## 1. Democratic Republic of the Congo: Fragility ## Source details **Canonical URL:** [1. Democratic Republic of the Congo: Fragility](https://www.imf.org/-/media/files/publications/cr/2019/1codea2019001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2019/1codea2019001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2019/1codea2019001.pdf.json) --- ### Context and humanitarian situation - DRC described as a fragile state with political instability, weak institutional capacity, and poor governance. - Natural-resource dependence: copper, cobalt, and other minerals fuel revenue but have fueled violent conflict and undermined governance. - Socioeconomic indicators: - Per capita income: about US$470 (declined from over US$1,000 in the 1990s). - Sub-Saharan African average per capita income: about US$1,600. - 2014 poverty: 77 percent of the population lived below the poverty line. - Population growth rate: around 3 percent a year. - 2016 UNDP Human Development Index ranking: 178th out of 185 countries. - CPIA score: 2.7 (a score below 3.2 represents low performance). - Humanitarian and health crises: - Over five million displaced people due to violent conflicts. - Ebola outbreak (as of July 17): Total cases 2,532; Total deaths 1,705; epidemic began in August 2018; WHO declared a “Public Health Emergency of International Concern.” - Political transition: - First peaceful presidential transition in January 2019: Félix Tshisekedi declared winner of December 2018 elections. - Kabila’s party holds large majorities in National Assembly and Senate. - Prime Minister appointed in May 2019: Sylvestre Llunga; cabinet appointments pending. - President Tshisekedi’s 100 day-program pillars: (i) good governance; (ii) sustainable economic growth; (iii) the human being; and (iv) solidarity. - Outstanding prior recommendations (Annex IV): - (i) step up domestic revenue mobilization; - (ii) remove bottlenecks to private sector activity; - (iii) strengthen governance and enhance transparency, particularly in management of natural resources; - (iv) recapitalize the central bank to strengthen its financial and operational autonomy. - Authorities expressed interest in a Fund-supported program. ### Main economic developments (2014–mid-2019) - Shock and initial deterioration (2014–2017): - Copper and cobalt prices slumped by 30 and 21 percent, respectively, between 2014 and 2016. - Growth: 6.9 percent in 2015 → 2.4 percent in 2016 → 3.7 percent in 2017. - Congolese franc depreciation between 2015 and 2017: 72 percent. - Annual average inflation rose from 1 percent to 36 percent. - BCC reserves fell from 4.9 to 1.9 weeks of imports. - Donor support cut in 2017; BCC monetized fiscal deficit and intervened in FX market; domestic arrears accrued. - Policy adjustment and stabilization (mid-2017 onward): - Balanced budget on a cash basis introduced mid-2017 while domestic arrears continued to accrue. - BCC policy rate raised from 2 percent in September 2016 to 20 percent in June 2017; liquidity reserve requirements increased; inflation decelerated sharply thereafter. - Recovery in 2018: - Total GDP growth (estimated): 5.8 percent. - Non-extractive GDP growth: 1.9 percent. - Twelve-month inflation: 7.2 percent by December 2018. - Congolese franc depreciation in 2018: 2.5 percent. - Current account deficit: 3.2 percent of GDP in 2017 → 4.6 percent of GDP in 2018. - Central bank foreign reserves: recovered to 2.6 weeks of imports. - External public debt (end-2018): 13.7 percent of GDP. - Domestic debt (domestic arrears): rose from 0.3 percent of GDP in 2015 to an estimated 6.5 percent of GDP by end-2018. - Financial sector in 2018: - M2 growth: 30 percent. - Credit to the private sector growth: 56 percent. - Dollarization: foreign currency deposits / total deposits = 90 percent in December 2018 (84 percent at end-2015). - Early 2019 developments: - Budget surplus for 2018: 0.4 percent of GDP. - BCC policy rate reduced to 9 percent in April 2019; reserve requirements unchanged. - End-June 2019 year-on-year inflation: 4.1 percent. - Local currency depreciation since start of 2019: 0.6 percent. - International reserves increased by about US$48 million during first five months of 2019. - Fiscal deficit close to zero percent of GDP as of mid-2019. ### Mining sector: structure, recent changes, and vulnerabilities - Central role: - Copper and cobalt represented 50 and 35 percent of total mining sales in 2018, respectively. - DRC ranks fourth largest producer of copper in 2018 (5.7 percent of 2018 world production) and largest producer of cobalt (64 percent of world production). - Mining sector employs about 4 percent of the working-age population. - Mining share in GDP: exceeded 25 percent over the last 5 years; close to 30 percent in 2018. - Minerals accounted for over 90 percent of total exports over the last five years. - Mining accounted for about a quarter of total FDI over the last 10 years. - Volatility and policy change: - Mining contribution to GDP growth highly volatile (mining GDP growth 2014–2018: 19.3, 4.8, -0.7, 7.8, 16.9). - Mining share in GDP (2014–2018): 26.3, 25.8, 25.0, 26.0, 28.7. - Mining export share of total exports (2014–2018): 94.8, 97.2, 73.0, 99.0, 98.8. - New Mining Code (June 2018): - Increases mining royalties and taxes; eliminates accelerated depreciation; rescinds ten-year fiscal stability clause. - Increases required repatriation of export proceeds from 40 to 60 percent. - Concerns: average effective tax rate well above international comparators; could limit development of mining sector; mining companies criticized rescinded fiscal stability clause and higher repatriation requirement. - Authorities argue changes needed for export receipts to have positive spillovers. ### Outlook and scenarios - Baseline scenario (status quo policies) — assumptions include decline in commodity prices in 2019 by about 7 percent (WEO projection); limited reforms; projections (medium term averages): - GDP growth: about 4 percent. - Inflation: about 5 percent. - Reserve coverage: will gradually rise towards 5 weeks of imports. - Outcome: suboptimal — insufficient growth to meet development needs and job demand. - Reform scenario (policy recommendations implemented) — key features: - GDP growth: increase relative to baseline by between 0.3 and 1.7 percentage points over the medium term. - Fiscal policy: infrastructure and social spending scaled up by 4.3 percent of GDP by 2024 through higher fiscal revenue and increased grants and external financing. - External borrowing increase: 1–2.5 percent of GDP per year would keep public external debt below 15 percent of GDP. - Reserves: reach 3 months of imports by 2024. - Fiscal revenue: higher than baseline but remains relatively low; deeper reforms needed beyond medium term. - Selected projections (Reform Scenario, percent of GDP or as indicated): - Real GDP (2018–2024): 5.8, 4.3, 4.2, 4.0, 5.5, 5.6, 6.3. - Consumer prices, period average (2018–2024): 29.3, 5.5, 5.0, 5.0, 5.0, 5.0, 5.0. - Revenue and grants (2018–2024): 11.6, 10.8, 11.1, 11.8, 12.8, 13.1, 14.2. - Overall fiscal balance (commitment basis) (2018–2024): 0.4, -0.1, -0.7, -0.8, -1.3, -1.8, -2.4. - Gross official reserves (weeks of imports) (2018–2024): 2.5, 3.2, 4.1, 5.9, 8.2, 10.7, 12.0. - Authorities’ view: - Authorities projected 2019 growth of 5.9 percent (staff projection: 4.3 percent), citing optimism for extractive and non-extractive sectors and increased public investment from 100-day plan. ### Risks and sensitivity (Annex III / RAM highlights) - Downside risks: - Escalation of Ebola epidemic. - Fiscal loosening with monetary financing. - Fall in copper and cobalt prices. - Intensification of armed conflicts. - Banking sector vulnerability due to correspondent banking relations concentrated through one domestic bank. - Political tensions within the governing coalition. - Upside potential: - New regime could facilitate reform implementation and resumption of donor support. - Debt distress risk: - External and overall risk of debt distress assessed as Moderate, but limited space to absorb shocks; lower revenues or higher borrowing could raise the risk. ### Fiscal stance, revenue mobilization, and public financial management - Fiscal stance: - Limited revenue mobilization and financing options call for continuation of a tight fiscal stance. - Recommended fiscal anchor: spending restraint and implementation of a balanced budget on a cash-basis; strict compliance with the rule of no central bank financing of the budget. - Staff recommends a fiscal policy framework based on the non-mineral domestic balance and updating the Fiscal Analysis of Resource Industries (FARI) model. - Revenue mobilization: - DRC’s revenue-to-GDP ratio is less than 12 percent, compared to the SSA average of over 20 percent. - World Bank estimate of tax gap: 5.3 percent of GDP. - Underlying weaknesses: large tax expenditures, widespread informality, narrow tax base, breakdown of the VAT system, proliferation of nuisance taxes and parafiscal levies (more than 350 taxes and 800 parafiscal levies for the central government alone). - Tax expenditures estimated at around 2 percent of GDP. - Recommendations: - Publish tax expenditure assessment with the 2020 budget and plan to rationalize tax expenditures. - Simplify the tax system and update/integrate computerized collection systems. - Public financial management, cash planning, and TSA: - Revenues only partially integrated into the TSA; multiple sub-accounts whose funds cannot be reallocated to the general account; some public sector accounts outside the treasury circuit (e.g., Roads Fund). - Domestic arrears (end-2018): stock amounted to 6.5 percent of GDP; composition: 61 percent audited arrears; up to 7 percent of GDP in potential arrears remains to be audited. - Recommendations: - Independent audit of non-audited domestic arrears; cross-settlement for cross debts; medium-term action plan for settlement. - Adopt legislation to allow direct transfer of revenue flows into the general account and integrate special accounts into the budget. - Produce realistic revenue and expenditure projections and restrict use of emergency spending procedures. ### Monetary, exchange rate, and external sector policies - Monetary policy: - Ultimate objective: achieve a medium-term inflation rate of 7 percent. - Constraints: high financial dollarization and a shallow interbank market; reserve requirements currently in local currency only, creating exchange rate mismatch. - Low BCC FX reserves and BCC holding foreign currency deposits at local banks limit FX intervention space. - Staff recommendations: - Maintain current monetary policy stance and framework. - Increase BCC FX reserves by sending abroad foreign currency deposits held at domestic banks. - Require reserve requirements on foreign currency deposits to be constituted in foreign currency and keep lower requirement rates for local currency deposits. - Pursue gradual financial de-dollarization. - External sector assessment (Annex I): - Current account (2018): -4.6 percent of GDP. - EBA-lite CA model: CA-Gap about 2.5 percent of GDP; indicated around 10 percent exchange rate misalignment. - Gross international reserves at end-2018: US$657 million; reserve coverage: 2.5 weeks of imports. - IMF reserve adequacy metric suggests 13.2 weeks (3.3 months) of imports. - Recommendation: accumulate international reserve buffers and implement prudent fiscal, monetary, and structural policies. ### Central bank autonomy, financial transparency, and financial sector stability - Central bank: - Recapitalization plan to about US$130 million formulated; schedule under discussion. - Two Congolese commercial banks publish reports under IFRS; rest of banks and the BCC anticipate complying before end-2020. - Only an abridged version of the audited financial statements of the BCC is published on the BCC website. - Recommendation: increase BCC autonomy and enhance financial transparency; implement IFRS by the BCC. - Financial sector vulnerabilities: - Regulatory capital to risk-weighted assets: 2014 23.7; 2015 20.4; 2016 9.0; 2017 16.0; 2018 14.2; Mar-19 14.8. - NPLs to gross loans: 2014 7.9; 2015 18.3; 2016 18.1; 2017 16.1; 2018 16.8; Mar-19 16.0. - Return on assets: 2014 1.8; 2015 1.5; 2016 -1.4; 2017 -0.1; 2018 1.1; Mar-19 0.3. - Capital requirements: minimum capital requirement increased to US$30 million; 6 out of 16 banks (excluding BIAC) have not complied yet; capital requirement to be raised to US$50 million at end-2020. - BIAC (fourth largest bank) experienced distress in 2016 and was put under BCC administration; BCC should speed up rehabilitation or resolution. - AML/CFT: DRC joined the Central African Anti-Money Laundering Action Group in late 2017; onsite evaluation against 2012 FATF standards undertaken in late 2018 with results being finalized; DRC should promptly implement priority actions. ### Business climate, governance, and anti-corruption - Constraints identified by private sector: - Cumbersome administrative