Statement at the Conclusion of an IMF Staff Visit to the Democratic Republic of the CongoPress Release No. 09/399
November 11, 2009
An International Monetary Fund (IMF) mission led by Mr. Brian Ames visited the Democratic Republic of Congo between October 27-November 10, 2009 to review recent economic developments and their impact on the authorities’ economic program, including the draft 2010 budget presently being considered by Parliament. The mission met with President of the Senate Léon Kengo, Prime Minister Adolphe Muzito, Minister of Finance Athanase Matenda, Minister of Budget Michel Lokola, Central Bank Governor Jean-Claude Masangu, and other senior government officials. The mission also participated in outreach activities with the Economic and Financial Committees (ECOFIN) of the National Assembly and the Senate on the 2010 budget.
The mission discussed how the recent acceleration in inflation and depreciation of the exchange rate beginning in late August affected the government’s economic program for 2009 and the macroeconomic and revenue assumptions underpinning the draft 2010 budget submitted to parliament in September. It reached understandings with the Government on a revised framework that was consistent with its objectives of high growth, low inflation, increased foreign exchange reserves, and poverty reduction.
Mr. Ames issued the following statement in Kinshasa:
"The main objective of the mission was to discuss how recent economic developments affected the government’s economic program for 2009 and the draft 2010 budget presently before parliament.
"Economic growth is projected to be 2.7 percent in 2009 owing to the effects of the global financial crisis on the domestic economy. After declining during May-August, inflation picked up in September-October in response to the increases in the money supply and the depreciation of the Congolese franc, which depreciated by 35 percent against the U.S. dollar between December 2008 and September 2009. Gross international reserves rose from a historic low of US$25 million in February to US$894 million at end-September (10 weeks of non aid import cover) following the disbursement of emergency assistance from the IMF and other development partners, the disbursement of the first tranche of the signature bonus under the Sino-Congolese Cooperation Agreement, and the recent general and special allocations of special drawing rights (SDRs) from the IMF to member countries.
"Against this backdrop, the authorities implemented their 2009 economic program satisfactorily through end-September, with government revenues and expenditure in line with projections. However, lack of timely coordination between the Treasury and the Central Bank impeded liquidity management, resulting in excess liquidity in the economy. The mission welcomes the recent tightening of monetary policy, which should help moderate inflation, and the efforts being undertaken to improve coordination in liquidity forecasting through weekly, rather than monthly, coordination meeting.
"With regard to the draft 2010 budget, while these recent developments will have an impact on the nominal value of projected revenues and proposed expenditure credits, they would not have an impact in real terms if the composition of spending remains the same. The authorities indicated that while they were open to revising the macroeconomic framework underpinning the budget, their economic and social priorities and policies for 2010 would remain the same. The mission’s discussions with the two ECOFINs took place in the context of a technical workshop, focusing on changes in key macroeconomic assumptions and their likely impact on revenues, expenditure, and financing of the 2010 budget. The mission appreciated the exchange, particularly its focus on assessing the risks and uncertainties going forward.
"The mission congratulated the authorities on the recent revisions to the Sino-Congolese Cooperation Agreement that made it consistent with debt sustainability. Although the government-guaranteed infrastructure financing would significantly increase the country’s external debt burden indicators over the medium term, the IMF and World Bank staff did not believe it would have a major impact on debt sustainability over the long term. Nevertheless, in the absence of debt relief, the country’s debt indicators would continue to indicate a high level of debt distress. On this basis, IMF staff expect to request financing assurances from Paris Club creditors regarding the rescheduling of the DRC’s official debt. If all goes well, IMF Board consideration of the authorities’ request for a new three-year arrangement under the Poverty Reduction and Growth Facility could follow shortly thereafter.
"The mission would like to thank the authorities for their warm hospitality and excellent cooperation during the visit."