IMF Staff Reaches Staff-Level Agreement with the Democratic Republic of Congo on the Third Review of the Extended Credit Facility
November 21, 2022
End-of-mission press releases include statements from IMF staff conveying preliminary findings after a country visit. The views expressed in this statement are those of IMF staff and do not necessarily represent the views of the IMF Executive Board. Based on the preliminary findings of this mission, staff will prepare a report which, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
- The IMF team reached a staff-level agreement on the third review of the authorities’ economic reform program supported by the Extended Credit Facility (ECF) arrangement.
- Despite recurrent external shocks and rising inflation, the post-covid recovery continues to gain momentum, with growth of 6.6% in 2022.
- In a context of high uncertainty, prudent policies aimed at reducing inflation, strengthening fiscal and foreign exchange reserves, and advancing the structural reform agenda will strengthen macroeconomic stability and build resilience.
Following the October 19 to November 2, 2022 visit to Kinshasa, a team from the International Monetary Fund (IMF), led by Mercedes Vera Martin, Chief of Mission for the Democratic Republic of Congo, finalized discussions from Washington DC on policies authorities and reform program. Following these discussions, Ms. Vera Martin issued the following statement:
“Following productive discussions, the Congolese authorities and the IMF team reached a staff-level agreement on the policies for the completion of the third review under the ECF arrangement. The arrangement is subject to IMF management approval and Executive Board review, which is expected in December 2022. Completion of the review will make available SDR 152.3 million (about SDR 200 million) for balance of payments support.
“Real GDP is showing resilience, with growth forecast at 6.6% in 2022, supported by higher-than-expected mining production. Inflation is expected to exceed 12% by the end of 2022, due to rising global food and fuel prices, exacerbated by the war in Ukraine and supply chain bottlenecks. The current account reached a surplus in the first half of the year thanks to strong exports, and at the end of October gross international reserves reached around 2 months of imports, well above the target at the beginning of the year. ECF agreement. The domestic fiscal balance (cash basis) is projected at 1.1 percent of GDP, in line with program commitments, despite unforeseen spending pressures resulting from the escalation of the conflict in the east, increased government spending and public institutions and repayment of arrears to fuel distributors, financed by higher windfall tax revenues, due to favorable mining developments.
“The outlook remains positive. IMF staff forecast growth of 6.3% in 2023 amid domestic policy tightening and a global slowdown that are also expected to weigh on growth. The medium-term outlook remains favorable, supported by expanding mining production and proactive reform efforts. In a context of fragility, the economy remains very vulnerable to shocks; volatile international commodity prices, tighter external financing conditions, rising inflation, slowing global growth and conflict in the East have created a challenging environment for economic policy-making . The authorities should remain vigilant and pursue their reform efforts to overcome structural obstacles to growth.
“Fiscal commitments under the ECF arrangement target a domestic fiscal deficit of 0.7 percent of GDP in 2023. Sustained revenue mobilization efforts and containment of current expenditures for administration, fuel subsidies and the wage bill will provide space for additional social spending and clearance of domestic arrears. . Contingency revenues, if any, will help build fiscal reserves to respond to shocks. Public financial management reforms remain essential to improve the quality, execution and control of expenditure, in particular by improving the budget process and credibility, strengthening budget transparency and accountability; the establishment of the single treasury account; strengthening the public procurement system; and strengthen the expenditure chain. Public investment management reforms will build absorptive capacity and improve efficiency.
“Proactive monetary policy will help anchor inflation, while continued reserve accumulation is needed given recurrent external shocks. Reforms to strengthen the monetary policy framework and central bank governance will improve liquidity management and the effectiveness of monetary policy Following the approval of the Commercial Banking Bill, an ambitious program of financial reforms aimed at strengthening banking regulatory, supervisory and resolution frameworks will contribute to strengthen the resilience of the banking sector.
“Structural and governance reforms remain essential for economic diversification and private sector-led growth. Improving anti-corruption and AML/CFT frameworks, simplifying the tax system, maintaining transparency in the mining sector (including by publishing all new and renegotiated mining contracts), and completing efforts to publishing beneficial ownership information for awarded government contracts will improve the business climate. and mobilize investments.
“As part of the ECF, the Congolese government has also requested funding under the new Resilience and Sustainability Facility aimed at providing long-term financing to help build resilience, including against climate change. . Discussions under this facility will begin in the coming months.
“We would like to thank the authorities and their technical teams for the frank and constructive discussions and we look forward to continuing our commitment to the DRC and its people.”
IMF Communications Department
PRESS OFFICER: Tataina Mossot
Call: +1 202 623-7100E-mail: [email protected]