procedures, extortion, arbitrary judicial decisions, plethora of taxes and charges. - Consequence: shrinks the formal economy and tax base. - SOE transparency shortcomings: Gécamines and Sicomines do not fully comply with audited financial statements submissions; audited statements not consistently published. - Staff recommendations: - Reduce red tape and simplify the tax system. - Provide regulatory and physical security; respect and enforce property rights; establish a professional and independent judiciary. - Strengthen transparency of SOEs: submission and publication of audited financial statements. - Expedite passage of anti-corruption law and law establishing an independent anti-corruption commission; step up enforcement. - Authorities requested the Fund to conduct a governance assessment under its new governance framework. ### Debt sustainability and public debt profile - Public debt (end-2018) and composition: - Total Public Debt: US$9,476 million (20.1 percent of GDP). - Arrears: US$3,403 million (7.2 percent of GDP; 36 percent of public debt). - Total External Debt: US$6,401 million (13.6 percent of GDP); Sicomines liabilities represent almost 40 percent of external debt. - Total Domestic Debt: US$3,074 million (6.5 percent of GDP). - Domestic arrears (2018) breakdown: - Reconciled legacy arrears: US$1,866 million (4.0 percent of GDP; 60.7 percent of total domestic debt). - VAT arrears: US$799 million (1.7 percent of GDP; 26.0 percent of total domestic debt). - Other legacy arrears amounting to about US$3 billion have still to be audited. - Debt-carrying capacity: - DRC Composite Indicator (CI) score: 1.98 (Weak). - Risk of external debt distress: Moderate; Overall risk of debt distress: Moderate. - DSA conclusions: - External debt sustainable under baseline but vulnerable to shocks due to weak revenue mobilization. - Policy priorities: increase revenue mobilization; prioritize concessional borrowing; develop medium-term debt strategy; avoid expensive external borrowing and collateralized loans. ### Staff appraisal and priority reforms (paras. 42–47 summary) - Macroeconomic context: - 2015-16 shock largely behind; recovery aided by prudent macro policies, cash-based fiscal policy, and peaceful transition in 2019. - Decisive structural reforms needed for higher inclusive growth and stronger buffers. - Revenue mobilization: - Critical to create sustainable fiscal space; integrate mining revenue into central Treasury; expand non-mining revenue via reduced exemptions, enlarging tax base, simplifying tax system, and improving administration. - Public financial management: - Strengthen PFM systems; use realistic revenue/expenditure projections; restore expenditure chain; implement TSA fully; vet public investment projects carefully; urgently audit and clear domestic arrears. - Monetary and central bank: - Recapitalize the BCC; increase FX reserves by transferring foreign currency deposits abroad; implement IFRS for BCC. - Financial sector and AML/CFT: - Improve regulatory framework; adopt Banking Law aligned with international standards; implement AML/CFT priority actions; promote microfinance. - Governance and anti-corruption: - Enhance transparency (public tendering of mining assets, publication of contracts, disclosure of beneficial ownership, audited SOE financials); expedite anti-corruption legislation and establishment of independent commission. *Source: IMF staff report excerpt (content unit: 1codea2019001).* ### 1. Democratic Republic of the Congo: Fragility ________________________________________________ 4 ### 1. Democratic Republic of the Congo: Fragility ### Context - DRC is described as a fragile state with political instability, weak institutional capacity, and poor governance. - Natural-resource dependence: copper, cobalt, and other minerals provide revenue but have fueled violent conflict and undermined governance. - Economic and social indicators: - Per capita income: about US$470 (declined from over US$1,000 in the 1990s). - Sub-Saharan African average per capita income: about US$1,600. - In 2014, 77 percent of the population lived below the poverty line. - High population growth rate: around 3 percent a year. - 2016 UNDP Human Development Index ranking: 178th out of 185 countries. - CPIA score: 2.7 (a score below 3.2 represents low performance). - Humanitarian situation: - Ongoing violent conflicts have produced over five million displaced people and widespread violence against civilians. - The country has been suffering from recurring humanitarian and health crises. - Ebola outbreak (as of July 17): - Total cases: 2,532. - Total deaths: 1,705. - Epidemic began in August 2018 in northeastern DRC, near borders with Uganda, Rwanda, and South Sudan. - A “Public Health Emergency of International Concern” declared by WHO. - Economic impact to date: limited, but containment hindered by violent conflict and distrust. - Political transition: - First peaceful presidential transition in January 2019: Félix Tshisekedi declared winner of December 2018 elections. - Kabila’s party holds large majorities in National Assembly and Senate. - Prime Minister appointed in May 2019: Sylvestre Llunga; cabinet appointments pending. - President Tshisekedi’s 100 day-program pillars: (i) good governance; (ii) sustainable economic growth; (iii) the human being; and (iv) solidarity. - Authorities aim to scale up public investment to reduce infrastructure gap. - Outstanding recommendations from prior consultation (Annex IV): - (i) step up domestic revenue mobilization; - (ii) remove bottlenecks to private sector activity; - (iii) strengthen governance and enhance transparency, particularly in management of natural resources; - (iv) recapitalize the central bank to strengthen its financial and operational autonomy. - Authorities expressed interest in a Fund-supported program to accompany their economic development agenda. ### Main Economic Developments - Shock and initial deterioration (2014–2017): - Copper and cobalt prices slumped by 30 and 21 percent, respectively, between 2014 and 2016. - Growth: 6.9 percent in 2015 → 2.4 percent in 2016 → 3.7 percent in 2017. - Congolese franc depreciation between 2015 and 2017: 72 percent. - Annual average inflation rose from 1 percent to 36 percent. - BCC reserves fell from 4.9 to 1.9 weeks of imports of goods and services. - Donor support cut in 2017 in response to delayed presidential elections. - Fiscal response: BCC monetized fiscal deficit and intervened in FX market; domestic arrears accrued. - Policy adjustment and stabilization (mid-2017 onward): - Government introduced a balanced budget on a cash basis in mid-2017 while continuing to accrue domestic arrears. - BCC policy rate raised from 2 percent in September 2016 to 20 percent in June 2017; liquidity reserve requirements increased. - Inflation decelerated sharply thereafter. - Recovery in 2018: - Total GDP growth (estimated): 5.8 percent. - Non-extractive GDP growth: 1.9 percent. - Twelve-month inflation: 7.2 percent by December 2018. - Congolese franc depreciation in 2018: 2.5 percent. - Current account deficit: 3.2 percent of GDP in 2017 → 4.6 percent of GDP in 2018. - Central bank foreign reserves: recovered to 2.6 weeks of imports. - External public debt (end-2018): 13.7 percent of GDP. - Domestic debt (domestic arrears): rose from 0.3 percent of GDP in 2015 to an estimated 6.5 percent of GDP by end-2018. - Financial sector in 2018: - M2 growth: 30 percent. - Credit to the private sector growth: 56 percent. - Dollarization: foreign currency deposits / total deposits = 90 percent in December 2018 (84 percent at end-2015). - Many financial soundness indicators remained weaker than prior to shocks (Table 5). - Early 2019 developments: - Budget surplus for 2018: 0.4 percent of GDP (thanks to large increase in mining revenue) despite fiscal loosening late-2018. - BCC policy rate reduced to 9 percent in April 2019; reserve requirements unchanged. - End-June 2019 year-on-year inflation: 4.1 percent. - Local currency depreciation since start of 2019: 0.6 percent. - International reserves increased by about US$48 million during first five months of 2019. - Fiscal deficit close to zero percent of GDP as of mid-2019. ### Mining Sector - Central role in the economy: - Copper and cobalt main commodities: represented 50 and 35 percent of total mining sales in 2018, respectively. - Other minerals: gold, diamond, zinc, coltan, cassiterite, wolframite and silver. - DRC ranks: - Fourth largest producer of copper in 2018 (5.7 percent of 2018 world production). - Largest producer of cobalt (64 percent of world production). - Employment: mining sector employs about 4 percent of the working-age population. - Mining share in GDP: exceeded 25 percent over the last 5 years; close to 30 percent in 2018. - Minerals accounted for over 90 percent of total exports over the last five years. - On average, mining accounted for a quarter of total FDI over the last 10 years. - Mining companies provide social and economic services in mining regions (hospitals, schools, roads) but have been criticized for lack of transparency and human rights abuses. - Volatility and vulnerability: - Mining contribution to GDP growth volatile in response to copper and cobalt price fluctuations. - Price volatility (e.g., 2015-16 falls) highlights need to build buffers and diversify economy. - New Mining Code (June 2018): - Substantially increases mining royalties and taxes and eliminates accelerated depreciation provisions. - Rescinded the ten-year fiscal stability clause. - Increased required repatriation of export proceeds from 40 to 60 percent. - Mining companies criticized aspects: rescinding fiscal stability clause and increased repatriation share make covering obligations abroad difficult. - Authorities argue changes are needed for export receipts to have positive spillovers on the rest of the economy. - Selected data (Democratic Republic of the Congo: Mining Sector, 2014–18): - Mining GDP growth (2014–2018): 19.3, 4.8, -0.7, 7.8, 16.9 - Mining share in GDP (percent of GDP) (2014–2018): 26.3, 25.8, 25.0, 26.0, 28.7 - Mining export as share of total exports (2014–2018): 94.8, 97.2, 73.0, 99.0, 98.8 - Mining revenue as share of total revenue (2014–2018): n.a., n.a., n.a., 10.6, 20.3 ### Outlook and Risks - Baseline scenario (status quo policies): - Assumptions: continued prudent macroeconomic policies, limited economic and governance reforms, decline in commodity prices in 2019 by about 7 percent (WEO projection), unchanged prices thereafter, low fiscal deficits due to limited financing, monetary and exchange rate policies consistent with slow recovery of BCC foreign reserves. - Projections (medium term averages): - GDP growth: about 4 percent. - Inflation: about 5 percent. - Reserve coverage: will gradually rise towards 5 weeks of imports. - Outcome: suboptimal — insufficient growth to meet development needs and job demand; limited but recovering external buffers. - Reform scenario (policy recommendations implemented): - Predicated on steady acceleration of non-extractive growth supported by reforms. - GDP growth: increase relative to baseline by between 0.3 and 1.7 percentage points over the medium term. - Fiscal policy: infrastructure and social spending scaled up by 4.3 percent of GDP by 2024 through higher fiscal revenue (tax policy and administration reforms) and increased grants and external financing as donor relations improve. - External borrowing increase: 1–2.5 percent of GDP per year would keep public external debt below 15 percent of GDP and maintain moderate risk of debt distress. - Reserves: would increase faster, reaching 3 months of imports by 2024. - Fiscal revenue: higher than baseline but remains relatively low due to severe constraints to revenue mobilization; deeper reforms needed beyond medium term. - Economic outlook sensitivity and risks (RAM, Annex III): - Downside risks: - Escalation of Ebola epidemic to other regions causing disruption to activity, loss of fiscal and export revenues, and diversion of public funds to response. - Need for substantial international logistical and financial support; potential complement from Rapid Credit Facility (RCF). - Fiscal loosening with monetary financing. - Fall in copper and cobalt prices. - Intensification of armed conflicts. - Banking sector vulnerability due to correspondent banking relations mainly channeled through one domestic bank. - Political tensions within governing coalition undermining stability. - Upside potential: - New regime could facilitate reform implementation and resumption of donor support. - Authorities’ view: - Authorities disagreed with staff baseline growth forecast and projected 2019 growth of 5.9 percent (staff projection: 4.3 percent). - Authorities’ reasons: optimistic forecasts for extractive and non-extractive sectors, increased global demand for electric cars sustaining extractive sector growth, increased public investment from 100-day plan, and recovery in private sector activity. - Authorities also noted that (i) commercial