Press Release: Statement at the Conclusion of an IMF Staff Visit to the Democratic Republic of the Congo
August 19, 2009Press Release No. 09/286
August 19, 2009
An International Monetary Fund (IMF) mission led by Mr. Brian Ames visited the Democratic Republic of the Congo from August 10-18, 2009 to conclude discussions on a new three-year arrangement under the IMF’s Poverty Reduction and Growth Facility (PRGF). The mission met with Prime Minister Adolphe Muzito, Minister of Finance Athanase Matenda, Minister of Budget Michel Lokola, Minister of Plan Olivier Kamitatu, Central Bank Governor Jean-Claude Masangu, and other senior government officials.
The mission reached understandings on policies for the remainder of 2009 and 2010 consistent with the authorities’ economic objectives of promoting growth, reducing inflation and rebuilding foreign exchange reserves undermined by the global financial crisis. The authorities also indicated that their partners had agreed to amendments to the Sino-Congolese Cooperation Agreement including the removal of the government guarantee on the mining component. When Fund staff confirm that the amended agreement is consistent with debt sustainability, the Congolese authorities will be in a position to seek financing assurances for their program from Paris Club creditors and the IMF’s Executive Board could consider a new three-year PRGF shortly afterwards.
Mr. Ames issued the following statement yesterday in Kinshasa:
“The discussions took place at a time when the authorities are facing difficult economic conditions following the onset of the global financial crisis. In response to a sharp decline in key commodity export prices and a deterioration in the country’s terms of trade during the fourth quarter of 2008, the DRC received emergency financial support from its development partners, including US$200 million through the Rapid Access Component of the IMF’s Exogenous Shock Facility (RAC-ESF). As a result, gross official reserves recovered from their historically low levels. Growth during the first half of 2009 was low due to a slowdown in mining and construction activities. Inflation peaked in April at an annualized rate of 100 percent and the exchange rate depreciated by 45 percent over the same period. Since then, inflation has decelerated and the exchange rate has stabilized.
“The mission reached understandings on a set of policies and targets for the rest of 2009 consistent with the authorities’ economic objectives. Government revenues during the first seven months of the year were below expectations and expenditures commitments in the pipeline are high relative to available resources. The situation is exacerbated by lower-than-expected proceeds from the government’s privatization program and delays in donor budget support. The authorities are taking measures to keep spending in line with their program targets, including canceling existing commitments where possible and capping new commitments. Ensuring implementation of these measures will require strong political support. Monetary policy will remain tight with the central bank policy rate expected to remain unchanged to assist in the disinflation effort.
“The mission also reached understandings on the main aggregates of the draft 2010 budget and a set of policies consistent with achieving the government’s objectives of 5 ½ percent growth, 15 percent year-end inflation, and a build up of foreign reserves to 11 weeks of non-aid imports. The authorities’ program focuses on mobilizing domestic revenues through measures at the three revenue administrations, strengthening public financial management, and reforming the central bank. The revenue assumptions are prudent given uncertainties regarding the economic recovery and the delayed impact of the reform measures. Government revenues are nevertheless projected to increase by 2 percent points of GDP compared to 2009 and overall spending will increase by more than 6 percent of GDP. The government’s wage policy allows for the phasing-in of the harmonization of salaries between Kinshasa and the other provinces and its decentralization policy will continue while taking into account capacity constraints at the provincial level.
“The authorities indicated that during the first annual review of the Sino-Congolese Cooperation Agreement their partners agreed to the removal of the government guarantee on the mining component and the elimination of the second phase of the infrastructure component. Once staff confirm that the amended agreement is consistent with debt sustainability, the authorities will be in a position to seek financing assurances for their program from Paris Club creditors. IMF Board consideration of a new three-year PRGF could follow shortly thereafter.
“The mission would like to thank the authorities for their warm hospitality and excellent cooperation during the visit.”