Press Release: IMF Approves US$14 Million in Emergency Post-Conflict Assistance for the Republic of Congo
November 17, 2000
The International Monetary Fund (IMF) today approved a credit of SDR 10.58 million (about US$14 million) in emergency post-conflict assistance for the Republic of Congo to support the government's reconstruction and economic recovery program in the aftermath of the 1998-99 armed conflict. The credit is available immediately.
In commenting on the Executive Board's discussion of the request by Republic of Congo, Eduardo Aninat, Deputy Managing Director and Acting Chairman, made the following statement:
"The Congolese authorities are to be commended for the rapid progress they made in implementing the measures necessary for political normalization and economic recovery following the devastating civil wars of 1997-99. Security has been largely restored, emergency humanitarian assistance is reaching those in need, and a start has been made with the rehabilitation of basic infrastructure. The peace process has been mainly initiated and managed by the Congolese themselves, and is enjoying the broad support of society. This is an encouraging sign of the preparedness of the Congolese to assume full ownership of their post-conflict program.
"Looking ahead, formidable challenges remain as the authorities face the daunting task of responding to the most pressing needs of the population in terms of providing health, food, and basic infrastructure, rebuilding institutional, administrative, and statistical capacity, and laying the foundations for strong economic growth that would significantly reduce unemployment and reverse the steep decline in living conditions."The authorities' post-conflict program strikes an appropriate balance between the requirements of immediate reconstruction and the objective of establishing macroeconomic stability. Adherence to the program's fiscal targets will be essential to ensure that its objectives will be met. The authorities are committed to placing oil revenue windfalls with the Bank of Central African States (BEAC). They should make every possible effort, at this favorable juncture of high oil prices, to normalize relations with the Congo's creditors so as to allow a resumption of much needed financial and technical assistance.
"The authorities are strongly encouraged to continue taking measures to strengthen tax and customs administration and expenditure monitoring, and to use the period under the emergency post-conflict program to improve data collection and reporting, especially in the area of fiscal expenditures. Improving governance and transparency will be important for promoting private sector-led growth. Prompt implementation of the agreement defining the financial relationship between the national oil company and the state will represent an important milestone in improving transparency in the oil sector.
"The authorities view the post-conflict program as a precursor to a more ambitious medium-term program that would complete the process of creating conditions for private sector-led growth, intensify the fight against poverty, and allow access to debt relief. Full implementation of the post-conflict program will pave the way for the Congo to move to a medium-term program that could be supported by an arrangement with the Fund under the Poverty Reduction and Growth Facility," Mr. Aninat said.
The post-conflict program is geared toward strengthening the country's administrative capacity and improving the macroeconomic framework, in order for growth in the non-oil sector to resume.
In determining the stance of fiscal policy for 2000-01, the authorities had to reconcile the large demands for emergency humanitarian assistance and reconstruction with the need to initiate the normalization of relations with Republic of Congo's creditors. Thus, fiscal policy aims at financing emergency humanitarian assistance and reconstruction, so as to support the peace process, while raising the primary fiscal surplus. The authorities' policy constraints have been eased by the oil windfall and the appreciation of the U.S. dollar vis-à-vis the CFA franc. Nevertheless, financing gaps remain, and support from the international community is needed to close them.
Structural reforms focusing on civil service reform and privatization will strengthen the fiscal position and enhance economic efficiency. Transparency will be boosted through measures to strengthen expenditure control and monitoring, and significant improvements in managing the state's oil proceeds.
Oil revenue is projected to reach an all-time high of 23% of GDP in 2000. As a result of the economic upturn and, especially, strong measures to improve tax and customs administrations in their collection efforts, non-oil revenue is projected to increase to 9.2% of GDP in 2001, after reaching 7.9% in 2000.
The trends in government expenditure reflect the status of the peace process. To support the release of resources for social spending, the wage bill will be stabilized at CFAF 106 billion in 2000. It is projected to drop slightly to CFA 104 billion in 2001 through a general wage freeze and a moratorium on the hiring of new staff, except in the health and education sectors. Nonwage, noninterest expenditure will be capped at CFAF 110 billion (5.7 percent of GDP) in 2000. This amount implies a 50 percent increase over the initial budget for 2000 so as to help consolidate the peace process. As the political and security situation is expected to continue to improve, this expenditure category should decline in 2001. Public investment outlays are projected to rise from 6.5 percent of GDP in 1999 to almost 10 percent of GDP in 2001. Consistent with the objectives of the post-conflict program, public investment, totaling CFAF 348 billion over the 2000-01 period, will focus on the restoration of basic infrastructure (including the setting up of a nationwide system of basic health care facilities), and on projects in agriculture, fishing, and forestry.
The authorities are aware that good governance and increased transparency are powerful elements in promoting democracy and improving the macroeconomic situation. In this regard, they have taken an important step by defining the financial relationship between the state and the national petroleum company. Further strengthening of expenditure control mechanisms constitutes another important objective.
The rehabilitation of the social sectors and the fight against unemployment and poverty are among the government's top priorities. Although no formal poverty-reduction plan has yet been developed, some measures are being implemented on an emergency basis. These include the quick rehabilitation of school shelters and primary health care units, and steps to fight contagious diseases, including HIV/AIDS. The authorities intend, however, to start both the technical preparations and a consultative process with the civil society to draw a plan for the fight against poverty.
The Republic of Congo joined the IMF on July 10, 1963, and its quota1 is SDR 84.60 million (about US$109 million). Its outstanding use of IMF financing currently totals SDR 21.14 (about US$27 million).