banks have large net foreign assets; and (ii) a large share of imports is done by mining companies with ample foreign exchange receipts. ### Selected Projections and Indicators (Text Table 1) - Reform Scenario (in percent of GDP, unless otherwise indicated) - Real GDP (2018–2024): 5.8, 4.3, 4.2, 4.0, 5.5, 5.6, 6.3 - Consumer prices, period average (2018–2024): 29.3, 5.5, 5.0, 5.0, 5.0, 5.0, 5.0 - Revenue and grants (2018–2024): 11.6, 10.8, 11.1, 11.8, 12.8, 13.1, 14.2 - Revenue (2018–2024): 10.4, 9.5, 9.5, 10.0, 10.9, 11.1, 12.0 - Grants (2018–2024): 1.1, 1.3, 1.6, 1.8, 1.9, 2.0, 2.2 - Expenditures (2018–2024): 11.2, 10.9, 11.8, 12.7, 14.1, 14.9, 16.5 - Of which: capital expenditures (2018–2024): 1.7, 2.0, 3.4, 4.2, 5.7, 6.2, 7.2 - Overall fiscal balance (commitment basis) (2018–2024): 0.4, -0.1, -0.7, -0.8, -1.3, -1.8, -2.4 - Current account balance, incl. transfers (2018–2024): -4.6, -3.5, -4.0, -4.3, -4.7, -5.2, -5.8 - Gross official reserves (weeks of imports) (2018–2024): 2.5, 3.2, 4.1, 5.9, 8.2, 10.7, 12.0 - External public debt (2018–2024): 13.7, 13.0, 12.4, 12.2, 12.2, 13.0, 14.6 - Baseline Scenario (in percent of GDP, unless otherwise indicated) - Real GDP (2018–2024): 5.8, 4.3, 3.9, 3.4, 4.5, 4.3, 4.6 - Consumer prices, period average (2018–2024): 29.3, 5.5, 5.0, 5.0, 5.0, 5.0, 5.0 - Revenue and grants (2018–2024): 11.6, 10.8, 10.6, 11.3, 11.7, 12.0, 12.3 - Revenue (2018–2024): 10.4, 9.5, 9.1, 9.7, 10.0, 10.2, 10.5 - Grants (2018–2024): 1.1, 1.3, 1.5, 1.6, 1.7, 1.8, 1.8 - Expenditures (2018–2024): 11.2, 10.9, 10.8, 11.1, 11.5, 11.8, 12.2 - Of which: capital expenditures (2018–2024): 1.7, 2.1, 2.4, 2.6, 3.0, 2.7, 3.5 - Overall fiscal balance (commitment basis) (2018–2024): 0.4, -0.2, -0.1, 0.2, 0.2, 0.2, 0.1 - Current account balance, incl. transfers (2018–2024): -4.6, -3.5, -4.2, -4.4, -4.3, -4.4, -4.5 - Gross official reserves (weeks of imports) (2018–2024): 2.6, 3.7, 3.9, 4.2, 4.6, 4.8, 5.0 - External public debt (2018–2024): 13.7, 13.3, 12.7, 12.1, 10.9, 9.8, 8.9 *Source: International Monetary Fund staff report content provided in the chapter "1. Democratic Republic of the Congo: Fragility."* ### 15. On current trends, limited revenue mobilization and financing options call for a ### 1codea2019001 - 15. On current trends, limited revenue mobilization and financing options call for a ### Fiscal stance and fiscal framework - On current trends, limited revenue mobilization and financing options call for a continuation of a tight fiscal stance. - Rationale: - Revenue prospects are constrained and potentially volatile. - Access to financing limited, despite a moderate risk of debt distress (see Debt Sustainability Analysis). - Policy anchor recommended: - Persevere with spending restraint and the implementation of a balanced budget on a cash-basis as the fiscal anchor. - Return to strict compliance with the rule of no central bank financing of the budget to avoid monetizing the deficit and creating inflation. - Medium-term staff recommendation: - Formulate a fiscal policy framework based on the non-mineral domestic balance to smooth spending vis-à-vis volatile mineral revenue and allow a scaling-up of public investment while maintaining debt sustainability. - Improve forecasting of mineral revenue, including by updating the Fiscal Analysis of Resource Industries (FARI) model with Fund capacity development (CD) support, and enhance inter-institutional coordination. ### Revenue mobilization: scope and priorities - Priority: increase fiscal space through enhanced revenue mobilization, especially non-resource revenue. - Key statistics and diagnostics: - DRC’s revenue-to-GDP ratio is less than 12 percent, compared to the SSA average of over 20 percent. - World Bank estimate of tax gap: 5.3 percent of GDP. - Underlying weaknesses cited: - Large tax expenditures, widespread informality, narrow tax base, breakdown of the VAT system. - Proliferation of nuisance taxes and parafiscal levies, more than 350 taxes and 800 parafiscal levies for the central government alone. - Proliferation of tax collection agencies and overlap between national and provincial taxes. - Difficulty policing long borders and pervasive corruption. - Recommendations: - Publish the tax expenditure assessment with the 2020 budget and devise a plan to rationalize tax expenditures over the medium term. - Simplify the tax system to strengthen the tax base and enhance revenue collection. - Update and integrate computerized collection systems and platforms to facilitate information-sharing and reduce tax evasion. - Estimate: Tax expenditures are estimated at around 2 percent of GDP. ### Natural resource (mining) revenues and related measures - The new Mining Code is expected to increase natural resource revenues but these would remain volatile. - Observations: - The average effective tax rate would be well above international comparators (Natural Resource Governance Institute, 2018), particularly for gold. - The revised Code could limit the development of the mining sector going forward. - Recommendations: - Further integrate mining revenue into the central government’s Treasury (including from state-owned enterprises and the mineral fund for future generations). - Strengthen tax administration to limit transfer pricing practices. - Reinstate VAT collections from mining companies and develop a plan to audit and clear VAT credit arrears. - Specific figures: - Authorities stopped collecting VAT on imports of mining companies because of their inability to refund VAT credit. - VAT credit arrears amounted to US$0.8 billion as of end-March 2019. - Authorities envisage progressive reimbursements against future tax payments. ### Expenditure efficiency and public investment - Findings: - Total central government expenditures remain modest, but current expenditures have increased faster than investment in recent years. - The wage bill is equivalent to about half of tax revenues and weighs heavily on the central government’s budget. - Efficiency of spending is low. - Policy implications: - Reform of the civil service is needed to increase efficiency: streamline the number of civil servants while increasing salaries. - Investment needs are considerable; the authorities developed an ambitious investment program based on the President’s 100-day plan, though financing options are limited. - The Ministry of Finance plans to issue Treasury securities starting in 2019. - Donor financing could be forthcoming, though not in the immediate future. ### Public financial management, cash planning, and TSA - Progress and remaining weaknesses: - Macroeconomic framework updated on a quarterly basis; cooperation for revenue forecasts has improved. - Credibility of the budget affected by weaknesses in revenue forecasting and Parliament’s pressures to set high revenue targets. - Budget execution relies on a weekly cash management committee and widespread use of ad-hoc/emergency spending procedures. - Recommendations: - Produce realistic revenue (particularly from the mineral sector) and expenditure projections and incorporate them in a revised 2019 budget and the draft 2020 budget. - Gradually restore the expenditure chain and restrict the use of emergency spending procedures. - Support the computerized expenditure chain system with regulations strictly framing the use of non-standard spending procedures. - Treasury Single Account (TSA) and cash management: - Revenues are only partially integrated into the TSA, which consists of a general treasury account and multiple sub-accounts whose funds cannot be reallocated to the general account. - Some public sector accounts are completely outside the treasury’s circuit, including “special accounts” (e.g., the Roads Fund). - Recommendations: - Adopt legislation to allow direct transfer of revenue flows into the administration’s general account and formalize the fungibility of resources from government sub-accounts. - Gradually integrate special accounts into the budget. - Recommendation to reinforce monitoring of Treasury flows and coordination between the government and the BCC in formulation of treasury plans. ### Domestic arrears and debt strategy - Arrears: - As of end-2018, the stock of domestic arrears, including VAT refund arrears, amounted to 6.5 percent of GDP. - Composition: 61 percent are audited arrears (mostly debt from social sectors and judiciary rulings), and the rest are debt to provinces and oil-related companies. - Up to 7 percent of GDP in potential arrears remains to be audited. - Recommended strategy: - Independent audit by international and/or local experts of all non-audited domestic arrears. - Cross-settlement in the case of cross debts. - Formulation of a medium-term action plan for settlement. - Debt profile and risks: - DRC’s risk of debt distress is assessed as moderate despite a low debt-to-GDP ratio. - External debt: 13.7 percent of GDP, of which liabilities from the mining-infrastructure project Sicomines represented almost 40 percent. - Domestic debt increased from 0.3 percent of GDP in 2014 to 6.5 percent in 2018, in part due to efforts to broaden coverage of domestic debt and auditing legacy arrears. - Vulnerabilities reflected in high debt-service-to-revenue ratios. - Policy recommendations: - Avoid expensive external borrowing, collateralized loans, and external arrears while re-engaging with the international community. - Develop a medium-term debt strategy to maximize efficiency of borrowing flows and ensure debt sustainability. - Continue broadening debt coverage, especially by including debt of state-owned enterprises without explicit guarantees from the central government. ### Monetary and exchange rate policies - Objective and constraints: - Monetary policy’s ultimate objective is to achieve a medium-term inflation rate of 7 percent. - Monetary policy hampered by high levels of financial dollarization and a shallow interbank market. - Reserve requirements must be maintained in local currency only, creating an exchange rate mismatch in commercial banks’ balance sheets. - Given low BCC foreign exchange (FX) reserves, space for FX interventions is very limited. - Low level of BCC FX reserves partly due to the BCC’s policy of holding its foreign currency deposits at local banks. - Staff recommendations: - Maintain current monetary policy stance and framework. - Increase BCC FX reserves by sending abroad its foreign currency deposits currently held at domestic banks. - Require reserve requirements on foreign currency deposits to be constituted in foreign currency and keep lower requirement rates for local currency deposits. - Financial de-dollarization should be a long-term objective achieved gradually through prudent macroeconomic policies and by building trust in the Congolese Franc and monetary policy conduct. - External sector and capital flow management: - New Mining Code requires mining companies to repatriate 60 percent (raised from 40 percent) of export receipts to their accounts in the DRC, with uses subject to Exchange Regulation of 2014. - This tightening of the repatriation requirement helped mitigate acute balance of payments pressures. - In line with the Fund’s Institutional View on capital flows (IV), tightening should complement macroeconomic adjustments and be scaled back as adjustment progresses and pressures subside. - External position: - Current account balance estimated at -4.6 percent of GDP in 2018. - Revised EBA-lite regression models suggest a current account gap of around -2.5 percent of GDP and an around 10 percent exchange rate misalignment. - Over the medium term, the current account balance is projected to stay around the norm, mainly financed by foreign direct investments. - Key challenge: inadequate level of foreign exchange reserves for external sustainability. - Recommended policies: prudent macroeconomic policies and structural policies to improve competitiveness and the business and institutional environments. ### Central bank autonomy and financial transparency - Observations: - 2010 safeguards assessment and 2014 Financial System Stability Assessment noted need to recapitalize the BCC to increase operational autonomy and improve transparency. - Plan to increase the capital of the BCC to about US$130 million has been formulated; recapitalization schedule still being discussed given budgetary constraints. - Two Congolese commercial banks publish reports under IFRS; the rest of the banks and the BCC anticipate complying before end-2020. - Only an abridged version of the audited financial statements of the BCC is published on the BCC website, a departure from safeguards policy requirements. - Recommendation: increase BCC autonomy and enhance financial transparency. ### Financial sector policies and supervision - Vulnerabilities: - Financial system highly vulnerable to shocks: net open FX position and large expansion in deposits and credit to the private sector in foreign currency during 2018 are sources of risk. - In 2016, the fourth largest bank, BIAC, experienced financial distress and was put under BCC