Statement at the Conclusion of a Staff Visit to the Democratic Republic of the CongoPress Release No. 11/66
March 3, 2011
An International Monetary Fund (IMF) mission led by Mr. Robert York visited Kinshasa February 20-March 1, 2011 to assess progress and discuss policies with the authorities in the context of the third review of the Extended Credit Facility (ECF) arrangement.1 The mission, met with President Joseph Kabila Kabange, Prime Minister Adolphe Muzito, Minister of Finance Matata Ponyo Mapon, Minister of Budget Jean-Baptiste Ntahwa, Minister of Economy Jean-Marie Bulambo Kilsho,Central Bank of Congo 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 structural reform priorities 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:
“Macroeconomic performance was strong in 2010. Real gross domestic product (GDP) growth was above 7 percent, inflation fell to below 10 percent for the first time in several years, and the external position improved. These positive developments were underpinned by prudent fiscal and monetary policies. Current global economic conditions, however, pose significant challenges for policymakers this year, which could also be exacerbated by the national elections planned for November. Higher world food and fuel prices are likely to put pressure on economic management and will require vigilance, to preserve recent gains in consolidating macroeconomic stability.
“In 2011, economic activity is expected to continue at a robust pace, supported by continued buoyant mining, construction, and services, but inflation might also be higher.
“The thrust of macroeconomic policies for 2011 should be maintained, to mitigate the risks of high food and fuel prices and safeguard the fiscal position. The Central Bank of Congo could accommodate the initial impact of these price increases on the price level but it should ensure the second-round effects do not undermine the medium-term objective of single-digit inflation. At the same time, higher-than-projected external budget support and a small reduction in the programmed accumulation of government deposits would help provide the fiscal space required to accommodate higher pro-poor spending while avoiding government recourse to central bank financing. The discussions also focused on minimizing fiscal risks, especially by accelerating structural reforms to boost domestic revenue and how to allow for a modest pass through of higher world oil prices to domestic fuel prices.
“Strengthening governance and transparency is also part of the ongoing dialogue with the Congolese authorities. In this connection, discussions focused on the authorities’ efforts to reform public financial management, enhance the independence and effectiveness of the central bank, and improve the business environment, especially in extractive industries—the source of the DRC’s long-term growth potential.
“Going forward, the mission called for continued satisfactory program performance. It reached broad agreement with the authorities on policies to address rising global commodity prices. The staff will recommend to IMF management for the Executive Board to consider completion of the third review under the ECF, scheduled for April 2011.”
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.