Statement by an IMF Staff Mission to the Democratic Republic of the CongoPress Release No. 08/32
February 27, 2008
A mission from the International Monetary Fund (IMF) headed by Mr. Brian Ames visited Kinshasa from February 17 to 26 and issued the following statement today:
"The mission met with President Joseph Kabila, Prime Minister Antoine Gizenga, Minister of Finance Athanase Matenda Kyelu, Minister of Budget Adolphe Muzito, Central Bank Governor Jean-Claude Masangu, and other key ministers and senior government officials. Following the December 2007 staff visit that initiated discussions on a possible new three-year arrangement under the IMF's Poverty Reduction and Growth Facility (PRGF), the mission assessed the implications for the government's economic program of recent adverse price and exchange rate developments that arose on account of large fiscal slippages during the final months of 2007. The mission would like to thank the authorities for their warm hospitality and excellent cooperation during the visit.
"Implementation of the Staff Monitored Program (SMP) through end-2007 was mixed. Although the program's broad macroeconomic objectives such as growth and inflation were met for the year as a whole, key monetary and budgetary targets were missed at end-December 2007 due to public spending overruns. Expenditure was higher than targeted because of unplanned national security spending and persistent weaknesses in public financial management. The spending overruns contributed to an 8-percent depreciation of the Congolese Franc and a 16-percent annualized inflation rate at end-January 2008.
"Exchange rate and inflationary pressures instigated by the recent fiscal slippages appear to have abated in response to remedial measures undertaken by the authorities. The Central Bank tightened monetary policy in early January and this has prevented further pressures on the exchange rate and inflation. Looking forward, prudent monetary policy along with strict budgetary discipline should anchor macroeconomic stability in line with the expectations of the Congolese people.
"The mission reached understandings on a set of macroeconomic policies and structural reforms for 2008 that, if implemented, would contribute to economic growth and stability. It assessed the likely macroeconomic and financial impact of large mining and social infrastructure projects that are currently being finalized, although some further clarifications will be needed. Concerns remain, however, over the management of public finances and the composition of spending. In particular, the large wage bill risks crowding out priority spending for goods and services and domestically financed investment. Discussions about a three-year program that could be supported by a financial arrangement under the IMF's PRGF will continue during the Spring Meetings of the IMF and World Bank in April 2008. In the meantime, the government has set new macroeconomic objectives and targets for end-March and end-June, along with structural measures, especially to strengthen public financial management. These targets and measures will be monitored by the IMF staff."