administration. - The BCC should speed up rehabilitation or resolution of BIAC while continuing close monitoring of the banking system. - Regulatory and supervisory measures: - Some FSAP recommendations adopted (e.g., revised law on leasing in March 2015; law on payment systems in July 2018). - AFRITAC Central providing support through end-2020 to align regulatory framework with international best practices. - Progress on risk-based supervision and supervisory processes; further efforts needed to develop institutional capacity, improve financial data quality, and implement a BCC rapid response process. - Capital requirements: - Minimum capital requirement increased to US$30 million, but 6 out of 16 banks (excluding BIAC) have not complied yet. - Capital requirement will be raised to US$50 million at end-2020. - Legal framework: - New Central Bank Law enacted in December 2018 aiming to reinforce BCC independence, increase capital, protect BCC assets, reinforce privilege of BCC credit operations, and enhance supervisory role. - A Banking Law to regulate credit institutions is under consideration in the Senate; Fund staff suggested aligning it with best international practices. - Microfinance sector growing but underdeveloped; legislation and audits/controls of financial data should be improved. - AML/CFT: - DRC should improve its AML/CFT framework informed by the upcoming mutual evaluation. - 2014 World Bank assessment identified system-wide strategic deficiencies against the 2012 FATF standard. - DRC joined the Central African Anti-Money Laundering Action Group in late 2017; onsite evaluation against 2012 FATF standards undertaken in late 2018 with results being finalized. - Upon conclusion, DRC should promptly implement priority actions identified. ### Business environment, governance, and anti-corruption - Government priorities: fight against corruption and improvement of economic governance. - Observations and weaknesses: - A 2011 decree requiring publication of all mining, oil, and forestry contracts has not been fully applied. - DRC is a signatory to the Extractive Industries Transparency Initiative (EITI); 2016 report published last June (report shows minor divergences but coverage issues, including from SOEs; several significant mining deals not published). - Staff recommendations to enhance transparency and governance: - Public tendering of mining assets and publication of all mining contracts. - Disclosure of true ownership of contractual parties. - Publication of audited financial statements of SOEs. - Greater involvement of the legislative branch in monitoring management of public assets. - Expedite passage of the anti-corruption law and the law establishing an independent anti-corruption commission and step up enforcement. - Implement reforms recommended elsewhere in the report to enhance PFM, tax administration, SOEs and central bank governance, financial sector oversight, and the AML/CFT framework. - Authorities requested the Fund to conduct a governance assessment under its new governance framework to help design and prioritize reforms. *Source: IMF staff report excerpt (content unit: 1codea2019001).* ### 37. Improving the business climate is needed to accelerate growth in the non-mining ### 37. Improving the business climate is needed to accelerate growth in the non-mining ### Business climate constraints and impacts - Private sector representatives identified: - cumbersome administrative procedures - extortion - arbitrary judicial decisions - a plethora of taxes and other charges - Consequences: - makes doing business difficult - shrinks the formal economy and the tax base (Text Figure 5) - Specific transparency and governance gaps noted: - SOEs, including Gécamines and Sicomines, do not fully comply with regulations requiring submission of audited financial statements to the register of public enterprises - audited financial statements are not consistently published on SOE websites or on the website of the Ministry of State Portfolio - Staff emphasis: - respect and enforce property rights - establish a professional and independent judiciary system - civil service reform to reduce entrenched petty corruption linked in part to very low salaries ### Reforms urged by staff to boost non-mining activity and inclusion - Reduce red tape and simplify the tax system - Provide regulatory and physical security to the business community - Enforce property rights and ensure an independent judiciary - Strengthen transparency of SOEs by ensuring submission and publication of audited financial statements - Civil service reform to streamline staff and raise salaries to reduce petty corruption ### Authorities’ views and reform challenges - Authorities agreed reforms would: - unleash economic activity - lead to a larger tax base and higher revenue - ultimately produce more inclusive growth - Challenges to implementing reforms: - difficulties in changing deep-seated habits and overcoming vested interests - need to mobilize funding and social consensus for structural changes such as civil service reform - requirement for sustained high levels of public investment to reach a critical mass of infrastructure - limited political capital in a fragmented political scene ### Other issues (E) - DRC requested to join the East African Community (EAC) in June 2019; accession should be discussed in November this year - Data provision is broadly adequate for surveillance; authorities need to improve timeliness and debt data coverage - The Fund’s CD strategy for DRC focuses on: - improving budget preparation and execution - strengthening banking supervision and regulation - reinforcing revenue mobilization - improving national accounts and fiscal data - undertaking a governance assessment (Annex II) ### Staff appraisal: macroeconomic context and priority reforms (paras. 42–47) - Context and opportunity: - 2015-16 commodity shock and political uncertainty are largely behind - economy is recovering thanks to prudent macroeconomic policies, particularly a cash-based fiscal policy - first ever peaceful transition of power took place at the beginning of 2019 - decisive structural reforms are needed to attain higher inclusive growth and stronger policy buffers - Revenue mobilization (para. 43): - increasing domestic revenue mobilization is critical to create sustainable fiscal space for development spending - mining revenue is expected to increase due to the revised Mining Code, but should be further integrated into the central government’s Treasury - staff recommends expanding non-mining revenue through reduced exemptions, enlargement of the tax base, simplification of the tax system, and improved tax administration and control of borders - Public financial management (PFM) (para. 44): - strengthen PFM systems to improve fiscal management and efficiency of public expenditures - use realistic revenue (particularly from the mineral sector) and expenditure projections for budget formulation and execution - gradually restore the expenditure chain and restrict use of emergency spending procedures - reform the civil service: streamline the number of civil servants while increasing salaries - full implementation of the TSA is necessary to enhance cash management; treasury plans must be frequently updated - public investment projects should be carefully vetted; avoid expensive borrowing and collateralized loans to maintain debt sustainability - urgently develop a strategy to clear domestic arrears and conduct an audit of unresolved ones - Monetary policy and central bank (para. 45): - fine-tune the monetary policy framework to enhance effectiveness - staff calls for the recapitalization of the BCC to help it fulfill its mandates - staff recommends increasing FX reserves to allow the BCC to intervene to counter disorderly market conditions and to support the external position, which was weaker than warranted by fundamentals and desirable policy settings in 2018 - BCC should transfer abroad its foreign currency deposits currently held at domestic banks, taking advantage of ample liquidity in the banking system - implement IFRS by the BCC to enhance its financial transparency - Financial sector and AML/CFT (para. 46): - further improve financial sector regulations; regulations and guidelines need to be enacted and enforced - adopt the Banking Law in line with international standards - improve AML/CFT framework by promptly implementing priority actions identified in the upcoming evaluation report of the Central African Anti-Money Laundering Action Group - promote microfinance to improve inclusive growth and financial inclusion - Governance and anti-corruption (para. 47): - fighting corruption and improving governance are crucial to enhance legitimacy and underpin confidence - urgently enhance transparency, including through: - public tendering of mining assets - publication of all mining contracts - disclosure of true ownership of contractual parties - publication of audited financial statements of SOEs - closer monitoring of public assets - expedite passage of the anti-corruption law and the law establishing an independent anti-corruption commission - the request for an IMF governance assessment should help design and prioritize government reforms in this area - improve the business climate to attract private investment and generate inclusive growth by reducing red tape, simplifying the tax system, and providing regulatory and physical security *Source: 1codea2019001 - 37. Improving the business climate is needed to accelerate growth in the non-mining (PDF).* ### 48. Staff recommends that the next Article IV consultation with the DRC be held on the ### 48. Staff recommends that the next Article IV consultation with the DRC be held on the standard 12-month consultation cycle. ### External indicators (2014–2018) - Commodity and production trends: - "While copper prices recovered after the 2015 commodity price crisis, cobalt process plummeted. However, the production of both commodities has been slowly increasing." - "Export values fell at end-2018 reflecting lower cobalt prices." - "Imports picked up at end-2018 due to election spending." - "As a result, the trade balance deteriorated at end-2018." - International reserves: - Gross international reserves (billions of US$) shown over Mar-14 to Dec-18 (chart). - International reserves (weeks; RHS) plotted alongside reserves levels. - Sources: DRC authorities; and IMF staff estimates. ### Real and fiscal indicators (2014–2018) - Growth and inflation: - "The extractive sector has been the main source of growth over the last two years, recovering from the 2015-16 crisis." - "Inflation has decelerated and stabilized at a low level." - Fiscal accounts and developments: - "Revenues remain low despite the revised Mining Code. Expenditures picked up last year due to election spending." - "The fiscal deficit was contained, but domestic arrears continued to rise." - "The fiscal deficit was monetized." - Sources: DRC authorities; IMF staff estimates. ### Monetary and financial indicators (2014–2018) - Credit, money, and reserves: - "Credit to the private sector has picked up since December 2017." - "A similar trend has been recorded for money supply as the economy has stabilized." - "Foreign currency deposits have increased at a faster rate than local currency." - "Excess reserves remain stable but volatile." - Exchange rate and real effective exchange rate: - "The depreciation of the Congolese franc is moderating against both the US Dollar and the Euro." - "But the real effective exchange rate has partly reversed the large depreciation recorded after the crisis." - Sources: DRC authorities; IMF staff estimates. ### Selected economic and financial indicators (Table 1, 2016–24) - Real GDP (annual percent change): 2016 Act. 2.4; 2017 Act. 3.7; 2018 Prel. 5.8; 2019 4.3; 2020 3.9; 2021 3.4; 2022 4.5; 2023 4.3; 2024 4.6. - Extractive GDP (annual percent change): 2016 -0.7; 2017 7.8; 2018 16.9; 2019 5.4; 2020 4.4; 2021 2.4; 2022 5.9; 2023 4.8; 2024 6.1. - Consumer prices, period average: 2016 3.2; 2017 35.8; 2018 9.3; 2019 5.5; 2020 5.0; 2021 5.0; 2022 5.0; 2023 5.0; 2024 5.0. - Exports, f.o.b. (U.S. dollars, percent change): 2016 15.6; 2017 -2.8; 2018 38.3; 2019 -21.4; 2020 4.3; 2021 4.0; 2022 7.6; 2023 6.3; 2024 7.5. - Imports, f.o.b. (U.S. dollars, percent change): 2016 14.9; 2017 -6.7; 2018 32.0; 2019 -20.2; 2020 6.9; 2021 5.5; 2022 6.9; 2023 7.5; 2024 7.9. - Broad money (annual percent change): 2016 22.2; 2017 42.8; 2018 30.1; 2019 9.5; 2020 9.6; 2021 9.9; 2022 10.7; 2023 9.8; 2024 9.3. - Revenue and grants (percent of GDP): 2016 14.0; 2017 11.7; 2018 11.6; 2019 10.8; 2020 10.6; 2021 11.3; 2022 11.7; 2023 12.0; 2024 12.3. - Expenditures (percent of GDP): 2016 14.5; 2017 10.4; 2018 11.2; 2019 10.9; 2020 10.8; 2021 11.1; 2022 11.5; 2023 11.8; 2024 12.2. - Overall fiscal balance (commitment basis, percent of GDP): 2016 -0.5; 2017 1.4; 2018 0.4; 2019 -0.2; 2020 -0.1; 2021 0.2; 2022 0.2; 2023 0.2; 2024 0.1. - Current account balance, incl. transfers (percent of GDP): 