Statement at the Conclusion of a Staff Visit to the Democratic Republic of the CongoPress Release No. 10/345
September 16, 2010
An International Monetary Fund (IMF) mission visited Kinshasa September 6-16, 2010 to assess progress and discuss policies with the authorities in the context of the second review of the Extended Credit Facility (ECF) arrangement1 (see Press Release No. 09/455). The mission, headed by Mr. Robert York, met with Prime Minister Adolphe Muzito, Minister of Budget Jean-Baptiste Ntahwa, Minister of Hydrocarbons Célestin Mbuyu, Central Bank of Congo Governor Jean-Claude Masangu, and other senior government officials. Discussions focused on recent economic developments, policy implementation under the ECF arrangement, the 2011 budget, and structural reform priorities needed to sustain high growth, low inflation, and improve the business environment.
Despite the challenging global economic environment in recent years and the fragile security situation, the macroeconomic outlook—at least in the short term—has significantly improved. Real gross domestic product (GDP) growth is projected at some 6 percent in 2010 and inflation is currently at 7½ percent, both better than last year; the budget remains on track and financing from the central bank has been curtailed; and the external sector is stronger than in 2009 owing to buoyant mining activity and debt relief from the enhanced Heavily Indebted Poor Countries and Multilateral Debt Relief Initiatives (see Press Release No. 10/274).
Going forward, the thrust of macroeconomic policies should be maintained. In particular, the 2011 budget should align the expenditure envelope with expected domestic revenue and available foreign financing in an effort to avoid any need for central bank financing. The discussions also focused on the risks that the authorities’ program faces. These risks include a faltering of the global economic recovery that could weaken growth prospects; the loss of fiscal control due to security concerns and slippages in the lead up to the presidential and parliamentary elections next year that could destabilize the economy; and failure to address weaknesses in the business environment and governance that could lead to lower foreign direct investment and financing, and hamper private sector development.
Based on these discussions, IMF staff intends to work closely with the authorities in the coming weeks, in consultation with Congo’s development partners and the World Bank, to maintain, and possibly accelerate, reforms in several areas. These areas include public financial management, the financial sector, independence and effectiveness of the central bank, and the extractive industries. In these industries, the aim is to establish a policy framework and measures that could strengthen the business environment and governance and transparency, which is important for Congo’s export-led growth prospects.
The staff could support the completion of the second ECF review, scheduled for late-December 2010, if performance continues to remain satisfactory and understandings can be reached on policies and reforms going forward. Indeed, if key structural reforms are expedited, the completion of this review could be accelerated.
1 The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.