Statement at the Conclusion of a Staff Visit to the Democratic Republic of CongoPress Release No. 11/324
September 3, 2011
An International Monetary Fund (IMF) mission led by Mr. Robert York visited Kinshasa August 24-September 3, 2011 to assess progress and discuss policies with the authorities in the context of the fourth review of the Extended Credit Facility (ECF) arrangement1. The mission met with the President of the Senate Leon Kengo, Prime Minister Adolphe Muzito, Minister of Finance Matata Ponyo, Minister of Budget Jean-Baptiste Ntahwa, Minister of Portfolio Jeanine Mabunda, Minister of Mines Martin Kabwelulu, Minister of Economy Jean-Marie Bulambo, Central Bank Governor Jean-Claude Masangu, other senior government officials, as well as donors. Discussions focused on recent economic developments, policy implementation under the ECF arrangement, execution of the 2011 budget and the draft budget for next year, and structural reform needed to consolidate macroeconomic stability, sustain high growth, and improve the business environment.
At the end of the mission, Mr. York issued the following statement in Kinshasa:
"Despite the difficult global economic environment, macroeconomic performance continues to remain strong and economic growth during 2011 could be higher than the 6½ percent previously projected. Economic activity is supported by favorable commodity prices for the country’s mineral exports and domestic demand. The increase in global food and fuel prices in the first few months of this year contributed to an acceleration of domestic inflation, but the pace of inflation has now slowed. However, inflation this year is likely to remain well above the central bank’s single-digit target.
"We commend the authorities on the good performance during the first semester of this year, which has been supported by the satisfactory implementation of macroeconomic policies. Maintaining the thrust of these policies will be important for containing inflationary pressures and safeguarding the fiscal position, especially in the run up to the November presidential and parliamentary elections. Spending pressures from the national elections are increasing and pose the main risk, but the government has so far been successful in holding the policy line set out in its economic program.
"Expenditure discipline has anchored the program, supported on the revenue side by the advance payment of some taxes, administrative reforms, and domestic fuel price increases. The mission welcomed these actions and encouraged the government to raise more domestic revenue to expand the resource envelope in order to increase poverty-reducing expenditures, and compensate for the ongoing low level of external budget support. Mobilizing domestic revenue figured prominently in the policy discussions on the draft 2012 budget.
"The central bank needs to remain vigilant against the threat of accelerating inflation, which could destabilize the economy. Maintaining the policy-interest rate at levels sufficiently positive in real terms will help to lower inflation, reduce inflation expectations, and alleviate any potential downward pressure on the exchange rate.
"The mission took note of progress in structural reform across a broad front but indicated that an acceleration of some measures was needed to fully implement the program. Among these reforms, making progress in enhancing governance and transparency in extractive industries is essential.
"The staff could support the completion of the fourth ECF review if performance continues to be satisfactory and understandings can be reached on policies and structural reforms going forward."
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.