2016 -4.1; 2017 -3.2; 2018 -4.6; 2019 -3.5; 2020 -4.2; 2021 -4.4; 2022 -4.3; 2023 -4.4; 2024 -4.5. - Gross official reserves (millions of U.S. dollars): 2016 625; 2017 601; 2018 657; 2019 1,011; 2020 1,108; 2021 1,282; 2022 1,530; 2023 1,721; 2024 1,820. - Gross official reserves (weeks of imports): 2016 2.8; 2017 1.9; 2018 2.6; 2019 3.7; 2020 3.9; 2021 4.2; 2022 4.6; 2023 4.8; 2024 5.0. - Total external public debt (percent of GDP): 2016 17.6; 2017 16.9; 2018 13.7; 2019 13.3; 2020 12.7; 2021 12.1; 2022 10.9; 2023 8.9; 2024 8.9. - Exchange rate (CDF per U.S. dollars): Period average 2016 1,024; 2017 1,480; 2018 1,624. End-of-period 2016 1,216; 2017 1,592; 2018 1,636. - Memorandum: Nominal GDP (millions of U.S. dollars): 2016 36,640; 2017 37,615; 2018 47,099; 2019 49,014; 2020 51,627; 2021 54,174; 2022 57,257; 2023 60,819; 2024 64,313. - Sources: Congolese authorities; and IMF staff estimates and projections. ### Central government financial operations (Tables 2a and 2b, 2016–24) - Revenue and grants (billions of CDF): 2016 Act. 5,246; 2017 Act. 6,538; 2018 Prel. 8,844; 2019 8,895; 2020 9,572; 2021 10,981; 2022 12,453; 2023 14,005; 2024 15,779. - Revenue (billions of CDF): 2016 4,195; 2017 5,443; 2018 7,993; 2019 7,824; 2020 8,221; 2021 9,434; 2022 10,655; 2023 11,949; 2024 13,428. - Tax revenue (billions of CDF): 2016 3,232; 2017 4,284; 2018 6,101; 2019 5,744; 2020 5,985; 2021 6,962; 2022 7,937; 2023 8,992; 2024 10,202. - Grants (billions of CDF): 2016 1,051; 2017 1,095; 2018 851; 2019 1,071; 2020 1,351; 2021 1,547; 2022 1,798; 2023 2,056; 2024 2,351. - Expenditure (billions of CDF): 2016 5,431; 2017 5,783; 2018 8,539; 2019 9,028; 2020 9,702; 2021 10,829; 2022 12,236; 2023 13,789; 2024 15,590. - Current expenditure (billions of CDF): 2016 3,926; 2017 4,080; 2018 6,034; 2019 6,846; 2020 7,252; 2021 8,091; 2022 8,805; 2023 9,847; 2024 10,752. - Capital expenditure (billions of CDF): 2016 1,270; 2017 1,301; 2018 1,285; 2019 1,707; 2020 2,116; 2021 2,544; 2022 3,181; 2023 3,216; 2024 4,511. - Exceptional expenditure and elections-related figures are reported (billions of CDF), including: elections-related entries (2016 168; 2017 320; 2018 851; 2019 325; etc.). - Overall fiscal balance (commitment basis, billions of CDF): 2016 -186; 2017 754; 2018 305; 2019 -133; 2020 -130; 2021 153; 2022 218; 2023 215; 2024 189. - Change in domestic arrears (repayment = - , billions of CDF): 2016 274; 2017 497; 2018 0; 2019 0; 2020 -360; 2021 -360; 2022 -360; 2023 -360. - Memorandum: Gross domestic product (billions of CDF): 2016 37,517; 2017 55,676; 2018 76,496; 2019 82,660; 2020 89,970; 2021 97,559; 2022 106,551; 2023 116,956; 2024 127,800. - Notes: "Unpaid VAT credit reimbursements and other arrears (cumulative)." "Mainly expenditure related to security and elections." - Sources: Congolese authorities; IMF staff estimates and projections. ### Monetary survey (Table 3, 2016–24) - Net foreign assets (billions of CDF): 2016 1,112; 2017 2,651; 2018 3,417; 2019 3,811; 2020 4,195; 2021 4,744; 2022 5,508; 2023 6,181; 2024 6,852. - Net domestic assets (billions of CDF): 2016 4,164; 2017 4,884; 2018 6,407; 2019 6,942; 2020 7,584; 2021 8,198; 2022 8,815; 2023 9,541; 2024 10,327. - Domestic credit (billions of CDF): 2016 3,079; 2017 3,266; 2018 4,662; 2019 4,970; 2020 5,588; 2021 6,158; 2022 6,717; 2023 7,366; 2024 8,063. - Credit to the private sector (billions of CDF): 2016 2,684; 2017 2,718; 2018 4,249; 2019 4,288; 2020 4,675; 2021 4,931; 2022 5,245; 2023 5,663; 2024 6,375. - Broad Money (M2, billions of CDF): 2016 5,276; 2017 7,535; 2018 9,801; 2019 10,735; 2020 11,761; 2021 12,922; 2022 14,302; 2023 15,699; 2024 17,154. - Foreign currency deposits (percent of M2): 2016 67.0; 2017 73.3; 2018 75.2; 2019 71.3; 2020 70.3; 2021 69.3; 2022 68.3; 2023 67.2; 2024 66.2. - Base money (billions of CDF): 2016 1,617; 2017 1,984; 2018 2,519; 2019 2,759; 2020 3,023; 2021 3,321; 2022 4,474; 2023 4,035; 2024 4,409. - Sources: Congolese authorities; IMF staff estimates and projections. ### Balance of payments (Tables 4a and 4b, 2016–24) - Current account (millions of U.S. dollars, Table 4a): 2016 -1,504; 2017 -1,211; 2018 -2,169; 2019 -1,725; 2020 -2,179; 2021 -2,378; 2022 -2,436; 2023 -2,659; 2024 -2,888. - Exports, f.o.b. (millions of U.S. dollars, Table 4a): 2016 11,885; 2017 11,548; 2018 15,967; 2019 12,545; 2020 13,083; 2021 13,612; 2022 14,644; 2023 15,567; 2024 16,737. - Imports, f.o.b. (millions of U.S. dollars, Table 4a): 2016 -12,149; 2017 -11,340; 2018 -14,973; 2019 -11,949; 2020 -12,778; 2021 -13,486; 2022 -14,414; 2023 -15,494; 2024 -16,722. - Gross official reserves (millions of U.S. dollars, Table 4a): 2016 625; 2017 601; 2018 657; 2019 1,011; 2020 1,108; 2021 1,282; 2022 1,530; 2023 1,721; 2024 1,820. - Debt service after debt relief (percent of exports): 2016 2.9; 2017 2.1; 2018 2.8; 2019 3.2; 2020 2.5; 2021 1.9; 2022 1.1; 2023 0.9; 2024 0.7. - Table 4b presents parallel series in CDF terms, including a Current account (billions of CDF): 2016 -1,540; 2017 -1,793; 2018 -3,523; 2019 -2,909; 2020 -3,797; 2021 -4,283; 2022 -4,533; 2023 -5,114; 2024 -5,739. - Notes: "Including interest due to the IMF." "Excluding principal repayments to the IMF." "Including unrecorded transactions. The latter may be substantial given weaknesses in statistics." - Sources: Congolese authorities; IMF staff estimates and projections. ### Financial soundness indicators (Table 5, 2014–Mar-19) - Capital adequacy: - Regulatory capital to risk-weighted assets: 2014 23.7; 2015 20.4; 2016 9.0; 2017 16.0; 2018 14.2; Mar-19 14.8. - Regulatory tier 1 capital to risk-weighted assets: 2014 18.4; 2015 16.7; 2016 12.0; 2017 14.2; 2018 11.9; Mar-19 12.5. - Asset quality: - NPLs to gross loans: 2014 7.9; 2015 18.3; 2016 18.1; 2017 16.1; 2018 16.8; Mar-19 16.0. - Profitability: - Return on assets (net income/total assets): 2014 1.8; 2015 1.5; 2016 -1.4; 2017 -0.1; 2018 1.1; Mar-19 0.3. - Liquidity and market sensitivity: - Liquid assets to total assets: 2014 60.4; 2015 53.4; 2016 47.5; 2017 55.8; 2018 50.2; Mar-19 52.9. - Foreign currency-denominated liabilities to total liabilities: 2014 84.4; 2015 81.8; 2016 82.8; 2017 77.2; 2018 74.6; Mar-19 74.4. - Foreign currency-denominated loans to total loans: 2014 81.9; 2015 85.6; 2016 85.1; 2017 93.7; 2018 93.5; Mar-19 93.8. - Source: Central Bank of the Democratic Republic of the Congo (BCC). ### Key policy-relevant observations and implications from the material - Timing and surveillance: - Staff recommends the next Article IV consultation be held on the standard 12-month consultation cycle. - Macro-financial stability: - Recovery in extractive sector activity is the main growth driver, but volatility in commodity prices (notably cobalt) and low international reserves keep external vulnerability elevated. - Fiscal pressures from election-related spending contributed to a deterioration in the trade balance and increased domestic arrears; the fiscal deficit was monetized in the period under review. - Broad money and private credit expansion resumed, with foreign currency deposits remaining a large share of liabilities, leaving the financial sector sensitive to exchange rate movements. - Public finance and external positions: - Revenues remain low relative to needs despite mining code revisions; grants and project financing are significant for the fiscal and external positions. - Gross official reserves increased from 625 to 1,820 (millions of U.S. dollars) across 2016–2024 projections but remain low in weeks of imports terms for recent years. - Financial sector health: - High NPL ratios and variable profitability point to ongoing banking-sector vulnerabilities despite adequate regulatory capital ratios in some years. - Data and monitoring: - Several tables and notes flag statistical weaknesses and unrecorded transactions, underscoring the need for strengthened statistical compilation and transparency. *Sources: Congolese authorities; IMF staff estimates and projections (as presented in the provided tables and figures).* ### Annex I. External Sector Assessment ### Annex I. External Sector Assessment ### A. Current Account - The current account (CA) balance is estimated at -4.6 percent of GDP in 2018, down from -3.3 percent of GDP in 2017. - Exports of goods and services expanded by 3.2 percent of GDP in 2018, driven by a recovery in mineral prices. - Mineral exports constituted 98.8 percent of goods exports in 2018. - Imports of goods and services increased by 3.0 percent of GDP in 2018, partly due to spending linked to the organization of the elections. - The CA balance is projected to remain around the norm over the medium term, mainly financed by foreign direct investment (FDI). - Financing mix for the CA deficit includes public borrowing, official flows in the capital account, and private FDI; structural policies improving the business and institutional environments may attract further FDI, concessional lending, and grants. - EBA-lite CA model results: - CA-Actual: -4.6% of GDP - Cyclical Contributions (from model): 1.6% - Cyclically adjusted CA: -6.3% of GDP - CA-Norm: -2.6% of GDP - Cyclically adjusted CA Norm: -4.2% of GDP - Multilaterally Consistent Cyclically adjusted CA Norm: -3.7% of GDP - CA-Gap: 2.5% of GDP - of which Policy gap: 2.2% of GDP - Elasticity: 26.0% - REER Gap: 9.8% - CA-Fitted: -3.9% of GDP - Residual: -0.7% of GDP - Natural Disasters and Conflicts contribution: 0.9% - Interpretation of CA model: - The CA-gap of about -2.5 percent of GDP in 2018 suggests a weak external position and an overvalued real effective exchange rate. - A key driver of the CA norm and a main source of the policy gap is the assumed pace of FX reserves accumulation; FX reserve holdings are very low (less than 3 weeks of imports), requiring policy adjustment over the medium term. ### B. Real Exchange Rate (REER) and Nominal Exchange Rate - REER developments: - The REER appreciated by 25 percent by December 2018 (end of period). - The REER appreciated by 9.2 percent (average) in 2018. - NEER developments: - The nominal effective exchange rate (NEER) continued to depreciate during the first three quarters of 2018 but appreciated by 2.2 percent in the last quarter of the year. - From a period average perspective, the NEER depreciated by 10 percent in 2018. - Congolese Franc (FC) movements: - FC depreciated by 10.5 percent in 2016. - FC depreciated by 44.6 percent in 2017. - Depreciation slowed to 9.7 percent in 2018. - IREER (EBA-lite REER model) results: - Ln(REER) Actual: 4.82 - Ln(REER) Fitted: 4.97 - Ln(REER) Norm: 4.87 - Residual: -0.14 - REER Gap: -4.3% - Assessment: - The CA model indicates an REER misalignment around a 9.8 percent overvaluation. - The EBA-lite REER model suggests the REER is slightly undervalued (REER Gap -4.3%), but REER model results are less reliable for countries with a short sample or large structural changes; therefore, the overall REER assessment is based on the CA model. - Policy implication: - Macroeconomic and structural policies should address policy gaps; competitiveness-enhancing reforms and improvements in the business environment are recommended to support external sustainability. ### C. Reserve Adequacy - Gross international reserves at end-2018: US$657 million. - Reserve coverage at end-2018: 2.5 weeks of imports. - IMF reserve adequacy metric suggests a reserve coverage of 13.2 weeks (3.3 months) of imports. - Assessment: - International reserves are significantly inadequate and insufficient to provide buffers against external shocks. - Low reserves undermine the stability of the financial system. - Policy recommendation: - Accumulate international reserve buffers; prudent fiscal and monetary policies and structural reforms are needed to improve external sustainability and reduce pressure on FX reserves. ### Overall Assessment and Policy Recommendations - Overall assessment for 2018: the external position of the Democratic Republic of the Congo was weaker than warranted by fundamentals and desirable policy settings. - Key challenge: inadequate level of FX reserves despite a low level of external debt. - Recommended policies: - Prudent fiscal policy and monetary policy to support external sustainability. - Structural policies to improve the business and institutional environments, enhance competitiveness, and attract further FDI, concessional lending, and grants. - Specific emphasis on accumulating FX reserve buffers and addressing policy gaps identified by the CA approach. *Source: Annex I. External Sector Assessment (Democratic Republic of the Congo), IMF staff estimates and Congolese authorities.