Press Release: Statement of the IMF Mission to the Republic of Congo
May 9, 2007
The following statement was issued today in Brazzaville by Mr. Joannes Mongardini, the International Monetary Fund mission chief for the Republic of Congo:
"An IMF mission visited Brazzaville during April 30-May 9, 2007. The mission met with H.E. President Sassou-N'guesso, Prime Minister Mvouba, Senior Planning Minister Moussa, Finance Minister Issoïbeka, and Mr. Dzon, National Director of the BEAC. The mission continued discussions on a staff-monitored program, the successful implementation of which would lay the basis for resumption of discussions under the IMF's Poverty Reduction and Growth Facility.1
"Economic growth in 2006 remained strong at 6.1 percent, reflecting high oil prices and strong non-oil activity. Consumer price inflation peaked at 8.2 percent in December 2006, reflecting expansionary fiscal policy, supply shortages, and transportation bottlenecks. Since then, it moderated to 5.2 percent in February 2007. The inflationary differential with partner countries has resulted in a loss of competitiveness. Big expenditure slippages in 2006, partly related to the fragile security situation in neighboring countries and to large capital expenditure increases, led to a widening of the non-oil primary deficit to 51 percent of non-oil GDP, compared with 35 percent envisaged under the PRGF-supported program, one of the highest deficits in Africa. With higher oil revenues, the current account registered a large surplus.
"The 2007 budget is based on appropriately conservative revenue projections and moderate growth of public expenditures—striking a balance between maintaining macroeconomic stability and allowing room for urgent infrastructure spending. The non-oil primary deficit is expected to fall to 42 percent of non-oil GDP, which would put budgetary policy back on a path toward fiscal sustainability. The budget will be complemented by structural measures to reduce current transfers, strengthen public financial management, and improve the quality of spending. Moreover, further efforts are envisaged toward instituting international best practices in the use of natural resources.
"Major governance challenges remain. In particular, the ongoing disagreements over the participation of some civil society members have stalled the setting up of the national committees of the Extractive Industries Transparency Initiative (EITI). Looking forward, the establishment of the long delayed anti-corruption observatory and the passage of a sound anti-corruption law would help establish the appropriate institutional framework to improve governance in the Republic of Congo.
"On the basis of the discussions during its visit to Brazzaville, the mission has reached provisional understandings with the authorities on a possible staff-monitored program. These understandings are subject to review by IMF departments and management."
1 The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments.