the low education of its work-force . Poor government management and political instability have further weakened the CAR's economic condition. The informal sector is important in the CAR, accounting for most economic activity and a large share of the diamond trade.

The CAR has had a turbulent economic history. Since gaining independence in 1960, the economy has endured intermittent periods of economic decline caused

in part by poor management. Between 1960 and 1990, the CAR's first 3 presidents pursued authoritarian policies that often impeded economic growth. Gross domestic product (GDP) declined at an average annual rate of 2.5 percent between 1985 and 1995, partly due to self-proclaimed Emperor Jean Bedel Bokassa's nationalizing several industries during the 1970s. During the 1980s, government mismanagement and corruption and low commodity prices accentuated this decline. During the 1990s, the CAR pursued economic and democratic reforms with some success, but several army mutinies in 1996 and 1997 degenerated into looting and destruction of property in Bangui. These events weakened the government and damaged the economy.

Agriculture is the primary occupation for four-fifths of the population in the CAR. During the colonial era, the French introduced cotton and coffee. They have served as the main cash crops for rural families ever since. Small amounts of tobacco are also grown for both the export and domestic markets. Cassava (manioc) is by far the biggest staple food crop and is produced primarily for home consumption. Millet, sorghum, corn, peanuts, and yams are also grown by farmers, who consume most of these foods themselves and sell excess harvest in the local markets.

While crop farming is the main work activity, diamonds and timber provide most of the CAR's export earnings. Diamonds are especially important, accounting for 54 percent of export revenues in 1999, while timber earned an additional 16 percent. For the domestic market, the CAR has developed a few industries that produce consumer goods .

Poor transport links are obstacles to economic development. An estimated 90 percent of the CAR's commercial traffic passes through the port of Douala in Cameroon, where services are notoriously inefficient and costly. Poorly maintained dirt roads link the country to Cameroon's northern railway terminal in Ngaoundere.

Government mismanagement and political instability are 2 additional factors that have hindered economic growth. Many nationalized companies have suffered under government mismanagement, thus contributing to the CAR's long decline. The resulting chronic budgetary problems, with the government unable to collect sufficient revenue to pay salaries, have fueled social tensions and political instability. To address these problems the CAR has collaborated with the World Bank (WB) and the International Monetary Fund (IMF) to privatize several state companies and made efforts to stimulate growth. While there has been progress, the problem of chronic financial mismanagement continues. The CAR's economic woes are also exacerbated by the scarcity of jobs, rampant diamond smuggling, the large informal economy, and low levels of private investment.

Despite many problems, the CAR has valuable economic assets that could be profitably exploited. Fertile land and consistent rainfall are favorable to agriculture, there is the potential to export more mineral resources, and the country has abundant hydroelectric power that provides cheap electricity. But any growth is reliant on political stability and peace in the country.