* ### Annex IV. Democratic Republic of the Congo: Status of Past ### Annex IV. Democratic Republic of the Congo: Status of Past Article IV Recommendations ### Status of Past Article IV Recommendations — Summary - Natural Resource Management - Recommendation: Enact new Mining Code in line with international best practice. - Status: New Mining Code enacted in June 2018. - Follow-up: Mining companies dispute key changes compared to the 2002 Mining Code. - Recommendation: Strengthen governance and enhance transparency in their management of natural resources. - Status: Governance and transparency in the management of natural resources remain poor. - Macroeconomic management - Recommendation: Accumulate FX reserves to mitigate vulnerability. - Status: FX reserves remain low and fell sharply in recent years. - Recommendation: Encourage de-dollarization. - Status: Initial de-dollarization measures have been reversed. - Fiscal Policy - Recommendation: Broaden tax base. - Status: Tax base remains limited. - Recommendation: Strengthen budget process to enhance credibility. - Status: Large deviations between targets and outturns persist. - Competitiveness and the business environment - Recommendation: Improve the business and investment climate. - Status: Business and investment climate remain difficult and in need of reform. - Central bank operations and management - Recommendation: Strengthen central bank independence and operations through recapitalization and enacting of Central Bank Law. - Status: Central bank still not recapitalized but Central Bank Law enacted in December 2018. - Financial sector regulation and stability - Recommendation: Enact Commercial Banking Law. - Status: Not yet enacted. ### Relations with the IMF — Key Facts and Financial Positions (as of May 31, 2019) - Membership Status: Joined September 28, 1963; Article VIII - General Resources Account - Quota: 1,066.00 - Percent of Quota: 100.00 - Fund holdings of currency: 1,066.00 - Percent of Quota (holdings): 100.00 - SDR Department - Net cumulative allocation: 510.86 (100.0 percent of Quota) - Holdings: 20.59 (4.03 percent of Quota) - Outstanding Purchases and Loans (SDR Million; Percent of Quota) - ECF Arrangement: 64.34 (6.04 percent of Quota) - Latest Financial Arrangements (summarized) - ECF — Approval Date Dec 11, 2009; Expiration Date Dec 10, 2012; Amount Approved (SDR Million) 346.45; Amount Drawn (SDR Million) 197.97 - ECF — Approval Date June 12, 2002; Expiration Date Mar 31, 2006; Amount Approved (SDR Million) 580.00; Amount Drawn (SDR Million) 553.47 - Stand-By — Approval Date June 09, 1989; Expiration Date June 08, 1990; Amount Approved (SDR Million) 116.40; Amount Drawn (SDR Million) 75.00 - Projected Payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs) - 2019 Principal: 24.75; Charges/interest: 2.75; Total: 27.50 - 2020 Principal: 29.70; Charges/interest: 5.45; Total: 35.15 - 2021 Principal: 9.90; Charges/interest: 5.45; Total: 15.35 - 2022 Charges/interest: 5.45; Total: 5.45 - 2023 Charges/interest: 5.45; Total: 5.45 ### HIPC and MDRI Assistance — Key Figures - Implementation of HIPC Initiative (Enhanced Framework) - Decision point date: July 2003 - Assistance committed by all creditors (US$ millions): 7,252.00 - Of which: IMF assistance (US$ millions): 391.60 (SDR equivalent millions) 280.30 - Completion point date: July 2010 - Disbursement of IMF assistance (SDR millions) - Assistance disbursed to the member: 280.30 - Interim assistance: 49.05 - Completion point balance: 231.25 - Additional disbursement of interest income: 50.44 - Total disbursements: 330.74 - Implementation of MDRI Assistance - MDRI-eligible debt (SDR Million): 248.08 - Financed by: MDRI Trust 0.00; Remaining HIPC resources 248.08 - Delivery Date: July 2010 — Eligible Debt: N/A (GRA), 248.08 (PRGT), Total 248.08 ### Exchange Rate Arrangement and Safeguards - Currency: Congo franc (CDF). - De jure exchange rate arrangement: Floating. - Fund classification of de facto arrangement: “stabilized.” - End-March 2019 exchange rate: US$1 = CF 1639.0. - Article VIII: Accepted obligations effective February 10, 2003, with one exchange rate restriction related to an inoperative regional payments’ agreement with the Economic Community of the Great Lakes Countries. - Last Article IV consultation concluded: September 11, 2015. - Safeguards Assessment (Banque Centrale du Congo, BCC) - Updated assessment completed April 2010: most 2008 recommendations implemented, but significant risks remained (lack of autonomy, need for recapitalization, absence of independently defined financial reporting framework). - Ministry of Finance completed first phase of recapitalization in March 2011 by bringing BCC's net worth to zero. - BCC committed to adopt IFRS (transition delayed). - BCC Law amended in December 2018 with changes on independence, autonomy, and transparency. - Resident Representative: Mr. Philippe Egoumé Bossogo assumed duties in September 2018. ### Relations with Other Financial Institutions - World Bank: World Bank Group projects and country overview pages referenced (URLs provided in source). - African Development Bank: Country page referenced (URL provided in source). ### Statistical Issues — Data Adequacy and Developments - General assessment: Data provision to the Fund has some shortcomings but is broadly adequate for surveillance and program monitoring purposes. Upgrades to national accounts, balance of payments, and government finance statistics would be helpful. - National accounts - Annual national accounts (ANA) compiled by National Institute of Statistics (INS) with IMF/AFC TA. - Use of ERETES software since 2006; definitive ANA for 2005 and 2006 compiled in compliance with 1993 SNA, implying an upward revision of GDP by about 60 percent. - INS temporarily suspended use of ERETES due to insufficient human resources. - With technical assistance from AFC, INS compiled ANA for 2016 and 2017. - Price statistics - Consumer price indices (CPI) calculated for Kinshasa by INS, BCC, Institute of Economic and Social Research (IESR), and the Economics Section of the U.S. Embassy in Kinshasa. - In 2011 INS started compiling CPI countrywide using weights based on the 2005 household survey. - BCC in 2013 began compiling a similar CPI using a different basket and weights based on prices in 5 provinces. - Government finance statistics - BCC produces aggregated monthly cash-basis statistics based on its accounting of government cash operations. - Treasury produces two sets of monthly statistics: transactions executed through BCC and a consolidated set including commercial bank accounts and off-budget operations. - Statistics do not rely on integrated double-entry public accounting and lack sufficient expenditure detail due to problems in the expenditure chain. - Treasury has started producing quarterly expenditure data reports by ministry and institution. - Ongoing work on tax administration, expenditure control, and implementation of a new public accounts framework expected to improve fiscal statistics. - Treasury compiled provisional annual data for budgetary central government for 2017 and 2018 in line with international standards; these data have not yet been disseminated. - DRC reported annual data up to 2010 for the IMF’s Government Finance Statistics Yearbook (GFSY) in GFS Manual 2001 format; reporting has not continued but work is underway to resume submission beginning with data for 2012-2016. - Monetary statistics - Monthly monetary and financial statistics (MFS) covering central bank and other depository corporations are compiled and reported by BCC in standardized report forms. - Depository corporation survey excludes data from non-bank deposit-taking institutions, a growing sector. - DRC has not reported data to the Financial Access Survey (FAS) since 2015. - Financial Soundness Indicators (FSIs) - DRC does not report FSIs for publication on the IMF website. - Technical assistance mission scheduled in 2019 to help develop core and encouraged FSIs for deposit-taking institutions. - Balance of payments - BCC compiling external sector statistics (ESS) using BPM6 methodology with JSA/IMF Project support. - BOP and IIP data up to 2018 are available in IFS. - Direct investment is the main weakness due to very large transactions in this category; a register and surveys of direct investment enterprises must be established. - Data Standards and Quality - DRC participates in the Enhanced General Data Dissemination System (e-GDDS) since April 24, 2004; metadata needs updating. ### Table of Common Indicators Required for Surveillance (as of July 10, 2019) — Selected Dates - Exchange Rates: May-19; Date received 6/4/2019; Frequency of data: M/M/M - International Reserve Assets and Reserves: Apr-19; Date received Jun-19; Frequency: M/M/M - Liabilities of the Monetary Authorities: Apr-19; Date received Jun-19; Frequency: M/M/M - Reserve/Base Money: Apr-19; Date received Jun-19; Frequency: M/M/M - Central Bank Balance Sheet: Apr-19; Date received Jun-19; Frequency: M/M/M - Consolidated Balance Sheet of the Banking System: Apr-19; Date received Jun-19; Frequency: M/M/M - Interest Rates: Apr-19; Date received Jun-19; Frequency: M/M/M - Consumer Price Index: Apr-19; Date received Jun-19; Frequency: M/M/M - Central Government Revenue, Expenditure, and Financing: 2018; Date received Jun-19; Frequency: A/A/A - Stock of Central Government and Central Government-Guaranteed Debt: 2018; Date received Jun-19; Frequency: A/A/A - External Current Account Balance: 2018; Date received 6/4/2019; Frequency: A/A/A - Exports and Imports of Goods and Services: 2018; Date received 6/4/2019; Frequency: A/A/A - GDP/GNP: 2018; Date received Jun-19; Frequency: A/A/A - Gross External Debt: 2018; Date received Jun-19; Frequency: A/A/A - International Investment Position: 2018; Date received 6/7/2019; Frequency: A/A/A ### Debt Sustainability Analysis — Key Findings and Coverage - Debt-carrying capacity (LIC DSF): Assessed as weak. - DRC Composite Indicator (CI) score: 1.98 (corresponds to a weak debt-carrying capacity as confirmed by April 2019 WEO assumptions and 2017 CPIA). - Risk assessments - Risk of external debt distress: Moderate - Overall risk of debt distress: Moderate - Granularity in the risk rating: Limited space to absorb shocks - Application of judgment: No - Summary observations - DRC remains at a moderate risk of external and overall debt distress, with limited space to absorb shocks. - Debt coverage has improved since the last DSA, especially on domestic debt. - External nominal debt ratios are lower than at the time of the 2015 DSA, but vulnerability in debt repayment capacity remains under the baseline due to weak revenue mobilization. - Most external debt thresholds are breached under stress tests, highlighting vulnerability to external shocks. - Policy implication: Given limited buffers, prudent borrowing policies are essential — prioritize concessional loans and strengthen debt management policies. - Public and publicly-guaranteed (PPG) debt coverage - Coverage includes debt contracted and guaranteed by the central government, the Central Bank of Congo (BCC), provinces, and part of state-owned enterprises (SOEs). - Public debt department (Direction Générale de la Dette Publique, DGDP) publishes quarterly and annual reports with residency-based debt information. - Reports summarize debt of central government, SICOMINES, Gécamines, guaranteed external debt of SOEs managed by the government, provinces (only the province of Maniema missing out of 26 provinces), and BCC’s debt. - Data on private sector’s and other public institutions’ debt are not available; other public institutions do not have capacity to borrow externally without government guarantee. - Authorities committed to broaden debt coverage and improve SOEs debt reporting. - Sicomines’ infrastructure loans have a government guarantee callable only after 2034; its debt service should be repaid by 2026 and is collateralized by Sicomines’ earnings. - Public debt coverage and parameters for contingent liability tailored stress test (selected items) - Definition of external/domestic debt: Residency-based - Is there a material difference between the two criteria? No - Public debt coverage used for the analysis: Central government; State and local government; Guarantees (to other entities) included; Central bank (borrowed on behalf of the government) included; Non-guaranteed SOE debt included. - Other elements of general government not captured in 1.0 percent of GDP: Some public institutions are not reporting to the DGDP. - SoE's debt (guaranteed and not guaranteed by the government): 0.5 percent of GDP (DGDP does not receive regular reports from SOEs). - PPP: 35 percent of PPP stock (0.00 numeric entry in table). - Financial market shock: 5 percent of GDP (default value). - Total (2+3+4+5) (in percent of GDP): 7.5 _Prepared by the staff of the International Monetary Fund (IMF) and the International Development Association (IDA); information as presented in the source document._ ### 2. From 2014 to 2017, the Congolese economy deteriorated sharply in the wake of a ### 1codea2019001 - 2. From 2014 to 2017, the Congolese economy deteriorated sharply in the wake of a ### Economic deterioration (2014–2017) - Copper price shock and political crisis reduced growth, exports, and fiscal revenues. - Copper accounted for over 50 percent of total exports of goods and services. - By end-2016, the price of copper had lost 45 percent of its value relative to 2011. - Donors stopped providing budget support because of delays in conducting the presidential elections. - Government deposits at the BCC were largely depleted by end-2016 and the fiscal rule of no BCC financing of the budget—introduced in 2011—was breached. - Domestic arrears were rising; end-of-period inflation rate rose to 23.6 percent in 2016, driven in part by central bank financing of the fiscal deficit. - Foreign reserves dropped from about 6 weeks of imports in January 2016 to less than 2 weeks by end-2017. - The exchange rate depreciated by 71 percent between end-2015 and end-2017, the largest depreciation in SSA over that period. - Current account deficit narrowed modestly to 3.1 percent of GDP in 2016. - GDP growth fell from 6.9 percent in 2015 to 2.4 percent in 2016 and 3.7 percent in 2017. ### Recovery since 2018 - GDP growth was 5.8 percent in 2018, supported by a rebound in commodity prices. - 12-month inflation fell sharply to less than 5 percent. - Exchange rate stabilized. - Strict budgetary discipline led to overall fiscal surpluses in 2017-18 and a balanced position is projected for 2019. - International reserves remained low, below 3 weeks of import coverage. ### Public and external debt levels and composition (end-2018) - External debt fell from $13.7 billion at end-2009 to US$6.4 billion by end-2018. - PPGE to GDP dropped to 22 percent in 2010 and to 13.6 percent in 2018. - New disbursements in 2017-18 were US$27.5 million or 0.07 percent of GDP. - External arrears amount to 0.7 percent of GDP. - Total external arrears: US$329 million (0.7 percent of GDP). - Bilateral creditors: US$164 million (0.3 percent of GDP). - Commercial creditors: US$165 million (0.3 percent of GDP). 1/ Includes Sicomines debt. - Total public debt stock (2018): - Total Public Debt: US$9,476 million (20.1 percent of GDP). - Of which: arrears US$3,403 million (7.2 percent of GDP; 36 percent of public debt). - Total External Debt: US$6,401 million (13.6 percent of GDP). - Of which: arrears US$329 million (0.7 percent of GDP; 35 percent of external debt). - Multilateral creditors US$1,916 million (4.1 percent of GDP; 30 percent of external debt). - Bilateral creditors US$1,240 million (2.6 percent of GDP; 19 percent of external debt). - Commercial creditors US$3,245 million (6.9 percent of GDP; 51 percent of external debt). - Total Domestic Debt: US$3,074 million (6.5 percent of GDP). - Sicomines’ debt represents almost 40 percent of total external debt and is assumed to be repaid over 10 and 15 years for mining and infrastructure projects, respectively. - About half of public external debt is owed to official creditors: 30 percent to multilateral creditors and 19 percent to bilateral official creditors. ### Domestic arrears detail (2018) - Total stock of domestic debt: US$3,074 million (6.5 percent of GDP). - Reconciled legacy arrears: US$1,866 million (4.0 percent of GDP; 60.7 percent of total domestic debt). - Arrears from provinces: US$147 million (0.3 percent of GDP; 4.8 percent of total domestic debt). - Arrears to oil companies: US$262 million (0.6 percent of GDP; 8.5 percent of total domestic debt). - VAT arrears: US$799 million (1.7 percent of GDP; 26.0 percent of total domestic debt). - Other legacy arrears amounting to about US$3 billion have still to be audited. - Historically, only 20 percent of audited arrears became validated according to the authorities. - Authorities expect to repay 72 percent of the legacy arrears; some categories are subject to discounted payment. ### Macroeconomic assumptions and projections (2019–2039 baseline) - Real GDP growth: average almost 4 percent over the medium term. - Inflation: projected to stabilize at around 5 percent, below the 7 percent target of the BCC. - Primary fiscal balance: projected to stay close to zero percent of GDP. - Capital expenditure: projected to reach 3.9 percent of GDP at the end of the projection period. - Revenues: SOEs’ revenue assumed equivalent to their debt service flows; SOEs represent an average of 4.4 percent of total revenues over the repayment period. - Current account balance: projected to average around 4 percent of GDP deficit over the medium term. - FDI inflows: projected to remain at around 4 percent of GDP. - Gross official reserves: expected to gradually rise to about 5 weeks of imports. - Financing assumptions: public investment financing mix assumed to remain unchanged; external financing projected as a mix with concessional loans accounting for half. ### Debt-carrying capacity and classification - DRC’s composite indicator (CI) score: 1.98, classified as Weak. - CI declined relative to previous vintages (previous vintages: 2.04 and 2.09). - Tailored stress for commodity price shock; contingent liability stress test used a shock of 7.5 percent of GDP composed of: - 5 percent of GDP default value for financial markets, - 0 percent of GDP for PPPs (no PPPs in DRC), - 0.5 percent of GDP for SOEs (risk of unreported debt). - Applicable thresholds cited: - PV of debt in % of GDP: 35 - PV of total public debt in percent of GDP: 30 - PV of external debt in percent of exports: 140 - Debt service in % of exports: 10 - Debt service in % of revenue: 14 ### External debt sustainability (baseline and stress scenarios) - PPG external debt to GDP: 13.6 percent at end-2018 versus projected 24.8 percent in 2015 DSA. - Present value of debt-to-GDP ratio: 10.8 percent in 2018 and anticipated to decline. - PV of PPG external debt-to-GDP peaks at 10.3 percent in 2019 against a 30 percent threshold. - Debt service-to-revenue reaches the 14 percent threshold in 2020 and then declines. - Under the exports shock scenario, PV of debt-to-exports, debt service-to-exports and debt service-to-revenue breach respective thresholds. - Conclusion: external debt sustainable under baseline but vulnerable due to low government revenues and exposure to commodity price volatility. ### Public debt sustainability (baseline and stress scenarios) - Increase in domestic debt since 2015: domestic debt was 0.3 percent of GDP at end-2014 and reached 6.5 percent of GDP by end-2018. - PV of public debt-to-GDP ratio projected to reach 16.7 percent in 2019 and decline to 5.1 percent by 2029, remaining below the 35 percent threshold. - Baseline assumes ambitious repayment profile of arrears over next 15 years and conservative assumption that unaudited amounts are fully repaid. - Under extreme commodity price shock, PV of debt-to-GDP peaks at 30.2 percent in 2021 and declines thereafter. - Under a one-time depreciation shock, debt service-to-revenue ratio would reach 46 percent in 2021 (compared with below 14 percent in 2019). ### Risks, vulnerabilities, and policy priorities - Main risks: - Commodity price volatility given dependence on copper and cobalt exports. - Low revenue mobilization (revenues averaged 9.5 percent of GDP in 2016-17 versus 20 percent in SSA). - Low FX reserves and limited buffers. - Limited access to external financing and weak borrowing conditions. - Policy priorities and recommendations: - Increase revenue mobilization to create fiscal space for investment and inclusive growth. - Build buffers through prudent macroeconomic and indebtedness policies. - Prepare a medium-term debt strategy consistent with debt sustainability and efficient use of borrowed resources. - Prioritize concessional borrowing and ensure high quality and prioritization of projects financed. - Limit exposure to non-concessional borrowing and manage contingent liabilities (SOEs and legacy arrears) carefully. *Source: Congolese authorities and IMF staff calculations and projections.* ### 17. The external and overall risk of debt distress for the DRC remain moderate. Under the ### 17. The external and overall risk of debt distress for the DRC remain moderate. Under the ### Risk assessment - The external and overall risk of debt distress for the DRC remain moderate. - The current low level of domestic debt still justifies the moderate risk of debt distress rating. - Lower revenues or higher borrowing (or both) could push the rating to high risk of debt distress, especially in the case of non-concessional borrowing. - The country is prone to severe shocks, especially through the export channel (as shown in the stress tests). ### Debt indicators and projections - The debt service-to-revenue ratio gets closer to the 14 percent threshold in the first years of projections and declines steadily afterwards. - Vulnerabilities have increased, especially on debt repayment capacity, despite lower total public debt levels than projected at the time of the 2015 DSA. - Weak revenue mobilization is reflected in debt service-to-revenue ratios with limited space to absorb negative shocks, especially at the beginning of the projection period (Figure 5). ### Arrears and domestic debt - External arrears are below 1 percent of GDP qualifying as de minimus case, so they do not affect the risk rating consideration. - Domestic arrears rose significantly in recent years and will likely increase further after completion of the audit of legacy arrears. - It is important that the authorities refrain from accumulating additional domestic arrears and prepare realistic plans to repay them. ### Policy recommendations and priorities - Adopt a cautious borrowing policy to avoid elevating the risk of debt distress. - Pursue prudent fiscal policy supported by domestic revenue mobilization. - Implement structural reforms, including for better management of public investments, to support ambitions to scale up public investment in infrastructure. *Source: 1codea2019001 - 17. The external and overall risk of debt distress for the DRC remain moderate.* ### 19. The authorities broadly agreed with the overall assessment of the country’s debt ### 1codea2019001 - 19. The authorities broadly agreed with the overall assessment of the country’s debt ### Authorities' assessment and commitments - The authorities "broadly agreed with the overall assessment of the country’s debt sustainability." - Policy stances and commitments: - Support for increased transparency and full disclosure of public debt. - Commitment to further broaden debt coverage, especially for SOEs. - Commitment to audit the rest of the legacy arrears. - Intention to prioritize concessional borrowing while noting the "scarcity" of concessional financing. - Agreement on the need to prepare a medium-term strategy to frame debt policy and strengthen debt management capacity. ### Risk ratings - Mechanical overall debt distress rating: Moderate - Final external debt distress rating: Moderate - Judgement was applied: No - Sources: Country authorities; and staff estimates and projections. ### External Debt Sustainability Framework — baseline indicators (selected) - External debt (nominal) (in percent of GDP), selected years: - 2016: 17.6 - 2017: 16.9 - 2018: 13.7 - 2019: 13.3 - 2020: 12.7 - 2021: 12.1 - 2022: 10.9 - 2023: 9.8 - 2024: 8.9 - 2025: 8.1 - 2026: 7.4 - 2027: 6.8 - 2028: 6.2 - 2029: 5.9 - 2039: 4.6 - Change in external debt: 4.2, -0.7, -3.2, -0.4, -0.5, -0.7, -1.1, -1.1, -0.9, -0.8, -0.7, -0.6, -0.6, -0.3, -0.1 (sequence as shown) - Identified net debt-creating flows (selected sequence): 2.0, 0.0, -1.5, -0.2, 0.1, 0.1, 0.0, 0.4, 0.7, 0.9, 1.0, 1.0, 1.0, 0.4, -0.1, -1.7, 0.5 - Non-interest current account deficit (percent of GDP), selected years: 4.1, 3.2, 4.6, 3.2, 3.9, 4.1, 4.0, 4.2, 4.3, 4.3, 4.4, 4.3, 4.2, 3.6, 2.4, 4.2, 4.1 - Exports (percent of GDP), selected years: 32.8, 31.0, 34.1, 25.9, 25.7, 25.5, 25.9, 26.0, 26.4, 25.4, 25.3, 25.1, 24.7, 24.6, 23.3 - Imports (percent of GDP), selected years: 38.9, 34.7, 37.7, 29.4, 29.5, 29.6, 29.9, 30.2, 30.9, 30.0, 29.9, 29.6, 29.0, 28.3, 26.2 - Net FDI (negative = inflow), selected years: -2.5, -2.8, -2.7, -3.2, -3.6, -3.9, -3.7, -3.5, -3.4, -3.3, -3.2, -3.2, -3.1, -3.0, -2.3, -4.0, -3.4 - PV of PPG external debt-to-GDP ratio (selected projection years): 10.8, 10.4, 9.9, 9.3, 8.2, 7.2, 6.4, 5.7, 5.1, 4.5, 3.9, 3.7, 2.8 - PV of PPG external debt-to-exports ratio (selected projection years): 31.7, 40.2, 38.7, 36.4, 31.7, 27.8, 24.4, 22.4, 20.0, 17.8, 15.9, 15.0, 12.0 - PPG debt service-to-exports ratio (selected projection years): 2.2, 1.9, 1.4, 5.4, 5.4, 5.5, 4.7, 4.6, 3.8, 3.8, 3.4, 3.2, 3.1, 1.9, 1.0 - Gross external financing need (Million of U.S. dollars), selected sequence: 813.1, 366.3, 1084.4, 683.3, 892.2, 891.1, 864.5, 1108.7, 1238.3, 1373.8, 1494.0, 1486.1, 1534.9, 875.1, 474.6 Key macro assumptions (selected) - Real GDP growth (percent), selected sequence: 2.4, 3.7, 5.8, 4.3, 3.9, 3.4, 4.5, 4.3, 4.6, 4.0, 4.1, 4.1, 4.2, 4.2, 5.1, 6.1, 4.1 (sequence as presented) - GDP deflator in US dollar terms (change in percent), selected values: -5.6, -1.0, 18.3, -0.2, 1.4, 1.5, 1.1, 1.9, 1.1, 1.6, 1.7, 1.7, 1.7, 1.7, 1.8, 3.2, 1.4 - Effective interest rate (percent) 4/: 0.4, 0.3, 0.4, 0.4, 2.4, 2.4, 2.3, 2.2, 1.9, 2.3, 2.1, 2.0, 1.8, 1.6, 1.4, 1.5, 0.4, 2.0 (values as shown across periods) - Growth of exports of G&S (US dollar terms, in percent), selected: 14.9, -3.0, 38.0, -20.9, 4.3, 4.0, 7.6, 6.4, 7.4, 2.0, 5.1, 5.2, 3.9, 5.6, 11.1, 12.9, 2.8 - Growth of imports of G&S (US dollar terms, in percent), selected: 11.5, -8.3, 36.1, -19.0, 5.6, 5.2, 6.9, 7.5, 7.9, 2.7, 5.5, 4.8, 4.0, 3.3, 7.9, 9.6, 3.1 - Grant element of new public sector borrowing (in percent), selected values: 20.7, 23.6, 30.1, 49.2, 43.2, 40.8, 39.4, 40.2, 40.9, 41.5, 40.6, 35.5, 37.3 (as shown) - Government revenues (excluding grants, percent of GDP), selected: 11.2, 9.8, 10.4, 10.3, 10.0, 10.5, 10.8, 11.0, 11.3, 11.0, 10.8, 10.9, 10.7, 10.5, 9.9, 11.9, 10.7 - Aid flows (Million of US dollars) 5/ (selected): 1040.5, 754.2, 537.1, 854.8, 1051.7, 1168.9, 1211.7, 1282.7, 1393.2, 1458.3, 1542.8, 1632.2, 1726.5, 1816.7, 3224.0 - Nominal GDP (Million of US dollars), selected periodic values: 36,640; 37,615; 47,099; 49,014; 51,627; 54,174; 57,257; 60,819; 64,313; 67,997; 71,933; 76,143; 80,634; 85,455; 159,518 - Nominal dollar GDP growth (selected sequence): -3.4, 2.7, 25.2, 4.1, 5.3, 4.9, 5.7, 6.2, 5.7, 5.7, 5.8, 5.9, 5.9, 6.0, 7.0, 9.6, 5.6 Memorandum items (selected) - PV of external debt (in percent of GDP), selected: 10.8, 10.4, 9.9, 9.3, 8.2, 7.2, 6.4, 5.7, 5.1, 4.5, 3.9, 3.7, 2.8 - PV of PPG external debt (in Million of US dollars), selected: 5,096.3; 5,115.7; 5,131.5; 5,022.3; 4,710.8; 4,387.0; 4,134.9; 3,869.9; 3,636.3; 3,340.2; 3,165.8; 3,149.2; 2,446.9 Notes on definitions from the external DSA - 1/ Includes both public and private sector external debt. - 3/ Residual includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. - 4/ Current-year interest payments divided by previous period debt stock. - 5/ Defined as grants, concessional loans, and debt relief. - 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). - 7/ Assumes that PV of private sector debt is equivalent to its face value. ### Public Sector Debt Sustainability Framework — baseline indicators (selected) - Public sector debt (percent of GDP), selected years: - 2016: 17.6 - 2017: 16.9 - 2018: 20.3 - 2019: 19.3 - 2020: 18.3 - 2021: 16.9 - 2022: 15.0 - 2023: 13.2 - 2024: 11.8 - 2025: 6.9 - 2026: 23.9 - 2029: 12.5 - Change in public sector debt (selected): 4.2, -0.7, 3.4, -0.9, -1.0, -1.4, -1.9, -1.8, -1.4, -0.6 - Identified debt-creating flows (selected): 3.3, -3.6, -4.9, -1.8, -2.0, -2.2, -2.3, -2.3, -2.1, -1.7, -4.8, -2.0 - Primary deficit (selected): 0.2, -1.6, -0.7, -1.2, -1.2, -1.4, -1.5, -1.5, -1.5, -1.3, -2.0, -1.4 - Revenue and grants (percent of GDP), selected: 14.0, 11.7, 11.6, 11.6, 11.5, 12.1, 12.5, 12.7, 13.1, 12.3, 14.4, 12.4 - Primary (noninterest) expenditure (percent of GDP), selected: 14.2, 10.1, 10.9, 10.5, 10.3, 10.6, 11.0, 11.2, 11.6, 11.0, 12.5, 11.0 - Automatic debt dynamics (selected): 3.1, -2.0, -4.2, -0.7, -0.8, -0.7, -0.8, -0.8, -0.6, -0.4 - PV of public debt-to-GDP ratio (selected): 17.5, 16.6, 15.6, 14.2, 12.4, 10.8, 9.4, 8.4, 5.7, 4.8 - PV of public debt-to-revenue and grants ratio (selected): 151.1, 142.7, 136.1, 117.6, 99.8, 84.5, 72.0, 38.0, 38.9 - Debt service-to-revenue and grants ratio (selected): 5.1, 5.1, 4.1, 12.0, 12.2, 14.4, 12.4, 11.6, 9.7, 5.2 - Gross financing need (selected): 0.9, -1.0, -0.2, 0.2, 0.2, 0.3, 0.1, 0.0, -0.2, -0.7 Key macro and fiscal assumptions (selected) - Real GDP growth (percent) (selected): 2.4, 3.7, 5.8, 4.3, 3.9, 3.4, 4.5, 4.3, 4.6, 4.2, 6.1, 4.1 - Average nominal interest rate on external debt (percent), selected: 0.4, 0.4, 0.4, 0.4, 2.5, 2.4, 2.3, 2.2, 2.0, 2.3, 1.4, 0.4, 2.1 - Average real interest rate on domestic debt (percent), selected: -3.8, -29.8, -22.7, -3.5, -4.6, -4.6, -4.3, -5.0, -4.3, -4.8, -11.6, -4.6 - Inflation rate (GDP deflator, percent), selected: 4.3, 43.1, 29.8, 3.6, 4.8, 4.9, 4.5, 5.3, 4.5, 5.1, 15.4, 4.8 - Primary deficit that stabilizes the debt-to-GDP ratio (selected): -4.0, -0.9, -4.1, -0.2, -0.1, 0.0, 0.4, 0.3, -0.1, -0.7, -3.0, -0.2 - PV of contingent liabilities (not included in public sector debt): 0.0 (all years shown) Notes on public DSA definitions - 1/ Coverage: central, state, and local governments, central bank, government-guaranteed debt, non-guaranteed SOE debt. Definition of external debt is Residency-based. - 2/ Underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. - 3/ Debt service defined as the sum of interest and amortization of medium and long-term, and short-term debt. - 4/ Gross financing need defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. - 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilize the debt ratio only in the year in question. ### Stress tests, sensitivity, and scenario analysis (selected results) - Figures and tables present alternative scenarios, bound tests, and tailored tests for 2019-2029 across indicators: - Key stress results indicate scenarios for PV of debt-to-exports, PV of debt-to-GDP, debt service-to-exports, and debt service-to-revenue. - Table 3 (Sensitivity Analysis for PPG External Debt, 2019-2029) shows baseline and scenario values (selected baseline values): - Baseline PV of debt-to-exports ratio (percent) 2019–2029 (selected): 10, 10, 9, 8, 7, 6, 5, 4, 4, 4, 4 (as displayed in table rows) - Tailored tests and bound tests include shocks for Real GDP growth, Primary balance, Exports, Other flows, Depreciation, and combinations (values and thresholds reported in the table). - Table 4 (Sensitivity Analysis for Public Debt, 2019-2029) reports PV of Debt-to-GDP, PV of Debt-to-Revenue, and Debt Service-to-Revenue under baseline and stress scenarios; baseline PV of Debt-to-GDP path (selected): 143, 136, 118, 100, 84, 72, 64, 56, 49, 42, 39 (as presented) - Figures illustrate: - Indicators of Public and Publicly Guaranteed External Debt under alternative scenarios, 2019-2029. - Indicators of Public Debt under alternative scenarios, 2019-2029. - Drivers of debt dynamics — baseline scenario (contributions of primary deficit, real GDP growth, real interest rate, price and exchange rate, residuals). - Realism Tools chart (note: "The Chart on Contribution to Real GDP growth is not presented due to missing data from 2015 DSA"). ### Policy implications and monitoring priorities (as reflected in the document) - Maintain and enhance transparency and full public disclosure of public debt, including broadening coverage to SOEs and auditing legacy arrears. - Prioritize concessional borrowing where available; recognize constraints due to scarcity of concessional financing. - Develop a medium-term debt strategy to frame debt policy and strengthen debt management capacity. - Monitor stress-test outcomes and sensitivity analyses (Real GDP growth, primary balance, exports, other flows, depreciation, contingent liabilities) to inform debt strategy and financing decisions. *Sources: Country authorities; and staff estimates and projections.* ### 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the ### Statement by Mr. Raghani, Executive Director and Mr. Alle, Senior Advisor for the Democratic Republic of the Congo August 26, 2019 ### Overview and Main Messages - Authorities thank Management and Staff for resumption of the Article IV consultation with the Democratic Republic of Congo (DRC) and value the Managing Director’s meeting with President Tshisekedi on April 5. - Authorities broadly agree with staff reports and seek strengthened Fund engagement, including the possibility of negotiating a Fund-supported program to meet balance-of-payment needs. - The December 2018 presidential election and the ensuing democratic transition are seen as opening promising possibilities for improved governance and economic prospects. ### Key Economic Developments and Outlook - Two distinct periods in 2014–18: - 2014–16: collapse in international prices of copper and cobalt led to a sharp economic downturn. - Growth decelerated from 6.9 percent in 2015 to 2.4 percent in 2016. - Between 2015 and 2017, inflation rose from 1 percent to 36 percent on average. - Reserves fell from 4.9 to 1.9 weeks of imports cover. - The Congolese franc lost 72 percent of its value against the US dollar. - Government revenue decreased significantly; the central bank financed the deficit. - 2017–18: partial recovery as mineral prices improved. - GDP growth rate rebounded to an estimated 5.8 percent in 2018. - Inflation dropped to 7.2 percent by year-end 2018. - Foreign reserves improved slightly to 2.6 weeks of imports. - The Congolese franc depreciated by 2.5 percent over the year. - 2019 developments and outlook: - Authorities report inflation continued to decline in H1 2019, depreciation moderated, international reserves strengthened, dollarization steadied, and credit to the private sector strongly recovered. - Authorities’ baseline growth forecast: 5.9 percent in 2019. - Staff scenario cited: 4.3 percent in 2019. - Authorities expect early investment projects and higher global demand for electric cars to boost growth. - Fiscal and debt stance: - DRC is ranked in the category of moderate risk of debt distress and is assessed to have borrowing space. - Authorities commit to a prudent debt strategy to maintain long-term debt sustainability. ### Policies and Reforms Going Forward - Overall priorities: - Increase domestic revenue mobilization. - Scale up public investment while strengthening the quality of capital spending. - Enhance monetary and financial sector policies. - Improve the business climate and diversify the economy. - Stepping up domestic revenue mobilization: - Current tax-to-GDP ratio is 12 percent. - Actions include enforcing the new Mining Code to capture resource revenue, reviewing taxes and tax collection processes to enhance transparency and accountability, broadening the tax base, and streamlining tax expenditures. - A tax expenditure assessment completed with FAD and the World Bank will support rationalization. - Scaling up public investment and strengthening its quality: - Public investment scaling is a high priority to close infrastructure gaps; financing to come from domestic Treasury securities (to be issued starting in 2019) and external resources as relations normalize with partners. - Emphasis on reinforcing project selection based on economic and social returns and ensuring accountability in project execution. - Enhancing monetary and financial sector policies: - Authorities have used monetary and exchange rate policies to address shocks; they noted staff recommendations on monetary policy stance and reserves management. - Measures aim to improve competitiveness, address external vulnerabilities, build trust in the Congolese franc, and contribute to de-dollarization. - New Central Bank Law (enacted December 2018) reinforces supervisory role. - Minimum capital requirement increased to US$30 million (as recommended by the last FSAP); majority of banks have complied. - Minimum capital requirement planned to be raised to US$50 million at end-2020. - Authorities committed to addressing loss of correspondent banking relations (CBRs) by improving AML/CFT framework; steps include an onsite evaluation against the 2012 FATF standards in late 2018 and prompt implementation of the upcoming mutual evaluation’s priority actions. - Specific measure in the mining sector: - Under the new Mining Code of 2018, mining companies are required to repatriate 60 percent of export receipts to their accounts in the DRC, with restrictions on the use of these resources; the measure aims to increase spillovers of the mining industry to the rest of the economy. - Staff assessed this as a tightening of the existing capital flow management measure (CFM) under the Fund’s Institutional View on capital flows. - Improving the business climate: - Authorities will prioritize infrastructure provision (including underserved regions), tax reforms, civil service reform, enforcement of property rights, and a professional and independent judiciary to attract private investment. - Combating corruption and improving governance, including transparency in the mining sector and management of key SOEs such as Gecamines and Sicomines, are central. - The forthcoming governance assessment under the Fund’s new governance framework will assist reform design and prioritization. - Diversifying the economy: - Authorities plan to add local value to minerals through medium-sized processing units across resource-rich regions to limit revenue volatility and create jobs. - Promotion of agriculture and agri-business is targeted for job creation and poverty reduction in rural areas. - Improved business climate and policies to attract private investment are expected to promote non-resource sector activities. ### Conclusion and Request - Authorities state DRC has made significant progress restoring macroeconomic stability and re-engaging with partners while setting an ambitious reform agenda. - They request Executive Directors’ support for the conclusion of the 2019 Article IV consultation. *Statement by Mr. Raghani, Executive Director and Mr. Alle, Senior Advisor for the Democratic Republic of the Congo, August 26, 2019* --- _Source: https://www.imf.org/-/media/files/publications/cr/2019/1codea2019001.pdf_